STANDEX INTERNATIONAL CORP/DE/

Previous wording

Net sales decreased for fiscal year 2024 by $20.4 million, or 2.8%, when compared to the prior year period. Organic sales decreased by $37.7 million, or 5.1%, due to transitory headwinds in several of our end markets, primarily due to lower demand in our Electronics, Specialty and Scientific segments, partially offset by project timing in our Engineering Technologies group. Organic sales included $94.0 million in the period attributed to fast growth markets. Acquisitions had a $40.4 million, or 5.5%, positive impact on sales, offset by negative impacts on sales for divestitures of $21.3 million, or 2.9%, and foreign currency of $1.8 million, or 0.3%.

Current wording

Net sales decreased for fiscal year 2024 by $20.4 million, or 2.8%, when compared to the prior year period. Organic sales decreased by $37.7 million, or 5.1%, due to transitory headwinds in several of our end markets, primarily due to lower demand in our Electronics, Scientific and Specialty segments, partially offset by project timing in our Engineering Technologies group. Organic sales included $94.0 million in the period attributed to fast growth markets. Acquisitions had a $40.4 million, or 5.5%, positive impact on sales, offset by negative impacts on sales for divestitures of $21.3 million, or 2.9%, and foreign currency of $1.8 million, or 0.3%.

Previous wording

Gross profit in fiscal year 2023 increased to $285.1 million, or a gross margin of 38.5%, as compared to $269.9 million, or a gross margin of 36.7%, for the prior year period. This increase was a result of organic sales increases of $39.6 million and productivity initiatives, which offset approximately $11.4 million of inflationary impacts in the areas of raw material and labor. Organic sales increases were attributed to $82.5 million to fast growth markets, targeted pricing initiatives in most of our businesses and volume in each business, with the exception of Scientific. Gross profit was also negatively impacted by the divestiture of the Procon business.

Current wording

Gross profit in fiscal year 2025 increased to $315.2 million, or a gross margin of 39.9%, as compared to $282.0 million, or a gross margin of 39.1%, for the prior year period. This increase was a result of higher volume, productivity initiatives and impact of acquisitions partially offset by material inflation.

Previous wording

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

Current wording

Selling, general, and administrative expenses, (“SG&A”) for the fiscal year 2025 were $193.4 million, or 24.5% of sales, compared to $169.9 million, or 23.5% of sales, during the prior year period. SG&A expenses during the period were primarily impacted by increased expenses due to the recent acquisitions and increased research and development and selling expenses.

Previous wording

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

Current wording

During fiscal year 2025, we incurred restructuring expenses of $6.9 million, primarily related to facility rationalization activities, and global headcount reductions mostly within our Engraving segment.

Previous wording

During fiscal year 2024, we incurred restructuring expenses of $8.2 million, primarily related to facility rationalization activities, and global headcount reductions primarily within our Engraving, Electronics and Engineering Technologies segments and as well as the Corporate headquarters.

Current wording

During fiscal year 2024, we incurred restructuring expenses of $8.2 million, primarily related to facility rationalization activities, and global headcount reductions primarily within our Electronics, Engineering Technologies and Engraving segments and as well as the Corporate headquarters.

Previous wording

We incurred acquisition related expenses of $2.6 million and $0.6 million in fiscal year 2024 and 2023, respectively. Acquisition related costs typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Current wording

We incurred acquisition related expenses of $21.4 million and $2.6 million in fiscal year 2025 and 2024, respectively. Acquisition related costs typically consist of due diligence, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Previous wording

Interest expense for fiscal year 2024 was $4.5 million, a decrease of $0.9 million as compared to the prior year. Our effective interest rate was 2.46%. Interest expense for fiscal year 2023 was $5.4 million, a decrease of $0.5 million as compared to the prior year.

Current wording

Interest expense for fiscal year 2025 was $23.9 million, an increase of $19.3 million as compared to the prior year. The increase in interest expense in fiscal 2025was due to increased debt to fund fiscal 2025 acquisitions. Our effective interest rate in fiscal 2025 was 6.38%. Interest expense for fiscal year 2024 was $4.5 million, a decrease of $0.9 million as compared to the prior year.

Previous wording

The income tax provision from continuing operations for the fiscal year ended June 30, 2024 was $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 may be significant as they depend on many factors including, but not limited to, the amount of our income or loss, the mix of income earned in the U.S. versus outside the U.S., the effective tax rate in each of the countries in which we earn income, and any one-time tax issues which occur during the period.

Current wording

The income tax provision from continuing operations for the fiscal year ended June 30, 2025 was $11.1 million, or an effective rate of 16.11%, compared to $21.5 million, or an effective rate of 22.6%, for the year ended June 30, 2024, and $24.8 million, or an effective rate of 15.1%, for the year ended June 30, 2023. Changes in the effective tax rates from period to period may be significant as they depend on many factors including, but not limited to, the amount of our income or loss, the mix of income earned in the U.S. versus outside the U.S., the effective tax rate in each of the countries in which we earn income, and any one-time tax issues which occur during the period.

Previous wording

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.

Current wording

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 $3.8 million relating to share-based compensation.

Previous wording

During fiscal year 2024, capital expenditures were $20.3 million or 2.8% of net sales, as compared to $24.3 million, or 3.3%, of net sales in the prior year. We expect 2025 capital spending to be between $35 million and $40 million.

Current wording

During fiscal year 2025, capital expenditures were $28.8 million or 3.6% of net sales, as compared to $20.3 million, or 2.8%, of net sales in the prior year. We expect 2026 capital spending to be between $33 million and $38 million.

Previous wording

Total backlog realizable within one year decreased $52.8 million, or 22.2% to $185.2 million at June 30, 2024 from $238.1 million at June 30, 2023. Changes in backlog under 1 year are as follows (in thousands):

Current wording

Total backlog realizable within one year increased $60.3 million, or 32.5% to $245.6 million at June 30, 2025 from $185.2 million at June 30, 2024. Changes in backlog under 1 year are as follows (in thousands):

Previous wording

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

Current wording

Income from operations in the fiscal year 2024 decreased $4.9 million, or 7.2% when compared to the prior year. The operating income decrease was the resultof $1.8 million purchase accounting adjustments on both Minntronix and Sanyu along with the operating margin impact on the lower organic sales, mix, among other cost variances offset partially by the acquisition operating margin and various cost saving initiatives.

Previous wording

Net sales in fiscal year 2024 increased $2.4 million, or 3.0%, when compared to the prior year. The organic sales increase was driven by improvement in the aviation and space end markets, more favorable project timing, and growth in new applications.

Current wording

Net sales in fiscal year 2024 increased $2.4 million, or 3.0%, when compared to the prior year. The organic sales increase was

Previous wording

Income from operations in fiscal year 2024 increased by $1.9 million, or 11.1%, when compared to the prior year. Operating income increase reflects productivity initiatives and lower freight costs, partially offset by lower volume.

Current wording

Income from operations in fiscal year 2024 increased $1.9 million or 11.1%, when compared to the prior year. Operating income increase reflects productivity initiatives and lower freight costs, partially offset by lower volume.

Previous wording

Net sales in fiscal year 2024 decreased by $1.4 million, or 0.9%, compared to the prior year. Organic sales decreased by $1.0 million, or 0.7%, as a result of delays in new platform rollouts in North America. Foreign exchange impacts were $0.4 million, or 0.2%.

Current wording

Net sales in fiscal year 2025 decreased by $22.3 million, or 14.8%, compared to the prior year. Organic sales decreased by $20.9 million, or 13.9%, primarily as a result of delays in new platform rollouts in North America. Foreign exchange impacts reduced sales by $1.4 million, or 0.9%.

Previous wording

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

Current wording

Corporate expenses in fiscal year 2025 decreased $0.8 million, or 2.3%, when compared to the prior year, primarily due to reduction in incentive compensation.

Previous wording

Corporate expenses in fiscal year 2024 decreased $3.0 million, or 8.6%, when compared to the prior year. Corporate expenses in fiscal year 2024 reflect reductions in professional service fees and incentive compensation.

Current wording

Corporate expenses in fiscal year 2024 decreased $3.0 million, or 8.6%, when compared to the prior year. Corporate expenses in fiscal year 2024 reflect reductions in incentive compensation.

Previous wording

In pursing our business strategy, the Company may divest certain businesses. Future divestitures may be classified as discontinued operations based on their strategic significance to the Company. Activity related to discontinued operations is as follows (in thousands):

Current wording

In pursuing our business strategy, the Company may divest certain businesses. Future divestitures may be classified as discontinued operations based on their strategic significance to the Company. Activity related to discontinued operations is as follows (in thousands):

Previous wording

At June 30, 2024, our total cash balance was $154.2 million, of which $128.1 million was held outside of the United States. The amount and timing of cash repatriation is dependent upon foreign exchange rates and each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capital controls; however, those balances are generally available without legal restrictions to fund ordinary business operations.

Current wording

At June 30, 2025, our total cash balance was $104.5 million, of which $78.7 million was held outside of the United States. The amount and timing of cash repatriation is dependent upon foreign exchange rates and each business unit’s operational needs including requirements to fund working capital, capital expenditure, and jurisdictional tax payments. The repatriation of cash balances from certain of our subsidiaries could have adverse tax consequences or be subject to capital controls; however, those balances are generally available without legal restrictions to fund ordinary business operations.

Previous wording

Net cash provided by continuing operating activities for the year ended June 30, 2023 was $90.8 million compared to net cash provided by continuing operating activities of $78.1 million in the prior year. We generated $116.6 million from income statement activities and used $18.2 million of cash to fund working capital and other balance sheet account increases. Cash flow provided by investing activities for the year ended June 30, 2023 totaled $41.6 million. We generated $67.0 million in proceeds from the divestiture of the Procon business and $24.3 million was used for capital expenditures. Cash used by financing activities for the year ended June 30, 2023 was $40.0 million and included stock repurchases of $25.5 million, cash paid for dividends of $13.0 million, contingent consideration payments to the sellers of the Renco business of $1.2 million and debt modification costs of $1.7 million.

Current wording

Net cash provided by continuing operating activities for the year ended June 30, 2025 was $69.6 million compared to net cash provided by continuing operating activities of $93.3 million in the prior year. We generated $102.0 million from income statement activities and used $12.9 million of cash to fund working capital and other balance sheet account increases. Cash flow used in investing activities for the year ended June 30, 2025 totaled $503.4 million. We used $478.9 million for the purchase of acquisitions in the fiscal year, $28.3 million was used for capital expenditures. We generated $3.5 million in the fiscal year proceeds from life insurance policies. Cash provided by financing activities for the year ended June 30, 2025 was $380.5 million and included proceeds from borrowings of $792.3 million, payment of debt of $389 million, stock repurchases of $9.9 million and cash paid for dividends of $15.0 million.

Previous wording

The fair value of the Company's U.S. defined benefit pension plan assets was $142.3 million at June 30, 2024, as compared to $142.1 million as of June 30, 2023. We participate in two multi-employer pension plans and sponsor six defined benefit plans including two in the U.S. and Japan and one each in the U.K. and Germany. The Company’s pension plan is frozen for U.S. employees and participants in the plan ceased accruing future benefits. Our primary U.S. defined benefit plan is not 100% funded under ERISA rules at June 30, 2024.

Current wording

The fair value of the Company's U.S. defined benefit pension plan assets was $146.4 million at June 30, 2025, as compared to $142.3 million as of June 30, 2024. We participate in two multi-employer pension plans and sponsor six defined benefit plans including two in the U.S. and Japan and one each in the U.K. and Germany. The Company’s pension plan is frozen for U.S. employees and participants in the plan ceased accruing future benefits. Our primary U.S. defined benefit plan is not 100% funded under ERISA rules at June 30, 2025.

Previous wording

U.S. defined benefit plan contributions of $10.0 million were made during fiscal year 2024 compared to $0.2 million during fiscal year 2023. There are required contributions of $5.8 million to the United States funded pension plan for fiscal year 2025. The Company expects to make contributions during fiscal year 2025 of $0.2 million and $0.3 million to its unfunded defined benefit plans in the U.S. and Germany, respectively. Any subsequent plan contributions will depend on the results of future actuarial valuations.

Current wording

U.S. defined benefit plan contributions of $7.6 million were made during fiscal year 2025 compared to $10.0 million during fiscal year 2024. There are required contributions of $6.5 million to the United States funded pension plan for fiscal year 2026. The Company expects to make contributions during fiscal year 2026 of $0.1 million and $0.3 million to its unfunded defined benefit plans in the U.S. and Germany, respectively. Any subsequent plan contributions will depend on the results of future actuarial valuations.

Previous wording

We have an insurance program in place to fund supplemental retirement income benefits for three retired executives. Current executives and new hires are not eligible for this program. At June 30, 2024, the underlying policies had a cash surrender value of $11.7 million and are reported net of loans of $4.9 million for which we have the legal right of offset. These amounts are reported net on our balance sheet.

Current wording

We have an insurance program in place to fund supplemental retirement income benefits for three retired executives. Current executives and new hires are not eligible for this program. At June 30, 2025, the underlying policies had a cash surrender value of $6.7 million and are reported net of loans of $2.7 million for which we have the legal right of offset. These amounts are reported net on our balance sheet.

Previous wording

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

Current wording

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

Previous wording

Funds borrowed under the facility may be used for the repayment of debt, working capital, capital expenditures, acquisitions (so long as certain conditions, including a specified funded debt to EBITDA leverage ratio is maintained), and other general corporate purposes. As of June 30, 2024, the Company has used $2.7 million against the letter of credit sub-facility and had the ability to borrow $347.3 million under the facility based on our current trailing twelve-month EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants. The Company’s current financial covenants under the facility are as follows:

Current wording

As of June 30,2025, the Company has used $1.9 million against the letter of credit sub-facility and had the ability to borrow $207.7 million under the facility based on our current trailing twelve-month EBITDA. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants. The Company’s current financial covenants under the facility are as follows:

Previous wording

Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted EBIT per the Credit Facility”), to interest expense for the trailing twelve months of at least 2.75:1. Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of $20.0 million or 10% of EBITDA. The facility allows for unlimited non-cash charges including purchase accounting and goodwill adjustments. At June 30, 2024, the Company’s Interest Coverage Ratio was 25.15.:1.

Current wording

Interest Coverage Ratio - The Company is required to maintain a ratio of Earnings Before Interest and Taxes, as Adjusted (“Adjusted EBIT per the Credit Facility”), to interest expense for the trailing twelve months of at least 2.75:1. Adjusted EBIT per the Credit Facility specifically excludes extraordinary and certain other defined items such as cash restructuring and acquisition related charges up to the lower of $20.0 million or 10% of EBITDA. The facility allows for unlimited non-cash charges including purchase accounting and goodwill adjustments. At June 30, 2025, the Company’s Interest Coverage Ratio was 6.42:1.

Previous wording

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

Current wording

Leverage Ratio- The Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the Credit Facility, calculated as Adjusted EBIT per the Credit Facility plus depreciation and amortization, may not exceed 3.5:1. Under certain circumstances in connection with a Material Acquisition (as defined in the Facility), the Facility allows for the leverage ratio to go as high as 4.0:1 for a four-fiscal quarter period. At June 30, 2025, the Company’s Leverage Ratio was 2.60:1.

Previous wording

As of June 30, 2024, we had borrowings under our facility of $150.0 million. In order to manage our interest rate exposure on these borrowings, we are party to $150.0 million of active floating to fixed rate swaps. These swaps convert our interest payments from SOFR to a weighted average rate of 0.85%. The effective rate of interest for our outstanding borrowings, including the impact of the interest rate swaps, was 2.46%. Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends.

Current wording

As of June 30, 2025, we had borrowings under our facility of $553.2 million. The effective rate of interest for our outstanding borrowings is 6.38%. Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends.

Previous wording

Our primary sources of cash are cash flows from continuing operations and borrowings under the facility. We expect that fiscal year 2025 depreciation and amortization expense will be between $24.0 million and $28.0 million and $8.0 million and $10.0 million, respectively.

Current wording

Our primary sources of cash are cash flows from continuing operations and borrowings under the facility. We expect that fiscal year 2026 depreciation and amortization expense will be between $24.0 million and $26.0 million and $15.5 million and $17.5 million, respectively.

Previous wording

Stockholders’ equity increased year over year by $14.0 million, primarily as a result of current year net income of $73.1 million offset by $45.7 million of cash returned to shareholders in the form of dividends and stock repurchases. The Company's net (cash) debt to capital percentage changed to (0.9)% as of June 30, 2024 from (3.8)% in the prior year.

Current wording

Stockholders’ equity increased year over year by $90.2 million, primarily as a result of current year net income of $55.7 million and stock issued for acquisitions of $26 million. The Company's net (cash) debt to capital percentage changed to (38.6)% as of June 30,2025 from (0.9)% in the prior year.

Previous wording

At June 30, 2024, we expect to pay estimated interest payments of $2.8 million within the next five years. This estimate is based upon effective interest rates as of June 30, 2024 and excludes any interest rate swaps which are assets to us. See Item 7A for further discussions surrounding interest rate exposure on our variable rate borrowings.

Current wording

At June 30, 2025, we expect to pay estimated interest payments of $176 million within the next five years. This estimate is based upon the loan balance, interest rate, and credit spread as of June 30, 2025. If we take into consideration the change in credit spread that will take effect in August 2025 and the interest rate at June 30, 2025, then the amount of estimated interest payments for the next five years would be $169 million. See Item 7A for further discussions surrounding interest rate exposure on our variable rate borrowings.

Previous wording

Post-retirement benefits and pension plan contribution payments represent future pension payments to comply with local funding requirements. Our policy is to fund domestic pension liabilities in accordance with the minimum and maximum limits imposed by the Employee Retirement Income Security Act of 1974 ("ERISA"), federal income tax laws and the funding requirements of the Pension Protection Act of 2006. At June 30, 2024, we expect to pay estimated post-retirement benefit payments of $6.0 million during fiscal year 2025. See "Item 8. Financial Statements and Supplementary Data, Note 16. Employee Benefit Plans" for additional information regarding these obligations.

Current wording

Post-retirement benefits and pension plan contribution payments represent future pension payments to comply with local funding requirements. Our policy is to fund domestic pension liabilities in accordance with the minimum and maximum limits imposed by the Employee Retirement Income Security Act of 1974 ("ERISA"), federal income tax laws and the funding requirements of the Pension Protection Act of 2006. At June 30,2025, we expect to pay estimated post-retirement benefit payments of $6.9 million during fiscal year 2026. See "Item 8. Financial Statements and Supplementary Data, Note 16. Employee Benefit Plans" for additional information regarding these obligations.

Previous wording

At June 30, 2024, we had $39.0 million of operating lease obligations. See "Item 8. Financial Statements and Supplementary Data, Note 20. Leases" for additional information regarding these obligations.

Current wording

At June 30,2025, we had $51.2 million of operating lease obligations. See "Item 8. Financial Statements and Supplementary Data, Note 20. Leases" for additional information regarding these obligations.

Previous wording

At June 30,2024, we had $9.8 million of non-current liabilities for uncertain tax positions. We are not able to provide a reasonable estimate of the timing of future payments related to these obligations.

Current wording

At June 30,2025, we had $2.9 million of non-current liabilities for uncertain tax positions. We are not able to provide a reasonable estimate of the timing of future payments related to these obligations.

Previous wording

*Inflation –*Certain of our expenses, such as wages and benefits, occupancy costs, freight and equipment repair and replacement, are subject to normal inflationary pressures. Inflation for medical costs can impact both our employee benefit costs as well as our reserves for workers' compensation claims. We monitor the inflationary rate and make adjustments to reserves whenever it is deemed necessary. Our ability to control worker compensation insurance medical cost inflation is dependent upon our ability to manage claims and purchase insurance coverage to limit the maximum exposure for us. Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price movements. In the past year, we have experienced price fluctuations for a number of materials including rhodium, steel, and other metal commodities. These materials are some of the key elements in the products manufactured in these segments. Wherever possible, we will implement price increases to offset the impact of changing prices. The ultimate acceptance of these price increases, if implemented, will be impacted by our affected divisions’ respective competitors and the timing of their price increases. In general, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.

Current wording

*Inflation –*Certain of our expenses, such as wages and benefits, occupancy costs, freight and equipment repair and replacement, are subject to normal inflationary pressures. Inflation for medical costs can impact both our employee benefit costs as well as our reserves for workers' compensation claims. We monitor the inflationary rate and make adjustments to reserves whenever it is deemed necessary. Our ability to control worker compensation insurance medical cost inflation is dependent upon our ability to manage claims and purchase insurance coverage to limit the maximum exposure for us. Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price movements. We have experienced price fluctuations for a number of materials including rhodium, steel, and other metal commodities. These materials are some of the key elements in the products manufactured in these segments. Wherever possible, we will implement price increases to offset the impact of changing prices. The ultimate acceptance of these price increases will be impacted by our affected divisions’ respective competitors and the timing of their price increases. In general, we do not enter into purchase contracts that extend beyond one operating cycle. While Standex considers our relationship with our suppliers to be good, there can be no assurances that we will not experience any supply shortage.

Previous wording

Foreign Currency Translation – Our primary functional currencies used by our non-U.S. subsidiaries are the Euro, British Pound Sterling (Pound), Japanese (Yen), Peso and Chinese (Yuan).

Current wording

Foreign Currency Translation – Our primary functional currencies used by our non-U.S. subsidiaries are the Euro, British Pound Sterling (Pound), Japanese (Yen), Mexican Peso, Chinese (Yuan), and Indian (Rupee).

Previous wording

Realization of Goodwill – Goodwill and certain indefinite-lived intangible assets are not 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 may be less than its carrying amount of the asset. The Company’s annual test for impairment is performed using a May 31st measurement date. We have identified six reporting units for impairment testing: Electronics, Engraving, Scientific, Engineering Technologies, Federal, and Hydraulics.

Current wording

Realization of Goodwill – Goodwill and certain indefinite-lived intangible assets are not 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 may be less than its carrying amount of the asset. The Company’s annual test for impairment is performed using a May 31st measurement date. We have identified six reporting units for impairment testing: Electronics, Engineering Technologies, Scientific, Engraving, Federal, and Hydraulics.

Previous wording

Our annual impairment testing at each reporting unit relied on assumptions surrounding general market conditions, short-term growth rates, a terminal growth rate of 2.5%, and detailed management forecasts of future cash flows prepared by the relevant reporting unit. Fair values were determined primarily by discounting estimated future cash flows at a weighted average cost of capital of 11.0%. During our annual impairment testing, we evaluated the sensitivity of our most critical assumption, the discount rate, and determined that a 100-basis point change in the discount rate selected would not have impacted the test results. Additionally, the Company could reduce the terminal growth rate from its current 2.5% to 1.0% and the fair value of all reporting units would still exceed their carrying value.

Current wording

Our annual impairment testing at each reporting unit relied on assumptions surrounding general market conditions, short-term growth rates, a terminal growth rate of 2.5%, and detailed management forecasts of future cash flows prepared by the relevant reporting unit. Fair values were determined primarily by discounting estimated future cash flows at a weighted average cost of capital of 9.84%. During our annual impairment testing, we evaluated the sensitivity of our most critical assumption, the discount rate, and determined that a 100-basis point change in the discount rate selected would not have impacted the test results. Additionally, the Company could reduce the terminal growth rate from its current 2.5% to 1.0% and the fair value of all reporting units would still exceed their carrying value.

Previous wording

Cost of Employee Benefit Plans – We provide a range of benefits to certain retirees, including pensions and some postretirement benefits. We record expenses relating to these plans based upon various actuarial assumptions such as discount rates, assumed rates of return, compensation increases and turnover rates. The expected return on plan assets assumption of 6.4% in the U.S. 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 and considers the historical returns earned on the funds. We have analyzed the rates of return on assets used and determined that these rates are reasonable based on the plans’ historical performance relative to the overall markets as well as our current expectations for long-term rates of returns for our pension assets. The U.S. discount rate of 5.6% 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. We review our actuarial assumptions, including discount rate and expected long-term rate of return on plan assets, on at least an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Based on information provided by our actuaries and other relevant sources, we believe that our assumptions are reasonable.

Current wording

Cost of Employee Benefit Plans – We provide a range of benefits to certain retirees, including pensions and some postretirement benefits. We record expenses relating to these plans based upon various actuarial assumptions such as discount rates, assumed rates of return, compensation increases and turnover rates. The expected return on plan assets assumption of 6.35% in the U.S. 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 and considers the historical returns earned on the funds. We have analyzed the rates of return on assets used and determined that these rates are reasonable based on the plans’ historical performance relative to the overall markets as well as our current expectations for long-term rates of returns for our pension assets. The U.S. discount rate of 5.6% 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. We review our actuarial assumptions, including discount rate and expected long-term rate of return on plan assets, on at least an annual basis and make modifications to the assumptions based on current rates and trends when appropriate. Based on information provided by our actuaries and other relevant sources, we believe that our assumptions are reasonable.