STANDEX INTERNATIONAL CORPDE

See notes to consolidated financial statements.

Standex International Corporation and Subsidiaries

Consolidated Statements of Operations

See notes to consolidated financial statements.

Standex International Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

See notes to consolidated financial statements.

Consolidated Statements of Stockholders' Equity

See notes to consolidated financial statements.

See notes to consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Accounting Policies

Basis of Presentation and Consolidation

Standex International Corporation (“Standex” or the “Company”) is a diversified industrial manufacturer infive broad business segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions with operations in the United States, Europe, Canada, Japan, Singapore, Mexico, Turkey, India, and China. The accompanying consolidated financial statements include the accounts of Standex International Corporation and its subsidiaries and are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.

The Company considers events or transactions that occur after the balance sheet date, but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. We evaluated subsequent events through the date and time our consolidated financial statements were issued.

Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the use of estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements and for the period then ended. Estimates are based on historical experience, actuarial estimates, current conditions and various other assumptions that are believed to be reasonable under the circumstances. These estimates form the basis for making judgments about the carrying values of assets and liabilities when they arenot readily apparent from other sources. These estimates assist in the identification and assessment of the accounting treatment necessary with respect to commitments and contingencies. Actual results* maydiffer from these estimates under different assumptions or conditions. The estimates and assumptions used in the preparation of the consolidated financial statements have considered the implications on the Company as a result of ongoing global events and related economic impacts. As a result, there is heightened volatility and uncertainty around supply chain performance, labor availability, and customer demand. However, the magnitude of such impact on the Company’s business and its duration is uncertain. The Company isnot* aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of* June 30, 2024* and the issuance date of this Annual Report on Form10-K.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments purchased with a maturity ofthree months or less. These investments are carried at cost, which approximates fair value. At* June 30, 2024* and2023, the Company’s cash was comprised solely of cash on deposit.

Trading Securities

The Company purchases investments for its non-qualified defined contribution plan for employees who exceed certain thresholds under our traditional401(k) plan. These investments are classified as trading and reported at fair value. The investments, generally consisting of mutual funds, are included in other non-current assets and amounted to $4.9 million at* June 30, 2024* and $3.7 million at* June 30, 2023*. Gains and losses on these investments are recorded as other non-operating (income) expense, net in the Consolidated Statements of Operations.

Accounts Receivable Allowances

The Company has provided an allowance for credit losses. All trade account receivables are reported net of allowances for expected credit losses. The allowances for expected credit losses represent management’s best estimate of the credit losses expected from our trade account receivables over the life of the underlying assets. Assets with similar risk characteristics are pooled together for determination of their current expected credit losses. The Company regularly performs detailed reviews of its pooled assets to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that* may*affect customers’ ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.

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The changes in the allowances for credit losses accounts during2024,2023, and2022 were as follows (in thousands):

Inventories

Inventories are stated at the lower of (first-in,first-out) cost or market. Inventory quantities on hand are reviewed regularly, and write downs are made for obsolete, slow moving, and non-saleable inventory, based primarily on management’s forecast of customer demand for those products in inventory.

Long-Lived Assets

Long-lived assets that are used in operations, excluding goodwill and identifiable intangible assets, are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount* may**not* be recoverable. Recognition and measurement of a potential impairment loss is performed on assets grouped with other assets and liabilities at the lowest level where identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment loss is the amount by which the carrying amount of a long-lived asset (asset group) exceeds its estimated fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

Property, Plant and Equipment

Property, plant and equipment are reported at cost less accumulated depreciation. Depreciation is recorded on assets over their estimated useful lives, generally using the straight-line method. Lives for property, plant and equipment are as follows:

Routine maintenance costs are expensed as incurred. Major improvements, including those made to leased facilities, are capitalized.

Leases

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater thanone year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable. We donot have material financing leases.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typicallynot readily determinable. As a result, we utilize our incremental borrowing rate to discount lease payments, which reflects the fixed rate at which we could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. To estimate our incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since we donot currently have a rating agency-based credit rating.

We have electednot to recognize leases with an original term ofone year or less on the balance sheet. We typically only include an initial lease term in our assessment of a lease arrangement. Options to renew a lease arenot included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

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Goodwill and Identifiable Intangible Assets

All business combinations are accounted for using the acquisition method. Goodwill and identifiable intangible assets with indefinite lives arenot amortized, but are reviewed annually for impairment or more frequently if impairment indicators arise. Definite lived identifiable intangible assets are amortized over the following useful lives:

Trade names are considered to have an indefinite life and arenot amortized.

See discussion of the Company’s assessment of impairment in Note6 – Goodwill and Note7 – Intangible Assets.

Fair Value of Financial Instruments

The financial instruments, shown below, are presented at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. When observable prices or inputs arenot available, valuation models* may*be applied.

Assets and liabilities recorded at fair value in the consolidated balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities and the methodologies used in valuation are as follows:

Level1 – Quoted prices (unadjusted) in active markets for identical assets and liabilities. The Company’s deferred compensation plan assets consist of shares in various mutual funds (for the deferred compensation plan, investments are participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on publicly quoted market prices for the funds’ shares as of the balance sheet dates. For pension assets (see Note16 – Employee Benefit Plans), securities are valued based on quoted market prices for securities held directly by the trust.

Level2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectly through correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company values the instruments based on the market price of instruments with similar terms, which are based on spot and forward rates as of the balance sheet dates. For pension assets held in commingled funds (see Note16 – Employee Benefit Plans), the Company values investments based on the net asset value of the funds, which are derived from the quoted market prices of the underlying fund holdings. The Company has considered the creditworthiness of counterparties in valuing all assets and liabilities.

Level3 – Unobservable inputs based upon the Company’s best estimate of what market participants would use in pricing the asset or liability.

The Company didnot have any transfers of assets and liabilities among levels of the fair value measurement hierarchy during the years ended* June 30,*2024 or2023. The Company’s policy is to recognize transfers between levels as of the date they occur.

Cash and cash equivalents, accounts receivable, accounts payable and debt are carried at cost, which approximates fair value.

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The fair values of our financial instruments at* June 30,*2024 and2023 were (in thousands):

(a) The fair value of our contingent consideration arrangement is determined based on our evaluation as to the probability and amount of any deferred compensation that has been earned to date.

The Company’s financial liabilities based upon Level3 inputs include contingent consideration arrangements relating to its acquisition of SEPL and GS Engineering. The Company is contractually obligated to pay contingent consideration payments to the Sellers of these businesses based on the achievement of certain criteria.

The Company is obligated to pay contingent consideration to the sellers of GS Engineering in the event that certain revenue and gross margin targets are achieved during thefive years following acquisition. The targets set in the GS stock purchase agreement werenot met for the first, second,third orfourth year, which concluded in thefourth quarter of fiscal years2020, 2021, 2022, 2023 and2024 respectively. As of* June 30,*2024, the Company hasno further obligations under this contingent consideration arrangement. The Company is obligated to pay contingent consideration to the sellers of SEPL in the event that certain financial targets are achieved during thetwo years following acquisition, which occurred in thefourth quarter of fiscal year2024. The maximum liability under this arrangement is $0.7 million.

The Company has determined the fair value of the liabilities for the contingent consideration based on a probability-weighted analysis. This fair value measurement is based on significant inputsnot observable in the market and thus represents a Level3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are typically the financial performance of the acquired businesses and the risk-adjusted discount rate for the fair value measurement.

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Additionally, the Company has financial assets based upon Level3 inputs, which represent investments in a privately held company.

The Company invested $2.0 million for equity securities of a company whose securities arenot publicly traded and where fair value isnot readily available. This was recorded as an investment within other non-current assets in the consolidated balance sheets to reflect the initial fair value of the stock acquired. These investments are recorded using either the equity method of accounting or the cost minus impairment adjusted for observable price changes, depending on ownership percentage and other factors that suggest significant influence. The Company concluded it doesnot have a significant ownership percentage or influence. The Company monitors this investment to evaluate whether any increase or decline in the value has occurred, based on the implied value of recent company financings, public market prices of comparable companies and general market conditions.

In thethird quarter of fiscal year2023, the Company purchased $2.7 million of debt securities from the same privately held company. The available for sale asset was recorded as a current asset in the prepaid expenses and other current assets line of the consolidated balance sheet to reflect the initial fair value of the instrument acquired. This asset was originally due to matureone year from the date of issuance. In fiscal year2024**, the maturity was extended to* August 2024.*Available-for-sale debt securities are recorded at fair market value and unrealized gains and losses are included in accumulated other comprehensive income (loss) in equity, net of related tax effects. Realized gains and losses are reported in other non-operating (income) expense, net.

There have beenno changes in the fair value of the estimates for the Level3 assets in fiscal year2024 other than the impact of foreign exchange, which decreased the fair value of the equity securities by $0.1 million from the prior year.

The Company will update its assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the agreements expire.

Concentration of Credit Risk

The Company is subject to credit risk through trade receivables. Concentration of risk with respect to trade receivables is minimized because of the diversification of our operations, as well as our large customer base and our geographical dispersion. No individual customer accounts for more than 5% of revenues or accounts receivable in the periods presented.

Revenue Recognition

In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that haveno alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.

Cost of Goods Sold and Selling, General and Administrative Expenses

The Company includes expenses in either cost of goods sold or selling, general and administrative categories based upon the natural classification of the expenses. Cost of goods sold includes expenses associated with the acquisition, inspection, manufacturing and receiving of materials for use in the manufacturing process. These costs include inbound freight charges, purchasing and receiving costs, inspection costs, internal transfer costs as well as depreciation, amortization, wages, benefits and other costs that are incurred directly or indirectly to support the manufacturing process. Selling, general and administrative includes expenses associated with the distribution of our products, sales effort, administration costs and other costs that arenot incurred to support the manufacturing process. The Company records distribution costs associated with the sale of inventory as a component of selling, general and administrative expenses in the Consolidated Statements of Operations. These expenses include warehousing costs, outbound freight charges and costs associated with salaried distribution personnel. Our gross profit margins* may**not* be comparable to those of other entities due to different classifications of costs and expenses.

Our total advertising expenses, which are classified under selling, general, and administrative expenses are primarily related to trade shows, and totaled $2.4 million, $2.7 million, and $2.3 million for the years ended* June 30,*2024,2023, and2022, respectively.

Research and Development

Research and development expenditures are expensed as incurred. Total research and development costs, which are classified under selling, general, and administrative expenses, were $20.5 million, $17.2 million, and $12.2 million for the years ended* June**30,* 2024,2023, and2022, respectively.

Warranties

The expected cost associated with warranty obligations on our products is recorded when the revenue is recognized. The Company’s estimate of warranty cost is based on contract terms and historical warranty loss experience that is periodically adjusted for recent actual experience. Since warranty estimates are forecasts based on the best available information, claims costs* may*differ from amounts provided. Adjustments to initial obligations for warranties are made as changes in the obligations become reasonably estimable.

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The changes in the continuing operations warranty reserve, which are recorded as accrued liabilities, during2024,2023, and2022 were as follows (in thousands):

Stock-Based Compensation Plans

Restricted stock awards, including performance-based awards, generally vest over terms fromone tothree years. Compensation expense associated with these awards is recorded based on their grant-date fair value and is generally recognized on a straight-line basis over the vesting period. Compensation cost for an award with a performance condition is based on the probable outcome of that performance condition. The stated vesting period is considered non-substantive for retirement eligible participants. Accordingly, the Company recognizes any remaining unrecognized compensation expense upon participant reaching retirement eligibility.

Foreign Currency Translation

The functional currency of our non-U.S. operations is the local currency. Assets and liabilities of non-U.S. operations are translated into U.S. Dollars on a monthly basis using period-end exchange rates. Revenues and expenses of these operations are translated using monthly average exchange rates. The resulting translation adjustment is reported as a component of comprehensive income (loss) in the consolidated statements of stockholders’ equity and comprehensive income. Gains and losses from foreign currency transactions are included in results of operations and werenot material for any period presented.

Derivative Instruments and Hedging Activities

The Company recognizes all derivatives on its balance sheet at fair value.

Forward foreign currency exchange contracts are periodically used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as foreign purchases of materials and loan payments from subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income.

The Company also uses interest rate swaps to manage exposure to interest rates on the Company’s variable rate indebtedness. The Company values the swaps based on contract prices in the derivatives market for similar instruments. The Company has designated its interest rate swap agreements, including any that* may*be forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.

The Company doesnot hold or issue derivative instruments for trading purposes.

Income Taxes

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The income tax provision from continuing operations for the fiscal year ended* June 30, 2024was $21.5 million, or an effective rate of 22.6%, compared to $24.8 million, or an effective rate of 15.1%, for the year ended June 30, 2023,and $19.8 million, or an effective rate of 24.4%, for the year ended June 30, 2022.Changes in the effective tax rates from period to period maybe significant as they depend on many factors including, butnot* 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 anyone-time tax issues which occur during the period.

The income tax provision from continuing operations for the fiscal year ended* June 30, 2024*was impacted by the following items: (i) a tax provision of $3.1 million due to the mix of income in various jurisdictions, (ii) tax benefits of $2.8 million related to foreign tax credits of $0.7 million, as well as Federal R&D tax credits of $2.1 million, (iii) a tax provision of $3.8 million related to officers’ compensation, and (iv) a tax benefit of $3.9 million relating to share-based compensation.

The income tax provision from continuing operations for the fiscal year ended* June 30, 2023*was impacted by the following items: (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 up prior-period provision amounts, and (iv) a tax expense of $1.0 million related to uncertain tax position.

Earnings Per Share

Both basic and diluted income is the same for computing earnings per share. There wereno outstanding instruments that had an anti-dilutive effect at* June 30, 2024,*2023 or2022.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed below, the Company doesnot believe that the adoption of recently issued standards had or* may*have a material impact on its condensed consolidated financial statements or disclosures.

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280) ("ASU2023-07"). This update provides, among other things, enhanced segment disclosure requirements including disclosures about significant segment expenses. ASU2023-07 is effective for fiscal years beginning after* December 15, 2023,and interim periods within fiscal years beginning after December 15, 2024.The Company will review the extent of new disclosures necessary in the coming quarters, prior to implementation during fiscal year2025.* Other than additional disclosure, the Company doesnot expect a change to its condensed consolidated financial statements upon adoption.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740) - Improvements to Income Tax Disclosures. This ASU is expected to enhance the transparency and decision usefulness of income tax disclosures by requiring public business entities on an annual basis to disclose specific categories in the rate reconciliation, additional information for reconciling items that meet a quantitative threshold, and certain information about income taxes paid. This ASU is effective for fiscal years beginning after* December 15, 2024.The amendments in this ASU are required to be applied on a prospective basis and retrospective adoption is permitted. The Company is currently evaluating the effect of adopting this new accounting guidance, which would be applicable to fiscal year2026.*

2. Acquisitions

The Company’s recent acquisitions are strategically significant to the future growth prospects of the Company. At the time of the acquisition and* June 30, 2024*, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

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Minntronix

On* July 31, 2023,*the Company paid $29.2 million in cash for the purchase of all the issued and outstanding equity interests of 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. Minntronix' results are reported within the Company's Electronics segment.

The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Minntronix's technical and applications expertise, which is highly complementary to the Company's existing business.

Identifiable intangible assets of $10.7 million consist primarily of $3.2 million for indefinite lived tradenames and $7.5 million of customer relationships to be amortized over 15 years. The goodwill of $13.9 million created by the transaction isnot deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

The components of the fair value of the Minntronix acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):

Sanyu

On* February 19, 2024,the Company completed the purchase of all the issued and outstanding equity interests of Sanyu Switch Co., Ltd (Sanyu), a privately held company for $20.9 million, net of cash acquired. Sanyu designs and manufactures reed relays for test and measurement and other switching applications. Products include surface mount relays, high current relays, high insulation relays, high density relays for test boards, and RF relays which are used in semi-conductors, other electronics manufacturing and other switching applications. Sanyu's results are reported within the Company's Electronics segment. The Company paid $22.2 million in cash in thethird* quarter of fiscal year2024 and recorded $2.5 million as holdback amounts. Holdback amounts are used to withhold a portion of the initial purchase price payment until certain post-closing conditions are satisfied and are expected to be settled within24 months from the date of acquisition.

The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a valuation of their fair values on the closing date. Goodwill recorded from this transaction is attributable to Sanyu's technical and applications expertise, which is highly complementary to the Company's existing business.

Identifiable intangible assets of $2.6 million consist primarily of $0.7 million for indefinite lived tradenames and $1.9 million of customer relationships to be amortized over 12 years. The goodwill of $8.2 million created by the transaction isnot deductible for income tax purposes. The accounting for business combinations requires estimates and judgments regarding expectations for future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets, in determining the assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's best estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques.

The components of the fair value of the Sanyu acquisition, including the preliminary allocation of the purchase price are as follows (in thousands):

SEPL

On* May 3, 2024,the Company purchased all of the issued and outstanding equity interests of Sanyu Electric Pte Ltd, or SEPL, a privately held company for $3.5 million. Its results are reported within the Company's Electronics segment. The Company paid $1.1 million, net of cash acquired in thefourth* quarter of fiscal year2024. The goodwill of $1.9 million created by the transaction isnot deductible for income tax purposes.

Acquisition Related Expenses

Acquisition related expenses include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation arrangements and (ii) acquisition related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters related to acquired entities. These costs donot include purchase accounting expenses, which the Company defines as acquired backlog and the step-up of inventory to fair value, or the amortization of the acquired intangible assets.

Acquisition related expenses were $2.6 million, $0.6 million and $1.6 million for fiscal years2024, 2023 and2022, respectively.

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3. REVENUE FROM CONTRACTS WITH CUSTOMERS

Most of the Company’s contracts have a single performance obligation which represents the product or service being sold to the customer. Some contracts include multiple performance obligations such as a product and the related installation and/or extended warranty. Additionally, most of the Company’s contracts offer assurance type warranties in connection with the sale of a product to customers. Assurance type warranties provide a customer with assurance that the product complies with agreed-upon specifications. Assurance type warranties donot represent a separate performance obligation.

In general, the Company recognizes revenue at the point in time control transfers to its customer based on predetermined shipping terms. Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that haveno alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.

Disaggregation of Revenue from Contracts with Customers

The following table presents revenue disaggregated by product line and segment (in thousands):

The following table presents revenue from continuing operations disaggregated by geography based on company’s locations (in thousands):

(1) EMEA consists primarily of Europe, Middle East and S. Africa.

The following table presents revenue from continuing operations disaggregated by timing of recognition (in thousands):

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Contract Balances

Contract assets represent sales recognized in excess of billings related to work completed butnot yet shipped for which revenue is recognized over time. Contract assets are recorded as prepaid expenses and other current assets. Contract liabilities are customer deposits for which revenue hasnot been recognized. Current contract liabilities are recorded as accrued liabilities.

The timing of revenue recognition, invoicing and cash collections results in billed receivables, contract assets and contract liabilities on the consolidated balance sheets.

When consideration is received from a customer prior to transferring goods or services to the customer under the terms of a contract, a contract liability is recorded. Contract liabilities are recognized as revenue after control of the goods and services are transferred to the customer and all revenue recognition criteria have been met.

The following table provides information about contract assets and liability balances (in thousands):

We recognized the following revenue which was included in the contract liability beginning balances (in thousands):

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4. Inventories

Inventories are comprised of (in thousands):

Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrative expenses and were $10.8 million, $12.2 million, and $14.0 million in2024,2023 and2022 respectively.

5. Property, plant and equipment

Property, plant and equipment consist of the following (in thousands):

Depreciation expense totaled $18.6 million, $18.2 million, and $18.0 million, respectively for the years ended* June 30,*2024,2023 and2022.

6. Goodwill

Goodwill and certain indefinite-lived intangible assets arenot amortized, but instead are tested for impairment at least annually and more frequently whenever events or changes in circumstances indicate that the fair value of the asset* maybe less than its carrying amount. The Company’s annual test for impairment is performed using a May**31st* measurement date.

The Company has identifiedsix reporting units for impairment testing: Electronics, Engraving, Scientific, Engineering Technologies, Federal, and Hydraulics. The Specialty Solutions segment includes Federal and Hydraulics.

As quoted market prices arenot available for the Company’s reporting units, the fair value of the reporting units is determined using a discounted cash flow model (income approach). This method uses various assumptions that are specific to each individual reporting unit in order to determine the fair value. In addition, the Company compares the estimated aggregate fair value of its reporting units to its overall market capitalization.

While the Company believes that estimates of future cash flows are reasonable, changes in assumptions could significantly affect valuations and result in impairments in the future. The most significant assumption involved in the Company’s determination of fair value is the cash flow projections of each reporting unit. If the estimates of future cash flows for each reporting unit* may*be insufficient to support the carrying value of the reporting units, the Company will reassess its conclusions related to fair value and the recoverability of goodwill.

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The Company completed its annual impairment testing as of* May 31,in each of the lastthree* fiscal years and determined that the fair value of each of its reporting units substantially exceeded each unit’s respective carrying value, therefore,no impairment charges were recorded in connection with the testing and assessment.

Changes to goodwill by segment associated with continuing operations during the fiscal year is as follows (in thousands):

7. Intangible Assets

Intangible assets consist of the following (in thousands):

Amortization expense from continuing operations totaled $8.2 million, $8.6 million, and $9.5 million, respectively for the years ended* June 30,*2024,2023, and2022.

At* June 30,*2024, aggregate amortization expense is estimated to be (in thousands):

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8. Debt

Long-term debt is comprised of the following at* June 30 (*in thousands):

The Company's long-term debt matures in* February**2028.*

*** ***Bank Credit Agreements

During thethird quarter of fiscal year2023**, the Company entered into a Third Amended & Restated Credit Agreement which renewed the existing Credit Agreement for an additional five-year period (“Credit Facility”, or “facility”). The facility has a borrowing limit of $500 million, which 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 Agreement, we pay a variable rate of interest and a commitment fee on borrowed amounts as well as a commitment fee on unused amounts under the facility. The amount of the commitment fee depends upon both the undrawn amount remaining available under the facility and the Company’s funded debt to EBITDA (as defined in the agreement) ratio at the last day of each quarter. As our funded debt to EBITDA ratio increases, the commitment fee increases.

Funds borrowed under the facility* maybe 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 30,2024, the Company had the ability to borrow $347.3 million under the facility based on our current EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants which the Company was compliant with as of June 30,*2024. The Company’s current financial covenants under the facility are as follows:

Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted EBIT per the Credit Agreement”), to interest expense for the trailingtwelve months of at least 2.75:1. Adjusted EBIT per the Credit Agreement specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of $20 million or 10% of EBITDA. The facility also allows unlimited non-cash charges including purchase accounting and goodwill adjustments. At* June 30,*2024, the Company’s Interest Coverage Ratio was 25:15:1.

Leverage Ratio - The Company’s ratio of funded debt to trailingtwelve month Adjusted EBITDA per the credit agreement, calculated as Adjusted EBIT per the Credit Agreement plus depreciation and amortization,* may**not* exceed 3.5:1. Under certain circumstances in connection with a Material Acquisitions (as defined in the Facility), the Credit Agreement allows for the leverage ratio to go as high as 4.0:1 for afour-fiscal quarter period. At* June 30,*2024 the Company’s Leverage Ratio was 0.65:1.

As of* June 30,*2024, we had borrowings under our facility of $150.0 million and the effective rate of interest for outstanding borrowings under the facility was 2.46%. Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility.

Other Long-Term Borrowings

At* June 30,*2024 and2023, the Company had standby letter of credit sub-facility outstanding, primarily for insurance and trade financing purposes of $2.7 million and $3.0 million, respectively.

9. Accrued LIABILITIES

Accrued liabilities from continuing operations recorded in our consolidated balance sheets at* June 30,*2024 and2023 consist of the following (in thousands):

10. Derivative Financial Instruments

Interest Rate Swaps

The Company’s effective swap agreements convert the base borrowing rate on $150 million of debt due under our revolving credit agreement from a variable rate equal toone month Secured Overnight Financing Rate (SOFR) to a weighted average fixed rate of 0.85% at* June 30,*2024.

The fair value of the swaps recognized in accrued liabilities and in other comprehensive income (loss) is as follows (in thousands):

The Company reportedno losses for the years ended* June 30,2024,2023, and2022, as a result of hedge ineffectiveness. Future changes in these swap arrangements, including termination of the agreements, may*result in a reclassification of any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest expense concurrent with the hedged exposure.

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Foreign Exchange Contracts

Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as sales to foreign customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At* June 30,*2024 and2023, the Company had outstanding forward contracts related to hedges of intercompany loans with net unrealized gains of less than $0.1 million and net realized losses of $1.7 million, respectively, which approximate the unrealized gains or losses on the related loans. The contracts have maturity dates in fiscal year2025, which correspond to the related intercompany loans. The notional amounts of these instruments, by currency in thousands, are as follows:

The table below presents the fair value of derivative financial instruments as well as their classification on the balance sheet at* June 30, (*in thousands):

The table below presents the amount of gain (loss) recognized in comprehensive income on our derivative financial instruments (effective portion) designated as hedging instruments and their classification within comprehensive income for the periods ended (in thousands):

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The table below presents the amount reclassified from accumulated other comprehensive income (loss) to net income for the periods ended (in thousands):

11. Income Taxes

The components of income from continuing operations before income taxes are as follows (in thousands):

The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes on continuing operations (in thousands) were as shown below:

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A reconciliation from the U.S. Federal income tax rate on continuing operations to the total tax provision is as follows:

Changes in the effective tax rates from period to period* maybe significant as they depend on many factors including, butnot* limited to, size of the Company’s income or loss and anyone-time activities occurring during the period.

The income tax provision from continuing operations for the fiscal year ended* June 30, 2024*was impacted by the following items: (i) a tax provision of $3.1 million due to the mix of income in various jurisdictions, (ii) tax benefits of $2.8 million related to foreign tax credits of $0.7 million, as well as Federal R&D tax credits of $2.1 million, (iii) a tax provision of $3.8 million related to officers’ compensation, and (iv) a tax benefit of $3.9 million relating to share-based compensation.

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

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Significant components of the Company’s deferred income taxes are as follows (in thousands):

The Company estimates the degree to which deferred tax assets, including net operating loss and credit carry forwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss carry forwards that it believes will more likely thannot go unrealized. The valuation allowance at* June 30,*2024 applies to federal capital loss, state loss, foreign loss, and state R&D credit carryforwards, which management has concluded that it is more likely thannot that these tax benefits willnot be realized. The increase (decrease) in the valuation allowance from the prior year was due to the current year activity in those same federal, state and foreign jurisdictions.

As of* June 30,2024, the Company had gross state net operating loss ("NOL") and credit carry forwards of approximately $31.8 million and $3.9 million, respectively, which maybe available to offset future state income tax liabilities and expire at various dates from2024* through2044. In addition, the Company had foreign NOL carry forwards of approximately $4.1 million, all of which carry forward indefinitely

Under ASU2016-09, Improvements to Employee Share-Based Payment Accounting, all excess tax benefits and tax deficiencies are recognized as income tax expense or benefit in the statement of operations. Accordingly, we recorded an income tax benefit in the consolidated statement of operation of $3.9 million during the fiscal year ended* June 30, 2024*for the windfall of tax benefits related to equity compensation.

U.S. tax law allows a100% dividend received deduction for foreign dividends and the Company has begun to bring back cash from foreign subsidiaries. However, the permanent reinvestment assertion must still be assessed and made regarding potential liabilities for foreign withholding taxes. As of* June 30, 2024,the Company maintained the assessment that previously undistributed earnings of certain foreign subsidiariesno* longer meet the requirements for indefinite reinvestment under applicable accounting guidance. Therefore, the Company recognized deferred tax liabilities of approximately $0.7 million that relate to withholding taxes on the current earnings of various foreign subsidiaries. It is expected that deferred tax liabilities will continue to be recorded on current earnings in future periods from these subsidiaries. The Company maintains the permanent reinvestment assertion on earnings in certain foreign jurisdictions. It isnot practicable to estimate the amount of tax that might be payable on the remaining undistributed earnings.

The total provision (benefit) for income taxes included in the consolidated financial statements was as follows (in thousands):

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The changes in the amount of gross unrecognized tax benefits were as follows (in thousands):

At* June 30,*2024, we had $9.8 million of non-current liabilities, included in accrued pension and other non-current liabilities on the consolidated balance sheet for uncertain tax positions. We arenot able to provide a reasonable estimate of the timing of future payments related to these obligations. The Company increased its uncertain tax position during the year due to state R&D tax credit exposures.

If the unrecognized tax benefits in the table above were recognized in a future period, $9.8 million of the unrecognized tax benefit would impact the Company’s effective tax rate. The Company expects a decrease in net unrecognized tax benefits of approximately $8.0 million in the nexttwelve months as a result of the lapse in the statute of limitations.

Within the nexttwelve months, the statute of limitations will close in various U.S., state and non-U.S. jurisdictions. The following tax years, in the major tax jurisdictions noted, are open for assessment or refund:

The Company’s policy is to include interest expense and penalties related to unrecognized tax benefits within the provision for income taxes on the consolidated statements of operations. At* June 30,*2024 and2023, the company had $1.3 million and $1.2 million for accrued interest expense on unrecognized tax benefits.

12. CONTINGENCIES

From time to time, the Company is subject to various claims and legal proceedings, including claims related to environmental remediation, either asserted or unasserted, that arise in the ordinary course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, the Company’s management doesnot believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow. The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such potential loss.

Litigation

In thesecond quarter of fiscal year2019, a lawsuit was filed against Standex Electronics, Inc., a wholly owned subsidiary of the Company (“Electronics”), by Miniature Precision Components, Inc., a customer (“MPC”), seeking damages in connection with allegedly faulty sensors designed and manufactured by Electronics. The subject sensors were incorporated by MPC into a subassembly sold by MPC to its customer, an automotive manufacturer. MPC alleges that the sensors incorrectly activated a diagnostic code in vehicles for which MPC’s customer issued a service bulletin, resulting in significant warranty costs for MPC. During thefourth quarter of fiscal year2022, the Company and MPC agreed to a full and comprehensive settlement of this matter. As a result in fiscal year2022, the Company recorded $5.7 million related to this litigation reported in accrued liabilities in the consolidated balance sheet and other operating expense in the consolidated statement of operations. During thefirst quarter of fiscal year2023, the liability was paid and the matter is considered settled.

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13. stock-based compensation and purchase plans

Stock-Based Compensation Plans

Under incentive compensation plans, the Company is authorized to make grants of stock options, restricted stock and performance share units to provide equity incentive compensation to key employees and directors. The stock award program offers employees and directors the opportunity to earn shares of our stock over time, rather than options that give the employees and directors the right to purchase stock at a set price. The Company has stock plans for directors, officers and certain key employees. The Company uses shares acquired through treasury stock repurchases for the issuance of shares of common stock for the settlement of awards under its stock-based compensation plans, with the net effect of these transactions accounting for the change in common stock outstanding.

Total compensation cost recognized in the consolidated statement of operations for equity based compensation awards was $9.8 million, $11.7 million, and $11.2 million for the years ended* June 30,2024,2023, and2022, respectively, primarily within Selling, General, and Administrative Expenses. The total income tax benefit recognized in the consolidated statement of operations for equity-based compensation plans was $2.2 million, $1.8 million, and $2.7 million for the years ended June 30,*2024,2023 and2022, respectively.

There were 242,954 shares of common stock reserved for issuance under various compensation plans at* June 30,*2024.

Restricted Stock Awards

The Company* mayaward shares of restricted stock to eligible employees and non-employee directors of the Company atno* cost, giving them, in most instances, all of the rights of stockholders, except that they* may**not* sell, assign, pledge or otherwise encumber such shares and rights during the restriction period. Such shares and rights are subject to forfeiture if certain employment conditions arenot met. During the restriction period, recipients of the shares are entitled to dividend equivalents on such shares, providing that such shares arenot forfeited. Dividends are accumulated and paid out at the end of the restriction period. Restrictions on non-vested stock awards generally lapse between fiscal year2025 and fiscal year2027. Compensation expense related to stock awards recognized was $6.0 million, $4.8 million, and $5.0 million, respectively, for fiscal years ended* June 30,*2024,2023, and2022. Substantially all awards are expected to vest.

A summary of restricted stock awards activity is as follows:

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Restricted stock awards granted during fiscal years2023 and2022 had a weighted average grant date fair value of $95.32 and $104.37, respectively. The grant date fair value of restricted stock awards is determined based on the closing price of the Company’s common stock on the date of grant. The fair value of awards vested during fiscal years2024,2023 and2022 was $9.0 million, $7.4 million and $6.8 million, respectively.

As of* June 30,*2024, there was $4.3 million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of 1.5 years.

Executive Compensation Program

The Company operates a compensation program for key employees. The plan contains both an annual component as well as a long-term component. Under the annual component, participants* mayelect to defer up to 50% of their annual incentive compensation in restricted stock which is purchased at a discount to the market. Additionally, non-employee directors of the Company maydefer a portion of their director’s fees in restricted stock units which is purchased at a discount to the market. During the restriction period, recipients of the shares are entitled to dividend equivalents on such units, providing that such shares arenot* forfeited.

Dividend equivalents are accumulated and paid out at the end of the restriction period. The restrictions on the units expire after three years. Restrictions on non-vested annual component awards generally lapse between fiscal year2025 and fiscal year2027. The compensation expense associated with this incentive program is charged to income over the restriction period. The Company recorded compensation expense related to this program of $0.9 million, $0.2 million, and $0.2 million for the years ended* June**30,* 2024,2023 and2022, respectively.

As of* June 30,*2024, there was $0.4 million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of 0.9 years.

The fair value of the awards under the annual component of this incentive program is measured using the Black-Scholes option-pricing model. Key assumptions used to apply this pricing model are as follows:

Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and the share units are earned based on the achievement of certain overall corporate financial performance targets over the performance period. At the end of the performance period, the number of shares of common stock issued will be determined by adjusting upward or downward from the target in a range between 50% and 200%.No shares will be issued if the minimum performance threshold isnot achieved. The final performance percentage, on which the payout will be based considering the performance metrics established for the performance period, will be certified by the Compensation Committee of the Board of Directors.

A participant’s right to any shares that are earned will cliff vest inthree years. An executive whose employment terminates prior to the vesting of any award for a reason other than death, disability, retirement, or following a change in control, will forfeit the shares represented by that award. In certain circumstances, such as death, disability, or retirement, PSUs are paid on a pro-rata basis. In the event of a change in control, vesting of the awards granted is accelerated.

A summary of the awards activity under the executive compensation program is as follows:

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Restricted stock awards granted under the annual component of this program in fiscal years2024,2023, and2022 had a weighted average grant date fair value of $81.41, $98.36, and $108.92, respectively. The PSUs granted in fiscal years2023 and2022 had a weighted average grant date fair value of $89.44 and $102.61, respectively. The grant date fair value of the PSUs is determined based on the closing price of the Company’s common stock on the date of grant. The fair value of PSUs vested under the long-term component of this program during the fiscal years ended* June 30,*2024,2023, and2022 was $21.4 million, $4.6 million, and $0.4 million respectively.

The Company recognized compensation expense related to the PSUs of $2.9 million, $6.7 million, and $6.0 million for the fiscal years ended* June 30,2024,2023 and2022 respectively based on the probability of the performance targets being met. The total unrecognized compensation costs related to non-vested performance share units was $3.8 million at June 30,*2024, which is expected to be recognized over a weighted average period of 1.2 years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan that allows employees to purchase shares of common stock of the Company at a discount from the market each quarter. The ESPP plan, which was effective as of* July 1, 2005,provided employees the option to purchase Standex stock at a discount of 5%. The Plan was modified, effective as of April 1, 2017,to increase the stock purchase discount to 15% and is considered a compensatory Plan. Under this amendment, at the beginning of each calendar quarter, employees mayelect to purchase shares of Company stock at a value equal to 85% of the closing price on the last trading day of the quarter. The15%* discount is recorded as a component of SG&A in the Company’s Consolidated Statements of Operations. Shares of stock reserved for the plan were 38,234 at* June 30,*2024. Shares purchased under this plan aggregated to 3,778 in fiscal year2024,6,256 in2023, and 6,707 in2022, at an average price of $137.38, $91.78, and $83.22, respectively.

14. Accumulated Other Comprehensive Income (LosS)

The components of the Company’s accumulated other comprehensive income (loss) are as follows (in thousands):

15**. restructuring**

The Company has undertaken a number of initiatives that have resulted in severance, restructuring, and related charges. Restructuring liabilities are included in accrued liabilities on the consolidated balance sheet. A summary of charges by initiative is as follows (in thousands):

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2024 Restructuring Initiatives

The Company continues to focus our efforts to reduce cost and improve productivity across our businesses, particularly through headcount reductions, facility closures, and consolidations. Restructuring expenses primarily related to headcount reductions and other cost saving initiatives. During fiscal year2024**, we also incurred restructuring expenses related tothird party assistance with analysis and implementation of these activities.

Prior Year Restructuring Initiatives

The Company continues to focus our efforts to reduce cost and improve productivity across our businesses, particularly through headcount reductions, facility closures, and consolidations. During fiscal years2023 and2022, the Company also incurred restructuring expenses related to headcount reductions, facility rationalization andthird party assistance with analysis and implementation of these activities.

The Company expects to incur additional restructuring costs of approximately $5.0 million in fiscal year2025 as the Company continues to focus its efforts to reduce cost and improve productivity across its businesses, particularly through facility closures and consolidations.

Activity in the reserves related to prior year restructuring initiatives is as follows (in thousands):

Activity in the reserves in fiscal year2023 (in thousands):

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The Company’s total restructuring expenses by segment are as follows (in thousands):

16**. Employee Benefit Plans**

Retirement Plans

The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U.S. The Company’s pension plan for U.S. employees is frozen for substantially all employees and participants in the plan have ceased accruing future benefits. Obligations under the Company's defined benefit plan operated in Ireland have been transferred to the buyer of the Procon business as part of the divestiture in fiscal year2023. Obligations under the unfunded defined benefit plan operated by the Sanyu business in Japan were transferred to the Company as of the date of acquisition in thethird quarter of fiscal year2024**.

Net periodic benefit cost for U.S. and non-U.S. plans included the following components (in thousands):

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The following table sets forth the funded status and amounts recognized as of* June 30,*2024 and2023 for our U.S. and foreign defined benefit pension plans (in thousands):

The accumulated benefit obligation for all defined benefit pension plans was $199.2 million and $206.6 million at* June 30,*2024 and2023, respectively.

The estimated actuarial net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $4.2 million.

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Plan Assets and Assumptions

The fair values of the Company’s pension plan assets at* June 30,*2024 and2023 by asset category, as classified in thethree levels of inputs described in Note1 under the captionFair Value of Financial Instruments, are as follows (in thousands):

Asset allocationand target asset allocationsare as follows:

Our investment policy for the U.S. pension plans targets a range of exposure to the various asset classes. Standex rebalances the portfolio periodically when the allocation isnot within the desired range of exposure. The plan seeks to provide returns in excess of the various benchmarks. The benchmarks include the following indices: S&P500; Citigroup PMI EPAC; Citigroup World Government Bond and Barclays Aggregate Bond. Athird-party investment consultant tracks the plan’s portfolio relative to the benchmarks and provides quarterly investment reviews which consist of a performance and risk assessment on all investment managers and on the portfolio.

Certain managers within the plan use, or have authorization to use, derivative financial instruments for hedging purposes, the creation of market exposures and management of country and asset allocation exposure. Currency speculation derivatives are strictly prohibited.

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Included in the above are the following assumptions relating to the obligations for defined benefit pension plans in the United States at* June 30,*2024; a discount rate of 5.6% and expected return on assets of 6.4%. The U.S. defined benefit pension plans represent the majority of our pension obligations. The expected return on plan assets assumption is based on our expectation of the long-term average rate of return on assets in the pension funds and is reflective of the current and projected asset mix of the funds. The discount rate reflects the current rate at which pension liabilities could be effectively settled at the end of the year. The discount rate is determined by matching our expected benefit payments from a stream of AA- or higher bonds available in the marketplace, adjusted to eliminate the effects of call provisions.

Expected benefit payments for all plans during the nextfive fiscal years are as follows:2025, $17.9 million;2026, $17.5 million;2027, $17.4 million;2028, $17.7 million;2029, $17.0 million and years thereafter, $80.9 million. The Company expects to make $6.3 million of contributions to its pension plans in fiscal year2025.

The Company operates defined benefit plans in Germany and Japan which are unfunded.

Multi-Employer Pension Plans

We contribute totwo multiemployer defined benefit plans under the terms of collective bargaining agreements that cover our union-represented employees. These plans generally provide for retirement, death and/or termination benefits for eligible employees within the applicable collective bargaining units, based on specific eligibility/participation requirements, vesting periods and benefit formulas. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

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The following table outlines the Company’s participation in multiemployer pension plans for the periods ended* June 30,*2024,2023, and2022, and sets forth the yearly contributions into each plan. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”) and thethree-digit plan number. The most recent Pension Protection Act zone status available in2024 and2023 relates to the plans’two most recent fiscal year-ends. The zone status is based on information that we received from the plans’ administrators and is certified by each plan’s actuary. Among other factors, plans certified in the red zone are generally less than65% funded, plans certified in the orange zone are both less than80% funded and have an accumulated funding deficiency or are expected to have a deficiency in any of the nextsix plan years, plans certified in the yellow zone are less than80% funded, and plans certified in the green zone are at least80% funded. The “FIP/RP Status Pending/Implemented” column indicates whether a financial improvement plan (“FIP”) for yellow/orange zone plans, or a rehabilitation plan (“RP”) for red zone plans, is either pending or has been implemented. For all plans, the Company’s contributions donot exceed5% of the total contributions to the plan in the most recent year.

Retirement Savings Plans

The Company hastwo primary employee savings plans, one for salaried employees andone for hourly employees. Substantially all of our full-time domestic employees are covered by these savings plans. Under the provisions of the plans, employees* maycontribute a portion of their compensation within certain limitations. The Company, at the discretion of the Board of Directors, maymake contributions on behalf of our employees under the plans. Company contributions were $2.8 million, $3.0 million, and $2.9 million for the years ended June 30,2024,2023, and2022, respectively. At June 30,*2024, the salaried plan holds approximately 82,000 shares of Company common stock, representing approximately 4.4% of the holdings of the plan.

17**. Industry Segment Information**

The company hasfive reportable segments organized around the types of products sold:

• Electronics – manufacturing and selling of electronic components for applications throughout the end-user market spectrum;

• Engraving – provides mold texturizing, slush molding tools, project management and design services, roll engraving, hygiene product tooling, low observation vents for stealth aircraft, and process machinery for a number of industries;

• Scientific – specialty temperature-controlled equipment for the medical, scientific, pharmaceutical, biotech and industrial markets;

• Engineering Technologies – provides net and near net formed single-source customized solutions in the manufacture of engineered components for the aviation, aerospace, defense, energy, industrial, medical, marine, oil and gas, and manned and unmanned space markets.

• Specialty Solutions – an aggregation oftwo operating segments that manufacture and sell refrigerated, heated and dry merchandizing display cases, and single and double acting telescopic and piston rod hydraulic cylinders.

The Procon business was included in the Specialty Solutions Segment through the date of divestiture in thethird quarter of fiscal year2023.

Net sales include only transactions with unaffiliated customers and includeno significant intersegment or export sales. Operating income by segment and geographic area excludes general corporate and interest expenses. Assets of the Corporate segment consist primarily of cash, office equipment, and other non-current assets.

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Given the nature of our corporate expenses, management concluded that it wouldnot presently be appropriate to allocate the expenses associated with corporate activities to our operating segments. These corporate expenses include the costs for the corporate headquarters, salaries and wages for the personnel in corporate, professional fees related to corporate matters and compliance efforts, stock-based compensation and post-retirement benefits related to our corporate executives, officers and directors, and other compliance related costs. The Company has a process to allocate and recharge certain direct costs to the operating segments when such direct costs are administered and paid at corporate. Such direct expenses that are recharged on an intercompany basis each month include such costs as insurance, workers’ compensation programs, and audit fees. The accounting policies applied by the reportable segments are the same as those described in the Summary of Accounting Policies footnote to the consolidated financial statements. There areno differences in accounting policies which would be necessary for an understanding of the reported segment information.

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18**. Divestitures**

On* February 28, 2023**,* the Company divested its Procon pumps business (“Procon”) to Investindustrial, a leading European investment and advisory group. Procon generated approximately $21.2 million in revenue in thefirst eight months of fiscal year2023**. Procon, which is reported within the Specialty Solutions Group, was divested in order to focus on the continued simplification of the Company’s portfolio and enable greater focus on managing larger platforms and pursuing growth opportunities. The Company received $67.0 million cash consideration at closing, which was presented as an investing cash flow for fiscal year2023. Cash consideration received at closing excluded amounts held in escrow and was net of closing cash. The Company recorded a pre-tax gain on sale of the business of $62.1 million in fiscal year2023. The operating unit's goodwill balance of $0.2 million was written off as a part of the transaction. The sale transaction and financial results of Procon were classified as continuing operations in the Consolidated Financial Statements.

During thefirst quarter of fiscal year2024**, the Company recorded an additional $0.3 million gain on the sale of the business due to cash received in the period related to closing cash adjustments. During thethird quarter of fiscal year2024, the company received $7.5 million of cash held in escrow, which was presented as an investing cash flow in fiscal year2024**.

19. DISCONTINUED OPERATIONS

In pursuing our business strategy, the Company continues to divest certain businesses and record activities of these businesses as discontinued operations.

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Activity related to discontinued operations for the most recentthree fiscal years is as follows (in thousands):

20. LEASES

In the normal course of its business, the Company enters into various leases as the lessee, primarily related to certain transportation vehicles, facilities, office space, and machinery and equipment. These leases have remaining lease terms betweenone andfifty-five years, some of which* may*include options to extend the leases or options to terminate the leases. Some lease arrangements require variable payments that are dependent on usage, output, or index-based adjustments.

Amounts recorded in the Company's Consolidated Balance Sheet and Statement of Operations related to leases are as follows (in thousands):

Lease cost

The components of lease costs are as follows (in thousands):

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Maturity of lease liability

The maturity of the Company's lease liabilities included in continuing operations at* June**30,* 2024 were as follows (in thousands):

The weighted average remaining lease term and discount rates are as follows:

Supplemental cash flow information related to leases is as follows:

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To the stockholders and the Board of Directors of Standex International Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Standex International Corporation and subsidiaries (the "Company") as of June 30, 2024 and 2023, the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows, for the each of the three years in the period ended June 30, 2024, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended June 30, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of June 30, 2024, based on criteria established inInternal Control—* Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 2, 2024 expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition–*** Revenue recognized over time***–*** Refer to note 3 to the financial statements***

Critical Audit Matter Description

Revenue is recognized over time under certain long-term contracts within the Engineering Technologies and Engraving groups for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin. For products manufactured over time, the transfer of control is measured pro rata, based upon current estimates of costs to complete such contracts. Losses on contracts are fully recognized in the period in which the losses become determinable. Revisions in profit estimates are reflected on a cumulative basis in the period in which the basis for such revision becomes known.

We identified revenue recognized over time as a critical audit matter because of the judgments and subjectivity involved in the determination of estimated costs to complete contracts. This required extensive audit effort and a high degree of auditor judgment when performing audit procedures to audit costs incurred to date and management’s estimates of margin at completion used to recognize revenue over time and evaluating the results of those procedures.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for certain performance obligations accounted for over time included the following, among others:

/s/ Deloitte & Touche LLP

Boston, Massachusetts

August 2, 2024

We have served as the Company’s auditor since 2020.