Standex(SXI) - 2023 Q4 - Annual Report

FORM 10-K Cover Page Form 10-K Details This section identifies the annual report (Form 10-K) for Standex International Corporation for FY2023, detailing company information, stock listing, and filer status Form 10-K Key Details | Detail | Value | | :--- | :--- | | Fiscal Year Ended | June 30, 2023 | | Commission File Number | 001-07233 | | Registrant Name | STANDEX INTERNATIONAL CORPORATION | | State of Incorporation | Delaware | | Trading Symbol | SXI | | Exchange | New York Stock Exchange | | Filer Status | Large accelerated filer | | Common Stock Outstanding (Aug 3, 2023) | 11,848,938 shares | | Market Value of Non-Affiliate Equity (Dec 31, 2022) | ~$1,202,032,050 | Forward Looking Statement Risk Factors for Forward-Looking Statements This section outlines factors that could cause actual results to differ from forward-looking statements, including economic conditions, competition, and acquisition challenges - Forward-looking statements are subject to risks including pandemics, economic downturns, financial market volatility, competition, rising raw material and logistics costs, and challenges in integrating acquisitions[7] PART I Item 1. Business Standex is a diversified industrial manufacturer with five segments, focusing on custom solutions and growth in high-potential markets through strategic portfolio management - Standex is a diversified industrial manufacturer with five reportable segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions, focusing on custom solutions and growth in high-potential markets[8] - Growth strategy includes increasing presence in rapidly growing markets (renewable energy, EVs, smart power grid, military/defense, life sciences), new product development, geographic expansion, and strategic acquisitions[8] Company Overview Standex is a diversified industrial manufacturer focused on custom solutions and growth in high-potential markets through strategic investments and strong cash flow - Standex operates with five reportable segments: Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions, focusing on 'Customer Intimacy' to deliver custom solutions[8] - The company's growth strategy targets rapidly growing markets like renewable energy, electric vehicles, smart power grids, military and defense, and life sciences, supported by organic and inorganic investments[8][11][12] - Strong historical cash flow is used to fund capital investments, strategic growth programs (organic and inorganic), and return cash to shareholders through dividends and stock buybacks[13] Description of Segments Electronics The Electronics group provides global sensing, switching, and magnetic power conversion components, designing innovative solutions for OEMs in diverse markets like electrification, security, and medical - Electronics group provides sensing, switching, and magnetic power conversion components globally, focusing on innovative solutions for OEM customers[15] - Key end-user markets include appliances, electrification (EVs, solar, smart-grid), security, military, medical, aerospace, and transportation[17] - Products include reed switches, Hall effect sensors, custom wound transformers, and inductors[19] Engraving The Engraving group is a global leader in custom textures and surface finishes for tooling used in consumer goods and automotive products, offering services from design to tool maintenance - Engraving group is a global leader in custom textures and surface finishes for tooling in consumer goods and automotive products, operating in 19 countries[22] - Services include bespoke texture design, prototype verification, mold engraving, enhancement, polishing, on-site support, and soft trim tooling production[23] - Technologies include laser engraving for superior features and chemical engraving for seamless textures, supported by Digital Transfer Technology[29] Scientific The Scientific business provides specialty temperature-controlled equipment for medical, scientific, pharmaceutical, biotech, and industrial markets, used to control critical healthcare products and samples - Scientific business offers specialty temperature-controlled equipment for medical, scientific, pharmaceutical, biotech, and industrial markets[30][33] - Products include laboratory/medical grade refrigerators, freezers, cryogenic storage tanks, and environmental stability chambers, used in hospitals, pharmacies, and various laboratories[32][40] Engineering Technologies The Engineering Technologies Group (ETG) provides innovative, metal-formed solutions for OEM and Tier 1 manufacturers, specializing in large dimensions, complex shapes, and single-piece construction for space, aviation, defense, energy, and medical markets - Engineering Technologies Group (ETG) delivers innovative, metal-formed solutions for OEM and Tier 1 manufacturers, focusing on reducing weight, material cost, and complexity[35][36] - Spincraft products serve space (launch vehicles, engines), aviation (aircraft engines, fuel systems), defense (missiles, naval propulsion), and energy markets (gas turbines, oil & gas exploration)[39][41][56] Specialty Solutions Specialty Solutions comprises Federal Industries (merchandising display cases) and Custom Hoists (hydraulic cylinders), both focused on custom solutions for retail, food service, construction, refuse, and mining applications - Specialty Solutions includes Federal Industries (merchandising display cases for retail/food service) and Custom Hoists (engineered hydraulic cylinders for demanding applications)[44] - Federal Industries custom designs display cases for bakeries, delis, and packaged foods in convenience stores, restaurants, and institutions[45][48] - Custom Hoists products are used in dump trucks, garbage trucks, container roll-off vehicles, and underground mining vehicles[46][49] Other Business Aspects Working Capital The primary source of working capital is cash generated from continuing operations, with no special working capital needs beyond the normal course of business for any segment - Primary source of working capital is cash from continuing operations; no special working capital needs for any segment[55] Competition Standex operates in competitive markets, differentiating itself through "Customer Intimacy" by providing tailored solutions based on industry expertise, product performance, technology, price, delivery, and quality of services - Standex faces competition in all product groups from domestic and foreign producers, based on industry expertise, product performance, technology, price, delivery, and service quality[58] - The company competes on 'Customer Intimacy,' applying expertise and technology to address customer needs with tailored solutions[58] International Operations Standex conducts international operations at 37 locations globally, with net sales from international operations decreasing to 39% in FY2023, subject to risks like exchange controls and currency fluctuations - International operations are conducted at 37 locations globally, including Europe, Canada, China, Japan, India, Mexico, and South Africa[59] Net Sales from International Operations | Metric | FY2022 | FY2023 | Change | | :--- | :--- | :--- | :--- | | Net Sales from International Operations | 42% | 39% | -3% | - International operations are exposed to risks including exchange controls, price controls, repatriation restrictions, and currency exchange rate changes[59] Research and Development The company invests in research and development to design new products, enhance existing ones, and provide customized solutions, continuously improving methods, processes, and equipment - R&D focuses on developing new products, enhancing existing ones, and providing customized solutions to meet customer needs, driving continuous improvement in methods and equipment[60] Environmental Matters Standex believes it is in substantial compliance with all applicable environmental laws and regulations, anticipating no material impact on future capital expenditures, earnings, or competitive position - Company believes it is in substantial compliance with environmental laws and regulations, anticipating no material impact on future capital expenditures, earnings, or competitive position from environmental matters[61] Human Capital Resources As of June 30, 2023, Standex employs approximately 3,800 individuals globally, focusing on competitive compensation, open communication, safety, and an inclusive working environment - As of June 30, 2023, Standex employs approximately 3,800 employees globally, with 1,200 in the U.S., emphasizing competitive wages, benefits, and open communication[62] - Focus areas include enhancing safety culture, monitoring Total Recordable Incident Rate, and promoting an inclusive working environment through the Inclusion Advisory Council and Women and Leadership Employee Resource Group[62][63][65] Executive Officers of Standex This section lists the executive officers of Standex International Corporation as of June 30, 2023, including their age and principal occupations over the past five years Executive Officers | Name | Age | Principal Occupation | | :--- | :--- | :--- | | David Dunbar | 61 | President and Chief Executive Officer (since Jan 2014) | | Ademir Sarcevic | 48 | Vice President and Chief Financial Officer (since Sep 2019) | | Alan J. Glass | 59 | Vice President, Chief Legal Officer and Secretary (since Apr 2016) | | Sean Valashinas | 52 | Vice President, Chief Accounting Officer and Assistant Treasurer (since Oct 2007) | | Annemarie Bell | 59 | Vice President, Chief Human Resources Officer (since Jul 2021) | Item 1A. Risk Factors The company faces various risks including global health crises, economic downturns, reliance on credit facilities, international business risks, operational challenges, legal and regulatory compliance, and cybersecurity threats - Risks include global health crises, economic downturns (inflation, recession), and reliance on credit facilities[71][72][74] - International operations face risks from currency fluctuations, government regulations, and political instability[75] - Operational risks include failure to achieve cost savings, intense competition, inability to introduce new products, commodity price volatility, tariffs, and acquisition integration difficulties[76][78][79][80][81][84] - Legal and regulatory risks encompass anti-bribery violations, environmental compliance, product regulations, and potential legal judgments[77][86][87][91] - Other significant risks include natural disasters, geopolitical conflicts (Ukraine war), dependence on key personnel, liabilities from divestitures, stock price volatility, pension funding, and cybersecurity threats[92][93][94][95][96][97][98][99] Item 1B. Unresolved Staff Comments There are no unresolved staff comments - No unresolved staff comments[101] Item 2. Properties Standex operates 56 facilities globally, including manufacturing plants, service centers, and warehouses, with 16 owned and the rest leased, totaling 2,410 thousand square feet - Standex operates 56 facilities globally (16 owned, 40 leased) totaling 2,410 thousand square feet[102] Standex Properties by Segment | Segment | Number of Locations | Leased (in thousands sq ft) | Owned (in thousands sq ft) | Total (in thousands sq ft) | | :--- | :--- | :--- | :--- | :--- | | Electronics | 14 | 281 | 272 | 553 | | Engraving | 33 | 856 | 149 | 1,005 | | Scientific | 1 | 164 | - | 164 | | Engineering Technologies | 3 | 190 | 171 | 361 | | Specialty Solutions | 3 | 109 | 198 | 307 | | Corporate & Other | 2 | 20 | - | 20 | | Total | 56 | 1,620 | 790 | 2,410 | Item 3. Legal Proceedings Discussion of legal matters is incorporated by reference to Note 12, "CONTINGENCIES," in the Notes to the Consolidated Financial Statements - Legal matters are referenced in Note 12, 'CONTINGENCIES,' of the Consolidated Financial Statements[105] Item 4. Mine Safety Disclosures This item is not applicable - Mine Safety Disclosures are not applicable[106] PART II Item 5. Market for Standex Common Stock Related Stockholder Matters and Issuer Purchases of Equity Securities Standex Common Stock (SXI) is traded on the NYSE, with approximately 1,170 stockholders as of July 31, 2023, and the company repurchased 50,870 shares during Q4 FY23 under an open-ended $200 million buyback program - Standex Common Stock (SXI) is traded on the New York Stock Exchange, with approximately 1,170 stockholders of record as of July 31, 2023[107] Issuer Purchases of Equity Securities (Q4 FY23) | Period | Total Shares Purchased | Average Price Paid per Share | Maximum Value Remaining Under Program (in thousands) | | :--- | :--- | :--- | :--- | | April 1 - April 30, 2023 | 242 | $122.44 | $72,086 | | May 1 - May 31, 2023 | 50,000 | $137.46 | $65,213 | | June 1 - June 30, 2023 | 628 | $141.47 | $65,124 | | TOTAL (Q4 FY23) | 50,870 | $137.44 | $65,124 | - The company has an open-ended stock buyback program authorizing up to $200 million in repurchases, most recently amended on April 28, 2022[108] Item 6. Selected Consolidated Financial Data This item is not applicable, indicating that selected consolidated financial data is not presented separately here - Selected Consolidated Financial Data is not applicable[112] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Standex's financial performance, condition, and strategic portfolio transformations, including consolidated results, segment analysis, liquidity, capital resources, and critical accounting policies Overview Standex has transformed its portfolio through strategic acquisitions and divestitures to focus on high-value end markets and customized solutions, leveraging strong cash flow for growth and shareholder returns while improving operational efficiency - Standex has transformed its portfolio by divesting non-strategic businesses (Procon, Enginetics) and acquiring companies (Minntronix, Sensor Solutions, Renco Electronics) to focus on high-value end markets and customized solutions[114][115] - Strong historical cash flow funds capital investments, strategic growth, and shareholder returns (dividends, stock buybacks)[116] - Restructuring efforts aim to improve operational efficiency, reduce costs, and enhance competitive position through facility consolidations, headcount reductions, and process improvements[117] Consolidated Results from Continuing Operations For FY2023, net sales increased slightly by 0.8% to $741.0 million, driven by organic growth and acquisitions, while income from operations surged by 93.8% to $171.1 million due to a $62.1 million gain on the Procon divestiture, and the effective income tax rate decreased to 15.1% Consolidated Results from Continuing Operations | Metric | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | YoY Change (FY23 vs FY22) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $741,048 | $735,339 | $656,232 | +0.8% | | Gross profit margin | 38.5% | 36.7% | 36.8% | +1.8 pp | | Restructuring costs | $3,831 | $4,399 | $3,478 | -12.9% | | Acquisition related expenses | $557 | $1,618 | $931 | -65.6% | | Other operating (income) expense, net | $(611) | $5,745 | $- | -110.6% | | (Gain) loss on sale of business | $(62,105) | $- | $14,624 | N/A | | Income from operations | $171,089 | $88,294 | $59,165 | +93.8% | | Backlog (realizable within 1 year) | $238,050 | $256,248 | $210,491 | -7.1% | | Interest expense | $5,405 | $5,874 | $5,992 | -8.0% | | Provision for income taxes | $24,796 | $19,807 | $14,157 | +25.2% | | Effective income tax rate | 15.1% | 24.4% | 26.9% | -9.3 pp | | Capital expenditures | $24,300 | $23,900 | $21,752 | +1.7% | Component of Sales Change | Component of Sales Change | FY2023 vs FY2022 (in thousands) | % of FY2022 Sales | | :--- | :--- | :--- | | Organic sales change | $39,639 | +5.7% | | Effect of acquisitions | $1,919 | +0.3% | | Effect of exchange rates | $(23,902) | -3.3% | | Effect of business divestitures | $(11,947) | -1.9% | | Net Sales Change | $5,710 | +0.8% | - Gross profit margin increased to 38.5% in FY2023 from 36.7% in FY2022, driven by organic sales growth and productivity initiatives, offsetting inflationary impacts[126] - Income from operations increased by $82.8 million (93.8%) in FY2023, primarily due to a $62.1 million gain on the Procon divestiture, organic sales growth, and cost reduction efforts[137] - Effective income tax rate decreased to 15.1% in FY2023, benefiting from income mix in various jurisdictions, foreign tax credits, Federal R&D tax credits, and a partial release of valuation allowance on capital loss carryforwards[141][142] - Total backlog realizable within one year decreased by 7.1% to $238.1 million at June 30, 2023, due to organic changes and divestitures[148] Segment Analysis Electronics Segment In FY2023, Electronics net sales increased by 0.5% to $305.9 million, with organic sales up 4.5% driven by industrial and electrification markets, though income from operations decreased by 2.1% due to inflationary impacts and foreign exchange Electronics Segment Performance | Metric | FY2023 (in thousands) | FY2022 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net sales | $305,872 | $304,290 | +0.5% | | Income from operations | $68,979 | $70,428 | -2.1% | | Operating income margin | 22.6% | 23.1% | -0.5 pp | - Organic sales increased by 4.5% in FY2023, driven by positive trends in industrial applications, power management, renewable energy technologies, and electric vehicle related applications[153] - Income from operations decreased due to inflationary impacts, mix, and foreign exchange, partially offset by organic sales growth and cost-saving initiatives[154] - Outlook for Q1 FY2024 expects slightly higher revenue primarily due to the recently announced acquisition and continued strength in fast-growth end markets, partially offset by continued slow recovery in China and Europe[155] Engraving Segment Engraving net sales increased by 4.0% to $152.1 million in FY2023, with organic sales up 9.8% due to customer project timing, and income from operations increased by 16.7% reflecting organic growth and productivity actions Engraving Segment Performance | Metric | FY2023 (in thousands) | FY2022 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net sales | $152,067 | $146,255 | +4.0% | | Income from operations | $25,462 | $21,825 | +16.7% | | Operating income margin | 16.7% | 14.9% | +1.8 pp | - Organic sales increased by 9.8% in FY2023 due to timing of customer projects, partially offset by a 5.8% negative foreign exchange impact[158] - Income from operations increased by 16.7% due to organic sales growth and productivity actions, offsetting foreign exchange impacts[159] Scientific Segment Scientific net sales decreased by 10.6% to $74.9 million in FY2023 due to lower COVID-19 vaccine cold storage demand, though income from operations decreased by a smaller 4.2% due to pricing and productivity Scientific Segment Performance | Metric | FY2023 (in thousands) | FY2022 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net sales | $74,924 | $83,850 | -10.6% | | Income from operations | $17,109 | $17,861 | -4.2% | | Operating income margin | 22.8% | 21.3% | +1.5 pp | - Net sales decreased by 10.6% in FY2023 due to lower demand for COVID-19 vaccine cold storage, partially offset by pricing actions[161] - Income from operations decreased by 4.2% due to lower sales volume, but was partially offset by pricing, productivity actions, and lower oceanic freight costs[163] Engineering Technologies Segment Engineering Technologies net sales increased by 3.8% to $81.1 million in FY2023, driven by a 5.3% organic sales increase from new product development in aerospace and defense, with income from operations rising by 25.9% due to productivity and volume Engineering Technologies Segment Performance | Metric | FY2023 (in thousands) | FY2022 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net sales | $81,079 | $78,117 | +3.8% | | Income from operations | $11,050 | $8,776 | +25.9% | | Operating income margin | 13.6% | 11.2% | +2.4 pp | - Organic sales increased by 5.3% in FY2023, primarily from new product development in aerospace and defense markets[166] - Income from operations increased by 25.9% due to productivity initiatives, volume increases, and the non-recurrence of a one-time project charge from FY2022[167] - Outlook for Q1 FY2024 expects a significant decrease in revenue due to project timing, but long-term demand remains robust with current backlog and new platform development[168] Specialty Solutions Segment Specialty Solutions net sales increased by 3.5% to $127.1 million in FY2023, with organic sales up 13.6% (excluding Procon divestiture) due to pricing and strong demand, leading to a 62.8% surge in income from operations Specialty Solutions Segment Performance | Metric | FY2023 (in thousands) | FY2022 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net sales | $127,106 | $122,827 | +3.5% | | Income from operations | $25,368 | $15,579 | +62.8% | | Operating income margin | 20.0% | 12.7% | +7.3 pp | - Organic sales increased by 13.6% (excluding Procon) in FY2023, driven by pricing realization, strong market demand, and the absence of prior-year labor work stoppages[171] - Income from operations increased by 62.8% due to sales increases in Display Merchandising, pricing actions, and the positive impact of resolving prior-year labor work stoppages[172] Corporate, Restructuring and Other Corporate expenses increased by 2.3% in FY2023 due to compensation and R&D costs, with this section also including the $62.1 million gain on the Procon business sale, restructuring, and acquisition-related costs Corporate, Restructuring and Other Performance | Metric | FY2023 (in thousands) | FY2022 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Corporate | $(35,207) | $(34,413) | +2.3% | | Gain (loss) on sale of business | $62,105 | $- | N/A | | Restructuring costs | $(3,831) | $(4,399) | -12.9% | | Acquisition related costs | $(557) | $(1,618) | -65.6% | | Other operating income (expense), net | $611 | $(5,745) | +110.6% | - Corporate expenses increased by 2.3% in FY2023 due to employee compensation accruals and research and development costs[175] Discontinued Operations The company may divest businesses classified as discontinued operations based on strategic significance, with a net loss from discontinued operations of $0.161 million for FY2023 Discontinued Operations Net Income (Loss) | Metric | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | Profit (loss) before taxes | $(204) | $(113) | $(2,620) | | Benefit (provision) for taxes | $43 | $24 | $550 | | Net income (loss) from discontinued operations | $(161) | $(89) | $(2,070) | Liquidity and Capital Resources As of June 30, 2023, Standex had $195.7 million in cash, with net cash from operating activities increasing to $90.8 million, and maintained strong financial covenants under its renewed $500 million revolving credit facility, resulting in a net cash position - Total cash balance was $195.7 million in FY2023, with $98.6 million held outside the U.S[178] - Company renewed its $500 million revolving credit facility (maturing Feb 2028), with an ability to borrow $371.5 million as of June 30, 2023[187][189] Financial Covenants (as of June 30, 2023) | Financial Covenant | Required Ratio | Actual Ratio | | :--- | :--- | :--- | | Interest Coverage Ratio | >= 2.75:1 | 20.61:1 | | Leverage Ratio (Funded Debt to Adjusted EBITDA) | <= 3.5:1 | 0.84:1 | - Stockholders' equity increased by $108.1 million year-over-year, primarily due to $139.0 million net income, offset by $38.5 million returned to shareholders[195] - Net (cash) debt to capital percentage improved to (3.8)% at June 30, 2023, from 12.3% in the prior year, indicating a net cash position[195] Cash Flow In FY2023, net cash from operating activities was $90.8 million, investing activities provided $41.6 million (mainly from Procon divestiture proceeds), and financing activities used $40.0 million for stock repurchases and dividends Cash Flow Activities | Cash Flow Activity | FY2023 (in thousands) | FY2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $90,801 | $77,716 | | Net cash provided by (used for) investing activities | $41,563 | $(31,044) | | Net cash (used for) financing activities | $(40,038) | $(69,426) | - Investing activities in FY2023 generated $41.6 million, primarily from $67.0 million proceeds from Procon divestiture, offset by $24.3 million in capital expenditures[180] - Financing activities used $40.0 million, including $25.5 million for stock repurchases and $13.0 million for dividends[180] Retirement Plans The U.S. pension plan is frozen with $142.1 million in assets at June 30, 2023, and the company expects to contribute $10.2 million to its pension plans in FY2024, covered by existing liquidity - U.S. pension plan is frozen, with assets valued at $142.1 million as of June 30, 2023[183] - Expected pension contributions for fiscal year 2024 are $10.2 million, which are expected to be covered by operating cash flows and available liquidity[184][185] Capital Structure Standex renewed its $500 million revolving credit facility, with $175.0 million in borrowings at an effective interest rate of 2.97% (mitigated by swaps), leading to a $108.1 million increase in stockholders' equity and a net cash position - Company renewed its $500 million revolving credit facility, maturing in February 2028, with $175.0 million in borrowings as of June 30, 2023[187][189][325][329] - Effective interest rate on borrowings was 2.97%, with $175.0 million of floating-to-fixed rate swaps converting interest payments to a weighted average rate of 1.13%[192][329][334] Capital Structure Metrics | Metric | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Long-term debt | $173,441 | $174,830 | | Cash and cash equivalents | $195,706 | $104,844 | | Net (cash) debt | $(22,265) | $69,986 | | Stockholders' equity | $607,449 | $499,343 | | Total capitalization | $585,184 | $569,329 | - Stockholders' equity increased by $108.1 million, and the net (cash) debt to capital percentage shifted to (3.8)% from 12.3% in the prior year[195] Other Matters This section addresses factors impacting the company, including inflationary pressures, foreign currency risks, pension plans, environmental compliance, low seasonality, and labor agreements - Company faces inflationary pressures on wages, benefits, and raw material costs (rhodium, steel, other metals), which it attempts to mitigate through price increases[199] - Primary functional currencies for non-U.S. subsidiaries are Euro, British Pound Sterling, Japanese Yen, and Chinese Yuan, exposing the company to foreign currency translation risk[200] - U.S. defined benefit pension plan is frozen, and the company believes it is in substantial compliance with environmental laws[200][201] - The business generally experiences low levels of seasonality and has labor agreements with four U.S. union locals and various European trade unions[202] Critical Accounting Policies Key accounting policies involve significant estimates and judgments for revenue recognition, accounts receivable, inventory valuation, goodwill and intangible asset impairment, employee benefit plans, and business combinations - Revenue is recognized at the point control transfers to the customer, or over time for highly customized long-term contracts in Engineering Technologies and Engraving[204][206][271] - Accounts receivable are reduced by an allowance for expected credit losses, based on specific accounts and pooled asset reviews[207][243] - Inventories are valued at the lower of cost or market, with write-downs for obsolete or excess inventory based on usage forecasts[208][246] - Goodwill and indefinite-lived intangible assets are tested for impairment annually using discounted cash flow models, with six reporting units identified for testing[209][210][314][315][316] - Cost of employee benefit plans relies on actuarial assumptions like discount rates and expected return on plan assets[214] - Business combinations accounting requires estimates for future cash flows and allocation to identifiable intangible assets, subject to adjustment during the measurement period[217][218] Item 7A. Quantitative and Qualitative Disclosures About Market Risk Standex is exposed to market risks from changes in interest rates, commodity prices, and foreign currency exchange rates, which the company mitigates through selective use of financial instruments for hedging - Company is exposed to market risks from interest rates, commodity prices, and foreign currency exchange, mitigated by selective use of financial instruments for hedging[220] Exchange Risk Standex is exposed to transactional and translation foreign exchange risks, primarily with EUR, GBP, MXN, JPY, and CNY, which are mitigated by natural hedges, forward foreign currency contracts, and cross-currency swaps - Exposed to transactional and translation exchange risks, primarily with EUR, GBP, MXN, JPY, and CNY[221][222] - Transactional risk is mitigated by natural hedges and forward foreign currency contracts; translation risk by cross-currency swaps[221][222] - A hypothetical 10% appreciation or depreciation of foreign currencies would not materially change operations, financial position, or cash flows[222] Notional Amounts of Foreign Exchange Contracts | Currency | Notional Amount (in thousands) - FY2023 | Notional Amount (in thousands) - FY2022 | | :--- | :--- | :--- | | EUR | - | 5,750 | | CAD | 16,600 | 16,600 | | JPY | 2,100,000 | 1,000,000 | Interest Rate The company's interest rate exposure on variable rate borrowings is mitigated by $175.0 million in floating-to-fixed rate swaps, converting SOFR-based interest to a weighted average fixed rate of 1.13% - Interest rate exposure on variable rate borrowings is mitigated by $175.0 million in active floating-to-fixed rate swaps[224] - Swaps convert SOFR-based interest to a weighted average fixed rate of 1.13%, making a 25-basis point interest rate increase immaterial to annual interest expense[224] Interest Rate Metrics | Metric | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Effective interest rate on borrowings | 2.97% | 2.53% | | Fair value of interest rate swaps (assets) | $10.2 million | $8.4 million | Concentration of Credit Risk Credit risk is minimized due to a diversified customer base and geographical dispersion, with no single customer accounting for more than 5% of consolidated outstanding receivables or sales - Credit risk is minimized by a diversified customer base and geographical dispersion; no single customer accounts for more than 5% of receivables or sales[225][270] Commodity Prices Standex is exposed to fluctuating market prices for key commodities like steel, aluminum, rhodium, copper, and petroleum-based products, which it attempts to offset through price adjustments to customers - Exposed to fluctuating prices for commodities like steel, aluminum, rhodium, copper, and petroleum-based products[226][227] - Attempts to offset price increases by implementing price adjustments to customers, but competitive factors may limit success[227] Item 8. Financial Statements and Supplementary Data This section presents Standex's audited consolidated financial statements for FY2023, 2022, and 2021, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes and the independent auditor's report Consolidated Balance Sheets As of June 30, 2023, total assets increased to $1,024.9 million from $934.4 million in 2022, driven by higher cash, while stockholders' equity significantly increased to $607.4 million Consolidated Balance Sheets | Metric | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total assets | $1,024,929 | $934,439 | | Cash and cash equivalents | $195,706 | $104,844 | | Accounts receivable, net | $123,440 | $117,075 | | Inventories | $98,537 | $105,339 | | Goodwill | $264,821 | $267,906 | | Total current liabilities | $140,967 | $150,768 | | Long-term debt | $173,441 | $174,830 | | Total stockholders' equity | $607,449 | $499,343 | - Total assets increased to $1,024.9 million in FY2023, primarily due to a significant increase in cash and cash equivalents[229] - Stockholders' equity increased by $108.1 million to $607.4 million, reflecting strong financial performance[229] Consolidated Statements of Operations For FY2023, net sales were $741.0 million, with gross profit improving to $285.1 million (38.5% margin), and net income significantly increased to $139.0 million (diluted EPS of $11.58) largely due to a $62.1 million gain on a business sale Consolidated Statements of Operations | Metric | FY2023 (in thousands, except per share) | FY2022 (in thousands, except per share) | FY2021 (in thousands, except per share) | | :--- | :--- | :--- | :--- | | Net sales | $741,048 | $735,339 | $656,232 | | Gross profit | $285,096 | $269,946 | $241,261 | | Income from operations | $171,089 | $88,294 | $59,165 | | Net income | $138,992 | $61,393 | $36,473 | | Basic earnings per share | $11.77 | $5.13 | $3.00 | | Diluted earnings per share | $11.58 | $5.06 | $2.97 | - Net income more than doubled to $139.0 million in FY2023, primarily due to a $62.1 million gain on the sale of the Procon business[230] - Diluted EPS increased to $11.58 in FY2023 from $5.06 in FY2022[230] Consolidated Statements of Comprehensive Income Net income for FY2023 was $139.0 million, with an other comprehensive loss of $(5.2) million primarily from foreign currency translation and pension actuarial losses, resulting in total comprehensive income of $133.8 million Consolidated Statements of Comprehensive Income | Metric | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | | Net income | $138,992 | $61,393 | $36,473 | | Other comprehensive income (loss), net of tax | $(5,165) | $(37,172) | $31,519 | | Comprehensive income | $133,827 | $24,221 | $67,992 | - Other comprehensive loss in FY2023 was $(5.2) million, mainly from foreign currency translation losses and pension actuarial losses, partially offset by derivative gains[232] Consolidated Statements of Stockholders' Equity Total stockholders' equity significantly increased to $607.4 million at June 30, 2023, driven by $139.0 million net income and stock-based compensation, partially offset by treasury stock repurchases and dividends Consolidated Statements of Stockholders' Equity | Metric | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total Stockholders' Equity | $607,449 | $499,343 | | Retained Earnings | $1,027,279 | $901,421 | | Treasury Stock (amount) | $(403,884) | $(381,942) | | Dividends Declared | $(13,134) | $(12,461) | | Treasury Stock Acquired | $(25,638) | $(31,425) | - Total stockholders' equity increased by $108.1 million, primarily due to net income of $139.0 million and stock-based compensation, despite $25.6 million in treasury stock repurchases and $13.1 million in dividends[234] Consolidated Statements of Cash Flows Net cash from operating activities was $90.8 million in FY2023, investing activities provided $41.6 million (driven by the Procon divestiture), and financing activities used $40.0 million, leading to an increase in cash and cash equivalents to $195.7 million Consolidated Statements of Cash Flows | Cash Flow Activity | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $90,801 | $77,716 | $83,582 | | Net cash provided by (used for) investing activities | $41,563 | $(31,044) | $(39,091) | | Net cash (used for) financing activities | $(40,038) | $(69,426) | $(31,732) | | Net change in cash and cash equivalents | $90,862 | $(31,523) | $17,558 | | Cash and cash equivalents at end of year | $195,706 | $104,844 | $136,367 | - Investing activities generated $41.6 million in FY2023, primarily from $67.0 million in proceeds from the Procon divestiture, net of $24.3 million in capital expenditures[236] - Financing activities used $40.0 million, including $25.5 million for treasury stock purchases and $13.0 million for cash dividends paid[236] Notes to Consolidated Financial Statements Note 1. Summary of Accounting Policies This note details significant accounting policies, including basis of presentation, use of estimates, revenue recognition, accounts receivable, inventory valuation, long-lived assets, leases, goodwill, intangible assets, fair value measurements, R&D, warranties, stock-based compensation, foreign currency, and derivatives - Financial statements are prepared in accordance with GAAP, using estimates and assumptions that affect reported amounts[238][240] - Key policies cover revenue recognition (point-in-time or over-time), accounts receivable allowances, inventory valuation (lower of cost or market), and long-lived asset impairment testing[204][206][207][208][243][246][247][271] - Goodwill and indefinite-lived intangible assets are tested annually for impairment; definite-lived intangibles are amortized[253][314] - Leases with terms over one year are recognized as right-of-use assets and liabilities, discounted using the incremental borrowing rate[249][250] - Derivative instruments (forward foreign currency contracts, interest rate swaps) are recognized at fair value and used for hedging purposes[279][280][281] Allowance for Credit Losses | Allowance for Credit Losses | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | Balance at beginning of year | $2,214 | $1,588 | $2,113 | | Provision charged to expense | $1,521 | $699 | $605 | | Write-offs, net of recoveries | $(947) | $(177) | $(1,150) | | Balance at end of year | $2,788 | $2,214 | $1,588 | R&D Expenses | R&D Expenses | FY2023 (in millions) | FY2022 (in millions) | FY2021 (in millions) | | :--- | :--- | :--- | :--- | | Total R&D Costs | $17.2 | $12.2 | $9.6 | Note 2. Acquisitions Standex's recent acquisitions, including Minntronix (post-FY23 for $30.0 million), Sensor Solutions (FY22 for $9.9 million), and Renco Electronics (FY21 for $27.4 million), are strategically significant for future growth, with acquisition-related expenses of $0.6 million in FY2023 - Acquired Minntronix (magnetics components) for $30.0 million post-FY2023, to be reported in Electronics segment[291] - Acquired Sensor Solutions (magnetic sensor products) for $9.9 million in FY2022, adding $5.8 million in goodwill to the Electronics segment[293][294][295] - Acquired Renco Electronics (magnetics components) for $27.4 million in FY2021, adding $14.0 million in goodwill to the Electronics segment[297][298][300] Acquisition Related Expenses | Acquisition Related Expenses | FY2023 (in millions) | FY2022 (in millions) | FY2021 (in millions) | | :--- | :--- | :--- | :--- | | Total Expenses | $0.6 | $1.6 | $0.9 | Note 3. Revenue from Contracts with Customers Revenue is generally recognized point-in-time, but for highly customized long-term contracts in Engineering Technologies and Engraving, it is recognized over time, with $668.6 million recognized point-in-time and $72.4 million over time in FY2023 - Revenue is recognized point-in-time when control transfers, or over time for highly customized long-term contracts in Engineering Technologies and Engraving[305][306][271] Revenue Recognition Timing | Revenue Recognition Timing | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | Products and services transferred at a point in time | $668,633 | $675,461 | $619,029 | | Products transferred over time | $72,415 | $59,878 | $37,203 | | Net sales | $741,048 | $735,339 | $656,232 | Revenue by Geography | Revenue by Geography | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | United States | $449,820 | $429,368 | $386,829 | | Asia Pacific | $130,130 | $148,028 | $125,516 | | EMEA | $144,672 | $143,967 | $129,908 | | Other Americas | $16,426 | $13,976 | $13,979 | | Total | $741,048 | $735,339 | $656,232 | Note 4. Inventories Inventories are valued at the lower of FIFO cost or market, totaling $98.5 million at June 30, 2023, with raw materials as the largest component, and distribution costs classified as SG&A were $12.2 million in FY2023 Inventory Composition | Inventory | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Raw materials | $45,268 | $56,321 | | Work in process | $20,389 | $20,592 | | Finished goods | $32,880 | $28,426 | | Total | $98,537 | $105,339 | - Distribution costs, classified under SG&A, were $12.2 million in FY2023, down from $14.0 million in FY2022[312] Note 5. Property, Plant and Equipment Property, plant and equipment are reported at cost less accumulated depreciation, totaling $130.9 million net at June 30, 2023, with machinery, equipment, and other assets as the largest component, and depreciation expense for FY2023 was $18.2 million Property, Plant and Equipment, Net | Property, Plant and Equipment | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Land, buildings and leasehold improvements | $79,335 | $74,834 | | Machinery, equipment and other | $217,497 | $208,878 | | Less accumulated depreciation | $(165,895) | $(155,128) | | Property, plant and equipment, net | $130,937 | $128,584 | - Depreciation expense totaled $18.2 million in FY2023, compared to $18.0 million in FY2022[313] Note 6. Goodwill Goodwill is tested annually for impairment across six reporting units, with no impairment charges recorded in FY2023 as fair value substantially exceeded carrying value, though $0.2 million of Procon's goodwill was written off due to its divestiture - Goodwill is tested annually for impairment (May 31st) across six reporting units: Electronics, Engraving, Scientific, Engineering Technologies, Federal, and Hydraulics[314][315] - No impairment charges were recorded in FY2023, as fair value substantially exceeded carrying value for all reporting units[320] - Procon operating unit's goodwill of $0.2 million was written off as part of its divestiture in FY2023[320] Goodwill by Segment | Goodwill by Segment | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Electronics | $133,432 | $136,969 | | Engraving | $76,583 | $76,250 | | Scientific | $15,454 | $15,454 | | Engineering Technologies | $36,293 | $35,928 | | Specialty Solutions | $3,059 | $3,305 | | Total | $264,821 | $267,906 | Note 7. Intangible Assets Identifiable intangible assets with definite lives are amortized, while indefinite-lived tradenames are not, with net intangible assets totaling $75.7 million at June 30, 2023, and amortization expense for FY2023 was $8.6 million Intangible Assets | Intangible Assets | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Customer relationships | $30,177 | $35,101 | | Tradenames (Indefinite-lived) | $22,328 | $22,483 | | Developed Technology | $23,037 | $27,680 | | Other | $109 | $506 | | Balance, June 30 | $75,651 | $85,770 | - Amortization expense from continuing operations totaled $8.6 million in FY2023, down from $9.5 million in FY2022[322] Estimated Amortization Expense | Estimated Amortization Expense (in thousands) | | :--- | :--- | | 2024 | $7,826 | | 2025 | $7,425 | | 2026 | $7,024 | | 2027 | $6,282 | | 2028 | $4,556 | | Thereafter | $20,210 | | Total | $53,323 | Note 8. Debt As of June 30, 2023, long-term debt was $173.4 million, primarily from $175.0 million borrowed under the renewed $500 million revolving credit facility, with the company compliant with all financial covenants Long-term Debt | Long-term Debt | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Bank credit agreements | $175,000 | $175,000 | | Issuance cost | $(1,559) | $(170) | | Total long-term debt | $173,441 | $174,830 | - Company renewed its $500 million revolving credit facility, maturing in February 2028, with $175.0 million in borrowings as of June 30, 2023[325][329] - Compliant with financial covenants: Interest Coverage Ratio of 20.61:1 (required >= 2.75:1) and Leverage Ratio of 0.84:1 (required <= 3.5:1)[327][328] Note 9. Accrued Liabilities Accrued liabilities from continuing operations totaled $62.0 million at June 30, 2023, down from $67.8 million in 2022, with the $5.7 million litigation accrual from FY2022 settled and paid in FY2023 Accrued Liabilities | Accrued Liabilities | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Payroll and employee benefits | $30,778 | $31,211 | | Operating lease current liability | $8,036 | $7,891 | | Litigation accrual | $- | $5,745 | | Warranty reserves | $2,094 | $1,918 | | Restructuring costs | $1,296 | $1,740 | | Workers' compensation | $1,516 | $1,664 | | Contingent consideration | $- | $1,166 | | Fair value of derivatives | $1,722 | $- | | Other | $16,589 | $16,438 | | Total | $62,031 | $67,773 | - Litigation accrual of $5.7 million from FY2022 was settled and paid in FY2023, resulting in a zero balance[333] Note 10. Derivative Financial Instruments Standex uses interest rate swaps to convert $175.0 million of variable rate debt to a fixed rate of 1.13%, with a fair value asset of $10.2 million, and foreign exchange contracts had net unrealized losses of $1.7 million at June 30, 2023 - Uses interest rate swaps to convert $175.0 million of variable rate debt to a weighted average fixed rate of 1.13%[334] Interest Rate Swaps | Interest Rate Swaps | Fair Value at June 30, 2023 (in thousands) | Fair Value at June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total | $10,235 | $8,420 | - Foreign exchange contracts are used to hedge anticipated foreign cash flows, with net unrealized losses of $1.7 million at June 30, 2023[337] Notional Amounts of Foreign Exchange Contracts | Notional Amounts of Foreign Exchange Contracts | FY2023 (in thousands) | FY2022 (in thousands) | | :--- | :--- | :--- | | EUR | - | 5,750 | | CAD | 16,600 | 16,600 | | JPY | 2,100,000 | 1,000,000 | Note 11. Income Taxes The income tax provision for FY2023 was $24.8 million, with an effective rate of 15.1% (down from 24.4% in FY2022), driven by tax benefits from income mix, foreign tax credits, R&D credits, and a $5.0 million valuation allowance release Income Tax Provision | Income Tax Provision | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | Total provision for income taxes | $24,796 | $19,807 | $14,157 | | Effective income tax rate | 15.1% | 24.4% | 26.9% | - Effective tax rate of 15.1% in FY2023 was impacted by tax benefits from income mix, $11.6 million foreign tax credits, $2.7 million Federal R&D tax credits, and a $5.0 million benefit from valuation allowance release on capital loss carryforwards[341] Deferred Tax Assets/Liabilities | Deferred Tax Assets/Liabilities | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Total deferred tax liability | $(35,219) | $(35,290) | | Total deferred tax asset | $44,478 | $40,893 | | Less: Valuation allowance | $(9,562) | $(14,932) | | Net deferred tax asset (liability) | $(303) | $(9,329) | - Unrecognized tax benefits totaled $9.5 million at June 30, 2023, which would impact the effective tax rate if recognized[350][351] Note 12. Contingencies The company is subject to various claims and legal proceedings, including environmental and product liability, with a $5.7 million litigation accrual from FY2022 settled and paid in FY2023, and management anticipates no material impact on financial position - Company is subject to various claims and legal proceedings, including environmental, product liability, and patent infringement[353] - A $5.7 million litigation accrual from FY2022 related to faulty sensors was settled and paid in FY2023[354] - Management does not anticipate a material impact on financial position, results, or cash flow from currently existing legal matters[353] Note 13. Stock-Based Compensation and Purchase Plans Standex offers stock-based compensation plans, including restricted stock awards and performance share units, to key employees and directors, with total compensation cost of $11.7 million in FY2023, and an Employee Stock Purchase Plan allowing stock purchases at a 15% discount - Total compensation cost for equity-based awards was $11.7 million in FY2023, primarily within SG&A[357] - Restricted stock awards generally vest over one to three years, with $3.5 million in unrecognized compensation costs as of June 30, 2023[359][362] - Performance Share Units (PSUs) are granted annually to key employees, earned based on corporate financial targets, with $3.7 million in unrecognized compensation costs at June 30, 2023[365][369] - Employee Stock Purchase Plan (ESPP) allows employees to purchase stock at a 15% discount, with 6,256 shares purchased in FY2023[370] Note 14. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive loss totaled $(158.5) million at June 30, 2023, primarily driven by foreign currency translation adjustments and unrealized pension losses, partially offset by unrealized gains on derivative instruments Accumulated Other Comprehensive Income (Loss) Components | Components | June 30, 2023 (in thousands) | June 30, 2022 (in thousands) | | :--- | :--- | :--- | | Foreign currency translation adjustment | $(74,373) | $(67,679) | | Unrealized pension losses, net of tax | $(92,761) | $(92,641) | | Unrealized losses (gains) on derivative instruments, net of tax | $8,657 | $7,008 | | Total | $(158,477) | $(153,312) | - Accumulated other comprehensive loss increased to $(158.5) million, mainly due to foreign currency translation adjustments and unrealized pension losses[371] Note 15. Restructuring Standex incurred $3.8 million in restructuring expenses in FY2023, primarily for headcount reductions and facility consolidations across Engraving, Electronics, and Corporate, and expects an additional $5.0 million in FY2024 Restructuring Expenses | Restructuring Expenses | FY2023 (in thousands) | FY2022 (in thousands) | FY2021 (in thousands) | | :--- | :--- | :--- | :--- | | Total expense | $3,831 | $4,399 | $3,478 | | Involuntary Employee Severance and Benefit Costs | $2,817 | $2,690 | $2,239 | | Other | $1,014 | $1,709 | $1,239 | - FY2023 restructuring expenses of $3.8 million were primarily for headcount reductions, facility rationalization, and third-party assistance in Engraving, Electronics, and Corporate[373][378] - Company expects to incur approximately $5.0 million in additional restructuring costs in fiscal year 2024[376] Note 16. Employee Benefit Plans Standex sponsors defined benefit pension plans, with the U.S. plan frozen (PBO of $184.7 million, assets of $142.1 million at June 30, 2023), expects $10.2 million in contributions for FY2024, and contributes to multi-employer and retirement savings plans - U.S. defined benefit pension plan is frozen, with a projected benefit obligation of $184.7 million and plan assets of $142.1 million at June 30, 2023[379][381] - Expected contributions to pension plans in FY2024 are $10.2 million[387] - Contributes to two multiemployer defined benefit plans (New England Teamsters and IAM National Pension Fund), both in 'Red Zone' status, with total contributions of $1.264 million in FY2023[389][392] - Company contributions to retirement savings plans were $3.0 million in FY2023[393] Note 17. Industry Segment Information Standex operates in five reportable segments (Electronics, Engraving, Scientific, Engineering Technologies, and Specialty Solutions), with this note providing disaggregated financial data for net sales, income from operations, capital expenditures, goodwill, and identifiable assets by segment Segment Financial Data (FY23) | Segment | Net Sales (in thousands) | Income (Loss) From Operations (in thousands) | Capital Expenditures (in thousands) | Goodwill (June 30, 2023, in thousands) | Identifiable Assets (June 30, 2023, in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Electronics | $305,872 | $68,979 | $16,542 | $133,432 | $384,333 | | Engraving | $152,067 | $25,462 | $3,347 | $76,583 | $262,960 | | Scientific | $74,924 | $17,109 | $229 | $15,454 | $104,593 | | Engineering Technologies | $81,079 | $11,050 | $1,987 | $36,293 | $120,176 | | Specialty Solutions | $127,106 | $25,368 | $2,064 | $3,059 | $48,280 | | Corporate and Other (Adjustments) | $- | $62,105 (Gain on Sale) | $43 | $- | $104,587 | | Total | $741,048 | $171,089 | $24,212 | $264,821 | $1,024,929 | - Corporate expenses are not allocated to operating segments, but direct costs like insurance and audit fees are recharged[396] Note 18. Divestitures On February 28, 2023, Standex divested its Procon pumps business for $67.0 million cash, recognizing a $62.1 million pre-tax gain, following the March 2021 divestiture of Enginetics for $11.7 million cash, which resulted in a $14.6 million pre-tax loss - Divested Procon pumps business on Feb 28, 2023, for $67.0 million cash, recognizing a $62.1 million pre-tax gain[400] - Divested Enginetics jet engine components business on March 31, 2021, for $11.7 million cash, resulting in a $14.6 million pre-tax loss (including goodwill impairment and intangible asset write-down)[401] Note 19. Discontinued Operations The company classifies activities of divested businesses as discontinued operations when strategically significant, with a net loss from discontinued operations of $0.161 million for FY2023 Discon