STANDEX INTERNATIONAL CORP/DE/ 10-K

Item 1. Business   Standex International Corporation and subsidiaries ("we," "us," "our," the "Company" and "Standex" is a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets. Headquartered in Salem, New Hampshire, we have six operating segments aggregated into five reportable segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions. Two operating segments are aggregated into Specialty Solutions. Our businesses work in close partnership with our customers to deliver custom solutions or engineered components that solve their unique and specific needs, an approach we call "Customer Intimacy."   Standex was incorporated in 1975 and is the successor of a corporation organized in 1955. We have paid dividends each quarter since Standex became a public corporation in November 1964. Overall management, strategic development and financial control are led by the executive staff at our corporate headquarters. Our growth strategy is focused on four key areas: (1) Increasing our presence in rapidly growing markets and applications (2) executing new product development in both core and adjacent market applications; (3) expanding geographically where meaningful business opportunities exist; and (4) undertaking strategically aligned acquisitions that strengthen and/or expand these core businesses. We direct our investments towards markets with long term, secular growth prospects such as renewable energy, electric vehicles, smart power grid, military and defense and life sciences.    Unless otherwise noted, references to years are to fiscal years. Currently our fiscal year end is June 30. Our fiscal year 2023 includes the twelve-month period from July 1, 2022 to June 30, 2023.     2   Our long-term business strategy is to create, improve, and enhance shareholder value by building more profitable, focused industrial platforms through our Standex Value Creation System. This methodology employs four components: Balanced Performance Plan, Growth Disciplines, Operational Excellence, and Talent Management and provides both a company-wide framework and tools used to achieve our goals. We intend to continue investing organically and inorganically in high margin and growth businesses using this balanced and proven approach.   It is our objective to grow larger and more profitable business units through both organic and inorganic initiatives. We have a particular focus on identifying and investing in opportunities that complement our products and will increase the overall scale, global presence and capabilities of our businesses.  We recently established an innovation and technology function focused on accelerating new, longer-term growth opportunities for emerging technologies, including our ongoing development project with a global renewable energy company. We continue to execute on acquisitions where strategically aligned with our businesses and where the opportunity meets our investment metrics. We have divested, and likely will continue to divest, businesses that we feel are not strategic or do not meet our growth and return expectations.   The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy.  We use cash flow generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest in the strategic growth programs described above, including organic and inorganic growth, and to return cash to our shareholders through payment of dividends and stock buybacks.    Please visit our website at www.standex.com to learn more about us or to review our most recent SEC filings. The information on our website is for informational purposes only and is not incorporated into this Annual Report on Form 10-K.    Description of Segments   Electronics     Our Electronics group is a global component and value-added solutions provider of both sensing and switching technologies as well as magnetic power conversion components and assemblies. Electronics competes on the basis of Customer Intimacy by designing, engineering, and manufacturing innovative solutions, components and assemblies to solve our customers’ application needs through our Partner/Solve/Deliver® approach.  Our approach allows us to expand the business through organic growth with current customers as well as developing new products, driving geographic expansion, and pursuing inorganic growth through strategic acquisitions.   Components are manufactured in plants located in the U.S., Mexico, the U.K., Germany, Japan, China and India.   Markets and Applications   Our highly engineered products and vertically integrated manufacturing capabilities provide solutions to an array of markets and provide safe and efficient power transformation, current monitoring, and isolation, as well as switch, sensor and relay solutions to monitor systems for function and safety. The end-user of our engineered solution is typically an original equipment manufacturer (“OEM”) or industrial equipment manufacturer. End-user markets include, but are not limited to, appliances, electrification (electric vehicles, solar, smart-grid, alternative energy), security, military, medical, aerospace, test and measurement, power distribution, transportation, and general industrial applications.   Brands   Business unit names are Standex Electronics, Standex-Meder Electronics, Renco Electronics, Northlake Engineering, Agile Magnetics, Sensor Solutions, Standex Electronics Japan. Other associated brand names include the MEDER, KENT, and KOFU reed switch brands.   Products and Services   Our sensing products employ reed switch, Hall effect, inductive, conductive and other technologies. Sensing based solutions include reed relays, fluid level, proximity, motion, flow, HVAC condensate as well as custom electronic sensors containing our core technologies. The magnetics or power conversion products include custom wound transformers and inductors for low and high frequency applications, current sense technology, advanced planar transformer technology, value added assemblies, and mechanical packaging.   Customers   The business sells globally to a wide variety of mainly OEM customers focused in the end markets noted previously through a direct sales force, regional sales managers, field applications engineers, commissioned agents, representative groups, and distribution channels.   3   Engraving   Our Engraving group is a global creator and provider of custom textures and surface finishes on tooling that enhance the beauty and function of a wide range of consumer good and automotive products. We focus on continuing to meet the needs of a changing marketplace by offering experienced craftsmanship while investing in new technologies such as laser engraving and soft surface skin texturized tooling. Our growth strategy is to continue to develop and/or acquire technologies to enhance surface textures that also allow our customers to introduce more sustainable manufacturing processes and reduce their own energy consumption. We are one company operating in 19 countries using a consistent approach to guarantee harmony on global programs in service of our customers.   Markets and Applications   Standex Engraving Mold Tech has become the global leader in its industry by offering a full range of services to OEM’s, Tier 1 suppliers, mold makers and product designers. From start to finish, these services include the design of bespoke textures, the verification of the texture on a prototype, engraving a mold, enhancing and polishing it, and then offering on-site try-out support with ongoing tool maintenance and texture repair capabilities. In addition to these services, we also produce soft trim tooling such as in mold graining (IMG) and nickel shells.   Brands    In addition to the Mold Tech brand, Engraving companies and brands also include:     ● Piazza Rosa and World Client Services (WCS), which both offer laser engraving and tool finishing in Europe and Mexico.   ● Tenibac-Graphion, which provides additional texturizing and prototyping capabilities in North America and China.   ● GS Engineering, which employs advanced processes and technology to rapidly produce molds for the creation of soft-touch surfaces.   ● Innovent, which is a specialized supplier of tools and machines used to produce diapers and products that contain absorbent materials between layers of non-woven fabric.     Products and Services   Texturing is achieved with either a laser or a chemical etching technique.     ● Laser Engraving offers superior features, such as multiple gloss levels, the elimination of paint and optimized scratch performance, and sharp definition for precise geometric patterns.   ● Chemical Engraving produces carefully designed textures and finishes without seams or distortion. Our Digital Transfer Technology offers an exclusive service which guarantees consistency, pattern integrity and texture harmony around the world.     Architexture Design Studio  uses proprietary technology called Model-Tech® which utilizes proven expertise to create and test custom textures. During the Model-Tech process, an original texture is first designed to offer beauty and function, which ultimately is used to create a large-format skin that can be wrapped on a model for testing.   Tooling Performance services include the enhancement, finishing and repair of a tool to improve its use during manufacturing.       ● Tool Enhancement services increase the wear resistance of the mold. Processes include advanced tool finishing services, anti-scratch, laser hardening in localized areas, Tribocoat® and Release Coat.   ● Tool Finishing and Repair allows customers to achieve outstanding quality while saving valuable time. These services include laser micro-welding, polishing and lapping, laser cladding to accommodate engineering changes, mold assembly, tool management, maintenance, texture repair and on-site support.   Soft Trim Tooling and nickel shell molds are used to produce soft surfaces that emulate the feel of natural materials. The IMG process we support consumes significantly less energy in our customers' operations than the traditional slush molding process.   Customers   The Engraving business has become the global leader providing these products and services by offering a full range of services to automotive OEM’s, product designers, Tier 1 suppliers, and toolmakers all around the world.     4   Scientific   Our Scientific business is a provider of specialty temperature-controlled equipment for the medical, scientific, pharmaceutical, biotech and industrial markets. The group designs and produces its products in Summerville, SC.   Our product portfolio is used to control the temperatures of critical healthcare products, medications, vaccines and laboratory samples.  We focus on solving customer problems for these critical applications and deliver innovative products and solutions meeting both exacting regulatory requirements and the unique needs of our customers.   Markets and Applications   The scientific and healthcare equipment that we design, assemble and manufacture is used in hospitals, pharmacies, clinical laboratories, reference laboratories, physicians’ offices, life science laboratories, government and academic facilities, and industrial testing laboratories.  Our product offerings include:     ● Laboratory and medical grade refrigerators, freezers and accessories,   ● Cryogenic storage tanks and accessories, and   ● Environmental stability chambers and incubators.   Brands   Our products are sold under various brands including American BioTech Supply (ABS), Lab Research Products (LRP),Corepoint, Cryosafe, CryoGuard, and Scientific.   Products and Services   We manufacture and provide specialty-controlled temperature equipment purpose-built for the medical, scientific, pharmaceutical, biotech and industrial markets. Our comprehensive portfolio includes a range of innovative reach in cold storage solutions for medications, vaccines, blood products and patient samples.   Customers   Scientific products are sold to medical and laboratory distributors, healthcare facilities, research universities, pharmaceutical companies, and pharmacies.   Engineering Technologies   Our Engineering Technologies Group (ETG) is a provider of innovative, metal-formed solutions for OEM and Tier 1 manufacturers for use in their advanced engineering designs.   Our solutions seek to address unique customer design challenges such as reduction of input weight, material cost, part count, and complexity involving all formable materials with particular focus on large dimensions, large thickness or thin-wall construction, complex shapes and contours, and/or single-piece construction requirements. Engineering Technologies devises and manufactures these cost-effective components and assemblies by combining a portfolio of best-in-class forming technologies and technical experience, vertically integrated manufacturing processes, and group wide technical and design expertise.   We intend to grow sales and product offerings by investing in advancements in our current and new technologies and identifying new cutting-edge solutions for these capabilities in existing and adjacent markets via customer and research collaboration.    Our segment is comprised of our Spincraft businesses with locations in Billerica, MA, New Berlin, WI, and Newcastle upon Tyne in the U.K.   Markets and Applications   Spincraft products serve applications within the space, aviation, defense, energy, medical, and general industrial markets.     ● The space market we serve is comprised of components and assemblies for space launch vehicles, engines, crewed and uncrewed spacecraft and other space infrastructure.    ● The aviation market offerings include a large portfolio of components and assemblies for commercial and private aircraft engines, nacelles and fuel systems.   ● The defense market we serve covers a wide spectrum of applications including components for missiles, naval propulsion and structures, large dimension exhaust systems and military aircraft engine solutions.   ● Applications within the energy market include components and assemblies for new and MRO gas turbines, as well as solutions for oil & gas exploration operations.     5     Brands   This group's brand name is Spincraft.   Products and Services     ● Space: Fuel tanks and fuel tank domes, rocket engine components, crew vehicle and unmanned spacecraft structures and bulkheads   ● Aviation: Nacelle inlet lipskins & ducts, engine components and fuel tank elements   ● Defense: Missile nose cones & structures, naval propulsion components and structures, exhaust assemblies, and military aircraft engine & exhaust components   ● Energy: Power generation turbine & other assemblies, oil & gas exploration connection components   Customers   Engineering Technologies components are sold directly to large space, aviation, defense, energy and medical companies, or suppliers to those companies.   Specialty Solutions   Specialty Solutions is comprised of two businesses: Federal Industries and Custom Hoists. These businesses differentiate themselves in their respective markets by collaborating with customers to develop and deliver custom solutions.    Federal Industries provides merchandising solutions to retail and food service customers whose revenue stream is enhanced through food presentation. Federal Industries focuses on the challenges of enabling retail and food service establishments to provide food and beverages that are fresh and appealing while at the same time providing for food safety, and energy efficiency. Our key differentiator is the ability to customize products to match customers’ décor within industry lead-time. This differentiator is used to target the convenience store, school cafeterias and quick-service restaurant segments.   Custom Hoists is a supplier of engineered hydraulic cylinders that meet customer specific requirements for demanding applications. Our engineering expertise coupled with broad manufacturing capabilities and responsiveness to customer needs drives our top line growth opportunities.  We leverage our full line of products for the construction markets in dump truck and trailer applications and deep expertise in the refuse market to expand into new adjacent markets, targeting the most challenging custom applications.  Flexible design capability, a global supply chain and speed to market enable us to be successful in growing our business.  Our team is dedicated to superior customer service through our technical engineering support and on-time delivery.     Specialty Solutions products are designed and/or manufactured in Hayesville, OH; Belleville, WI; and Tianjin, China.   Markets and Applications   Federal Industries custom designs and manufactures refrigerated, heated and dry merchandising display cases for bakery, deli, confectionary and packaged food products utilized in restaurants, convenience stores, quick-service restaurants, supermarkets, drug stores and institutions such as hotels, hospitals, and school cafeterias.   Custom Hoist products are utilized by OEMs on vehicles such as dump trucks, dump trailers, bottom dumps, garbage trucks (both recycling and rear loader), container roll off vehicles, hook lift trucks, liquid waste handlers, vacuum trucks, compactors, balers, airport catering vehicles, container handling equipment for airlines, lift trucks, yard tractors, and underground mining vehicles.    Brands   Federal Industries products are sold under the Federal brand.    Custom Hoists products are sold under the Custom Hoist brand.    Products and Services   Federal Industries offers a selection of display cases, including innovative customization, for fresh food merchandising requirements.    Custom Hoists designs and manufactures single and double acting telescopic and piston rod hydraulic cylinders for original and aftermarket use in construction equipment, refuse, airline support, mining, oil and gas, and other material handling applications.     Customers   Specialty Solutions products are sold to OEMs, distributors, service organizations, aftermarket repair outlets, end-users, dealers, buying groups, consultants, government agencies and manufacturers.   The following provides a description of key areas impacting our Company.    Working Capital   Our primary source of working capital is the cash generated from continuing operations. No segments require any special working capital needs outside of the normal course of business.   6   Competition   Standex manufactures and markets products many of which have achieved a unique or leadership position in their market, however, we encounter competition in varying degrees in all product groups and for each product line. Competitors include domestic and foreign producers of the same and similar products. The principal methods of competition are industry and design expertise, product performance and technology, price, delivery schedule, quality of services, and other terms and conditions. Standex competes on the basis of Customer Intimacy in which our teams work as extensions of our customers organizations to apply our expertise and technology to address needs with customer solutions.   International Operations   International operations are conducted at 37 locations, in Europe, Canada, China, Japan, India, Southeast Asia, Korea, Mexico, and South Africa. See the Notes to Consolidated Financial Statements for international operations financial data. Our net sales from continuing international operations decreased slightly from 42% in fiscal year  2022 to 39% in fiscal year  2023. International operations are subject to certain inherent risks in connection with the conduct of business in foreign countries including, exchange controls, price controls, limitations on participation in local enterprises, nationalizations, expropriation and other governmental action, restrictions of repatriation of earnings, and changes in currency exchange rates.   Research and Development   We develop and design new products to meet customer needs in order to offer enhanced products or to provide customized solutions for customers. Developing new and improved products, broadening the application of established products, and continuing efforts to improve our methods, processes, and equipment continues to drive our success. Research and development costs are quantified in the Notes to Consolidated Financial Statements.    Environmental Matters   Based on our knowledge and current known facts, we believe that we are presently in substantial compliance with all existing applicable environmental laws and regulations and do not anticipate (i) any instances of non-compliance that will have a material effect on our future capital expenditures, earnings or competitive position or (ii) any material capital expenditures for environmental control facilities.   Financial Information about Geographic Areas   Information regarding revenues from external customers attributed to the United States, all foreign countries and any individual foreign country, if material, is contained in the Notes to Consolidated Financial Statements, “Revenue from Contracts with Customers.”   Human Capital Resources    Standex International recognizes that its long, successful history and future opportunities are directly linked to dedicated, engaged and diverse employees that serve the Company in all business operations. As of June 30, 2023, we employ approximately 3,800 employees of which approximately 1,200 are in the United States. About 200 of our U.S. employees are represented by unions. Wages and benefits are competitive with those of other manufacturers in the geographic areas in which our facilities are located. We strive to maintain open, two-way communication and build excellent relationships with both our non-union employee population and the various unions and works councils within our business segments. Employees participate in regular training programs appropriate for their responsibility and optional training programs have been developed for those who seek professional and personal growth opportunities. Our global Standex Safety Council, with representatives from all Standex sites, meets regularly, as we work continuously to enhance our safety culture and closely monitor our Total Recordable Incident Rate.    The Company’s Chief Human Resources Officer meets regularly with the Chief Executive Officer to align Human Capital strategy, plan and initiatives with business strategy and goals. Our goal is to strive to provide a rewarding employee experience across the company. We continuously review our Human Capital Resources metrics, including safety metrics, turnover, and culture survey responses and associated action plans, to promote an emotionally and physically safe and inclusive working environment. Our LEAP performance management and development process places emphasis on both manager engagement and employee ownership. We regularly conduct employee engagement and satisfaction surveys, including our annual Culture Survey, completed in fiscal year 2023. Results from these surveys and engagement activities drive advances in senior management focus to continuously improve our culture and way of working.   Standex hosts an annual meeting event in the first quarter of the fiscal year with the extended global leadership team, representative of all our business segments and corporate functions, in which participants join together to align on business and culture goals, participate in leadership development training, share best practices and build unity across the company.   The Company established the Inclusion Advisory Council (IAC) as a collaboration of employee voices that helps to inform and align the company’s commitment to inclusivity and represents the diverse world in which we live and engage with our employees, communities, customers and shareholders. The IAC provides operational input and guidance to the Executive Leadership Team in three areas.  First, the IAC sets global goals and objectives to promote inclusivity and diversity.  Second, the IAC collaborates with Corporate Communications and the global Standex community to help develop internal and external communications highlighting the work and progress of the IAC.  Finally, the IAC champions the adoption and implementation of IAC initiatives and projects within our respective businesses. We also launched our Women and Leadership Employee Resource Group in fiscal year 2023, which aims to continue increasing representation of women at all levels to contribute to the Company’s business success through relationships, and partnerships.   7     Executive Officers of Standex   The executive officers of the Company as of June 30,  2023 are a s follows:   Name Age Principal Occupation During the Past Five Years       David Dunbar 61 President and Chief Executive Officer of the Company since January 2014.       Ademir Sarcevic 48 Vice President and Chief Financial Officer of the Company since September 2019. Various positions over the years at Pentair plc from 2012 to September 2019 with increasing responsibility ending as Senior Vice President and Chief Accounting Officer.       Alan J. Glass 59 Vice President, Chief Legal Officer and Secretary of the Company since April 2016.        Sean Valashinas 52 Vice President, Chief Accounting Officer and Assistant Treasurer of the Company since October 2007.       Annemarie Bell 59 Vice President, Chief Human Resources Officer since July 2021, Vice President of Human Resources from June 2019 to July 2021, Interim Vice President of Human Resources from October 2018 through June 2019; Vice President of Human Resources for four of Standex business units from October 2015 through October 2018   The executive officers are elected each year at the first meeting of the Board of Directors subsequent to the annual meeting of stockholders, to serve for one-year terms of office. There are no family relationships among any of the directors or executive officers of the Company.   Long-Lived Assets   Long-lived assets are described and discussed in the Notes to Consolidated Financial Statements under the caption “Long-Lived Assets.”   Available Information   Standex’s corporate headquarters are at 23 Keewaydin Drive, Salem, New Hampshire 03079, and our telephone number at that location is (603) 893-9701.   The U.S. Securities and Exchange Commission (the “SEC”) maintains an internet website at www.sec.gov that contains our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and all amendments thereto. Standex’s internet website address is www.standex.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statements, and all amendments thereto, are available free of charge on our website as soon as reasonably practicable after such reports are electronically filed with or furnished to the SEC. In addition, our code of business conduct, our code of ethics for senior financial management, our corporate governance guidelines, and the charters of each of the committees of our Board of Directors (which are not deemed filed by this reference), are available on our website and are available in print to any Standex shareholder, without charge, upon request in writing to “Chief Legal Officer, Standex International Corporation, 23 Keewaydin Drive, Salem, New Hampshire, 03079.”