STANDEX INTERNATIONAL CORP/DE/

Previous wording

Statements contained in this periodic report that are not based on historical facts are“forward-looking statements”* within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as*“should,”* “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company*’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include, but are not limited to: the impact of pandemics and other global crises or catastrophic events on employees, our supply chain, and the demand for our products and services around the world; materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, defense, transportation, food service equipment, consumer appliance, energy, oil and gas and general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics costs, especially with respect to transportation of goods from Asia; the impact of inflation on the costs of providing our products and services; an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations, cost reduction efforts including procurement savings and productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing techniques; the potential for losses associated with the exit from or divestiture of businesses that are no longer strategic or no longer meet our growth and return expectations; the inability to achieve the savings expected from global sourcing of raw materials and diversification efforts in emerging markets; the impact on cost structure and on economic conditions as a result of actual and threatened increases in trade tariffs; the inability to attain expected benefits from acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company; increased costs from acquisitions to improve and coordina…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Statements contained in this periodic report that are not based on historical facts are“forward-looking statements”* within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as*“should,”* “could,” “may,” “will,” “expect,” “believe,” “estimate,” “anticipate,” “intend,” “continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the Company*’s business and the results of its operations and that may cause the actual results of operations in future periods to differ materially from those currently expected or anticipated. These factors include, but are not limited to: the impact of pandemics and other global crises or catastrophic events on employees, our supply chain, and the demand for our products and services around the world; materially adverse or unanticipated legal judgments, fines, penalties or settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash; domestic and international economic conditions, including the impact, length and degree of economic downturns on the customers and markets we serve and more specifically conditions in the automotive, construction, aerospace, defense, transportation, food service equipment, consumer appliance, energy, oil and gas and general industrial markets; lower-cost competition; the relative mix of products which impact margins and operating efficiencies in certain of our businesses; the impact of higher raw material and component costs, particularly steel, certain materials used in electronics parts, petroleum based products, and refrigeration components; the impact of higher transportation and logistics costs, especially with respect to transportation of goods from Asia; the impact of inflation on the costs of providing our products and services; an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations, cost reduction efforts including procurement savings and productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing techniques; the potential for losses associated with the exit from or divestiture of businesses that are no longer strategic or no longer meet our growth and return expectations; the inability to achieve the savings expected from global sourcing of raw materials and diversification efforts in emerging markets; the impact on cost structure and on economic conditions as a result of actual and potential increases in trade tariffs; the inability to attain expected benefits from acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies envisioned by the Company; increased costs from acquisitions to improve and coordinat…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets. Headquartered in Salem, New Hampshire, we have six operating segments aggregated into five reportable segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions. Two operating segments are aggregated into Specialty Solutions. Our businesses work in close partnership with our customers to deliver custom solutions or engineered components that solve their unique and specific needs, an approach we call "Customer Intimacy".

Current wording

We are a diversified industrial manufacturer with leading positions in a variety of products and services that are used in diverse commercial and industrial markets. We are headquartered in Salem, New Hampshire, and have six operating segments aggregated into five reportable segments: Electronics, Engineering Technologies, Scientific, Engraving, and Specialty Solutions. Two operating segments are aggregated into Specialty Solutions. Our businesses work in close partnership with our customers to deliver custom solutions or engineered components that solve their unique and specific needs, an approach we call "Customer Intimacy".

Previous wording

The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. We use cash flow generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest in the strategic growth programs described above, including organic growth and acquisitions, and to return cash to our shareholders through payment of dividends and stock buybacks.

Current wording

The Company’s strong historical cash flow has been a cornerstone for funding our capital allocation strategy. We use cash flow generated from operations to fund investments in capital assets to upgrade our facilities, improve productivity and lower costs, invest in the strategic growth programs described above, including organic growth, and to return cash to our shareholders through payment of dividends and stock buybacks.

Previous wording

We incurred acquisition related expenses of $2.2 million in the third quarter of fiscal year 2025 and $20.4 million in the first nine months of fiscal year 2025. Acquisition related expenses typically consist of due diligence, advisory, legal, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Current wording

We incurred acquisition related expenses of $0.4 million in the first quarter of fiscal year 2026. Acquisition related expenses typically consist of due diligence, advisory, legal, integration, and valuation expenses incurred in connection with recent or pending acquisitions.

Previous wording

Income from operations for the third quarter of fiscal year 2025 was $26.3 million, compared to $21.8 million during the prior year quarter. The increase of $4.4 million, or 20.2%, is primarily due to contributions from recent acquisitions and productivity improvement initiatives, partially offset by lower organic sales and acquisition related costs.

Current wording

Income from operations for the first quarter of fiscal year 2026 was $29.6 million, compared to $24.1 million during the prior year quarter. The increase of $5.5 million, or 23.0%, is primarily due to the contributions from recent acquisitions and productivity improvement initiatives partially offset by increase in administrative and research and development expenses.

Previous wording

Interest expense for the third quarter of fiscal year 2025 was $8.4 million, an increase from interest expense of $0.9 million during the prior year quarter. Interest expense for the nine months ended March 31, 2025 was $14.9 million an increase from interest expense of $3.2 million during the prior year period. Our effective interest rate for the nine months ended March 31, 2025 was 6.00%.

Current wording

Interest expense for the first quarter of fiscal year 2026 was $8.9 million, an increase from interest expense of $7.9 million from the prior year quarter. Our effective interest rate for the three months ended September 30, 2025 was 6.10%.

Previous wording

The Company's effective tax rate from continuing operations for the third quarter of fiscal year 2025 and for the nine months ended March 31, 2025 was 29.6% and 1.1% compared with 21.4% and 22.5% for the prior year quarter and prior year period, respectively. The tax rate was impacted in the current period by the following items: (i) a discrete tax benefit related to the release of a previously recorded tax reserve for a one-time tax charge on historical foreign earnings, as the relevant statute of limitations expired during the quarter, (ii) the jurisdictional mix of earnings, (iii) foreign withholding taxes and (iv) federal research and development tax credits.

Current wording

The Company's effective tax rate from continuing operations for the first quarter of fiscal year 2026 and 2025 was 24.6% and 21.4%, respectively.

Previous wording

The tax rate was impacted in the prior period by the following items: (i) a discrete tax expense related to provision to return adjustments associated with federal research and development tax credits and the limitation on executive compensation, (ii) the jurisdictional mix of earnings and (iii) a discrete tax benefit related to foreign withholding taxes.

Current wording

The tax rate was impacted in the prior period by the following items: (i) a discrete tax benefit related to equity compensation, (ii) variations in the geographical mix of earnings, (iii) foreign withholding taxes, and (iv) tax credits related to federal research and development tax activities.

Previous wording

Total backlog realizable under one year increased $50.7 million, or 25.5%, to $249.9 million at March 31, 2025, from $199.2 million at March 31, 2024. The year over year increase is primarily driven by an additional $71.6 million in backlog for the recent acquisitions in the Electronics and Engineering Technologies segments.

Current wording

Total backlog realizable under one year increased $67.6 million, or 37.8%, to $246.3 million at September 30, 2025, from $178.7 million at September 30, 2024. The year over year increase is primarily driven by an additional $28.0 million and $25.4 million in backlog from the recent acquisitions in the Electronics and Engineering Technologies segments.

Previous wording

Income from operations in the third quarter of fiscal year 2025 increased by $9.8 million, or 62.2%, when compared to the prior year quarter. The operating income increase was the result of contributions from the recent acquisitions, productivity initiatives and product mix, partially offset by lower organic sales.

Current wording

Income from operations in the first quarter of fiscal year 2026 increased by $11.3 million, or 66.1%, when compared to the prior year quarter. The operating income increase was the result of contributions from the recent acquisitions, pricing initiatives and product mix.

Previous wording

In the fourth quarter of fiscal year 2025, on a sequential basis, we expect slightly higher revenue and similar to slightly higher operating margin, primarily driven by contributions from the Amran/Narayan acquisition, higher sales into fast growth end markets, and price realizations, partially offset by higher tariff cost and continued strategic growth investments.

Current wording

In the second quarter of fiscal year 2026, on a sequential basis, we expect slightly higher revenue from core businesses partially offset by lower sales from the Amran/Narayan Group due to the holiday season in India. We expect similar operating margin sequentially, primarily driven by product mix and continued strategic growth investments.

Previous wording

In the fourth quarter of fiscal year 2025, on a sequential basis, we expect similar to slightly higher revenue and similar operating margin.

Current wording

In the second quarter of fiscal year 2026, on a sequential basis, we expect moderately higher revenue due to growth in new product sales and similar operating margin.

Previous wording

Income from operations in the third quarter of fiscal year 2025 decreased $1.0 million, or 20.4%, when compared to the prior year quarter. The decrease is primarily driven by organic decline, partially offset by contributions from the acquisition.

Current wording

Income from operations in the first quarter of fiscal year 2026 decreased $0.1 million, or 1.5%, when compared to the prior year quarter due to organic decline partially offset by contribution from the acquisition.

Previous wording

Net sales in the third quarter of fiscal year 2025 decreased by $5.7 million, or 15.7%, when compared to the prior year quarter. Organic sales decreased by $4.6 million, or 12.7%, due to continued softness in North America from delays in new platform rollouts. Foreign currency negative impacts on net sales were $1.1 million, or 3.0%.

Current wording

Net sales in the first quarter of fiscal year 2026 increased by $2.5 million, or 7.4%, when compared to the prior year quarter. Organic sales increased by $1.8 million, or 5.6%, due to improved demand in Europe. Foreign currency negative impacts on net sales were $0.6 million, or 1.9%.

Previous wording

Income from operations in the third quarter of fiscal year 2025 decreased by $3.2 million, or 51.2%, when compared to the prior year quarter. The operating income decrease was driven by organic sales decreases due to lower demand, partially offset by the realization of previously announced productivity initiatives and restructuring actions.

Current wording

Income from operations in the first quarter of fiscal year 2026 increased by $0.7 million, or 12.2%, when compared to the prior year quarter. The operating income increase was driven by organic sales increase and the realization of previously announced productivity initiatives and restructuring actions.

Previous wording

In the fourth quarter of fiscal year 2025, on a sequential basis, we expect slightly higher revenue and moderately higher operating margin due to favorable project timing in Asia, slightly improved demand in North America and Europe, and realization of previously announced restructuring actions.

Current wording

In the second quarter of fiscal year 2026, on a sequential basis, we expect moderately lower sales and slightly lower operating margin due to project timing.

Previous wording

In the fourth quarter of fiscal year 2025, on a sequential basis, we expect moderately higher revenue and operating margin.

Current wording

In the second quarter of fiscal year 2026, on a sequential basis, we expect slightly higher revenue and operating margin.

Previous wording

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

Current wording

The restructuring and acquisition related costs have been discussed above in the Company Overview.

Previous 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. Net income (loss) from discontinued operations was less than $0.1 million for the three and nine months ended March 31, 2025, respectively. Net income (loss) from discontinued operations was less than $0.5 million for the three and nine months ended March 31, 2024, respectively.

Current wording

In pursuing our business strategy, we may divest certain businesses. Future divestitures may be classified as discontinued operations based on their strategic significance to the Company. Net income (loss) from discontinued operations was less than $0.1 million for the three months ended September 30, 2025 and less than $0.1 million for the three months ended September 30, 2024.

Previous wording

At March 31, 2025, our total cash balance was $109.8 million, of which $88.8 million was held by foreign subsidiaries. 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 September 30, 2025, our total cash balance was $98.7 million, of which $78.9 million was held by foreign subsidiaries. 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 nine months ended March 31, 2025, was $36.2 million compared to net cash provided by continuing operating activities of $64.6 million in the prior year. We generated $75.0 million from income statement activities and used $32.7 million of cash to fund working capital and other balance sheet increases. Cash flow used in investing activities for the nine months ended March 31, 2025 totaled $493.3 million and consisted of $477.4 million for the acquisition of businesses, net of cash acquired, $19.8 million used for capital expenditures offset by $3.5 million in life insurance proceeds and $0.4 million proceeds from sales of real estate and equipment. Cash used for financing activities for the nine months ended March 31, 2025 totaled $411.4 million and consisted primarily of borrowings of $792.3 million, repayments of $362.1 million, cash paid for dividends of $11.2 million, purchases of stock of $5.2 million, and $4.4 million in related financing fees.

Current wording

Net cash provided by continuing operating activities for the three months ended September 30, 2025, was $16.8 million compared to net cash provided by continuing operating activities of $17.5 million in the prior year. We generated $26.3 million from income statement activities and used $9.5 million of cash to fund working capital and other balance sheet increases. Cash flow used in investing activities for the three months ended September 30, 2025 totaled $6.4 million and consisted primarily of cash used for capital expenditures. Cash used for financing activities for the three months ended September 30, 2025 totaled $15.5 million and consisted primarily of repayments of borrowings of $8.0 million, cash paid for dividends of $3.8 million and activity under share-based payment plans of $1.1 million.

Previous wording

Under the terms of the Credit Facility, 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.

Current wording

Under the terms of the Credit Facility, 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 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.

Previous wording

During the second quarter of fiscal year 2025, the Company entered into a $250 million 364-day term loan with existing lenders. Also, during the period, we converted the 364-day term loan into an exercise of the accordion feature under our existing credit facilities. In connection with the conversion of the loan, the Company entered into a Second Amendment to Third Amended and Restated Credit Agreement. This amendment expanded the total available credit under the Revolving Credit Agreement from $500 million to $825 million.

Current wording

During the second quarter of fiscal year 2025, we entered into a $250 million 364-day term loan with existing lenders. Also, during the period, we converted the 364-day term loan into an exercise of the accordion feature under our existing credit facilities. In connection with the conversion of the loan, we entered into a Second Amendment to Third Amended and Restated Credit Agreement. This amendment expanded the total available credit under the Revolving Credit Agreement from $500 million to $825 million. As of September 30, 2025, we used $1.9 million against the letter of credit sub-facility and had the ability to borrow $197.6 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. Current financial covenants under the facility are as follows:

Previous wording

Interest Coverage RatioThe 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 also allows for unlimited non-cash purchase accounting and goodwill adjustments. At March 31, 2025, the Company’s Interest Coverage Ratio was 9.42:1.

Current wording

Interest Coverage RatioWe are 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 also allows for unlimited non-cash purchase accounting and goodwill adjustments. At September 30, 2025, the Interest Coverage Ratio was 4.62:1.

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 March 31, 2025, the Company’s leverage ratio was 2.78:1.

Current wording

Leverage Ratio The 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 September 30, 2025, the leverage ratio was 2.62:1.

Previous wording

As of March 31, 2025, we had borrowings under our facility of $579.4 million. In order to manage our interest rate exposure on these borrowings, we are party to $25.0 million of active floating to fixed rate swaps. These swaps convert our interest payments from SOFR to a weighted average fixed rate of 0.81%. The effective rate of interest for our outstanding borrowings, including the impact of the interest rate swaps, was 5.63%.

Current wording

As of September 30, 2025, we had borrowings under our facility of $544.6 million. In order to manage our interest rate exposure on these borrowings, we are party to $225 million of active floating to fixed rate swaps. These swaps convert our interest payments from SOFR to a weighted average fixed rate of 3.48%. The effective rate of interest for our outstanding borrowings, including the impact of the interest rate swaps, was 6.10%.

Previous wording

Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends. Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. We expect fiscal year 2025 capital spending to be between $30.0 million and $35.0 million. We expect that fiscal year 2025 depreciation and amortization expense will be between $20.0 million and $22.0 million and $12.5 million and $14.5 million, respec tively.

Current wording

Our primary cash requirements in addition to day-to-day operating needs include interest payments, capital expenditures, acquisitions, share repurchases, and dividends. Our primary sources of cash for these requirements are cash flows from continuing operations and borrowings under the facility. We expect fiscal year 2026 capital spending to be between $33.0 million and $38.0 million. 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

The fair value of the Company's U.S. defined benefit pension plan assets was $144.1 million at March 31, 2025, as compared to $142.3 million at the most recent measurement date, which occurred as of June 30, 2024. The next measurement date to determine plan assets and benefit obligations will be on June 30, 2025.

Current wording

The fair value of our U.S. defined benefit pension plan assets was $149.7 million at September 30, 2025, as compared to $146.4 million at the most recent measurement date, which occurred as of June 30, 2025. The next measurement date to determine plan assets and benefit obligations will be on June 30, 2026.

Previous wording

The Company expects to pay $0.1 million in contributions to its defined benefit plans during the remainder of fiscal year 2025. Contributions of $6.2 million and $8.5 million were made during the nine months ended March 31, 2025 and March 31, 2024, respectively. The Company expects to make contributions during the remainder of fiscal year 2025 of $0.2 million and $0.3 million to its unfunded defined benefit plans in the U.S. and Germany, respectively. There are no required contributions to the plans in Japan or the U.K. Any subsequent plan contributions will depend on the results of future actuarial valuations.

Current wording

Contributions of $1.3 million and $3.4 million were made during the three months ended September 30, 2025 and 2024, respectively. We expect to pay $5.7 million in contributions to our defined benefit plans during the remainder of fiscal year 2026 comprising of $5.4 million and $0.3 million to our unfunded defined benefit plans in the U.S. and Germany, respectively. There are no required contributions to the plans in Japan or the U.K. 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 two retired executives. Current executives and new hires are not eligible for this program. During the second quarter of fiscal year 2025, we received $3.5 million in proceeds under this program. At March 31, 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.

Current wording

We have an insurance program in place to fund supplemental retirement income benefits for two retired executives. Current executives and new hires are not eligible for this program. At September 30, 2025, the underlying policies had a cash surrender value of $6.5 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

*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.

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 our maximum exposure. 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

Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial assumptions such as discount rates, mortality rates, and assumed rates of returns. The Company’s pension plan is frozen for substantially all eligible U.S. employees and participants in the plan ceased accruing future benefits.

Current wording

Defined Benefit Pension Plans – We record expenses related to these plans based upon various actuarial assumptions such as discount rates, mortality rates, and assumed rates of returns. Our pension plan is frozen for substantially all eligible U.S. employees and participants in the plan ceased accruing future benefits.

Previous wording

Employee Relations – The Company has labor agreements with several union locals in the United States and several European employees belong to European trade unions.

Current wording

Employee Relations – We have labor agreements with several union locals in the United States and several European employees belong to European trade unions.