What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-08-04 compared with 2022-08-05 · 129 added, 145 removed, 352 unchanged (44% of the section changed)

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We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets.

We have seven operating segments that aggregate to five reportable segments. Please refer to Item 1.

We have six operating segments that aggregate to five reportable segments. Please refer to Item 1.

Business, above, for additional information regarding our segment structure and management strategy.

As part of our ongoing strategy:

O n July 31, 2023, we acquired Minntronix, a privately held company.

Minntronix designs and manufactures customized as well as standard magnetics components and products including transformers, inductors, current sensors, coils, chokes, and filters.

The products are used in applications across cable fiber, smart meters, industrial control and lighting, electric vehicles, and home security markets.

Its results will be reported in the Electronics segment. 

In the third quarter of fiscal year 2023, we divested our Procon business for $75.0 million.

This transaction reflects the continued simplification of our portfolio and enables greater focus on managing our larger platforms and pursuing growth opportunities.

Proceeds will be deployed towards organic and inorganic initiatives and returning capital to shareholders.

Its results are reported within our Specialty Solutions segment.

In fiscal year 2023, we received $67.0 million cash consideration and recorded a pre-tax gain on the sale of $62.1 million in the Consolidated Financial Statements.

Cash consideration received at closing excludes amounts held in escrow and was net of closing cash.

In the third quarter of fiscal year 2022, we acquired Sensor Solutions, a designer and manufacturer of customized standard magnetic sensor products including hall effect switch and latching sensors, linear and rotary sensors, and specialty sensors.

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Renco’s results are reported within our Electronics segment beginning in fiscal year 2021.

During the third quarter of fiscal year 2020, we initiated a program and signed an agreement to divest our Master-Bilt and NorLake businesses (together our Refrigerated Solutions Group or RSG). 

This divestiture allowed us to continue the simplification of our portfolio and enabled us to focus more clearly on those of our businesses that sell differentiated products and which have higher growth and margin profiles. 

The divestiture was finalized and consideration was exchanged in the fourth quarter of 2020. 

Results of RSG in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements.  

As a result of these portfolio moves, we have transformed Standex to a company with a more focused group of businesses selling customized solutions to high value end markets via a compelling customer value proposition. 

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Unless otherwise noted, references to years are to fiscal years.

Impact of COVID-19 Pandemic on the Company

Given the global nature of our business and the number of our facilities worldwide, we continue to be impacted globally by COVID-19 related issues.

We have taken effective action around the world to protect our health and safety, continue to serve our customers, support our communities and manage our cash flows.  Our priority was and remains the health and safety of all of our employees. 

Each of our facilities is following safe practices as defined in their local jurisdictions as well as sharing experiences and innovative ways of overcoming challenges brought on by the crisis during updates with global site leaders. 

We are rigorously following health protocols in our plants, including changing work cell configurations and revising shift schedules when appropriate, in order to do our best to maintain operations. 

Initially, we experienced revenue reductions in many of our businesses due to the impact that the pandemic had on our customers.

Conversely, public and private sector responses to COVID-19 vaccine distribution, especially in the United States, have resulted in increased sales of scientific refrigeration equipment to customers within our Scientific reporting segment.

While overall customer demand has rebounded from the impact of the pandemic, more recently we have been impacted by (i) supply chain shortages, (ii) increased material costs, (iii) labor shortages, especially in North America, and (iv) lockdowns implemented by the Chinese government in select cities in which we operate.

Like other industrial manufacturers, we are impacted by rising inflation which we attempt to manage through appropriate pricing actions and enhanced production efficiency measures.

We exited the fourth quarter of 2022 with $104.8 million in cash and $175.0 million of borrowings under our revolving credit facility. 

Our leverage ratio covenant, as defined in our revolving credit agreement, was 0.98 to 1 and allowed us the capacity to borrow an additional $312.6 million at June 30, 2022. 

We believe that we have sufficient liquidity around the world and access to financing to execute on our short and long-term strategic plans.

Finally, we continue to monitor our ability to participate in any governmental assistance programs available to us in each of our global locations and participate in these programs as available and appropriate. 

Consolidated Results from Continuing Operations (in thousands):

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Acquisition related expenses

Other operating expense

Loss on sale of business

Other operating (income) expense, net

(Gain) loss on sale of business

Income from operations

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Organic sales change

Net sales increased for fiscal year 2023 by $5.7 million, or 0.8%, when compared to the prior year period.

Organic sales increased by $39.6 million, or 5.7% excluding the impact of the Procon divestiture, primarily due to pricing actions and strong demand in our Engraving, Specialty and ETG segments.

Acquisitions had a $1.9 million, or 0.3%, positive impact on sales, offset by negative impacts on sales for divestitures of $11.9 million, or 1.9%, and foreign currency of $23.9 million, or 3.3%. 

Net sales increased for fiscal year 2022 by $79.1 million or 12.1% when compared to the prior year. Organic sales increased $96.3 million or 14.7% primarily due to pricing actions and strong demand in our Electronics segment, acquisitions had a $1.9 million impact on sales, and foreign currency had a $9.9 million or 1.5% negative impact on sales.

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We discuss our results and outlook for each segment below. 

Net sales increased for fiscal year 2021 by $51.7 million or 8.6% when compared to the prior year end.

The acquisition of Renco contributed $25.6 million or 4.2% to overall sales growth.

Organic sales increased $15.3 million or 2.5% primarily as a result of impacts from the COVID-19 pandemic economic recovery, and foreign currency had a $14.5 million or 2.4% positive impact on sales.

These increases were offset by a $3.6 million impact on sales due to the divestiture of Enginetics in the third quarter of fiscal year 2021.

Gross Profit 

Gross profit in fiscal year 2022 increased to $269.9 million, or a gross margin of 36.7% as compared to $241.3 million, or a gross margin of 36.8% in fiscal year 2021.

This increase is a result of organic sales increases, productivity initiatives and targeted prices increases, partially offset by raw material and ocean freight cost headwinds, a one-time project related charge at Engineering Technologies, along with production decreases due to a temporary work stoppage in our Specialty Solutions segment which was resolved during the first quarter.

Gross profit in fiscal year 2023 increased to $285.1 million, or a gross margin of 38.5%, as compared to $269.9 million, or a gross margin of 36.7%, for the prior year period. This increase was a result of organic sales increases of $39.6 million and productivity initiatives, which offset approximately $11.4 million of inflationary impacts in the areas of raw material and labor.

Organic sales increases were attributed to $82.5 million to fast growth markets, targeted pricing initiatives in most of our businesses and volume in each business, with the exception of Scientific.

Gross profit was also negatively impacted by the divestiture of the Procon business. 

Gross profit in fiscal year 2022 increased to $269.9 million, or a gross margin of 36.7% as compared to $241.3 million, or a gross margin of 36.8% in fiscal year 2021.

This increase is a result of organic sales increases, productivity initiatives and targeted prices increases, offset by raw material and ocean freight cost headwinds, along with business mix. 

This increase was a result of organic sales increases of $96.3 million, productivity initiatives and targeted prices increases to offset approximately $38 million of inflationary impacts in the areas of ocean freight, raw material, and labor.

Organic sales increases were partially a result of an approximate $20 million increase in sales to fast growth markets such as electric vehicles, green energy, and the commercialization of space.

Gross profit increases were partially offset by increased costs of sales of $50.4 million which included a one-time project related charge at Engineering Technologies of $0.8 million, along with production decreases due to a temporary work stoppage in our Specialty Solutions segment which was resolved during the first quarter.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2023 were $172.3 million, or 23.3% of sales, compared to $169.9 million, or 23.1% of sales, during the prior year period. SG&A expenses during the period were primarily impacted by increased research and development spending to drive future product initiatives.

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2022 were $169.9 million, or 23.1% of sales compared to $163.1 million, or 24.8% of sales during the prior year.

SG&A expenses during this period were primarily impacted by increased distribution expenses associated with the customer mix and higher organic sales volume and increased research and development spending to drive future product initiatives.

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2021 were $163.1 million, or 24.8% of sales compared to $148.5 million, or 24.6% of sales during the prior year.

SG&A expenses during this period were impacted by approximately $4.8 million of SG&A expenses related to the Renco acquisition, increased distribution expenses of $2.0 million as a result of increased organic sales, an increase in research and development spending to drive future product initiatives, and general wage inflation, offset by productivity and cost out actions. 

Restructuring Charges

Restructuring Costs

During fiscal year 2023, we incurred restructuring expenses of $3.8 million, primarily related to productivity improvements, facility rationalization activities, and global headcount reductions primarily within our Engraving and Electronics segments and Corporate headquarters.

During fiscal year 2022, we incurred restructuring expenses of $4.4 million, primarily related to productivity improvements, facility rationalization activities, and global headcount reductions within our Engraving and Electronics segments.

During fiscal year 2021, we incurred restructuring expenses of $3.5 million, primarily related to productivity improvements, facility rationalization activities, and global headcount reductions within our Engraving and Specialty Solutions segments.

Loss on Sale of Business

(Gain) Loss on Sale of Business

We recorded a pre-tax gain on sale of the Procon business of $62.1 million for fiscal year 2023.

The goodwill balance of $0.2 million was written off as a part of the transaction.

The sale transaction and financial results of Procon are classified as continuing operations in the Consolidated Financial Statements.

We recorded a pre-tax loss on sale of the Enginetics business of $14.6 million for fiscal year 2021.

The loss included a $7.6 million impairment of goodwill assigned to the entirety of the Engineering Technologies segment and a $5.4 million write-down of intangible assets. 

Acquisition Related Expenses

We incurred acquisition related expenses of $1.6 million and $0.9 million in fiscal year 2022 and 2021, respectively.

Acquisition related expenses typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Other Operating Expense 

We incurred expense of $5.7 million in fiscal year 2022 related to a litigation accrual.

Refer to Part II, Item 8, Note 12, "CONTINGENCIES," in the Notes to the Consolidated Financial Statements for details.

Acquisition Related Costs

We incurred acquisition related expenses of $0.6 million and $1.6 million in fiscal year 2023 and 2022, respectively.

Acquisition related costs typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Other Operating (Income) Expense, Net

We incurred expense of $5.7 million in fiscal year 2022 related to a litigation accrual. 

In the third quarter of fiscal year 2023, we received $1.0 million from our insurance provider as recoupment related to this litigation matter. Refer to Part II, Item 8, Note 12, "CONTINGENCIES," in the Notes to the Consolidated Financial Statements for details.

Income from Operations

Income from operations for the fiscal year 2023 was $171.1 million, compared to $88.3 million during the prior year. 

The increase of $82.8 million, or 93.8%, is primarily due to the divestiture of the Procon business for a gain of $62.1 million as well as income from organic sales increases and pricing actions, along with cost reduction activities and productivity improvement initiatives, partially offset by foreign currency, material inflation, and increased logistics and labor costs.

Income from operations for the fiscal year 2022 was $88.3 million, compared to $59.2 million during the prior year.

The $29.1 million increase, or 49.2% is primarily due to the loss on sale of the Enginetics business of $14.6 million in the prior year, income from organic sales increases and pricing actions, along with cost reduction activities and productivity improvement initiatives implemented in all of our businesses, partially offset by material inflation, logistics and labor costs as well as the impact of the COVID-19 lockdown in China in the fourth fiscal quarter of 2022 and a litigation charge of $5.7 million.

Income from operations for the fiscal year 2021 was $59.2 million, compared to $60.5 million during the prior year.

The $1.4 million decrease, or 2.3% is primarily due to the loss on sale of the Enginetics business of $14.6 million along with material inflation, partially offset by income from organic sales increases and pricing actions, along with cost reduction activities and productivity improvement initiatives implemented in all of our businesses.

Discussion of the performance of each of our reportable segments is fully explained in the segment analysis that follows.  

Interest Expense

Interest expense for the fiscal year 2022 was $5.9 million a decrease of $0.1 million as compared to the prior year.

Interest expense for the fiscal year 2021 was $6.0 million, a decrease of $1.5 million as compared to the prior year.

On March 27, 2020, the CARES Act was enacted to address the economic impact of the COVID-19 pandemic in the United States.

Among other things, the CARES Act allows a five-year carryback period for tax losses generated in 2019 through 2021.

The June 30, 2021 tax provision includes benefits of $0.2 million and $0.8 million from tax losses in the years ended June 30, 2019 and June 30, 2020, respectively, that the CARES Act allows to be carried back to the years ended June 30, 2014 and June 30, 2015, when the U.S.

federal income tax rate was 35%.

The income tax provision from continuing operations for the fiscal year ended June 30, 2022 was $19.8 million, or an effective rate of 24.4% compared to $14.2 million, or an effective rate of 26.9% for the year ended June 30, 2021, and $13.1 million, or an effective rate of 24.2% for the year ended June 30, 2020.

Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, the amount of our income or loss, the mix of income earned in the US versus outside the US, the effective tax rate in each of the countries in which we earn income, and any one-time tax issues which occur during the period.

Interest expense for fiscal year 2023 was $5.4 million a decrease of $0.5 million as compared to the prior year.

Our effective interest rate was 2.97%.

Interest expense for fiscal year 2022 was $5.9 million a decrease of $0.1 million as compared to the prior year.

The income tax provision from continuing operations for the fiscal year ended June 30, 2023 was $24.8 million, or an effective rate of 15.1%, compared to $19.8 million, or an effective rate of 24.4%, for the year ended June 30, 2022, and $14.2 million, or an effective rate of 26.9%, for the year ended June 30, 2021.

Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, the amount of our income or loss, the mix of income earned in the U.S. versus outside the U.S., the effective tax rate in each of the countries in which we earn income, and any one-time tax issues which occur during the period.

The income tax provision from continuing operations for the fiscal year ended June 30, 2023 was impacted by the following items:

(i) a tax provision of $4.3 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $2.2 million related to Federal R&D credit and Foreign Tax credit (iii) a tax benefit of $1.3 million related to return-to-accrual adjustments to true up prior-period provision amounts, and (iv) a tax expense of $1.0 million related to uncertain tax position. 

(i) a tax benefit of $4.3 million due to the mix of income in various jurisdictions, (ii) tax benefits of $14.3 million primarily related to foreign tax credits of $11.6 million, as well as Federal R&D tax credits of $2.7 million, (iii) a tax provision of $11.3 million related to the U.S.

tax effects of international operations, and (iv) a tax benefit of $5.0 million relating to the partial release of the valuation allowance on capital loss carryforwards, which were utilized against the capital gain recognized on the divestiture of the Procon business.

The income tax provision from continuing operations for the fiscal year ended June 30, 2022 was impacted by the following items: (i) a tax provision of $4.3 million due to the mix of income in various jurisdictions, (ii) a tax benefit of $2.2 million related to Federal R&D credit and Foreign Tax Credit, (iii) a tax benefit of $1.3 million related to return-to-accrual adjustments to true-up prior-period provision amounts, and (iv) a tax expense of $1.0 million related to uncertain tax position.

The income tax provision from continuing operations for the fiscal year ended June 30, 2021 was impacted by the following items:

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federal income tax rate was 35%, (iii) a tax benefit of $0.8 million related to Federal R&D credit and Foreign Tax Credit, (iv) a tax benefit of $1.7 million related to return-to-accrual adjustments to true-up up prior-period provision amounts, and (v) the tax expense of $1.2 million attributable to the divestiture of the Enginetics Corporation during the year.

The income tax provision from continuing operations for the fiscal year ended June 30, 2020 was impacted by the following items:

(i) a tax benefit of $1.2 million related to the Federal R&D credit, (ii) a tax provision of $1.4 million due to the mix of income in various jurisdictions, (iii) a tax benefit of $0.7 million related to the release of uncertain tax provision reserves, and (iv) a tax provision of $0.8 million related to GILTI.

Capital Expenditures

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Specialty Solutions

Total backlog realizable within one year increased $45.8 million, or 21.7% to $256.3 million at June 30, 2022 from $210.5 million at June 30, 2021. 

Electronics total backlog increased 46% due to demand in all geographic markets in response to the beginning of the global recovery from the pandemic, new business opportunities, plus an additional $2.3 million due to the acquisition of Sensor Solutions.

Backlog declines in the Engineering Technologies segment are primarily due to project related timing, particularly in the space end market.

Changes in backlog under 1 year are as follows (in thousands):

Total backlog realizable within one year decreased $18.2 million, or 7.1% to $238.1 million at June 30, 2023 from $256.3 million at June 30, 2022.  Changes in backlog under 1 year are as follows (in thousands):

As of June 30, 2023

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Organic change

Effect of acquisitions

Effect of divestitures

Backlog under 1 year, current period

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Overall Outlook

Looking forward to fiscal year 2023, we expect to be well-positioned, with anticipated continued improvement in key financial metrics, supported by productivity initiatives.

Looking forward to fiscal year 2024, we expect to be well-positioned, with anticipated continued improvement in key financial metrics, supported by productivity initiatives. 

In general, for fiscal year 2024, we expect:

continued growth in transportation markets from electric vehicle programs, both the ramp up of existing business and new business opportunities, including sensors for chargers plugs and soft trim growth;

vaccine storage demand to decline after record COVID-19 related surge in fiscal year 2021 and early fiscal year 2022, countered by a return of demand from universities and research institutions;

commercial aviation and defense end markets to remain strong with double digit sales increase from the prior year based on current program expectations;

space markets to remain attractive, with an anticipated moderate volume decline due to timing of production versus launch;

continued growth in transportation markets from electric vehicle program with a ramp up of new business opportunities, including sensors for charger plugs and soft trim growth;

vaccine storage demand to remain stable after the record COVID-19 related surge in fiscal year 2021 and early fiscal year 2022;

commercial aviation and defense end markets demand to increase based on current program expectations;

space markets to remain attractive, with volume to slightly increase from fiscal year 2023 due to new product development for existing customers;

refuse and dump end markets to remain stable while being supported by investments in the U.S.

infrastructure bill;

strong Merchandising and Pumps business to benefit from return to pre-COVID-19 demand levels in food service equipment markets. 

stable demand levels in food service equipment markets. 

2023 compared to 2022

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Operating income margin

Net sales in fiscal year 2022 increased $50.9 million, or 20.1%, when compared to the prior year.

Net sales in fiscal year 2023 increased $1.6 million, or 0.5%, when compared to the prior year. 

Organic sales increased by $13.7 million, or 4.5%, reflecting positive trends in end markets like industrial applications, power management, renewable energy technologies, and electric vehicle related applications. Sensor Solutions was acquired in the third quarter of fiscal year 2022, adding $1.9 million, or 0.6%, in sales for the period. The foreign currency impact decreased sales by $14.0 million, or 4.6%.

Income from operations in the fiscal year 2023 decreased $1.4 million, or 2.1%, when compared to the prior year. The operating income decrease was the result of inflationary impacts, mix and foreign exchange offset partially by organic sales growth and various cost saving initiatives.

In the first quarter of fiscal year 2024, on a sequential basis, we expect slightly higher revenue primarily due to the recently announced acquisition and continued strength in our fast growth end markets, partially offset by continued slow recovery in China and Europe.

Sequentially, we expect similar operating margin.

Net sales in fiscal year 2022 increased 50.9 million, or 20.1%, when compared to the prior year.

Organic sales increased $56.1 million, or 22.2%, reflecting a broad-based geographical recovery with continued strong demand for all product groups as well as new business opportunities, including the impact of a COVID-19 lockdown in China in the fourth fiscal quarter. Acquisitions in fiscal year 2022 added $1.9 million, or 0.8% in sales. The foreign currency impact decreased sales by $7.1 million, or 2.8%. 

Income from operations in the fiscal year 2022 increased $23.8 million, or 51.1%, when compared to the prior year.

The operating income increase was the result of organic sales growth, various pricing actions and cost saving initiatives, partially offset by material and freight cost increases.

In the first quarter of fiscal year 2023, on a sequential basis, we expect a moderate increase in revenue due to continued positive end market demand trends and some recovery of sales deferred due to the COVID-19 lockdown in China.

We also expect a slight sequential increase in operating margin reflecting the sales increase partially offset by product mix. 

Net sales in fiscal year 2021 increased 68.1 million, or 36.7%, when compared to the prior year as organic sales increased $35.9 million, or 3.6%.

The Renco Electronics acquisition added $25.6 million or 13.8%.

The foreign currency impacted increased sales by $6.6 million, or $6.5%.

Organic sales growth was positive in all geographic areas as well as the product groups of magnetics, sensors and switching technologies supported by the rebound from the COVID-19 pandemic impact. 

Income from operations in the fiscal year 2022 increased $23.8 million, or 51.1% when compared to the prior year.

The operating income increase was the result of organic sales growth, product line mix, various cost savings initiatives, and the impact of the Renco acquisition, offset by inflationary material cost increases.

The operating income increase was the result of organic sales growth, various pricing actions and cost saving initiatives, partially offset by material and freight cost increases.

2023 compared to 2022

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Operating income margin

Net sales in fiscal year 2022 decreased by $0.8 million, or 0.5%, compared to the prior year.

Net sales in fiscal year 2023 increased by $5.8 million, or 4.0%, compared to the prior year. Organic sales increased by $14.3 million, or 9.8%, as a result of timing of customer projects.

The organic sales increase was partially offset by foreign exchange impacts of $8.5 million, or 5.8%. 

Income from operations in fiscal year 2023 increased by $3.6 million, or 16.7%, when compared to the prior year.

Operating income increased during the period reflecting the organic sales increase and productivity actions, offsetting the foreign exchange impacts.

In the first quarter of fiscal year 2024, we expect slightly lower revenue reflecting timing of customer projects and slightly higher operating margin.

Net sales in fiscal year 2022 decreased by $0.8 million or 0.5% compared to the prior year.

Organic sales increased by $0.9 million, or 0.6%, as a result of timing of projects.

The sales increase was offset by foreign exchange impacts of $1.6 million, or 1.1%.

Income from operations in fiscal year 2022 decreased by $0.7 million, or 3.0%, when compared to the prior year, reflecting geographic mix, partially offset by productivity initiatives.

In the first quarter of fiscal year 2023, we expect a slight sequential decrease in revenue and operating margin due to project mix partially offset by operational improvements.

Net sales in fiscal year 2021 increased by $3.3 million or 2.3% compared to the prior year.

Favorable foreign exchange impacts of $6.6 million, or 4.6%, for the period were offset by organic sales declines of $3.3 million, or 2.3%, as a result of the regional timing of automotive projects.

Income from operations in fiscal year 2021 increased by $2.0 million, or 9.8%, when compared to the prior year.

The increase was primarily a result of cost savings initiatives partially offset by organic sales declines for the year. 

Income from operations in fiscal year 2022 decreased by $0.7 million, or 3.0%, when compared to the prior year.

The decrease reflected geographic mix, partially offset by productivity initiatives.

2023 compared to 2022

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Operating income margin

Net sales in fiscal year 2022 increased by $4.4 million, or 5.6% when compared to the prior year. 

The net sales increase reflects overall growth in end markets, such as pharmaceutical channels, clinical settings, and academic laboratories, including continued strong demand for cold storage surrounding COVID-19 vaccine distribution and the general market recovery as well as pricing actions.

Income from operations in fiscal year 2022 decreased by $0.4 million, or 2.1%, reflecting higher freight costs and investments in new product development, offset by revenue growth and pricing actions.

In the first quarter of fiscal year 2023, on a sequential basis, we expect slight revenue and operating margin decrease due to lower COVID vaccine storage demand. 

Net sales in fiscal year 2021 remained relatively flat compared to the prior year.

The net sales increase reflects overall growth in end markets including pharmaceutical channels, clinical laboratories, and academic institutions, primarily in response to customer needs for cold storage surrounding COVID-19 vaccine distribution.

Income from operations in fiscal year 2021 increased $4.5 million or 32.8%, reflecting revenue growth, partially offset by reinvestments in the business for future growth opportunities and increased freight costs. 

Net sales in fiscal year 2023 decreased by $8.9 million, or 10.6% when compared to the prior year. 

Net sales decreased as expected due to lower demand for cold storage surrounding COVID-19 vaccine distribution partially offset by pricing actions.

Income from operations in fiscal year 2023 decreased by $0.8 million, or 4.2%, when compared to the prior year.

Operating income decrease reflects lower sales volume, partially offset by pricing and productivity actions and lower oceanic freight costs.

In the first quarter of fiscal year 2024, on a sequential basis, we expect similar revenue and operating margin.

Net sales in fiscal year 2022 increased by $4.4 million, or 5.6% when compared to the prior year.

The net sales increase reflected overall growth in end markets, such as pharmaceutical channels, clinical settings, and academic laboratories, including continued strong demand for cold storage surrounding COVID-19 vaccine distribution and the general market recovery as well as pricing actions.

Income from operations in fiscal year 2022 decreased $0.4 million or 2.1%, reflected higher freight costs and investments in new product development, offset by revenue growth and pricing actions.

Engineering Technologies

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Operating income margin

Net sales in fiscal year 2022 increased $2.6 million or 3.4% when compared to the prior year.

Net sales in fiscal year 2023 increased $3.0 million, or 3.8%, when compared to the prior year. Organic sales increased by $4.1 million, or 5.3%, offset by foreign currency impacts of $1.1 million, or 1.5%, as compared to the prior year period.

Organic sales change was primarily due to increases in new product development of 

new solutions provided to customers in the aerospace and defense markets. 

Income from operations in fiscal year 2023 increased $2.3 million, or 25.9%, when compared to the prior year.

The increase was primarily due to productivity initiatives, volume increases and the impact of a one-time project related charge in first quarter of fiscal year 2022 that did not repeat.

In the first quarter of fiscal year 2024, on a sequential basis, we expect a significant decrease in revenue reflecting timing of projects and a slight to moderate decrease in operating margin, with productivity initiatives mostly offsetting the impact of volume decline and higher mix of development projects.

The long-term demand remains robust with the current backlog and new platform development funnel expected to provide solid foundation for growth in the second half of fiscal year 2024 and beyond.

Net sales in fiscal year 2022 decreased $2.6 million, or 3.4%, when compared to the prior year.

Sales distribution by market in 2022 was as follows:

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Excluding the impact of the divestiture, sales increased $11.8 million primarily due to customer demand in the commercial aviation market, along with an increase in sales into the space end market, particularly related to commercialization of space and a medical market customer demand surge. 

Income from operations in fiscal year 2022 increased $2.6 million or 42.4% when compared to the prior year.

Income from operations in fiscal year 2022 increased $2.6 million, or 42.4%, when compared to the prior year.

The increase was primarily due to cost saving measures implemented during the pandemic and maintained as economic activity resumed along with the absences of losses associated with the Enginetics business, offset by a $1.1 million one-time project-related charge.

In the first quarter of fiscal year 2023, on a sequential basis, we expect a moderate to significant decrease in revenue reflecting timing of projects and a slight decrease in operating margin, with productivity initiatives mostly offsetting the impact of the volume decline.

Net sales in fiscal year 2021 decreased $28.5 million or 27.4% when compared to the prior year.

Sales distribution by market in 2021 was as follows:

40% space, 26% aviation, 19% defense, 7% energy, and 8% other markets.

The decline was primarily due to the impact of COVID-19 on the commercial aviation segment, especially engine parts manufacturing, along with the divestiture of our Enginetics business.

Income from operations in fiscal year 2021 decreased $7.9 million or 56.1% when compared to the prior year.

The decrease was primarily due to lower volume in the commercial aviation segment along with project timing in the energy markets.

These declines were partially offset by higher defense segment sales, improvements in manufacturing efficiencies, and cost reductions in response to the reduced volume levels. 

Specialty Solutions

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Operating income margin

Net sales for fiscal year 2022 increased $22.0 million, or 21.8% when compared to the prior year.

Net sales for fiscal year 2023 increased $4.3 million, or 3.5% when compared to the prior year. Organic sales increased $16.7 million, or 13.6% excluding Procon, as compared to the prior year period. The increased sales volume is primarily due to pricing realization, strong market demand and the absence of the labor work stoppage in two plants during the prior year.

The impact of the Procon divestiture partially offset the organics sales increase. 

Income from operations for fiscal year 2023 increased $9.8 million, or 62.8%, when compared to the prior year. 

Operating income increased due to sales increases in Display Merchandising, pricing actions and the impact of the labor work stoppage in two plants during the prior year. 

In the first quarter of fiscal year 2024, on a sequential basis, we expect a slight decrease in revenue and operating margin.

Net sales for fiscal year 2022 increased $22.0 million, or 21.8%, when compared to the prior year.

Organic sales increased $22.9 million, or 22.7%.

Increased sales volume is primarily due to a continued recovery in the Pumps and Merchandising businesses and pricing actions, partially offset by the impact of a temporary work stoppage which was resolved during the first quarter.

Increased sales volume was primarily due to a continued recovery in the Pumps and Merchandising businesses and pricing actions, partially offset by the impact of a temporary work stoppage which was resolved during the first quarter.

Income from operations for fiscal year 2022 increased $1.2 million, or 8.5%, when compared to the prior year primarily as a result of increased sales volume in the Pumps and Merchandising businesses, partially offset by higher costs of labor, including the temporary work stoppage in the first quarter and higher raw material and ocean freight costs.

In the first quarter of fiscal year 2023, on a sequential basis, we expect revenue to be similar and operating margin to slightly increase reflecting end market demand trends and the impact of pricing and productivity initiatives. 

Net sales for fiscal year 2021 decreased $13.1 million, or 11.5% when compared to the prior year.

Organic sales declined $13.6 million, or 11.9%, partially offset by positive foreign exchange impacts of $0.5 million, or 0.5%.

Decreased sales volume is primarily due to the impact of the COVID-19 pandemic earlier in the year, which created market downturns in the beverage, food service, and OEM equipment markets.

Income from operations for fiscal year 2021 decreased $4.2 million, or 22.6%, when compared to the prior year.

The decrease during the period is primarily due to reduced sales volume in each of our businesses and increased raw material costs in the OEM equipment market, particularly for steel, partially offset by productivity and cost out actions.

Corporate, Restructuring and Other

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(in thousands except

Loss on sale of business

Restructuring

Acquisition related expenses

Other operating expense

Gain (loss) on sale of business

Restructuring costs

Acquisition related costs

Other operating income (expense), net

Corporate expenses in fiscal year 2023 increased $0.8 million, or 2.3%, when compared to the prior year, primarily due to employee related compensation accruals and research and development costs.

Corporate expenses remained flat in fiscal year 2021 primarily due to general wage inflation and benefit increases offset by cost saving reductions compared to the prior year.

The loss on sale of business, restructuring, and acquisition related expenses have been discussed above in the Company Overview.

The increase in other operating expense in fiscal year 2022 reflects a $5.7 million litigation accrual. 

Corporate expenses in fiscal year 2022 increased $4.7 million, or 16%, when compared to the prior year, primarily due to employee related compensation accruals and research and development costs.

The gain on sale of business, restructuring costs, acquisition related costs and other operating income (expense), net have been discussed above in the Company Overview. 

Discontinued Operations

In pursing our business strategy, the Company may divest certain businesses.

Future divestitures may be classified as discontinued operations based on their strategic significance to the Company.

Results of the Refrigerated Solutions Group and Cooking Solutions Group in current and prior periods have been classified as discontinued operations in the Consolidated Financial Statements and excluded from the results of continuing operations.

Future divestitures may be classified as discontinued operations based on their strategic significance to the Company. 

Activity related to discontinued operations is as follows (in thousands):

Year Ended June 30,

Gain (loss) on sale of business

Transaction fees

Profit (loss) before taxes

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At June 30, 2023, our total cash balance was $195.7 million, of which $98.6 million was held outside of the United States. 

In the fourth quarter of fiscal year 2022, we paid $25.0 million of our outstanding borrowings under the credit facility.

During fiscal years 2023, 2022 and 2021, we repatriated $29.1 million, $30.8 million, and $37.6 million of our cash previously held outside of the United States, respectively. 

During fiscal year 2023, we anticipate returning $30.0 million to $35.0 million of foreign cash, however, the amount and timing of cash repatriation during 2023 will be dependent upon foreign exchange rates and each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. 

The amount and timing of cash repatriation is dependent upon foreign exchange rates and each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. 

The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capital controls;

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Net cash provided by continuing operating activities for the year ended June 30, 2023 was $90.8 million compared to net cash provided by continuing operating activities of $78.1 million in the prior year.

We generated $116.6 million from income statement activities and used $18.2 million of cash to fund working capital and other balance sheet account increases.

Cash flow provided by investing activities for the year ended June 30, 2023 totaled $41.6 million.

We generated $67.0 million in proceeds from the divestiture of the Procon business and $24.3 million was used for capital expenditures. Cash used by financing activities for the year ended June 30, 2023 was $40.0 million and included stock repurchases of $25.5 million, cash paid for dividends of $13.0 million, contingent consideration payments to the sellers of the Renco business of $1.2 million and debt modification costs of $1.7 million. 

Net cash provided by continuing operating activities for the year ended June 30, 2022 was $78.1 million compared to net cash provided by continuing operating activities of $81.9 million in the prior year.

We generated $101.7 million from income statement activities and used $23.1 million of cash to fund working capital increases.

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Cash used by financing activities for the year ended June 30, 2022 were $69.4 million and included stock repurchases of $31.4 million, repayments of debt of $25.0 million, cash paid for dividends of $12.2 million, and contingent consideration payments due to the seller of the Renco business of $2.2 million.

Net cash provided by continuing operating activities for the year ended June 30, 2021 was $81.9 million compared to net cash provided by continuing operating activities of $54.7 million in the prior year.

We generated $94.7 million from income statement activities and generated $4.4 million of cash to fund working capital decreases.

Cash flow used in investing activities for the year ended June 30, 2021 totaled $39.1 million. 

Uses of investing cash consisted primarily of $27.4 million for the acquisition of Renco and capital expenditures of $21.75 million offset by $11.7 million of proceeds from the sale of the Enginetics business.

Cash used by financing activities for the year ended June 30, 2021 were $31.7 million and included stock repurchases of $21.2 million and cash paid for dividends of $11.4 million.

We sponsor a number of defined benefit and defined contribution retirement plans. 

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The fair value of the Company's U.S.

defined benefit pension plan assets was $157.9 million at June 30, 2022, as compared to $212.6 million as of June 30, 2021. We participate in two multi-employer pension plans and sponsor six defined benefit plans including two in the U.S.

and one in the U.K., Germany, Ireland, and Japan. 

defined benefit pension plan assets was $142.1 million at June 30, 2023, as compared to $157.9 million as of June 30, 2022. We participate in two multi-employer pension plans and sponsor five defined benefit plans including two in the U.S.

and one each in the U.K., Germany and Japan. 

The Company’s pension plan is frozen for U.S.

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Our primary U.S.

defined benefit plan is not 100% funded under ERISA rules at June 30, 2022. 

defined benefit plan contributions of $0.2 million were made during fiscal year 2022 compared to $7.8 million during fiscal year 2021.There are no required contributions to the United States funded pension plan for fiscal year 2023.

defined benefit plan is not 100% funded under ERISA rules at June 30, 2023. Obligations under our defined benefit plan operated in Ireland have been transferred to the buyer of the Procon business as part of the divestiture.

defined benefit plan contributions of $0.2 million were made during fiscal year 2023 compared to $0.2 million during fiscal year 2022.

There are required contributions of $9.8 million to the United States funded pension plan for fiscal year 2024.

The Company expects to make contributions during fiscal year 2024 of $0.2 million and $0.2 million to its unfunded defined benefit plans in the U.S.

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We have an insurance program in place to fund supplemental retirement income benefits for three retired executives. 

Current executives and new hires are not eligible for this program. At June 30, 2022, the underlying policies had a cash surrender value of $11.1 million and are reported net of loans of $5.1 million for which we have the legal right of offset.

Current executives and new hires are not eligible for this program. At June 30, 2023, the underlying policies had a cash surrender value of $11.7 million and are reported net of loans of $5.0 million for which we have the legal right of offset.

These amounts are reported net on our balance sheet.

Capital Structure

During the second quarter of fiscal year 2019, the Company entered into a five-year Amended and Restated Credit Agreement (“credit agreement”, or “facility”).

The facility has a borrowing limit of $500 million and can be increased by an amount of up to $250 million, in accordance with specified conditions contained in the agreement.

The facility also includes a $10 million sublimit for swing line loans and a $35 million sublimit for letters of credit.

During the third quarter of fiscal year 2023, the Company entered into a Third Amended & Restated Credit Agreement which renewed the existing Credit Agreement for an additional five-year period (“credit agreement”, or “facility”) with a borrowing limit of $500 million. 

The facility can be increased by an amount of up to $250 million, in accordance with specified conditions contained in the agreement. 

The facility also includes a $10 million sublimit for swing line loans and a $35 million sublimit for letters of credit. 

Under the terms of the Credit Facility, we will pay a variable rate of interest and a fee on borrowed amounts as well as a commitment fee on unused amounts under the facility.

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Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures, acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained), and other general corporate purposes.

As of June 30, 2022, the Company has used $5.1 million against the letter of credit sub-facility and had the ability to borrow $312.6 million under the facility based on our current trailing twelve-month EBITDA.

As of June 30, 2023, the Company has used $3.0 million against the letter of credit sub-facility and had the ability to borrow $371.5 million under the facility based on our current trailing twelve-month EBITDA.

The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants.

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In order to manage our interest rate exposure on these borrowings, we are party to $175.0 million of active floating to fixed rate swaps. 

These swaps convert our interest payments from LIBOR to a weighted average rate of 1.18%. 

These swaps convert our interest payments from SOFR to a weighted average rate of 1.13%. 

The effective rate of interest for our outstanding borrowings, including the impact of the interest rate swaps, was 2.97%. 

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Our primary sources of cash are cash flows from continuing operations and borrowings under the facility. 

We expect that fiscal year 2023 depreciation and amortization expense will be between $20.0 and $21.0 million and $7.0 and $9.0 million, respectively.

We expect that fiscal year 2024 depreciation and amortization expense will be between $22.0 million and $24.0 million and $8.0 million and $10.0 million, respectively.

The following table sets forth our capitalization at June 30:

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Less cash and cash equivalents

Net (cash) debt

Stockholders' equity

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Stockholders’

equity decreased year over year by $7.1 million, primarily as a result of $43.6 million of cash returned to shareholders in the form of dividends and stock repurchases, offset by current year net income of $61.4 million. The Company's net debt to capital percentage changed to 12.3% as of June 30, 2022 from 11.1% in the prior year. 

equity increased year over year by $108.1 million, primarily as a result of current year net income of $139.0 million offset by $38.5 million of cash returned to shareholders in the form of dividends and stock repurchases. The Company's net (cash) debt to capital percentage changed to (3.8)% as of June 30, 2023 from 12.3% in the prior year. 

At June 30, 2023, we expect to pay estimated interest payments of $7.9 million within the next five years.

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Our policy is to fund domestic pension liabilities in accordance with the minimum and maximum limits imposed by the Employee Retirement Income Security Act of 1974 ("ERISA"), federal income tax laws and the funding requirements of the Pension Protection Act of 2006.

At June 30, 2022, we expect to pay estimated post-retirement benefit payments of $170.4 million.

At June 30, 2023, we expect to pay estimated post-retirement benefit payments of $10.2 million during fiscal year 2024.

Financial Statements and Supplementary Data, Note 16.

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The Company’s annual test for impairment is performed using a May 31st measurement date.

We have identified seven reporting units for impairment testing:

Electronics, Engraving, Scientific, Engineering Technologies, Procon, Federal, and Hydraulics.

We have identified six reporting units for impairment testing:

Electronics, Engraving, Scientific, Engineering Technologies, Federal, and Hydraulics.

As quoted market prices are not available for the Company’s reporting units, the fair value of the reporting units is determined using a discounted cash flow model (income approach). 

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The most significant assumption involved in the Company’s determination of fair value is the cash flow projections of each reporting unit. 

As a result of our annual assessment in the fourth quarter of fiscal year 2022, the Company determined that the fair value of the seven reporting units substantially exceeded their respective carrying values. 

As a result of our annual assessment in the fourth quarter of fiscal year 2023, the Company determined that the fair value of the six reporting units substantially exceeded their respective carrying values. 

Therefore, no impairment charges were recorded in connection with our annual assessment during the fourth quarter of fiscal year 2023. 

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In future years, the impact of discount rate changes could yield different sensitivities.

See the Notes to the Consolidated Financial Statements for further information regarding pension plans.

Business Combinations - The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business and the allocation of those cash flows to identifiable intangible assets in determining the estimated fair values for assets acquired and liabilities assumed. 

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However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. 

At June 30, 2022 and 2021, the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of $0.6 million and $2.8 million respectively. 

At June 30, 2023 and 2022, the fair value, in the aggregate, of the Company’s open foreign exchange contracts was a liability of $1.7 million and $0.6 million respectively. 

Our primary translation risk is with the Euro, British Pound Sterling, Peso, Japanese Yen and Chinese Yuan. 

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Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings and is mitigated by our use of interest rate swap agreements to modify our exposure to interest rate movements. 

At June 30, 2022, we have $175.0 million of active floating to fixed rate swaps with terms ranging from one to four years. 

These swaps convert our interest payments from LIBOR to a weighted average rate of 1.18%. 

At June 30, 2023, we have $175.0 million of active floating to fixed rate swaps with terms ranging from one to three years. 

These swaps convert our interest payments from SOFR to a weighted average rate of 1.13%. 

At June 30, 2023, the fair value, in the aggregate, of the Company’s interest rate swaps were assets of $10.2 million.

At June 30, 2021, the fair value, in the aggregate, of the Company’s interest rate swaps were liabilities of $3.1 million. A 25-basis point increase in interest rates would not change our annual interest expense as all of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.

At June 30, 2022, the fair value, in the aggregate, of the Company’s interest rate swaps were assets of $8.4 million. A 25-basis point increase in interest rates would not change our annual interest expense as all of our outstanding debt is currently converted to fixed rate debts by means of interest rate swaps.

Concentration of Credit Risk

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While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.

The Engineering Technologies, Specialty Solutions, and Electronics segments are all sensitive to price increases for steel and aluminum products, other metal commodities such as rhodium and copper, and petroleum-based products. 

In the past year, we have experienced price fluctuations for a number of materials including rhodium, steel, and other metal commodities. 

We continue to experience price fluctuations for a number of materials including rhodium, steel, and other metal commodities. 

These materials are some of the key elements in the products manufactured in these segments. 

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity