UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2018~~2019

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-7233

STANDEX INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 ~~days. YES~~days.YES [X] NO [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES [X] NO [ ]


DELAWARE				31-0596149
(State of incorporation)				(IRS Employer Identification No.)


11 KEEWAYDIN DRIVE, SALEM, NEW HAMPSHIRE		03079
(Address of principal executive offices)		(Zip Code)

(603) 893-9701

(~~Registrant’s~~Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ~~“large~~“large accelerated filer,” ~~“accelerated filer”~~“accelerated filer” and ~~“smaller~~“smaller reporting ~~company”~~company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [ X ]

Accelerated filer [ ]

Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller Reporting Company [ ]

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

The number of shares of Registrant's Common Stock outstanding on April ~~26, 2018~~27, 2019 was ~~12,831,505.~~ 12,651,101.

STANDEX INTERNATIONAL CORPORATION

INDEX

Page No.

PART I.

FINANCIAL INFORMATION:

Item 1.

Condensed Consolidated Balance Sheets as of

March 31, 20182019 (unaudited) and June 30, 201722018

CondensedConsolidatedStatements of Operations for the

Three and Nine Months Ended March 31, 2019 and 2018 and 2017 (unaudited)3

CondensedConsolidatedStatements of Comprehensive Income for the

Three and Nine Months Ended March 31, 2019 and 2018 (unaudited)

Condensed Consolidated Statement of Stockholders’ Equity for the Three

and ~~2017~~Nine Months Ended March 31, 2019 and 2018 (unaudited)4

Condensed Consolidated Statements of Cash Flows for the

Nine Months Ended March 31, 2019 and 2018 and 2017 (unaudited)5

7

Notes to Unaudited Condensed Consolidated Financial Statements6

Item 2.

Management's Discussion and Analysis of Financial Condition and

Results of Operations25

Item 3.

Quantitative and Qualitative Disclosures about Market Risk35

Item 4.

Controls and Procedures37

43

PART II.

OTHER INFORMATION:

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds37

Item 6.

Exhibits39

144

PART I.FINANCIAL INFORMATION

ITEM 1

STANDEX INTERNATIONAL CORPORATION
Condensed Consolidated Balance Sheets

(In thousands, except per share data)

March 31, 2018
(unaudited)
June 30,
2017
ASSETS

Current Assets:

Cash and cash equivalents

$
96,325

$
   88,566
Accounts receivable, net of reserve for doubtful accounts of

132,505

  127,060
$2,534 and $2,406 at March 31, 2018 and June 30, 2017

Inventories

131,589

  119,401
Prepaid expenses and other current assets

10,154

      8,397
Income taxes receivable

1,301

    2,469
Deferred tax asset

-

14,991
Total current assets

371,874

  360,884
Property, plant, and equipment, net

147,782

   133,160
Intangible assets, net

103,052

102,503
Goodwill

254,703

242,690
Deferred tax asset

10,234

1,135
Other non-current assets

28,631

    27,304
Total non-current assets

544,402

506,792
Total assets

$
916,276

$
  867,676

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$
82,621

$
96,487
Accrued liabilities

63,539

     58,694
Income taxes payable

2,820

4,783
Total current liabilities

148,980

159,964
Long-term debt

204,726

191,976
Accrued pension and other non-current liabilities

116,163

107,072
Total non-current liabilities

320,889

299,048
Stockholders' equity:

��

Common stock, par value $1.50 per share, 60,000,000

shares authorized, 27,984,278 issued, 12,710,243 and

12,662,661 outstanding at March 31, 2018 and June 30, 2017

     41,976

    41,976
Additional paid-in capital

60,031

56,783
Retained earnings

751,136

716,605
Accumulated other comprehensive loss

(115,267)

(115,938)
Treasury shares: 15,274,035 shares at March 31, 2018

and 15,321,617 shares at June 30, 2017

(291,469)

(290,762)
Total stockholders' equity

446,407

408,664
Total liabilities and stockholders' equity

$
916,276

$
867,676

See notes to unaudited condensed consolidated financial statements


PART I. FINANCIAL INFORMATION
ITEM 1

STANDEX INTERNATIONAL CORPORATION
Condensed Consolidated Balance Sheets

(In thousands, except per share data)	March 31, 2019 (unaudited)		June 30, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	96,041		$	109,602
Accounts receivable, net of reserve for doubtful accounts of		115,782			119,783
$1,777 and $2,184 at March 31, 2019 and June 30, 2018
Inventories		103,383			104,300
Prepaid expenses and other current assets		27,115			10,255
Income taxes receivable		3,320			2,348
Current assets- Discontinued Operations		106,863			37,671
Total current assets		452,504			383,959
Property, plant, and equipment, net		139,432			136,934
Intangible assets, net		111,505			84,938
Goodwill		260,443			211,751
Deferred tax asset		9,645			7,447
Other non-current assets		29,812			29,749
Long-term assets-Discontinued Operations		-			62,159
Total non-current assets		550,837			532,978
Total assets	$	1,003,341		$	916,937

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	61,358		$	78,947
Accrued liabilities		61,147			57,679
Income taxes payable		4,762			6,050
Current liabilities-Discontinued Operations		2,561			18,665
Total current liabilities		129,828			161,341
Long-term debt		291,725			193,772
Accrued pension and other non-current liabilities		102,171			110,979
Non-current liabilities-Discontinued Operations		-			50
Total non-current liabilities		393,896			304,801
Stockholders' equity:
Common stock, par value $1.50 per share, 60,000,000
shares authorized, 27,984,278 issued, 12,531,735 and
12,705,562 outstanding at March 31, 2019 and June 30, 2018		41,976			41,976
Additional paid-in capital		63,774			61,328
Retained earnings		808,417			761,430
Accumulated other comprehensive loss		(124,417)			(121,859)
Treasury shares: 15,452,543 shares at March 31, 2019
and 15,278,716 shares at June 30, 2018		(310,133)			(292,080)
Total stockholders' equity		479,617			450,795
Total liabilities and stockholders' equity	$	1,003,341		$	916,937

See notes to unaudited condensed consolidated financial statements


STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Operations

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(In thousands, except per share data)	2019		2018		2019		2018
Net sales	$	193,771	$	192,147	$	582,380	$	566,982
Cost of sales		131,981		126,035		384,402		371,882
Gross profit		61,790		66,112		197,978		195,100
Selling, general, and administrative expenses		45,390		44,979		136,555		131,830
Acquisition related costs		805		1,254		2,352		2,962
Restructuring costs		549		1,060		1,173		5,792
Total operating expenses		46,744		47,293		140,080		140,584
Income from operations		15,046		18,819		57,898		54,516
Interest expense		(3,230)		(2,286)		(8,598)		(5,800)
Other non-operating expense, net		(679)		(1,014)		(1,694)		(1,350)
Income from continuing operations before income taxes		11,137		15,519		47,606		47,366
Provision for income taxes		3,833		3,696		13,535		27,312
Net income from continuing operations		7,304		11,823		34,071		20,054
Income (loss) from discontinued operations, net of income taxes		18,965		977		21,450		3,940
Net income	$	26,269	$	12,800	$	55,521	$	23,994

Basic earnings per share:
Continuing operations	$	0.58	$	0.93	$	2.70	$	1.58
Discontinued operations		1.51		0.08		1.70		0.31
Total	$	2.09	$	1.01	$	4.40	$	1.89
Diluted earnings per share:
Continuing operations	$	0.58	$	0.92	$	2.69	$	1.57
Discontinued operations		1.51		0.08		1.69		0.31
Total	$	2.09	$	1.00	$	4.38	$	1.88

Cash dividends per share	$	0.20	$	0.18	$	0.58	$	0.52

See notes to unaudited condensed consolidated financial statements


STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Comprehensive Income

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(In thousands)	2019		2018			2019		2018
Net income	$	26,269	$	12,800	$	55,521	$	23,994
Other comprehensive income (loss):
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs	$	(30)	$	(285)	$	250	$	(623)
Amortization of unrecognized costs		1,116		1,378		3,347		4,114
Derivative instruments:
Change in unrealized gains (losses)		1449		(316)		(2,226)		(1,893)
Amortization of unrealized gains and into interest expense		(506)		2,363		1,767		3,427
Foreign currency translation gains (losses)		410		11,694		(5,252)		14,148
Other comprehensive income (loss) before tax	$	2,439	$	14,834	$	(2,114)	$	19,173

Income tax provision (benefit):
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs	$	1	$	(348)	$	(25)	$	129
Amortization of unrecognized costs		(273)		(329)		(818)		(1,134)
Derivative instruments:
Change in unrealized gains and (losses)		172		(127)		338		(231)
Amortization of unrealized (losses) into interest expense		21		(7)		61		(51)
Income tax provision (benefit) to other comprehensive income (loss)	$	(79)	$	(811)	$	(444)	$	(1,287)

Other comprehensive gain (loss), net of tax		2,360		14,023		(2,558)		17,886
Comprehensive income	$	28,629	$	26,823	$	52,963	$	41,880

See notes to unaudited condensed consolidated financial statements


Consolidated Statements of Stockholders' Equity

Standex International Corporation and Subsidiaries								Accumulated
								Other	Treasury Stock
For theNine month period ended March 31, 2019 (in thousands, except as specified)		Common Stock		Additional Paid-in Capital		Retained Earnings		Comprehensive Income (Loss)	Shares		Amount	Total Stockholders’ Equity
Balance, June 30, 2018	$	41,976	$	61,328	$	761,430	$	(121,859)	15,279	$	(292,080)	$	450,795
Stock issued for employee stock option and purchase plans, including related income tax benefit and other				(234)					(62)		1,186		952
Stock-based compensation				2,680									2,680
Treasury stock acquired									236		(19,239)		(19,239)
Adoption of ASC 606						(1,106)							(1,106)
Comprehensive income:
Net Income						55,521							55,521
Foreign currency translation adjustment								(5,252)					(5,252)
Pension and OPEB adjustments, net of tax of $0.8 million								2,754					2,754
Change in fair value of derivatives, net of tax of $0.4 million								(60)					(60)
Dividends declared ($0.58 per share)						(7,428)							(7,428)
Balance, March 31, 2019	$	41,976	$	63,774	$	808,417	$	(124,417)	15,453	$	(310,133)	$	479,617
For theNine month period ended March 31, 2018 (in thousands, except as specified)
Balance, June 30, 2017	$	41,976	$	56,783	$	716,605	$	(115,938)	15,322	$	(290,762)	$	408,664
Stock issued for employee stock option and purchase plans, including related income tax benefit and other				(533)					(69)		1,301		768
Stock-based compensation				3,781									3,781
Treasury stock acquired									21		(2,008)		(2,008)
Adoption of ASU 2018-02						17,215		(17,215)					-
Comprehensive income:
Net Income						23,994							23,994
Foreign currency translation adjustment								14,148					14,148
Pension and OPEB adjustments, net of tax of $0.9 million								2,486					2,486
Change in fair value of derivatives, net of tax of $0.3 million								1,252					1,252
Dividends declared ($0.52 per share)						(6,678)							(6,678)
Balance, March 31, 2018	$	41,976	$	60,031	$	751,136	$	(115,267)	15,274	$	(291,469)	$	446,407


Consolidated Statements of Stockholders' Equity

Standex International Corporation and Subsidiaries									Accumulated
								Other		Treasury Stock
For theThree month period ended March 31, 2019 (in thousands, except as specified)		Common Stock		Additional Paid-in Capital		Retained Earnings		Comprehensive Income (Loss)		Shares		Amount		Total Stockholders’ Equity
Balance, December 31, 2018	$	41,976	$	63,024	$	784,687	$	(126,777)		15,454	$	(310,084)		$	452,826
Stock issued for employee stock option and purchase plans, including related income tax benefit and other				99						(2)			55		154
Stock-based compensation				651											651
Treasury stock acquired										1		(104)			(104)
Adoption of ASC 606
Comprehensive income:
Net Income						26,269									26,269
Foreign currency translation adjustment								410							410
Pension and OPEB adjustments, net of tax of $0.3 million								813							813
Change in fair value of derivatives, net of tax of $0.2 million								1,137							1,137
Dividends declared ($0.20 per share)						(2,539)									(2,539)
Balance, March 31, 2019	$	41,976	$	63,774	$	808,417	$	(124,417)		15,453	$	(310,133)		$	479,617

Balance, December 31, 2017	$	41,976	$	59,016	$	723,435	$	(112,075)		15,275	$	(291,420)		$	420,932
Stock issued for employee stock option and purchase plans, including related income tax benefit and other				116						(2)		34			150
Stock-based compensation				899											899
Treasury stock acquired										1		(83)			(83)
Adoption of ASU 2018-02						17,215		(17,215)							-
Comprehensive income:
Net Income						12,800									12,800
Foreign currency translation adjustment								11,694							11,694
Pension and OPEB adjustments, net of tax of $0.3 million								416							416
Change in fair value of derivatives, net of tax of $0.2 million								1,913							1,913
Dividends declared ($0.18 per share)						(2,314)									(2,314)
Balance, March 31, 2018	$	41,976	$	60,031	$	751,136	$	(115,267)		15,274	$	(291,469)		$	446,407


STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows

	Nine Months Ended
	March 31,
(In thousands)	2019		2018
Cash flows from operating activities
Net income	$	55,521	$	23,994
Income from discontinued operations		21,450		3,940
Income from continuing operations		34,071		20,054
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		22,794		19,632
Stock-based compensation		2,680		3,775
Non-cash portion of restructuring charge		(81)		(1,187)
Deferred repatriation tax		-		11,465
Disposal of real estate and equipment		-		(433)
Contributions to defined benefit plans		(751)		(808)
Net changes in operating assets and liabilities		(33,753)		(25,608)
Net cash provided by operating activities - continuing operations		24,960		26,890
Net cash (used in) operating activities - discontinued operations		617		1,829
Net cash provided by operating activities		25,577		28,719
Cash flows from investing activities
Expenditures for property, plant, and equipment		(17,844)		(20,207)
Expenditures for acquisitions, net of cash acquired		(96,768)		(10,397)
Proceeds from life insurance policies		-		2,217
Proceeds from sales of real estate and equipment		2,898		1,949
Other investing activity		(377)		(397)
Net cash provided by (used in) investing activities- continuing operations		(112,091)		(26,835)
Net cash provided by (used in) investing activities- discontinued operations		2,925		(1,184)
Net cash provided by (used in) investing activities		(109,166)		(28,019)
Cash flows from financing activities
Borrowings on revolving credit facility		206,650		134,500
Payments of revolving credit facility		(107,650)		(124,788)
Contingent consideration payment		(910)		-
Activity under share-based payment plans		952		774
Purchases of treasury stock		(19,239)		(2,007)
Cash dividends paid		(7,331)		(6,600)
Net cash provided by financing activities		72,472		1,879
Effect of exchange rate changes on cash and cash equivalents		(2,444)		5,179
Net change in cash and cash equivalents		(13,561)		7,758
Cash and cash equivalents at beginning of year		109,602		88,566
Cash and cash equivalents at end of period	$	96,041	$	96,324

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest	$	7,574	$	4,518
Income taxes, net of refunds	$	8,027	$	17,720

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Operations

Three Months Ended

Nine Months Ended

March 31,

March 31,
(In thousands, except per share data)

2018

2017

2018

2017
Net sales

$
216,743

$
184,715

$
640,873

$
538,169
Cost of sales

142,971

123,367

421,394

358,152
    Gross profit

73,772

61,348

219,479

180,017
Selling, general, and administrative expenses

51,854

43,472

152,559

125,578
Acquisition related costs

1,254

5,422

2,962

6,925
Restructuring costs

1,337

   1,019

   6,307

3,077
    Total operating expenses

54,445

49,913

161,828

135,580
Income from operations

19,327

11,435

57,651

44,437
Interest expense

(2,286)

    (953)

(5,800)

(2,499)
Other non-operating income, net

     (293)

     52

764

      819
Income from continuing operations before income taxes

16,748

10,534

52,615

42,757
Provision for income taxes

3,928

2,874

28,599

10,311
Net income from continuing operations

12,820

7,660

24,016

32,446
Income (loss) from discontinued operations, net of
   income taxes

(20)

          1

   (22)

   (43)
Net income

$
12,800

$
7,661

$
23,994

$
  32,403

Basic earnings per share:

     Continuing operations

$
    1.01

$
    0.60

$
     1.89

$
     2.56
     Discontinued operations

         -

         -

         -

         -
          Total

$
1.01

$
0.60

$
    1.89

$
    2.56
Diluted earnings per share:

     Continuing operations

$
    1.00

$
    0.60

$
    1.88

$
    2.54
     Discontinued operations

         -

         -

         -

         -
          Total

$
1.00

$
0.60

$
    1.88

$
    2.54

Cash dividends per share

$
    0.18

$
    0.16

$
     0.52

$
     0.46

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Comprehensive Income

Three Months Ended

Nine Months Ended

March 31,

March 31,
(In thousands)
2018

2017

2018

2017
Net income
$
12,800

$
7,661

$
23,994

$
32,403
Other comprehensive income (loss):

  Defined benefit pension plans:

     Actuarial gains (losses) and other changes in
         unrecognized costs
$

(285)

$

(128)

$

(623)

$

503
     Amortization of unrecognized costs

1,378

1,427

4,114

4,294
  Derivative instruments:

     Change in unrealized gains (losses)

(316)

(3,445)

(1,893)

(2,891)
     Amortization of unrealized gains and into
         interest expense

2,363

80

3,427

384
  Foreign currency translation gains (losses)

11,694

4,498

14,148

(7,109)
Other comprehensive income (loss) before tax
$
14,834

$
2,432

$
19,173

$
(4,819)

Income tax provision (benefit):

  Defined benefit pension plans:

     Actuarial gains (losses) and other changes in
         unrecognized costs
$

(348)

$

29

$

129

$

(105)
     Amortization of unrecognized costs

(329)

(503)

(1,134)

(1,511)
  Derivative instruments:

     Change in unrealized gains and (losses)

(127)

1,311

(231)

1,100
     Amortization of unrealized (losses) into
        interest expense

(7)

(30)

(51)

(146)
Income tax provision (benefit) to other comprehensive
        income (loss)
$

(811)

$

807

$

(1,287)

$

(662)

Other comprehensive gain (loss), net of tax

14,023

3,239

17,886

(5,481)
Comprehensive income
$
26,823

$
10,900

$
41,880

$
26,922

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows

Nine Months Ended

March 31,
(In thousands)

2018

2017
Cash flows from operating activities

Net income

$
23,994

$
       32,403
Income from discontinued operations

(22)

              (43)
Income from continuing operations

      24,016

       32,446
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization

21,464

         13,824
Stock-based compensation

       3,775

         3,915
Non-cash portion of restructuring charge

(1,187)

              227
      Deferred repatriation tax

11,465

-
Disposal of real estate and equipment

(433)

-
Contributions to defined benefit plans

        (808)

         (962)
Net changes in operating assets and liabilities

   (29,509)

      (17,974)
Net cash provided by operating activities - continuing operations
28,783

31,476
Net cash (used in) operating activities - discontinued operations
(62)

        (458)
Net cash provided by operating activities

28,721

31,018
Cash flows from investing activities

Expenditures for property, plant, and equipment

     (21,391)

      (17,824)
Expenditures for acquisitions, net of cash acquired

(10,397)

     (153,815)
Proceeds from life insurance policies

2,217

-
Proceeds from sales of real estate and equipment

1,949

129
Other investing activity

(397)

158
Net cash (used in) investing activities

(28,019)

(171,352)
Cash flows from financing activities

Borrowings on revolving credit facility

134,500

     250,000
Payments of revolving credit facility

  (124,788)

    (127,000)
Activity under share-based payment plans

774

            715
Purchases of treasury stock

     (2,007)

        (7,406)
Cash dividends paid

     (6,600)

        (5,826)
Net cash provided by financing activities

1,879

110,483
Effect of exchange rate changes on cash and cash equivalents

5,178

(4,184)
Net change in cash and cash equivalents

7,759

      (34,035)
Cash and cash equivalents at beginning of year

88,566

     121,988
Cash and cash equivalents at end of period

$
96,325

$
     87,953

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:

Interest

$
4,518

$
2,010
Income taxes, net of refunds

$
17,720

$
10,400

See notes to unaudited condensed consolidated financial statements

STANDEX INTERNATIONAL CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1)

Management Statement

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was passed which resulted in the Company recording provisional estimates related to foreign earnings and changes in the revaluation of deferred taxes in our consolidated financial statements. Other changes implemented by the Act will not impact the Company until the fiscal year ending June 30, 2019. The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. We evaluated subsequent events through the date and time our unaudited condensed consolidated financial statements were issued.

During the fourth quarter of fiscal 2017, we adopted Accounting Standards Update (ASU) 2016-09 requiring the recognition of excess tax benefits as a component of income tax expense which were historically recognized in equity. The fiscal results for the three months ended March 31, 2017 were recast to include an immaterial tax benefit. The results for the nine months ended March 31, 2017 have been recast to include a tax benefit of $0.6 million. In addition, the ASU requires a prospective update to the treasury method of calculating weighted average diluted shares outstanding resulting in the inclusion of additional shares in our diluted EPS calculation for the three and nine months ended March 31, 2017.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounts Standards Board ("FASB") issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” which amends most of the existing revenue recognition guidance, including industry-specific guidance. ASU 2014-09 establishes a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers. Under ASU No. 2014-09, an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.In early 2016, the FASB issued additional updates: ASU No. 2016-10, 2016-11 and 2016-12. These updates provide further guidance and clarification on specific items within the previously issued update.The Company anticipates it will adopt Topic 606 under the modified retrospective method and will only apply this method to contracts that are not completed as of the date of adoption.

Application of this method will result in a cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings at the date of initial application for any open contracts as of the adoption date.

The Company has established a global steering committee with a project plan to analyze the impact of this standard. The assessment phase of the project plan is on-going and includes identifying the various revenue streams, initiating contract reviews and reviewing current accounting policies and practices to identify potential differences that would result from the application of the standard. This assessment includes (1) utilizing questionnaires to assist with the identification of revenue streams, (2) performing sample contract analyses for each revenue stream identified, (3) assessing the noted differences in recognition and measurement that may result from adopting this new standard, (4) performing detailed analyses of contracts with larger customers, and (5) developing plans to test transactions for consistency with contract provisions that affect revenue recognition.

As part of the analysis phase, the committee has been analyzing the impact of the standard on its contract portfolio by reviewing a sample of its contracts to identify potential differences that would result from applying the requirements of the new standard. The committee also has been analyzing the impact of requirements for combining contracts, performance obligations, and variable consideration.

Based on procedures performed to date, the committee has identified two areas that would likely be impacted by application of the new revenue standard. In the Food Service Equipment segment, the Company bases volume-related rebate accruals on the achievement of certain pre-defined tiers. The new guidance requires the Company to calculate the rebate accrual on anticipated sales for the rebate period, rather than measurement of actual achievement of specific tiers. The Company expects to record a one-time catch up adjustment for this change upon adoption of the new standard, however the analysis of the impact is still on-going. In Engineering Technologies, the committee is analyzing certain long-term contracts, currently recognizing revenue utilizing the point-in-time method, to determine if any of the three criteria in ASC 606-10-25-27 are being met which would require revenue to be recognized over time under the new standard.

The global steering committee is apprising both management and the audit committee of project status on a recurring basis. The Company has not yet finalized its assessment of the impact of Topic 606. Following the completion of the assessment phase, the Company will initiate efforts to redesign impacted processes, policies, controls and disclosures, as necessary. The Company expects to adopt this standard, as required, for interim and annual reporting periods beginning July 1, 2018. The Company does not expect to early adopt.

~~In November 2015, the FASB issued ASC Update 2015-17,~~~~Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes~~, as part of its simplification initiatives. This update requires deferred tax liabilities and assets to be classified as non-current on the consolidated condensed balance sheet for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early application is permitted. An entity can elect adoption prospectively or retrospectively to all periods presented. We have adopted ASU 2015-17 prospectively. As a result, we have presented all deferred tax assets and liabilities as noncurrent on our consolidated balance sheet as of March 31, 2018, but have not reclassified current deferred assets and liabilities on our consolidated balance sheet as of June 30, 2017. There was no impact on our results of operations as a result of the adoption of ASU 2015-17.

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). ASU 2016-02 ~~increases transparency and comparability among organizations by recognizing~~requires lessees to recognize lease assets and lease liabilities on the balance sheet and ~~disclosing key information~~requires expanded disclosures about leasing arrangements. ~~A modified retrospective~~In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842) Targeted Improvements”. The updated guidance provides an optional transition ~~approach is required~~method, which allows for ~~lessees for capital~~the application of the standard as of the adoption date with no restatement of prior period amounts. We plan to adopt the standard on July 1, 2019 under the optional transition method described above. We have selected a lease accounting software package and are completing the accumulation of existing lease data as well as assessing the impact that the new standard will have on our Consolidated Financial Statements, which will consist primarily of a balance sheet gross up of our operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. For leases with a term of twelve months or less, a lessee is permitted to ~~make an accounting policy election by class of underlying asset not to recognize~~show equal and offsetting lease assets and lease liabilities. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. While we are continuing to assess the effect of the adoption, we currently believe the most significant potential changes relate to (i) recognition of right-of-use assets and lease liabilities on our balance sheet for equipment and real estate operating leases, and (ii) the derecognition of existing assets and liabilities for certain

sale-leaseback transactions that currently do not qualify for sale accounting. The Company anticipates the adoption will have a material impact on the Company’s consolidated financial statements dueDue to the materiality of the underlying leases subject to the new guidance, we anticipate the adoption will have a material impact on the Company’s consolidated financial statements, however we are unable to quantify that effect until our analysis is complete.

In January 2017, the FASB issued ASU 2017-04,Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairments by eliminating step two from the goodwill impairment test. Instead, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment. It further clarifies that an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The Company is currently assessing the potential impact of the adoption of ASU 2017-04 on our goodwill impairment testing procedures and our consolidated financial statements.

~~In March 2017, the FASB issued ASU 2017-07,~~~~Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost~~, which changes how employers that sponsor defined benefit pension or other postretirement benefit plans present the net periodic benefit cost in the income statement. The new guidance requires the service cost component of net periodic benefit cost to be presented in the same income statement line items as other employee compensation costs arising from services rendered during the period. Other components of the net periodic benefit cost are to be stated separately from service cost and outside of operating income. This guidance is effective for fiscal years beginning after December 15, 2017 (fiscal 2019 for the Company) and interim periods within those annual periods. The amendment is to be applied retrospectively. The provisions of the new standard will impact the classification. The Company is continuing to evaluate the impact of the adoption of ASU 2017-07 on the consolidated financial statements and disclosures and expects to adopt this standard, as required, for interim and annual reporting periods beginning July 1, 2018.

In August 2017, the FASB issued ASU 2017-12,Derivatives and Hedging (Topic 815);, Targeting Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an ~~entity’s~~entity’s risk management activities in its financial statements and to make certain targeted improvements to simplify the application of hedge accounting guidance. The new guidance requires additional disclosures including cumulative basis adjustments for fair value hedges and the effect of hedging on individual income statement line ~~items.~~items along with providing new alternatives for applying hedge accounting to additional hedging strategies and measuring the hedged item in fair value hedges of interest rate risk. This guidance is effective for fiscal years beginning after December 15, 2018 (fiscal 2020 for the Company), and interim periods within those fiscal years. The amendment is to be applied prospectively. ~~The~~Given the improvements made to the application of hedge accounting under the guidance, the Company ~~is in the preliminary stages of assessing the potential impact of the adoption of ASU 2017-12 on our consolidated financial statements.~~

~~In February 2018, the FASB issued ASU 2018-02,~~~~Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income~~, which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from "An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018" (the "Act") that are stranded in accumulated other comprehensive income. This standard also requires certain disclosures about stranded tax effects. This ASU, however, does not change the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. ASU 2018-02 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. We electeddecided to early adopt ~~this~~the ASU ~~for~~during the ~~period ended March 31, 2018. The amount~~second quarter of ~~the reclassification was $17.2 million.~~

2)~~ACQUISITIONS~~fiscal year 2019.

Acquisitions

The ~~Company’s~~Company’s recent acquisitions are strategically significant to the future growth prospects of the Company. At the time of the acquisition and March 31, ~~2018,~~2019, the Company evaluated the significance of each acquisition on a standalone basis and in aggregate, considering both qualitative and quantitative factors.

Agile Magnetics

On the last business day of the first quarter of fiscal year 2019, the Company acquired Regional Mfg. Specialists, Inc. (now named Agile Magnetics). The New Hampshire based, privately held company is a provider of high-reliability magnetics to customers in the semiconductor, military, aerospace, healthcare, and general industrial industries. The Company has included the results of Agile in its Electronics segment in the condensed consolidated financial statements.

The Company paid $39.2 million in cash for all of the issued and outstanding equity interests of Agile. The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on a preliminary estimate of their fair values on the closing date. The Company has commenced a formal valuation of the acquired assets and liabilities and has updated the preliminary intangible asset based on the preliminary valuation results. Goodwill recorded from this transaction is attributable to expanded capabilities of the combined organization which will allow for improved responsiveness to customer demands via a larger pool of engineering resources and local manufacturing.

Intangible assets of $18.2 million are preliminarily recorded, consisting of $14.3 million of customer relationships, $3.8 million for trademarks, and $0.1 million for a non-compete arrangement. The goodwill of $15.6 million preliminarily recorded in connection with the transaction is deductible for income tax purposes. The Company’s assigned fair values are preliminary as of March 31, 2019 until such time as the valuation can be finalized.

The components of the fair value of the Agile acquisition, including the preliminary allocation of the purchase price at March 31, 2019, are as follows (in thousands):


		Preliminary Allocation September 30, 2018	Adjustments	Adjusted Allocation March 31, 2019
Fair value of business combination:
Cash payments	$	39,194	-	39,194
Less, cash acquired		(1)	-	(1)
Total	$	39,193	-	39,193


		Preliminary Allocation September 30, 2018	Adjustments	Adjusted Allocation March 31, 2019
Identifiable assets acquired and liabilities assumed:
Other acquired assets	$	1,928	(35)	1,893
Inventories		2,506	268	2,774
Customer Backlog		-	220	220
Property, plant, & equipment		1,318	(348)	970
Identifiable intangible assets		13,718	4,432	18,150
Goodwill		20,142	(4,528)	15,614
Liabilities assumed		(419)	(9)	(428)
Total	$	39,193	-	39,193

Tenibac-Graphion Inc.

During August of fiscal year 2019, the Company acquired Tenibac-Graphion Inc. (“Tenibac”). The Michigan based privately held company is a provider of chemical and laser texturing services for the automotive, medical, packaging, and consumer products markets. The Company has included the results of Tenibac in its Engraving segment in the condensed consolidated financial statements.

The Company paid $57.3 million in cash for all of the issued and outstanding equity interests of Tenibac. The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date. Goodwill recorded from this transaction is attributable to the complimentary services that the combined business can now offer to our customers, through increased responsiveness to customer demands, and providing innovative approaches to solving customer needs by offering a full line of mold and tool services to customers.

Intangible assets of $16.9 million are preliminarily recorded, consisting of $11.3 million of customer relationships to be amortized over a period of nine years, $4.2 million for trademarks, and $1.4 million of other intangibles assets. The Company’s assigned fair values are preliminary as of March 31, 2019 until reviewed closing financial statements, including U.S. 338(h)10 elections, can be prepared by an independent accountant and agreed to by both parties as required by the stock purchase agreement. The goodwill of $33.8 million created by the transaction is deductible for income tax purposes.

The components of the fair value of the Tenibac acquisition, including the preliminary allocation of the purchase price at March 31, 2019, are as follows (in thousands):


		Preliminary Allocation September 30, 2018	Adjustments		Adjusted Allocation March 31, 2019
Fair value of business combination:
Cash payments	$	57,284		-		57,284
Less cash acquired		(558)		-		(558)
Total	$	56,726		-		56,726

		Preliminary Allocation September 30, 2018		Adjustments		Adjusted Allocation March 31, 2019
Identifiable assets acquired and liabilities assumed:
Other acquired assets	$	5,023		(1,245)		3,778
Inventories		324		-		324
Customer backlog		1,000		(800)		200
Property, plant, & equipment		2,490		510		3,000
Identifiable intangible assets		15,960		944		16,904
Goodwill		32,949		830		33,779
Liabilities assumed		(1,020)		(239)		(1,259)
Total	$	56,726		-		56,726

Piazza Rosa Group

During the first quarter of fiscal year 2018, the Company acquired the Piazza Rosa Group. The Italy-based privately held company is a leading provider of mold and tool treatment and finishing services for the automotive and consumer products markets. We have included the results of the Piazza Rosa Group in our Engraving ~~segment in our Condensed Consolidated Financial Statements.~~segment.

The Company paid $10.1 million in cash ~~net of a $2.8 million payment to satisfy debt of the entity at the time of acquisition,~~ for all of the issued and outstanding equity interests of the Piazza Rosa ~~Group.~~Group and also paid $2.8 million subsequent to closing in order to satisfy assumed debt of the entity at the time of acquisition. The ~~final purchase price is subject to net asset value adjustments~~Company has estimated that ~~have not yet been finalized.~~total cash consideration will be adjusted by $2.6 million based upon achievement of certain revenue metrics over the three years following acquisition. The ~~preliminary~~Company made the first payment of $0.9 million during the first quarter of 2019 based on achievement of the revenue metrics during the first year.

The purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date. Goodwill recorded from this transaction is attributable to potential revenue increases from the combined competencies with Standex ~~Engraving’s~~Engraving’s worldwide presence and Piazza Rosa ~~Group’s~~Group’s texturizing capabilities. The combined companies create a global tool finishing service leader and open additional opportunities in the broader surface engineering market.

Intangible assets of $4.1 million were preliminarily recorded, consisting of $2.3 million of customer relationships to be amortized over a period of eight years, $1.6 million for trademarks, and $0.2 million of other intangibles assets. ~~Since~~The Company finalized its purchase accounting for this acquisition in the ~~preliminary valuation,~~first quarter of fiscal year 2019 and reduced the ~~Company adjusted goodwill~~identifiable intangible asset estimate by ~~$1.6~~$0.6 million ~~primarily as a result of identification of other identifiable assets.~~at that time. The goodwill of ~~$4.6~~$7.1 million created by the transaction is not deductible for income tax purposes.

The components of the fair value of the Piazza Rosa Group acquisition, including the ~~preliminary~~final allocation of the purchase price ~~at March 31, 2018, are as follows (in thousands):~~

Preliminary Allocation

Adjustments

Adjusted Allocation

September 30, 2017

March 31, 2018
Fair value of business combination:

Cash payments

$
12,889

$
                -

$
12,889
Less: cash paid to satisfy acquired debt

  (2,833)

                -

  (2,833)
Total

$
10,056

$
                -

$
10,056
Identifiable assets acquired and liabilities assumed:

Other acquired assets

$
2,678

$
1,664

$
4,342
Inventories

637

(2)

635
Property, plant, and equipment

5,005

                -

5,005
Identifiable intangible assets

4,087

(1)

4,086
Goodwill

6,218

(1,643)

4,575
Liabilities assumed

(7,387)

                -

(7,387)
Deferred taxes

(1,182)

(18)

(1,200)
Total

$
10,056

$
                -

$
10,056

~~OKI Sensor Device Corporation~~

During the third quarter of fiscal year 2017, the Company acquired all of the outstanding shares of OKI Sensor Device Corporation from OKI Electric Industry Co., Ltd. Located in Kofu City, Japan, OKI Sensor Device Corporation is the world’s leading designer and supplier of magnetic reed switches. Now named Standex Electronics Japan Corporation (“Standex Electronics Japan”), the acquisition enhances the Company’s access to important Asian markets and enables the Company to offer a world class suite of reed switches and related magnetic solutions while continuing to serve Standex Electronics Japan’s diverse distribution channels. We have included the results of Standex Electronics Japan in our Electronics segment in our Condensed Consolidated Financial Statements.

The Company paid $129.2 million in cash, net of cash acquired, for 100% of the outstanding stock of Standex Electronics Japan. The preliminary purchase price was allocated to the net tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values on the closing date. Goodwill recorded from this transaction is attributable to potential revenue increases from enhanced access to our Asian markets and synergies created from the vertical integration with a key supplier.

Intangible assets of $51.4 million were recorded, consisting of $47.8 million of developed technology to be amortized over a period of 10-20 years, $3.4 million of customer relationships to be amortized over a period of fifteen years, and $0.2 million of product order backlog which was amortized during fiscal year 2017. Since the preliminary valuation, the Company adjusted goodwill by $3.4 million as a result of tax adjustments, a pension adjustment of $1.9 million and purchase accounting changes including a decrease in the fair value of developed technology, fixed assets, and customer relationships of $2.3 million, $0.2 million, and $0.2 million, respectively, and an additional $0.1 million of product order backlog which was amortized during fiscal year 2017. The goodwill of $79.4 million created by the transaction is not deductible for income tax purposes.

~~The components of the fair value of the Standex Electronics Japan acquisition, including the final allocation of purchase price at March 31, 2018,~~ are as follows (in thousands):

Preliminary Allocation

Final Allocation

March 31, 2017

Adjustments

March 31, 2018
Fair value of business combination:

Cash payments

$
137,676

$
                -

$
137,676
Less: cash acquired

  (8,521)

                -

  (8,521)
Total

$
129,155

$
                -

$
129,155
Identifiable assets acquired and liabilities assumed:

Other acquired assets

$
12,497

$
(2,158)

$
10,339
Inventories

7,387

816

8,203
Property, plant, and equipment

12,703

   5,503

18,206
Identifiable intangible assets

53,800

(2,400)

51,400
Goodwill

75,985

3,449

79,434
Liabilities assumed

(10,811)

(8,468)

(19,279)
Deferred taxes

(22,406)

3,258

(19,148)
Total

$
129,155

$
                -

$
129,155

The following table reflects the unaudited pro forma operating results of the Company for the three and nine months ended March 31, 2018 and 2017, which give effect to the acquisition of Standex Electronics Japan as if it had occurred at the beginning of each period presented. The pro forma information combines the historical financial results of the Company and Standex Electronics Japan, adjusted for changes in foreign exchange rates.

The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective at the beginning of each period, nor are they intended to be indicative of results that may occur in the future. The pro forma information does not include the effects of any synergies related to the Standex Electronics Japan acquisition, transactions between the entities prior to acquisition, or the pre-acquisition impact of other businesses acquired by the Company during this period as they were not material to the Company’s historical results of operations.

(Unaudited Pro Forma)
(Unaudited Pro Forma)

Three Months ended
March 31,
Nine Months Ended
March 31,
In thousands
2018

2017
2018

2017
Net Sales
$
216,743

$
200,423

$
640,873

$
587,496
Net Income
$
12,820

$
12,944

$
24,191

$
41,653

Earnings per share:

Basic
$
1.01

$
1.02

$
1.91

$
3.29
Diluted
$
1.00

$
1.01

$
1.89

$
3.26

* Fiscal year 2017 unaudited pro-forma results have been recast as a result of the adoption of Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting.

~~Pro forma earnings during the nine months ended March 31, 2018 were adjusted to exclude tax-affected acquisition-related costs incurred during the first quarter of $0.2 million.~~

Pro forma earnings during the three months ended March 31, 2017 were adjusted to include expense of $0.6 million for amortization of intangible assets recognized at fair value, depreciation expense of $0.4 million for the fair value adjustment of the acquired fixed assets, and $0.3 million of interest expense associated with incremental borrowings under the Company’s Credit Facility. Pro forma earnings were also adjusted to exclude non-recurring acquisition-related costs of $3.1 million.

Pro forma earnings during the nine months ended March 31, 2017 were adjusted to include expense of $1.8 million for amortization of intangible assets recognized at fair value, depreciation expense of $1.1 million for the fair value adjustment of the acquired fixed assets, and $0.8 million of interest expense associated with incremental borrowings under the Company’s Credit Facility. Pro forma earnings were also adjusted to exclude non-recurring acquisition-related costs of $3.6 million.


		Preliminary Allocation
		September 30, 2017		Adjustments		Final Allocation
Fair value of business combination:
Total cash consideration	$	10,056	$	-	$	10,056
Fair value of contingent consideration		-		2,617		2,617
Total	$	10,056	$	2,617	$	12,673
		Preliminary Allocation September 30, 2017		Adjustments		Final Allocation
Identifiable assets acquired and liabilities assumed:
Other acquired assets	$	2,678	$	1,664	$	4,342
Inventories		637		(2)		635
Property, plant, and equipment		5,005		558		5,563
Identifiable intangible assets		4,087		(615)		3,472
Goodwill		6,218		858		7,076
Liabilities assumed		(7,387)		-		(7,387)
Deferred taxes		(1,182)		154		(1,028)
Total	$	10,056	$	2,617	$	12,673

Acquisition-Related Costs

Acquisition-related costs include costs related to acquired businesses and other pending acquisitions. These costs consist of (i) deferred compensation and (ii) acquisition-related professional service fees and expenses, including financial advisory, legal, accounting, and other outside services incurred in connection with acquisition activities, and regulatory matters related to acquired entities. These costs do not include ~~the amortization of the acquired intangible assets, and also do not include~~ purchase accounting expenses, which we define as acquired backlog and the step-up of inventory to fair ~~value.~~value, or the amortization of the acquired intangible assets.

Deferred compensation costs relate to payments due to the Horizon Scientific seller of ~~$2.8~~$3.0 million on the second anniversary and $5.6 million on the third anniversary of the closing date of the purchase. For the three and nine months ended March 31, ~~2018,~~2019 we recorded deferred compensation costs ~~for~~of $0.7 million and $2.1 million respectively related to estimated deferred compensation earned by the Horizon Scientific seller to date ~~of $0.7 million and $2.1 million, respectively.~~which are nearly equal to the amounts recorded during the same periods in fiscal year 2018. The payments are contingent on the seller remaining an employee of the Company, with limited exceptions, at each anniversary date.

Acquisition related ~~expenses~~costs consist of miscellaneous professional service fees and expenses for our recent acquisitions.

The components of acquisition-related costs are as follows ~~(dollars in~~(in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		March 31,				March 31,					March 31,				March 31,
		2018		2017		2018		2017			2019		2018		2019		2018
Deferred compensation arrangements		$	702	$	703	$	2,108	$	1,405		$	703	$	702	$	2,107	$	2,108
Acquisition-related costs			589		4,719		891		5,520
Other			(37)		-		(37)		-
Other acquisition-related costs										Other acquisition-related costs		102		552		245		854
Total	Total	$	1,254	$	5,422	$	2,962	$	6,925	Total	$	805	$	1,254	$	2,352	$	2,962

3)

3)Revenue From Contracts With Customers

Effective July 1, 2018, the Company adopted the new accounting standard, ASU No. 2014-09, “Revenue from Contracts with Customers” (ASC 606) using the modified retrospective method to contracts that were not completed as of June 30, 2018. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings, whereby the cumulative impact of all prior periods is recorded in retained earnings or other impacted balance sheet line items upon adoption. The comparative information has not been adjusted and continues to be reported under ASC 605. The impact on the Company’s

consolidated income statements, balance sheets, equity or cash flows as of the adoption date as a result of applying ASC 606 have been reflected within those respective financial statements.

Under the Company’s historical accounting policies, non-developmental long-term contracts were recognized when the goods were transferred to the customer. Upon adoption, contracts for highly customized customer products that have no alternative use and in which the contract specifies the Company has a right to payment for its costs, plus a reasonable margin met the requirements for recognition over time under ASC 606. Additionally, under the Company’s historical accounting policies, the Food Service Equipment segment estimated the rebate accrual based on a volume-related method for rebates. Under ASC 606, the Company now calculates the rebate accrual on anticipated sales for the rebate period, rather than measurement of actual achievement of specific tiers.

Upon adoption, we recognized a reduction to retained earnings of $1.0 million which is comprised of (i) a net change for Engineering Technologies of $0.7 million in revenues offset by cost of sales increase of $0.6 million; and (ii) a $1.5 million adjustment for accrued rebates in the Food Service Equipment segment. The details of the adjustments to retained earnings upon adoption on June 30, 2018 as well as the effects on the consolidated balance sheet as of June 30, 2018, as if ASC 606 had been adopted in our 2018 fiscal year are as follows:


		Cumulative
(in thousands)		Effect
Net sales	$	(799)
Cost of Sales		(574)
Income tax expense		340
Net Loss		(1,033)

Effective Date

Reported
June 30, 2018

ASC 606
Adjustments

As Adjusted
July 1, 2018

Inventories

$ 127,223
$ (574)
$ 126,649

Accounts receivable

134,228
703
134,931

Accrued liabilities

         65,575
1,502
67,077

Deferred income taxes

     26,816
(340)
26,476

Retained earnings

761,430
(1,033)
760,397

Note that above amounts as of June 30 are before any restatement of balances to discontinued operations.

The following tables reconcile the balances as presented as of and for the three and nine months ended March 31, 2019 exclusive of the cumulative effect adjustment presented above to the balances prior to the adjustments made to implement the new revenue recognition standard for the same period (in thousands):

Three Months Ended March 31, 2019

As Presented
Impact of
ASC 606
Balances
Without adoption of ASC 606
Net sales
$
193,771
$
(3,324)
$
190,447
Cost of sales

131,981

(2,460)

129,521
   Gross profit

61,790

(864)

60,926
Provision for income taxes

3,833

(250)

3,583
Income from continuing operations

7,304

(614)

6,690
Income (loss) from discontinued operations, net of income taxes

18,965

-

18,965
Net income (loss)
$
26,269
$
(614)
$
25,655

Nine Months Ended March 31, 2019

As Presented
Impact of
ASC 606
Balances
Without adoption of ASC 606
Net sales
$
582,380
$
(9,179)
$
573,201
Cost of sales

384,402

(7,742)

376,660
   Gross profit

197,978

(1,437)

196,541
Provision for income taxes

13,535

(416)

13,119
Income from continuing operations

34,071

(1,021)

33,050
Income (loss) from discontinued operations, net of income taxes

21,450

195

21,645
Net income (loss)
$
55,521
$
(826)
$
54,695

As of March 31, 2019

As Presented

Impact of
ASC 606

Balances
Without adoption of ASC 606

ASSETS

Prepaid Expenses
$
27,115
$
(10,407)
$
16,708

Inventories

103,383

7,742

111,125

LIABILITIES

Income taxes payable

4,762

84

4,846

Retained earnings

808,417

402

808,819

Disaggregation of Revenue from Contracts with Customers
The following table presents revenue disaggregated by product line and segment (in thousands):

Three Months Ended
Revenue by Product Line
March 31, 2019
March 31, 2018
Refrigeration
$
46,883
$
52,245
Merchandising & Display

7,662

8,814
Pumps

9,321

9,822
Total Food Service Equipment

63,866

70,881

Engraving Services

34,505

30,375
Engraving Products

2,630

3,374
Total Engraving

37,135

33,749

Engineering Technologies Components

27,467

23,426

Electronics

50,197

51,213

Hydraulics Cylinders and System

15,106

12,878

Total Revenue by Product Line
$
193,771
$
192,147

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

Nine Months Ended
Revenue by Product Line
March 31, 2019
March 31, 2018
Refrigeration
$
153,955

168,562
Merchandising & Display

25,638

25,720
Pumps

25,262

27,571
Total Food Service Equipment

204,855

221,853

Engraving Services

104,159

90,499
Engraving Products

7,443

9,958
Total Engraving

111,602

100,457

Engineering Technologies Components

71,818

65,621

Electronics

154,347

144,082

Hydraulics Cylinders and System

39,758

34,969

Total Revenue by Product Line
$
582,380

566,982

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

Three Months Ended
Nine Months
Ended
Net sales

March 31, 2019
March 31, 2019
United States
$
126,910
381,615
Asia Pacific

25,608
81,649
EMEA⁽¹⁾

37,271
105,775
Other Americas

3,982
13,341
Total
$
193,771
582,380

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

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

Timing of Revenue Recognition
Three Months Ended

March 31, 2019
March 31, 2018
Products and services transferred at a point in time
$
184,950
$
187,970
Products transferred over time

8,821

4,177
Net Sales
$
193,771
$
192,147

Timing of Revenue Recognition
Nine Months Ended

March 31, 2019
March 31, 2018
Products and services transferred at a point in time
$
360,948
$
555,923
Products transferred over time

21,432

11,059
Net Sales
$
582,380
$
566,982

4

Contract Balances

Contract assets represent sales recognized in excess of billings related to work completed but not yet shipped for which revenue is recognized over time. Contract assets are recorded as accounts receivable.
Contract liabilities are customer deposits for which revenue has not been recognized. Current contract liabilities are recorded as accrued expenses.

The following table provides information about contract assets and liability balances as of March 31, 2019 (in thousands):

Balance at Beginning of Period

Additions

Deductions

Balance at End of Period
Nine months ended March 31, 2019

Contract assets:

Accounts receivable
$          5,655

$      23,500

$        24,844

$        4,311
Unbilled services
5,904

13,708

8,938

10,674
Contract liabilities:

Customer deposits
2,552

4,612

1,881

5,283

During the three and nine months ended March 31, 2019, we recognized the following revenue as a result of changes in the contract liability balances (in thousands):

Revenue recognized in the period from:
March 31, 2019

Three months ended
Nine months ended

Amounts included in the contract liability balance at the beginning of the period
$
1,378
$
1,881

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

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

4)

Fair Value Measurements

The financial instruments shown below are presented at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models may be applied.

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

Level 1 – Quoted prices in active markets for identical assets and liabilities. The ~~Company’s~~Company’s deferred compensation plan assets consist of shares in various mutual funds (for the deferred compensation plan,

investments are participant-directed) which invest in a broad portfolio of debt and equity securities. These assets are valued based on publicly quoted market prices for the ~~funds’~~funds’ shares as of the balance sheet dates.

Level 2 – Inputs, other than quoted prices in an active market, that are observable either directly or indirectly through correlation with market data. For foreign exchange forward contracts and interest rate swaps, the Company values the instruments based on the market price of instruments with similar terms, which are based on spot and forward rates as of the balance sheet dates. The Company has considered the creditworthiness of counterparties in valuing all assets and liabilities.

Level 3 – Unobservable inputs based upon the ~~Company’s~~Company’s best estimate of what market participants would use in pricing the asset or liability.

There were no transfers of assets or liabilities between any levels of the fair value measurement hierarchy at March 31, ~~2018~~2019 and June 30, ~~2017.~~2018. The ~~Company’s~~Company’s policy is to recognize transfers between levels as of the date they occur.

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

Items presented at fair value at March 31, ~~2018~~2019 and June 30, ~~2017~~2018 consisted of the following (in thousands):

~~March 31, 2018~~


									March 31, 2019
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Marketable securities - deferred compensation plan	$	2,399	$	2,399	$	-	$	-	$	2,485	$	2,485	$	-	$	-
Foreign exchange contracts		1,794		-		1,794		-
Interest rate swaps		1,107		-		1,107		-		455		-		455		-
Net investment hedge										2,170		-		2,170		-

Liabilities
Foreign exchange contracts	$	7,877	$	-	$	7,877	$	-	$	3,732	$	-	$	3,732	$	-
Interest rate swaps		-		-		-		-		721		-		721		-
Contingent acquisition payments^(a)		4,216		-		-		4,216		5,730		-		-		5,730
Net investment hedge										2,264		-		2,264		-


	June 30, 2017								June 30, 2018
	Total		Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Marketable securities - deferred compensation plan	$	2,397	$	2,397	$	-	$	-	$	2,362	$	2,362	$	-	$	-
Foreign exchange contracts		399		-		399		-		1,357		-		1,357		-
Interest rate swaps		3,777		-		3,777		-		1,325		-		1,325		-

Liabilities
Foreign exchange contracts	$	3,232	$	-	$	3,232	$	-	$	4,204	$	-	$	4,204	$	-
Interest rate swaps		3,958		-		3,958		-
Contingent acquisition payments^(a)		2,108		-		-		2,108		7,535		-		-		7,535

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

Our financial liabilities based upon Level 3 inputs ~~include a~~consist of contingent consideration ~~arrangement~~arrangements relating to our ~~acquisition~~acquisitions of Horizon ~~Scientific.~~Scientific and Piazza Rosa. We are contractually obligated to pay contingent consideration payments in connection with the Horizon Scientific acquisition based on the criteria of continued employment of the seller on the second and third anniversary of the closing date of the acquisition. We are contractually obligated to pay contingent consideration payments in connection with the Piazza Rosa acquisition based on the achievement of certain revenue targets during each of the first three years following acquisition. Piazza Rosa exceeded the defined revenue targets during the first year and a payment was made to the Piazza Rosa sellers during the first quarter of fiscal 2019. The seller of Horizon remained employed on the second anniversary of the closing date and a payment was made to the seller in the second quarter of fiscal 2019. We will update our assumptions each reporting period based on new developments and record such amounts at fair value based on the revised assumptions until the consideration is paid.

~~Contingent acquisition payment liabilities are scheduled to be paid in periods through fiscal year 2020.~~ As of March 31, 2018, we could be required to pay up to $8.4 million for contingent consideration arrangements if specific criteria are achieved. We have determined the fair value of the liabilities for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future payments was based on several factors, the most significant of which are continued employment of the seller and the risk-adjusted discount rate for the fair value measurement. As of March 31, 2018,2019, neither ~~the amount recognized for the contingent consideration arrangement, nor~~ the range of outcomes ornor the assumptions used to develop the estimate had changed.

4)~~Inventories~~5)

Discontinued Operations

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

During the first quarter of 2019, in order to focus its financial assets and managerial resources on its remaining portfolio of businesses, the Company decided to divest its Cooking Solutions Group, which consisted of three operating segments and a minority interest investment. In connection with the divestiture, during the second quarter of 2019, the Company sold its minority interest investment to the majority shareholders. During the third quarter of fiscal 2019, the Company entered into a definitive agreement to sell the three operating segments to the Middleby Corporation for a cash purchase price of $105 million, subject to post-closing adjustments and various transaction fees.

The transaction closed on March 31, 2019 and resulted in a pre-tax gain of $20.5 million less related transaction expenses of $4.4 million. The Company reported a tax benefit related to the sale due to the write-off of deferred tax liabilities related to the Cooking Solutions Group. Because the transaction closed on a non-business day, cash proceeds related to the sale were not received until the next business day which resulted in a receivable of $106.9 million recorded at quarter end. The receivable from the buyer is recorded as a component of current assets – discontinued operations on the Condensed Consolidated Balance Sheet as of March 31, 2019. The proceeds received were subsequently used to pay down borrowings on our revolving credit facility.

Results of the Cooking Solutions Group in current and prior periods have been classified as discontinued operations in the Condensed Consolidated Financial Statements and excluded from the results from continuing operations. Activity related to the Cooking Solutions Group and other discontinued operations for the three and nine months ended March 31, 2019 and 2018 is as follows (in thousands):


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Net Sales	$	23,024	$	24,596	$	71,451	$	73,891

Gain on Sale of Business	$	20,539	$	-	$	20,539	$	-
Transaction Fees		(4,397)		-		(4,397)		-
Income from Operations	$	16,214	$	1,089	$	19,824	$	4,847

Profit Before Taxes	$	16,447	$	1,214	$	19,459	$	5,227
Benefit (Provision) for Taxes		2,518		(237)		1,991		(1,287)
Net income from Discontinued Operations	$	18,965	$	977	$	21,450	$	3,940

Assets and liabilities related to our discontinued operations appear in the condensed consolidated balance sheets are as follows (in thousands):


	March 31, 2019		June 30, 2018
Accounts receivable	$	-	$	14,445
Inventories		-		22,923
Prepaid Expenses		-		303
Due from Buyer		106,863		-
Total current assets		106,863		37,671

Property, plant, equipment, net		-		7,637
Intangible assets, net		-		13,137
Goodwill		-		40,011
Other non-current assets		-		1,374
Total non-current assets		-		62,159
Total Assets		106,863		99,830

Accounts Payable		-		10,759
Accrued Liabilities		2,561		7,897
Income Tax Payable		-		9
Total current liabilities		2,561		18,665

Non-current Liabilities		-		50
Total Liabilities		2,561		18,715

Net Assets	$	104,302	$	81,115

Inventories

Inventories are comprised of the following (in thousands):

March 31, 2018

June 30,
2017
Raw materials

$
61,485

$
53,313
Work in process

33,992

28,110
Finished goods

36,112

37,978
Total

$
131,589

$
119,401


	March 31, 2019		June 30, 2018
Raw materials	$	47,216	$	46,833
Work in process		31,235		30,526
Finished goods		24,932		26,941
Total	$	103,383	$	104,300

Distribution costs associated with the sale of inventory, which are recorded as a component of selling, general and administrative expenses in the accompanying Unaudited Condensed Consolidated Statements of Operations, were ~~$7.1~~$4.7 million and ~~$18.6~~$13.6 million for the three and nine months ended March 31, 2019, respectively, and $5.4 million and $14.1 million for the three and nine months ended March 31, 2018, ~~respectively, and $4.9 million and $14.5 million for the three and nine months ended March 31, 2017,~~ respectively.

5)~~Goodwill~~

Goodwill

Changes to goodwill during the period ended March 31, ~~2018~~2019 were as follows (in thousands):

June 30,
2017

Acquisitions

Translation Adjustment
March 31, 2018
Food Service Equipment
$
63,464

$
-

$
             -

$
63,464
Engraving

   20,000

4,575

461

       25,036
Engineering Technologies

   44,120

-

695

        44,815
Electronics

   112,047

533

      5,749

118,329
Hydraulics

     3,059

-

               -

         3,059
Total
$
242,690

$
5,108

$
6,905

$
254,703

6)

June 30,
2018
Discontinued
Operations
Continuing Ops - June 30, 2018
Acquisitions
Translation Adjustment
March 31, 2019
Food Service Equipment
$
63,464
$
(40,011)
$
23,453
$
-
$
-
$
23,453
Engraving

27,194

-

27,194

34,281

(376)

61,099
Engineering Technologies

44,247

-

44,247

-

(119)

44,128
Electronics

113,798

-

113,798

15,614

(708)

128,704
Hydraulics

3,059

-

3,059

-

-

3,059
Total
$
  251,762
$
(40,011)
$
211,751
$
49,895
$
(1,203)
$
260,443

Intangible Assets

Intangible assets consist of the following (in thousands):


				Tradenames
		Customer Relationships		(Indefinite-lived)		Developed Technology		Other		Total
March 31, 2019
Cost	$	72,559	$	18,850	$	48,228	$	5,486	$	145,123
Accumulated amortization		(22,712)		-		(7,527)		(3,379)		(33,618)
Balance, March 31, 2019	$	49,847	$	18,850	$	40,701	$	2,107	$	111,505

June 30, 2018
Cost	$	48,285	$	11,102	$	48,281	$	4,025	$	111,693
Accumulated amortization		(19,134)		-		(4,709)		(2,912)		(26,755)
Balance, June 30, 2018	$	29,151	$	11,102	$	43,572	$	1,113	$	84,938

Tradenames

Customer Relationships

(Indefinite-lived)

Developed Technology

Other

Total
March 31, 2018

Cost
$
67,727

$
20,451

$
50,313

$
4,951

$
143,442
Accumulated amortization

(33,046)

                   -

(3,926)

(3,418)

(40,390)
Balance, March 31, 2018
$
  34,681

$
         20,451

$
46,387

$
1,533

$
103,052

June 30, 2017

Cost
$
  64,247

$
       18,715

$
47,586

$
4,503

$
135,051
Accumulated amortization

(28,764)

                   -

(826)

(2,958)

(32,548)
Balance, June 30, 2017
$
  35,483

$
         18,715

$
46,760

$
1,545

$
102,503

Amortization expense from continuing operations for the three months ended March 31, 2019 and 2018 ~~and 2017~~ was ~~$2.2~~$2.8 million and ~~$1.1~~$1.9 million, respectively. Amortization expense from continuing operations for the nine months ended March 31, 2019 and 2018 ~~and 2017~~ was ~~$6.7~~$7.6 million and ~~$3.1~~$6.0 million, respectively. At March 31, ~~2018,~~2019, amortization expense of ~~current~~ intangible assets is estimated to be ~~$2.4~~$2.9 million for the remainder of fiscal year ~~2018, $9.2 million in~~ 2019, ~~$8.7~~$11.0 million in 2020, ~~$8.1~~$10.3 million in 2021, ~~$7.6~~$9.7 million in 2022, $8.9 million in 2023 and ~~$46.5~~$50.3 million thereafter.

7)Warranties

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

The changes in warranty reserve from continuing operations, which are recorded as a component of accrued liabilities, as of March 31, ~~2018~~2019 and ~~year ended~~ June 30, ~~2017~~2018 were as follows (in thousands):


	March 31, 2018		June 30, 2017				March 31, 2019		June 30, 2018
Balance at beginning of year	$	9,243		$	9,085	$	4,966	$	4,667
Acquisitions and other		(20)			301		(139)		(138)
Warranty expense		6,872			9,203		3,773		6,248
Warranty claims		(6,762)			(9,346)		(3,577)		(5,811)
Balance at end of period	$	9,333		$	9,243	$	5,023	$	4,966

8)~~Debt~~10)

Debt

Long-term debt is comprised of the following (in thousands):


	March 31, 2018		June 30, 2017		March 31, 2019		June 30, 2018
Bank credit agreements	$	204,975	$	192,500	$	293,000	$	194,000
Other		-		6
Total funded debt		204,975		192,506		293,000		194,000
Issuance Cost		(249)		(530)		(1,275)		(228)
Total long-term debt	$	204,726	$	191,976	$	291,725	$	193,772

The ~~Company’s~~Company’s debt payments are due as follows (in thousands):


Fiscal Year	March 31, 2018		March 31, 2019
2018	$	-
2019		-	$	-
2020		204,975		-
2021		-		-
2022		-		-
2023				-
Thereafter		-		293,000
Total Debt		204,975		293,000
Issuance cost		(249)		(1,275)
Debt net of issuance cost	$	204,726	$	291,725

Bank Credit Agreements

During the second quarter of fiscal year ~~2015,~~2019, the Company entered into ana five-year Amended and Restated Credit Agreement (“(“Credit ~~Facility”~~Facility”, or ~~“facility”~~“facility”). ~~This five-year Credit Facility expires in December 2019 and~~The facility has a borrowing limit of $500 million which is an increase of $100 million from the prior facility’s $400 million ~~which~~limit. The facility can be increased by an amount of up to ~~$100~~$250 million, in accordance with specified conditions contained in the agreement. The facility also includes a $10 million sublimit for swing line loans and a ~~$30~~$35 million sublimit for letters of credit.

At March 31, ~~2018,~~2019, the Company had standby letters of credit outstanding, primarily for insurance purposes, of ~~$8.9~~$7.4 million and had the ability to borrow ~~$186.1~~$175.9 million under the facility. At March 31, ~~2018,~~2019, the carrying value of the current borrowings under the facility approximates fair value.

9)

11)

Derivative Financial Instruments

In August 2017, the FASB issued ASU 2017-12,Derivatives and Hedging (Topic 815); Targeting Improvements to Accounting for Hedging Activities, which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and to make certain targeted improvements to simplify the application of hedge accounting guidance. Given the improvements made to the application of hedge accounting under the guidance, the Company has decided to early adopt the ASU in the second quarter of fiscal 2019, or on December 1, 2018. As of the adoption date, the Company had both foreign currency swaps and interest rate swaps which are designated and accounted for as cash flow hedges with no hedge ineffectiveness historically recorded. As the Company had historically determined its foreign currency exchange contracts and interest rate swaps to be perfectly effective it did not record any hedge ineffectiveness in earnings related to the swaps historically or on the initial application date. Therefore, there is no cumulative-effect adjustment necessary to apply this change in accounting principle. In addition to the above, the Company reviewed the ASU and identified no other provisions of the standard which would result in a quantitative impact as a result of applying the new guidance.

Interest Rate Swaps

From time to time as dictated by market opportunities, the Company enters into interest rate swap agreements designed to manage exposure to interest rates on the ~~Company’s~~Company’s variable rate indebtedness. The Company recognizes all derivatives on its balance sheet at fair value. The Company has designated its interest rate swap agreements, including those that are forward-dated, as cash flow hedges, and changes in the fair value of the swaps are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with the swaps will be reported by the Company in interest expense.

The ~~Company’s~~Company’s effective swap agreements convert the base borrowing rate on ~~$75~~$85 million of debt due under our revolving credit agreement from a variable rate equal to LIBOR to a weighted average fixed rate of ~~1.74%~~2.11% at March 31, ~~2018.~~2019. The fair value of the swaps, recognized in accrued expenses and in other comprehensive income, is as follows (in thousands, except percentages):

Effective Date

Notional Amount
Fixed Interest Rate
Maturity

March 31,
2018

June 30,
2017
December 19, 2014

     20,000
1.18%
December 19, 2017
$
-

$
8
December 19, 2014

       5,000
1.20%
December 19, 2017

-

1
December 18, 2015

    15,000
1.46%
December 19, 2018

66

(1)
December 19, 2015

     10,000
2.01%
December 19, 2019

49

(106)
May 24, 2017

25,000
1.88%
April 24, 2022

618

(60)
May 24, 2017

25,000
1.67%
May 24, 2020

374

(23)

$
1,107

$
(181)



Effective Date	Notional Amount	Fixed Interest Rate	Maturity		March 31, 2019		June 30, 2018
December 18, 2015	15,000	1.46%	December 19, 2018		-		55
December 19, 2015	10,000	2.01%	December 19, 2019		32		74
May 24, 2017	25,000	1.88%	April 24, 2022		220		764
May 24, 2017	25,000	1.67%	May 24, 2020		203		432
August 6, 2018	25,000	2.83%	August 6, 2023		(721)		-
				$	(266)	$	1,325

The Company reported no losses for the three and nine months ended March 31, ~~2018,~~2019, as a result of hedge ineffectiveness. Future changes in these swap arrangements, including termination of the agreements, may result in a reclassification of any gain or loss reported in accumulated other comprehensive income (loss) into earnings as an adjustment to interest expense. Accumulated other comprehensive income (loss) related to these instruments is being amortized into interest expense concurrent with the hedged exposure.

Foreign Exchange Contracts

Forward foreign currency exchange contracts are used to limit the impact of currency fluctuations on certain anticipated foreign cash flows, such as collections from customers and loan payments between subsidiaries. The Company enters into such contracts for hedging purposes only. The Company has designated certain of these currency contracts as hedges, and changes in the fair value of these contracts are recognized in other comprehensive income until the hedged items are recognized in earnings. Hedge ineffectiveness, if any, associated with these contracts will be reported in net income. At March 31, ~~2018~~2019 and June 30, ~~2017,~~2018, the Company

had outstanding forward contracts related to hedges of intercompany loans with net unrealized ~~gain (losses)~~losses of ~~$(6.0)~~$(3.7) million and ~~$(2.8)~~$(2.9) million, respectively, which approximate the unrealized gains and losses on the related loans. The contracts have maturity dates ranging from ~~2018-2023,~~2019-2023, which correspond to the related intercompany loans.

Net Investment Hedges

During the third quarter of 2019, the Company entered into a foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain non-U.S. subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. The change in the fair value of the net investment hedges attributable to changes other than those due to fluctuations in the spot rate are excluded from the assessment of hedge effectiveness and that difference is reported directly in earnings. The interest rate differential of the net investment hedges will be excluded from the assessment of hedge effectiveness and amortized linearly to earnings over the life of the derivative. Any difference between the change in fair value of the excluded component and amounts recognized in earnings under that systematic and rational method shall be recognized in other comprehensive income.

For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its non-U.S. subsidiaries. These hedges are determined to be effective. During the three and nine months ended March 31, 2019, the Company recognized $0.4 million of gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss. The contractual amount of the Company’s foreign currency forward contracts that are designated as net investment hedges is $120.0 million as of March 31, 2019.

The notional amounts of the ~~Company’s~~Company’s forward contracts, by currency, are as follows:


Currency	March 31, 2019	June 30, 2018
USD	175,015	64,558
Euro	12,250	21,300
Pound Sterling	-	6,826
Peso	-	54,000
Canadian	20,600	20,600

Currency

March 31, 2018

June 30,
2017
USD

64,558

73,000
Euro

21,300

21,335
Pound Sterling

6,750

6,962
Peso

54,000

54,000
Canadian

20,600

20,600

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

Asset Derivatives

March 31, 2019

June 30, 2018

Derivative designated

Balance

as hedging instruments

Sheet

Line Item

Fair Value

Line Item

Fair Value

Interest rate swaps

Other Assets

455

Other Assets

1,325

Foreign exchange contracts

Other Assets

1,357

Net investment hedge

Other Assets

2,170

2,625

2,682

Liability Derivatives

March 31, 2019

June 30, 2018

Derivative designated

Balance

as hedging instruments

Sheet

Line Item

Fair Value

Line Item

Fair Value

Interest rate swaps

Accrued Liabilities

721

Accrued Liabilities

Foreign exchange contracts

Accrued Liabilities

3,732

Accrued Liabilities

4,204

Net investment hedge

Other non-current liabilities

2,264

6,717

4,204

Asset Derivatives

March 31, 2018

June 30, 2017
Derivative designated
Balance

Balance

as hedging instruments
Sheet

Sheet

Line Item

Fair Value

Line Item

Fair Value
Interest rate swaps
Other Assets

$
1,107

Other Assets

$
-
Foreign exchange contracts
Other Assets

1,794

Other Assets

-

$
2,901

$
-

Liability Derivatives

March 31, 2018

June 30, 2017
Derivative designated
Balance

Balance

as hedging instruments
Sheet

Sheet

Line Item

Fair Value

Line Item

Fair Value
Interest rate swaps
Accrued Liabilities
$
-

Accrued Liabilities
$
181
Foreign exchange contracts
Accrued Liabilities

7,877

Accrued Liabilities

2,833

$
7,877

$
3,014

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	March 31,				March 31,				March 31,				March 31,
	2018		2017		2018		2017		2019		2018		2019		2018
Interest rate swaps	$	513	$	(3,445)	$	930	$	(2,817)	$	(693)	$	513	$	(1,365)	$	930
Foreign exchange contracts		(829)		-		(2,823)		(74)		2,142		(829)		(861)		(2,823)
	$	(316)	$	(3,445)	$	(1,893)	$	(2,891)	$	1,449	$	(316)	$	(2,226)	$	(1,893)

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

Details about Accumulated

Affected line item
Other Comprehensive

Three Months Ended

Nine Months Ended

in the Unaudited
Income (Loss) Components
March 31,

March 31,

Condensed Statements

2018

2017

2018

2017

of Operations
Cross currency swaps

$
2,363

$
80

$
3,427

$
309

Interest expense
Foreign exchange contracts

-

-

-

75

Cost of Sales

$
2,363

$
80

$
3,427

$
384


Details about Accumulated									Affected line item
Other Comprehensive	Three Months Ended				Nine Months Ended				in the Unaudited
Income (Loss) Components	March 31,				March 31,				Condensed Statements
	2019		2018		2019		2018		of Operations
Interest rate swaps	$	(84)	$	2,363	$	(246)	$	3,427	Interest expense
Foreign exchange contracts		(422)		-		2,012		-	Interest expense
Net investment hedge		(435)		-		(435)		-	Non-operating income
	$	(941)	$	2,363	$	1,331	$	3,427

10)12)

Retirement Benefits

The Company has defined benefit pension plans covering certain current and former employees both inside and outside of the U.S. The ~~Company’s~~Company’s pension plan for U.S. employees is frozen for substantially all participants and has been replaced with a defined contribution benefit plan.

Net Periodic Benefit Cost for the ~~Company’s~~Company’s U.S. and Foreign pension benefit plans for the threeandnine monthsendedMarch 31, 2019 and 2018consisted of the following components (in thousands):


	U.S. Plans				Non-U.S. Plans
	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Service cost	$	1	$	1	$	9	$	9
Interest cost		2,586		2,520		254		269
Expected return on plan assets		(3,385)		(3,354)		(229)		(244)
Recognized net actuarial loss		1,030		1,145		86		242
Amortization of prior service cost		-		-		-		(9)
Net periodic benefit cost	$	232	$	312	$	120	$	267


	U.S. Plans				Non-U.S. Plans
	Nine Months Ended				Nine Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Service cost	$	3	$	3	$	26	$	27
Interest cost		7,757		7,560		757		783
Expected return on plan assets		(10,156)		(10,061)		(682)		(710)
Recognized net actuarial loss		3,091		3,435		256		705
Amortization of prior service cost		-		-		-		(26)
Net periodic benefit cost	$	695	$	937	$	357	$	779

The contributions made to defined benefit plans for the three and nine months ended March 31, 2019 and 2018 ~~and 2017 consisted of the following components~~are presented below along with remaining contributions to be made for fiscal year 2019 (in thousands):

U.S. Plans

Non-U.S. Plans

Three Months Ended

Three Months Ended

March 31,

March 31,

2018

2017

2018

2017
Service cost
$
             1

$
             1

$
              9

$
             9
Interest cost

        2,520

        2,613

          269

          250
Expected return on plan assets

      (3,354)

      (3,440)

        (244)

         (282)
Recognized net actuarial loss

      1,145

      1,190

          242

           249
Amortization of prior service cost

                -

                -

          (9)

          (12)
Net periodic benefit cost
$
           312

$
           364

$
           267

$
          214


Contributions to defined benefit plans		Three Months Ended March 31,				Nine Months Ended March 31,					Remaining Contributions to be made in Fiscal 2019
		2019		2018		2019		2018
United States, unfunded plan	$	56	$	67	$	169	$	194		$ 56
United Kingdom		196		210		582		614			184
Germany, unfunded plan		-		-		-		-			274
Ireland		-		-		-		-			65
	$	252	$	277	$	751	$	808	$		579

U.S. Plans

Non-U.S. Plans

Nine Months Ended

Nine Months Ended

March 31,

March 31,

2018

2017

2018

2017
Service cost
$
3

$
2

$
27

$
28
Interest cost

7,560

7,838

783

764
Expected return on plan assets

(10,061)

(10,321)

(710)

(861)
Recognized net actuarial loss

3,435

3,571

705

760
Amortization of prior service cost

-

-

(26)

(36)
Net periodic benefit cost
$
937

$
1,090

$
779

$
655

The Company expects to pay $6.9 million in contributions to its defined benefit plans during fiscal 2018. Contributions of $0.3 million and $0.8 million were made during the three and nine months ended March 31, 2018 compared to $0.3 million and $1.0 million during the three and nine months ended March 31, 2017, respectively. Required contributions of $0.9 million will be paid to the Company’s U.K. defined benefit plan during 2018. The Company expects to make contributions during the current fiscal year of $0.2 million and $0.3 million to its unfunded defined benefit plans in the U.S. and Germany respectively. Subsequent to the end of the third quarter, the Company made a $5.5 million contribution to its defined benefit plan in the U.S. to accelerate tax benefits afforded to the Company by recent tax law changes.13)

11)Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act was passed which, among other things, reduces the federal corporate tax rate to 21.0% effective for taxable years starting on or after January 1, 2018. The Company is using a blended federal rate of 28.0% for the year ending June 30, 2018. During the quarter ended December 31, 2017, the Company reported provisional amounts for toll/transition tax and the change in the U.S. deferred tax. Pursuant to SEC guidance provided in Staff Accounting Bulletin No. 118, the Company is utilizing the measurement period approach for the income tax effects of tax reform for which the accounting is incomplete. During the current quarter ending March 31, 2018, the Company updated the impact of the tax law as follows:

The Company has discretely recorded an additional charge of approximately $178 thousand to its provision for income taxes for the quarter ending March 31, 2018 due to a revaluation of the Company's estimated deferred tax assets as of December 31, 2017. The increase was a result of a change in the estimated current year activity from the prior quarter for a total year-to date impact of approximately $1.4 million. As in the prior quarter, the impact is based on estimated amounts for the current quarter.

The Company has discretely recorded a tax benefit of approximately $633 thousand to its provision for income taxes for the quarter ending March 31, 2018 related to a mandatory deemed repatriation of foreign earnings. The benefit was the result of updating the calculation based on the federal tax return filed in the quarter that was partially offset by an estimated tax provision for state taxes on the impact of the deemed repatriation for a total year-to date impact of approximately $13.1 million. The Company is still using an estimate because the calculation involves data from a future period (June 30, 2018) and

the Company is awaiting further guidance from the tax authorities regarding the technical application of the rules. Under the Act, the Company is permitted to pay this tax over an eight-year period commencing with the due date of the 2018 tax return.

Since these provisions during the quarter are still based on estimates, the Company will continue to measure the impact of these areas and record any changes in subsequent quarters when information and guidance become available.

Other law changes implemented by the Act such as the repeal of the Section 199 manufacturing deduction, changes to the calculation for Section 162(m) executive compensation deduction, interest deduction limitation and Global Intangible Low Taxed Income (GILTI), and others will not have any impact on the Company until the fiscal year ending June 30, 2019. The Company will continue to monitor guidance regarding these changes for how it will impact the financial statements in later periods.

The Company's effective tax rate from continuing operations for the third quarter of ~~2018~~2019 was ~~23.4%~~34.4% compared with ~~27.3%~~23.8% for the prior year quarter. The effective tax rate in ~~2018~~2019 was higher due to both an ~~approximately~~ $0.5 million discrete tax benefit related to the US tax reform ~~and a higher benefit related to a true-up for the filed tax return~~ recorded in the ~~period~~prior year quarter and not in the current year quarter as well as withholding taxes included in the annual effective tax rate for foreign repatriation in the current quarter that was not included in the rate in the prior year quarter.

The Company's effective tax rate from continuing operations for the nine months ended March 31, ~~2018~~2019 was ~~54.4%~~28.4% compared with ~~24.1%~~57.7% for the prior year. The effective tax rate for ~~the~~prior year to date was higher due to ~~net discrete~~the impact of the Sec. 965 repatriation “toll” tax ~~reform charges of $14.6 million~~that was included in the prior year (recorded in FY18 Q2) and not recorded in the current ~~year and not~~year.

The Company increased its uncertain tax position during the quarter due to technical positions taken on the FY18 tax return filed during the quarter concerning the impact of the mandatory repatriation. The expense related to this position was recorded in the prior ~~year.~~year and resulted in a balance sheet reclass only.

14)

12)Earnings Per Share

The following table sets forth a reconciliation of the number of shares (in thousands) used in the computation of basic and diluted earnings per share:

Three Months Ended

Nine Months Ended

March 31,

March 31,

2018

2017

2018

2017
Basic - Average shares outstanding

12,709

12,664

12,695

12,667
Dilutive effect of unvested, restricted stock awards

88

94

89

105
Diluted - Average shares outstanding

12,797

12,758

12,784

12,772


		Three Months Ended			Nine Months Ended
		March 31,			March 31,
	2019		2018	2019		2018
Basic - Average shares outstanding	12,530		12,709	12,626		12,695
Dilutive effect of unvested, restricted stock awards	44		88	61		89
Diluted - Average shares outstanding	12,574		12,797	12,687		12,784

During the fourth quarter of fiscal 2017, the Company adopted Accounting Standards Update (ASU) 2016-09 which required a prospective update to the treasury method of calculating weighted average diluted shares outstanding resulting in the inclusion of additional shares in diluted EPS calculation for the three and nine months ended March 31, 2017.

Earnings available to common stockholders are the same for computing both basic and diluted earnings per share. ~~No options to purchase~~There were not any anti-dilutive potential common ~~stock were~~shares excluded ~~as anti-dilutive~~ from the calculation ~~of diluted earnings per share~~above for the three and nine months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

Performance stock units of ~~51,270~~68,933 and ~~29,607~~51,270 for the nine months ended March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, are excluded from the diluted earnings per share calculation as the performance criteria have not been met.

13)

15)

Comprehensive Income (Loss)

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


	March 31, 2018		June 30, 2017		March 31, 2019		June 30, 2018
Foreign currency translation adjustment	$	(10,959)	$	(25,107)	$	(30,266)	$	(25,013)
Unrealized pension losses, net of tax		(101,375)		(86,646)		(92,357)		(95,112)
Unrealized losses on derivative instruments, net of tax		(2,933)		(4,185)		(1,794)		(1,734)
Accumulated other comprehensive loss⁽¹⁾	$	(115,267)	$	(115,938)
Total					$	(124,417)	$	(121,859)

(1)~~Reflects stranded tax effects from the change in tax rate as a result of the early adoption of ASU 2018-02 in the amount of $17.2 million which has been reclassified to retained earnings.~~ 16)

Contingencies

14)~~Contingencies~~

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

17)

15)Industry Segment Information

The Company has determined that it has five reportable segments organized around the types of product sold:

•

Food Service Equipment – ~~an aggregation~~ a manufacturer of ~~eight operating segments that manufacture and sell~~ commercial food service equipment;

•

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

•

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

•

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

•

Hydraulics – manufacturing ~~and selling~~ of single and double-acting telescopic and piston rod hydraulic ~~cylinders.~~ cylinders

Net sales and income (loss) from continuing operations by segment for the three and nine months ended March 31, ~~2018~~2019 and ~~2017~~2018 were as follows (in thousands):


		Three Months Ended March 31,									Three Months Ended March 31,
		Net Sales				Income from Operations					Net Sales				Income from Operations
		2018		2017		2018		2017			2019		2018		2019		2018
Segment:
Engraving											$	37,135	$	33,749	$	4,485	$	7,195
Electronics												50,197		51,213		9,418		11,221
Engineering Technologies												27,467		23,426		2,800		1,155
Hydraulics												15,106		12,878		2,242		1,749
Food Service Equipment		$	95,482	$	92,730	$	6,785	$	7,418			63,866		70,881		3,559		5,546
Engraving			33,749		25,492		7,030		6,003
Engineering Technologies			23,426		23,678		1,140		2,442
Electronics			51,208		32,308		11,173		6,499
Hydraulics			12,878		10,507		1,728		1,674
Restructuring costs							(1,337)		(1,019)							(549)		(1,060)
Corporate							(5,938)		(6,160)							(6,104)		(5,733)
Acquisition-related costs							(1,254)		(5,422)							(805)		(1,254)
Sub-total		$	216,743	$	184,715	$	19,327	$	11,435		$	193,771	$	192,147	$	15,046	$	18,819
Interest expense							(2,286)		(953)							(3,230)		(2,286)
Other non-operating income							(293)		52							(679)		(1,014)
Income from continuing operations before income taxes	Income from continuing operations before income taxes					$	16,748	$	10,534	Income from continuing operations before income taxes					$	11,137	$	15,519


		Nine Months Ended March 31,										Nine Months Ended March 31,
		Net Sales				Income from Operations						Net Sales						Income from Operations
		2018		2017		2018		2017			2019			2018			2019			2018
Segment:
Engraving													111,602			100,457			18,883			21,735
Electronics													154,347			144,082			32,581			31,774
Engineering Technologies													71,818			65,621			6,636			3,879
Hydraulics													39,758			34,969			5,753			5,138
Food Service Equipment		$	295,796	$	277,582	$	25,051	$	24,112		$	204,855		$	221,853		$	15,417		$	19,834
Engraving			100,457		78,084		21,246		19,910
Engineering Technologies			65,621		60,948		3,836		5,815
Electronics			144,030		91,455		31,628		19,064
Hydraulics			34,969		30,100		5,076		4,782
Restructuring costs							(6,307)		(3,077)									(1,173)			(5,792)
Corporate							(19,917)		(19,244)									(17,847)			(19,090)
Acquisition-related costs							(2,962)		(6,925)									(2,352)			(2,962)
Sub-total		$	640,873	$	538,169	$	57,651	$	44,437		$	582,380		$	566,982		$	57,898		$	54,516
Interest expense							(5,800)		(2,499)									(8,598)			(5,800)
Other non-operating income							764		819									(1,694)			(1,350)
Income from continuing operations before income taxes	Income from continuing operations before income taxes					$	52,615	$	42,757	Income from continuing operations before income taxes							$	47,606		$	47,366

Net sales include only transactions with unaffiliated customers and include no intersegment sales. Income (loss) from operations by segment excludes interest expense and other non-operating income (expense).

The ~~Company’s~~Company’s identifiable assets at March 31, ~~2018~~2019 and June 30, ~~2017~~2018 are as follows (in thousands):


	March 31, 2019		June 30, 2018
Engraving		202,989			149,973
Electronics		336,494			318,564
Engineering Technologies		147,754			150,150
Hydraulics		32,655			25,646
Food Service Equipment	$	152,062		$	149,743
Corporate & Other		24,524			23,031
Discontinued Operations		106,863			99,830
Total	$	1,003,341		$	916,937

March 31, 2018
   June 30, 2017
Food Service Equipment

$
249,716

$
243,414
Engraving

148,844

115,664
Engineering Technologies

141,314

150,805
Electronics

320,271

292,776
Hydraulics

25,062

   21,405
Corporate & Other

31,069

   43,612
Total

$
         916,276

$
867,676

16)~~Restructuring~~18)

Restructuring

The Company has undertaken cost reduction and facility consolidation initiatives that have resulted in severance, restructuring, and related charges. ~~A summary of charges by initiative is as follows (in thousands):~~

Three Months Ended

Nine Months Ended

March 31, 2018

March 31, 2018
Fiscal 2018

Involuntary Employee Severance and Benefit Costs

Other

Total

Involuntary Employee Severance and Benefit Costs

Other

Total
Restructuring initiatives
$
344

$
953

$
1,297

$
2,254

$
2,953

$
5,207
Prior year initiatives

7

33

40

161

939

1,100

$
       351

$
986

$
   1,337

$
           2,415

$
3,892

$
  6,307

Three Months Ended

Nine Months Ended

March 31, 2017

March 31, 2017
Fiscal 2017

Involuntary Employee Severance and Benefit Costs

Other

Total

Involuntary Employee Severance and Benefit Costs

Other

Total
Restructuring initiatives
$
222

$
823

$
1,045

$
1,368

$
   1,651

$
3,019
Prior year initiatives

           -

(26)

(26)

-

58

58

$
       222

$
797

$
   1,019

$
           1,368

$
1,709

$
  3,077

~~2018~~2019 Restructuring Initiatives

The Company continues to focus on our efforts to reduce cost and improve productivity across our businesses, particularly through headcount reductions, facility closures, and consolidations. During ~~the nine months ended March 31, 2018,~~fiscal year 2019, we also incurred restructuring expenses ~~from~~related to third party assistance with analysis and implementation of these activities.

Prior Year Restructuring Initiatives

During the fiscal year 2018, ~~initiatives~~we initiated restructuring expenses related to three restructuring programs, ~~that are intended to improve profitability, streamline production and enhance capacity to support future growth:~~namely: (1) the realignment of management functions at the Food Service Equipment Group level; (2) headcount reduction and plant realignment with regard to the standard products businesses within Food Service Equipment; and (3) the exit of an unprofitable Engraving business in Brazil.

Involuntary Employee Severance and Benefit Costs

Other

Total

Restructuring liabilities at June 30, 2017

$
-

$
-

$
-

Additions and adjustments

2,435

2,945

5,380

Payments

(2,204)

(2,913)

(5,117)

Restructuring liabilities at March 31, 2018

$
231

$
32

$
263

~~Prior Year Initiatives~~

~~The prior year initiatives yet to be completed are primarily the finalization~~

A summary of ~~the manufacturing footprint consolidation within our Enginetics business in the Engineering Technology segment.~~charges by initiative is as follows (in thousands):


	Three Months Ended						Nine Months Ended
	March 31, 2019						March 31, 2019
Fiscal 2019	Involuntary Employee Severance and Benefit Costs		Other		Total		Involuntary Employee Severance and Benefit Costs		Other		Total
Restructuring initiatives	$	497	$	5	$	502	$	794	$	75	$	869
Prior year initiatives		47		-		47		172		132		304
	$	544	$	5	$	549	$	966	$	207	$	1,173


	Three Months Ended						Nine Months Ended
	March 31, 2018						March 31, 2018
Fiscal 2018	Involuntary Employee Severance and Benefit Costs		Other		Total		Involuntary Employee Severance and Benefit Costs		Other		Total
Restructuring initiatives	$	265	$	755	$	1,020	$	2,043	$	2,649	$	4,692
Prior year initiatives		7		33		40		161		939		1,100
	$	272	$	788	$	1,060	$	2,204	$	3,588	$	5,792

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


Current Year Initiatives	Involuntary Employee Severance and Benefit Costs		Other		Total
Restructuring liabilities at June 30, 2018	$	-	$	-	$	-
Additions and adjustments		794		75		869
Payments		(484)		(75)		(559)
Restructuring liabilities at March 31, 2019	$	310	$	-	$	310


Prior Year Initiatives	Involuntary Employee Severance and Benefit Costs		Other		Total
Restructuring liabilities at June 30, 2018	$	456	$	25	$	481
Additions and adjustments		172		132		304
Payments		(545)		(151)		(696)
Restructuring liabilities at March 31, 2019	$	83	$	6	$	89

Involuntary Employee Severance and Benefit Costs

Other

Total
Restructuring liabilities at June 30, 2017

$
839

$
906

$
1,745
Additions and adjustments

163

937

1,100
Payments

               (710)

       (1,843)

    (2,553)
Restructuring liabilities at March 31, 2018

$
292

$
-

$
292

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

Three Months Ended

Nine Months Ended

March 31, 2018

March 31, 2018

Involuntary Employee Severance and Benefit Costs

Other

Total

Involuntary Employee Severance and Benefit Costs

Other

Total
Food Service Equipment
$
80

$
945

$
        1,025

$
829

$
2,505

$
3,334
Engraving

186

2

188

925

345

1,270
Engineering Technologies

8

18

26

161

900

1,061
Electronics

77

7

84

209

90

299
Corporate

-

14

14

291

52

343

$
351

$
986

$
    1,337

$
       2,415

$
3,892

$
6,307


		Three Months Ended															Nine Months Ended
		March 31, 2019															March 31, 2019
		Involuntary Employee Severance and Benefit Costs				Other					Total				Involuntary Employee Severance and Benefit Costs						Other						Total
Food Service Equipment		$		-				$		-	$		-		$				276				$		91		$		367
Engraving				173						-			173						239						-				239
Engineering Technologies				-						-			-						17						99				116
Electronics				296						5			301						297						17				314
Corporate				75						-			75						137						-				137
		$		544				$		5	$		549		$				966				$		207		$		1,173
	Three Months Ended																	Nine Months Ended
	March 31, 2018																	March 31, 2018
	Involuntary Employee Severance and Benefit Costs				Other							Total				Involuntary Employee Severance and Benefit Costs						Other						Total
Food Service Equipment	$		1				$		747			$		748		$				618				$		2,201		$		2,819
Engraving			186						2					188						925						345				1,270
Engineering Technologies			8						18					26						161						900				1,061
Electronics			77						7					84						209						90				299
Corporate			-						14					14						291						52				343
	$		272				$		788			$		1,060		$				2,204				$		3,588		$		5,792

Three Months Ended

Nine Months Ended

March 31, 2017

March 31, 2017

Involuntary Employee Severance and Benefit Costs

Other

Total

Involuntary Employee Severance and Benefit Costs

Other

Total
Food Service Equipment
$
-

$
    7

$
        7

$
1,129

$
85

$
1,214
Engraving

-

-

-

6

        -

6
Engineering Technologies

222

730

952

222

1,164

1,385
Electronics

-

86

        86

11

455

467
Corporate

-

(26)

(26)

-

5

5

$
222

$
797

$
    1,019

$
       1,368

$
1,709

$
3,077

During the third quarter of fiscal year 2018, we incurred restructuring expenses of $1.3 million primarily related to two restructuring programs that are intended to improve profitability, streamline production and enhance capacity to support future growth including headcount reduction and plant realignment with regard to the standard products businesses within Food Service Equipment and the exit of an unprofitable Engraving business in Brazil.

Restructuring ~~expenses~~expense is expected to be approximately $0.8 million for ~~the nine months ended March 31, 2018 were $6.3 million as a result of the forgoing initiatives and footprint optimization of the Engineering Technologies segment.~~

~~We expect to incur additional restructuring costs between $1.5 million and $2.0 million during~~ the remainder of fiscal year ~~2018.~~2019.

2319)

Subsequent Event

On April 17, 2019, the Company announced that it had entered into an agreement to acquire Ohio-based Genius Solutions Engineering Company (d/b/a GS Engineering), a provider of specialized “soft surface” skin texturized tooling, for $30 million. GS Engineering primarily serves the automotive end market and will report operating results into the Engraving segment.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements contained in this Quarterly Report ~~on Form 10-Q~~ that are not based on historical facts are ~~“forward-looking statements”~~“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,~~“should,” ~~“could,~~“could,” ~~“may,~~“may,” ~~“will,~~“will,” ~~“expect,~~“expect,” ~~“believe,~~“believe,” ~~“estimate,~~“estimate,” ~~“anticipate,~~“anticipate,” ~~“intends,~~“intend,” ~~“continue,~~“continue,” or similar terms or variations of those terms or the negative of those terms. There are many factors that affect the ~~Company’s~~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 ~~desired.~~anticipated. These factors include, but are not limited ~~to material~~to: materially adverse or ~~unforeseen~~unanticipated legal judgments, fines, penalties or ~~settlements,~~settlements; conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign ~~cash, general~~cash; domestic and international ~~recessionary~~ economic conditions, including the impact, length and degree of economic downturns ~~or slow growth conditions~~ on the customers and markets we serve and more specifically conditions in the food service equipment, automotive, construction, aerospace, energy, oil and gas, transportation, consumer appliance and general industrial ~~markets,~~markets; lower-cost ~~competition,~~competition; the relative mix of products which impact margins and operating efficiencies ~~both domestic and foreign,~~ in certain of our ~~businesses,~~businesses; the impact of higher raw material and component costs,~~(including the impact of any protective tariffs),~~ particularly steel, petroleum based products, ~~and~~ refrigeration components and certain materials used in electronics parts; an inability to realize the expected cost savings from restructuring activities including effective completion of plant consolidations, cost reduction efforts ~~restructuring~~ including procurement savings and productivity enhancements, capital management improvements, strategic capital expenditures, and the implementation of lean enterprise manufacturing ~~techniques,~~techniques; the inability to achieve the savings expected from ~~the~~global sourcing of raw materials ~~from~~ and diversification efforts in emerging ~~markets,~~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 ~~strategic alliances or~~ acquisitions and the inability to effectively consummate and integrate such acquisitions and achieve synergies ~~contemplated~~envisioned by the ~~Company. Other factors that could~~Company; market acceptance of our products; our ability to design, introduce and sell new products and related product components; the ability to redesign certain of our products to continue meeting evolving regulatory requirements; the impact ~~the Company include~~of delays initiated by our customers; and our ability to increase manufacturing production to meet demand; and potential changes to future pension funding requirements and the impact of recently passed tax reform legislation in the United States. For further information on these and other risk factors, please see the section “Risk Factors” in Company’s Annual Report on Form 10-K.requirements. In addition, any forward-looking statements represent management's estimates only as of the day made and should not be relied upon as representing management's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and management specifically disclaim any obligation to do so, even if management's estimates change.

Overview

We are a leading manufacturer of a variety of products and ~~provide~~ services for diverse commercial and industrial markets. We have ~~twelve operating segments, aggregated and organized for reporting purposes into~~ five reportable segments: Food Service Equipment, Engraving, Engineering Technologies, Electronics and Hydraulics. Overall management, strategic development and financial control are ~~maintained~~led by the executive staff ~~from~~at our corporate headquarters located in Salem, New Hampshire. During the third quarter of 2019, we completed the previously announced divestiture of our Cooking Solutions Group consistent with our strategy to focus our financial assets and managerial resources on our higher growth and operating margin businesses. The divestiture of the Cooking Solutions Group was completed as of March 31, 2019 and consideration was exchanged on April 1. Subsequent to the disposition, we now have nine operating business units.

Our long-term strategy is to ~~build~~create, improve, and enhance shareholder value by building larger, more profitable industrial platforms through a value creation system that assists management in meeting specific corporate and business unit financial and strategic performance ~~goals in order~~goals. In so doing, we expect to ~~create, improve,~~focus our financial assets and ~~enhance shareholder value.~~managerial resources on our higher growth and operating margin businesses while considering divestiture of those businesses that we feel are not strategic or do not meet our growth and return expectations. The Standex Value Creation System is a standard methodology which provides consistent tools used throughout the company in order to achieve our ~~organization’s~~organization’s goal of transforming from its historic roots as a holding company to an efficient operating company. The Standex Value Creation System employs four components: Balanced Performance Plan,

Standex Growth Disciplines, Standex Operational Excellence, and Standex Talent Management. The Balanced Performance Plan process aligns annual goals throughout the business and provides a standard reporting, management and review ~~process. It is focused on~~process by setting and meeting annual and quarterly targets that support our short and long-term goals. The Standex Growth Disciplines use a set of tools and processes including market maps, growth lane ways, and market tests to identify opportunities to expand the business organically and through acquisitions. Standex Operational Excellence employs a standard playbook and processes, including LEAN, to eliminate waste and improve profitability, cash flow and customer satisfaction. Finally, the Standex Talent Management process is an organizational development process that provides training, development, and succession planning for our

employees throughout our worldwide organization. The Standex Value Creation System ties all disciplines in the organization together under a common umbrella by providing standard tools and processes to deliver our business objectives.Through the use of our Standex Value Creation System, we have developed a balanced approach to value creation. While we intend to continue investing acquisition capital in high growth segments such as Electronics and Engraving, we will continue to support all of our businesses as they enhance value through deployment of our GDP+ and OpEx playbooks.

It is our objective to ~~grow larger~~invest in our higher growth and ~~more profitable business units~~operating margin businesses through both organic initiatives and acquisitions. WeOrganically, we seek to identify and implement ~~organic~~ growth initiatives such as new product development, geographic expansion, and the introduction of products and technologies into new markets and applications, key accounts and strategic sales channel partners. ~~Also,~~Inorganically, we ~~have a long-term objective~~look to ~~create sizable business platforms by adding~~add strategically aligned or ~~“bolt on”~~“bolt on” acquisitions to strengthen ~~the individual~~these core businesses, ~~create~~creating both sales and cost synergies ~~with our core business platforms,~~ and ~~accelerate~~accelerating their growth and margin improvement. ~~We look to create both sales and cost synergies within our core business platforms, accelerate growth and improve margins.~~ We have a particular focus on identifying and investing in opportunities that complement our products and will increase the global presence and capabilities of our core businesses. From time to time, we have divested, and likely will continue to ~~divest, businesses that we feel are not strategic or do not meet our growth and return expectations.~~ divest.



As part of our ongoing ~~strategy,~~strategy:

During the first quarter of 2019, the Company decided to divest its Cooking Solutions Group, which consisted of three operating segments, Associated American Industries, BKI, and Ultrafryer, and a minority interest investment. During the third quarter of 2019, we completed this divestiture. In connection with the divestiture efforts, we also sold our minority interest in a European oven manufacturer back to the majority owners. Results of the Cooking Solutions Group in current and prior periods have been classified as discontinued operations in the Condensed Consolidated Financial Statements.

In September 2018, we acquired New Hampshire-based Regional Mfg. Specialists, Inc. (now named Agile Magnetics, Inc.), a provider of high-reliability magnetics. The addition of Agile Magnetics is an important step forward in building out the high reliability magnetics business of Standex Electronics. As a result of this combination, we have broadened our exposure to several high-growth end-markets and added a valuable manufacturing and sales base in the Northeast. Additionally, we can now offer complementary products from Standex’s broader portfolio to Agile’s customer base. Agile Magnetics products include transformers, inductors and coils for mission critical applications for blue chip OEMs in the semiconductor, military, aerospace, healthcare, and industrial markets. It operates one manufacturing facility in New Hampshire.

In August 2018, we acquired Michigan-based Tenibac-Graphion, Inc. (Tenibac-Graphion), a provider of chemical and laser texturing services. The combination of Tenibac-Graphion and Standex Engraving will expand services available to customers, increase responsiveness to customer demands, and drive innovative approaches to solving customer needs. The combined customer base now has access to the full line of mold and tool services, such as the Architexture design consultancy, Vycon™ part wrapping, chemical and laser engraving, tool finishing, and tool enhancements. Tenibac-Graphion serves automotive, packaging, medical and consumer products customers, and operates three facilities, two in Michigan and one in China.

We acquired Italy-based Piazza Rosa Group (“(“Piazza ~~Rosa”~~Rosa”). in July 2017. The privately held company is a leading provider of mold, tool treatment and finishing services for the automotive and consumer products ~~markets.The~~markets. The combination of these competencies with Standex ~~Engraving’s~~Engraving’s worldwide presence and texturizing capabilities creates a global tool finishing service leader. The

acquisition also opens additional opportunities in the broader surface engineering market. The Piazza Rosa ~~Group’s~~Group’s results are reported within our Engraving segment.

During our third quarter of fiscal year 2017, we acquired all of the outstanding shares of Oki Sensor Device Corporation from Oki Electric Industry Co., Ltd. Located in Kofu City, Japan, Oki Sensor Device Corporation is the world’s leading designer and supplier of magnetic reed switches. Now named Standex Electronics Japan Corporation, (“Standex Electronics Japan”) the acquisition enhances the Company’s access to important Asian markets and enables the Company to offer a world class suite of reed switches and related magnetic solutions while continuing to serve Standex Electronics Japan’s diverse distribution channels. Standex Electronics Japan’s results are reported within our Electronics segment.

We ~~develop “Customer Intimacy”~~create “Customer Intimacy” by utilizing the Standex Growth Disciplines to partner with our customers in order to develop and deliver custom solutions or engineered components. By partnering with our customers during long-term product development cycles, we become an extension of their development teams. Through this Partner, Solve, Deliver® methodology, we are able to secure our position as a preferred long-term solution provider for our products ~~services~~ and components. This strategy ~~results~~is designed to result in increased sales and operating margins that enhance shareholder returns.

Standex Operational Excellence drives continuous improvement in the efficiency of our businesses, both on the shop floor and in the office environment. We recognize that our businesses are competing in a global economy that requires us to improve our competitive position. We have deployed a number of management competencies to drive improvements in the cost structure of our business units including operational excellence through lean enterprise, the use of low cost manufacturing facilities in countries such as Mexico and China, the consolidation of manufacturing facilities to achieve economies of scale and leveraging of fixed infrastructure costs, alternate sourcing to achieve procurement cost reductions, and capital improvements to increase productivity.

The ~~Company’s~~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 the strategic growth programs described above, including acquisitions and investments for organic growth, investments in capital assets to improve productivity and lower costs and to return cash to our shareholders through payment of dividends and stock buybacks.

Restructuring expenses reflect costs associated with our efforts to continuously improve operational efficiency and expand globally in order to remain competitive in the end-user markets we serve. We incur costs for actions to size our businesses to a level appropriate for current economic conditions, improve our cost structure, enhance our competitive position and increase operating margins. Such expenses ~~may~~ include costs for moving facilities to locations that allow for lower fixed and variable costs, ~~external consultants who provide additional expertise,~~ starting up plants after relocation, downsizing operations because of changing economic conditions, and other costs resulting from asset redeployment decisions. Shutdown costs include severance, benefits, stay bonuses, lease and contract terminations, asset write-downs, costs of moving fixed assets, and moving and relocation costs. Vacant facility costs include maintenance, utilities, property taxes and other costs.

Because of the diversity of the ~~Company’s~~Company’s businesses, end user markets and geographic locations, ~~management does~~we do not use specific external indices to predict the future performance of the Company, other than general information about broad macroeconomic trends. Each of our individual business units serves niche markets and attempts to identify trends other than general business and economic conditions which are specific to its business and which could impact ~~their~~its performance. Those units report pertinent information to senior management, which uses it to the extent relevant to assess the future performance of the Company. A description of any such material trends is described below in the applicable segment analysis.

We monitor a number of key performance indicators ~~(“KPIs”~~(“KPIs”) including net sales, income from operations, backlog, effective income tax rate, gross profit margin, and operating cash flow. A discussion of these KPIs is included below. We may also supplement the discussion of these KPIs by identifying the impact of foreign exchange rates, acquisitions, and other significant items when they have a material impact on a specific KPI.

We believe the discussion of these items provides enhanced information to investors by disclosing their impact on the overall trend which provides a clearer comparative view of the KPI, as applicable. For discussion of the impact of foreign exchange rates on KPIs, the Company calculates the impact as the difference between the current period KPI calculated at the current period exchange rate as compared to the KPI calculated at the historical exchange rate for the prior period. For discussion of the impact of acquisitions, we isolate the effect on the KPI amount that would have existed regardless of our acquisition. Sales resulting from synergies between our acquisitions and existing operations of the Company are considered organic growth for the purposes of our discussion.

Unless otherwise noted, references to years are to fiscal years.

Results from Continuing Operations

Three Months Ended

Nine Months Ended

March 31,

March 31,
(In thousands, except percentages)

2018

2017

2018

2017
Net sales
$
216,743

$
184,715

$
640,873

$
538,169
Gross profit margin

34.0%

33.2%

34.2%

33.4%
Income from operations

19,327

11,435

57,651

44,437


		Three Months Ended				Nine Months Ended
		March 31,				March 31,
(In thousands, except percentages)		2019		2018		2019		2018
Net sales	$	193,771	$	192,147	$	582,380	$	566,982
Gross profit margin		31.9%		34.4%		34.0%		34.4%
Income from operations		15,046		18,819		57,898		54,516


		Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
(In thousands)		March 31, 2018		March 31, 2018		March 31, 2019		March 31, 2019
Net sales, prior year period	$	184,715	$	538,169	$	192,147	$	566,982
Components of change in sales:
Organic sales change		10,619		36,271		(1,718)		3,316
Effect of acquisitions		15,706		55,897		7,680		20,416
Effect of exchange rates		5,703		10,536		(4,338)		(8,334)
Net sales, current period	$	216,743	$	640,873	$	193,771	$	582,380

Net sales ~~for~~increased in the third quarter of ~~2018 increased $32.0~~fiscal year 2019 by $1.6 million or ~~17.3%,~~0.8% when compared to the prior year ~~period.~~quarter. Acquisitions contributed $7.7 million or 4.0% to overall sales growth. Organic sales ~~increased by $10.6~~declined $1.7 million or ~~5.7%~~0.9%, ~~driven primarily by organic growth in Engraving, Electronics,~~ and ~~Hydraulics. Acquisitions also contributed 8.5% to the overall growth in the quarter. Foreign~~foreign currency ~~was favorable~~had a $4.3 million or 2.3% negative impact on sales. We discuss our results and ~~contributed 3.1% to the sales increase.~~outlook for each segment below.

Net sales in the nine months ended March 31, ~~2018~~2019 increased ~~$102.7~~$15.4 million or ~~19.1%,~~2.7% when compared to ~~the~~ prior year. ~~The~~Organic sales contributed $3.3 million or 0.6% to overall sales growth. Acquisitions accounted for $20.4 million or 3.6% of the increase in ~~net sales was driven by organic growth across all segments~~sales. Foreign currency also had a negative effect of ~~$36.3~~$8.3 million or ~~6.7%, incremental sales from acquisitions of $55.9 million, or 10.4%, and favorable currency contributions of $10.5 million, or 2.0%. We discuss our outlook for each segment below.~~1.5% on sales.

Gross Profit Margin

Our gross margin for the third quarter of ~~2018~~2019 was ~~34.0%, compared to~~31.9% which declined from the prior year quarter’s gross margin of ~~33.2%~~34.4%. ~~Gross~~We experienced gross margin declines in all segments except Engineering Technologies as a product of the deleveraging generated by organic sales declines, as well as increased ~~by 0.8% primarily due to sales mix.~~ expenses such as, material costs, and wage inflation.

Our gross margin in the nine months ended March 31, ~~2018~~2019 was ~~34.2%,~~34.0% which was a slight decrease when compared to the prior year results of ~~33.4%~~34.4%. ~~Gross margin also increased year to date due to sales mix.~~

Selling, General, and Administrative Expenses

Selling, General, and Administrative Expenses (“(“SG~~&A”~~&A”) for the third quarter of ~~2018~~2019 were ~~$51.9~~$45.4 million, or ~~23.9%~~23.4% of sales, compared to ~~$43.5~~$45.0 million, or ~~23.6%~~23.4% of sales, during the prior year quarter. SG&A expenses during the quarter were impacted by: i) on-going SG&A expenses related to our recent acquisitions of ~~$3.9~~$2.2 million offset by ii) ~~an increase~~a decline in distribution and selling expenses of ~~$1.9~~$1.3 million ~~iii) and an increase in administrative expenses primarily related to investments to support~~as a result of our ~~recent acquisitions and growth laneways.~~organic sales declines.

SG&A for the nine months ended March 31, ~~2018~~2019 were ~~$152.6~~$136.6 million, or ~~23.8%~~23.4% of sales, compared to ~~$125.6~~$131.8 million, or 23.3% of sales, during the prior ~~year quarter.~~year. SG&A expenses were impacted ~~by: i)~~by on-going SG&A expenses related to our recent acquisitions of ~~$10.6 million, ii) an increase in distribution~~$5.2 million. Distribution and selling expenses ~~of $5.5 million, iii) and an increase in administrative expenses primarily related~~remained consistent with prior year to ~~investments to support our recent acquisitions and growth laneways.~~date levels.

Restructuring Charges

~~During the third quarter of fiscal year 2018, we~~We incurred restructuring expenses of ~~$1.3~~$0.5 million for the quarter and $1.2 million for the nine-month period, primarily related to ~~two restructuring programs that are intended to improve profitability, streamline production~~headcount reductions within our Electronics and ~~enhance capacity to support future growth including headcount reduction and plant realignment with regard to the standard products businesses within Food Service Equipment~~Engraving segments and the ~~exit~~commencement of ~~an unprofitable~~facility rationalization within our Engraving ~~business in Brazil.~~Group.

~~Restructuring expenses for~~We expect to incur restructuring costs of approximately $0.8 million throughout the ~~nine months ended March 31, 2018 were $6.3 million~~remainder of fiscal year 2019 primarily as a result of ~~the forgoing initiatives~~further rationalization efforts within Engraving and ~~footprint optimization of the Engineering Technologies segment.~~ Wetargeted administrative headcount reductions across other segments. Further, we expect to incur additional restructuring costs ~~between $1.5 million and $2.0~~of approximately $2.5 million during ~~the remainder of~~ fiscal year ~~2018.~~2020 to complete these restructuring efforts, which we anticipate will generate annual savings of $2.7 million per year upon completion.

Acquisition Related Expenses

~~During the third quarter of fiscal year 2018, we~~We incurred acquisition-related expenses of $0.8 million during the third quarter and $2.4 million for the nine months ended March 31, 2019 as compared to $1.3 million ~~comprised primarily of acquisition expenses~~and $3.0 million for the ~~Horizon Scientific acquisition including $0.7 million for~~respective periods in the prior year. Acquisition-related expenses in fiscal year 2019 primarily related to deferred compensation earned during the quarter by the seller of our Horizon Scientific ~~seller during the quarter.~~business acquired in October of fiscal year 2017. The last of these payments ~~are~~is payable in October of fiscal year 2020 and is contingent on the seller remaining an employee of the Company ~~and are therefore treated as compensation expense.~~ at that time.

Acquisition related expenses for the nine months ended March 31, 2018 were $3.0 million comprised primarily of $2.1 million for deferred compensation earned by the Horizon Scientific seller during the year, and other acquisition expenses related to Standex Electronics Japan and Piazza Rosa.

Income from Operations

Income from operations for thethird quarter of ~~2018~~2019 was ~~$19.3~~$15.1 million, compared to ~~$11.4~~$18.8 million during the prior year quarter. The ~~increase~~decline of ~~$7.9~~$3.7 million, or ~~69.0%~~20.0%, is primarily due to ~~higher~~gross profit declines of $4.3 million as a result of the deleveraging generated by organic sales ~~volume, improved gross margin, performance of our recent acquisitions,~~declines, as well as increased expenses such as, material costs and ~~lower pre-acquisition expenses,~~wage inflation. The operating income declines were partially offset by ~~increased selling,~~lower administrative ~~and distribution expenses related to overall increased sales volumeand higher restructuring expenses related to on-going initiatives to improve profitability.~~spending.

Income from operations for the nine months ended March 31, ~~2018~~2019 was ~~$57.7~~$57.9 million, compared to ~~$44.4~~$54.5 million during the prior year. The increase of ~~$13.2~~$3.4 million, or ~~29.7%~~6.2%, is primarily due to ~~higher sales volume, improved gross margin, and a lesser amount of purchase accounting incurred in~~operating income generated by the Tenibac acquisition made during the year, lower restructuring expenses as compared to the prior year, ~~as a result~~and the variability of our recent acquisitions, partially offset by increased selling, administrative and distribution expenses related to increased sales volumeand higher restructuring expenses related to on-going initiatives to improve profitability.business segment performance.

Interest Expense

Interest expense for the third quarter of ~~2018~~2019 was ~~$2.3~~$3.2 million, compared to ~~$1.0~~$2.3 million during the prior year quarter. Interest expense for the nine months ended March 31, 2019 and March 31, 2018 were $8.6 million and $5.8 million, respectively. The ~~increase~~increased interest expense for both periods is due to higher borrowings associated with the recent acquisitions in addition to an increase in our effective interest rate of 3.71% as of March 31, 2019, as compared to 2.98% as of March 31, ~~2018, as compared to 1.76% as of March 31, 2017.Interest expense for the nine months ended March 31, 2018 and March 31, 2017 were $5.8 million and $2.5 million, respectively.~~2018.

Income Taxes

The Company's effective tax rate from continuing operations for the third quarter of ~~2018~~2019 was ~~23.4%~~34.4% compared with ~~27.3%~~23.8% for the prior year quarter. The effective tax rate in ~~2018~~2019 was ~~lower~~higher due to ~~the impact of~~a $0.5 million discrete tax benefit related to the US tax reform ~~including~~recorded in the prior year quarter, withholding taxes included in the current year for foreign repatriation, and a ~~$0.5 million favorable adjustment to our previous estimate~~shift in geographic mix whereby we incurred lower profit before tax in the United States (a low tax jurisdiction), and comparatively higher income in the rest of the ~~impact of the new tax legislation.~~world.

The Company's effective tax rate from continuing operations for the nine months ended March 31, ~~2018~~2019 was ~~54.4%~~28.4% compared with ~~24.1%~~57.7% for the prior year. The effective tax rate for ~~the~~prior year to date was higher due to ~~net discrete tax reform charges of~~the $14.6 million ~~recorded in the current year.~~

See Note 1, “Management Statement” and Note 11, “Income Taxes” in the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this report for further discussion on the impact of the ~~Tax Cuts~~U.S. Section 965 repatriation tax.

The Company is routinely audited by various jurisdictions. The Company is currently under audit by the IRS for the fiscal years ending June 30, 2016 and ~~Jobs Act and Staff Accounting Bulletin No. 118.~~2017. We anticipate finalizing the audit during the first quarter of fiscal year 2020.

~~Backlog~~

Backlog

Backlog includes all active or open orders for goods and services. Backlog also includes any future deliveries based on executed customer contracts, so long as such deliveries are based on agreed upon delivery schedules. ~~Backlog~~With the exception of our Engineering Technologies Group, backlog is not generally a significant factor in the ~~Company’s~~Company’s businesses because of our relatively short delivery periods and rapid inventory ~~turnover with the exception of Engineering Technologies.~~turnover. Backlog orders are not

necessarily an indicator of future sales levels because of variations in lead times and customer production demand pull systems. Customers may delay delivery of products or cancel orders prior to shipment, subject to possible cancellation penalties. Due to the nature of long term agreements in the Engineering Technologies group, the timing of orders and delivery dates can vary considerably resulting in significant backlog changes from one period to another. In general, the majority of net realizable backlog beyond one year comes from the Engineering Technologies Group.


		As of March 31, 2018				As of March 31, 2017				As of March 31, 2019				As of March 31, 2018
		Total Backlog		Backlog under 1 year		Total * Backlog		Backlog * under 1 year		Total Backlog		Backlog under 1 year		Total Backlog		Backlog under 1 year
Food Service Equipment	$	39,242	$	35,914	$	46,479	$	43,441	$	31,558	$	28,114	$	31,903	$	28,575
Engraving		22,194		22,194		17,094		17,094		17,490		17,481		22,282		22,282
Engineering Technologies		93,646		72,961		87,952		61,705		119,454		84,212		93,646		72,960
Electronics		72,046		68,097		43,351		40,552		69,507		62,654		72,046		68,097
Hydraulics		10,610		10,604		5,364		5,364		14,952		14,887		10,610		10,604
Total	$	237,738	$	209,770	$	200,240	$	168,156	$	252,961	$	207,348	$	230,487	$	202,518

* The Company continually evaluates backlog based on changes in customer delivery schedules and other manufacturing considerations. For comparability reasons, we have revised backlog in our Engraving segment as of March 31, 2017 from amounts previously reported to better reflect backlog based on agreed upon delivery schedules at that point in time.

Total backlog realizable under one year increased ~~$41.6~~$4.8 million, or ~~24.7%~~2.4%, to ~~$209.8~~$207.3 million at March 31, ~~2018~~2019 from ~~$168.2~~$202.5 million at March 31, ~~2017.~~

2018. Organic backlog under one year ~~increased $30.0~~decreased $0.7 million, or ~~17.9%~~0.3%, while acquisitions contributed an additional ~~$11.6~~$5.5 million. The Engraving Group experienced backlog declines as compared to prior year primarily due to the timing of new platform launches within the automotive industry which that segment serves.

~~Segment Analysis~~Engraving Group


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$ 37,135	$ 33,749	10.0%	111,602	$ 100,457	11.1%
Income from operations	4,485	7,195	(37.7%)	18,883	21,735	(13.1%)
Operating income margin	12.1%	21.3%		16.9%	21.6%

Net sales for the third quarter of 2019 increased by $3.4 million, or 10.0%, when compared to the prior year quarter. Organic sales increased by $1.0 million, or 3.0%. Acquisitions contributed $4.6 million, or 13.6% partially offset by a negative foreign exchange impact of $2.2 million, or 6.6%, during the quarter. New product offerings of nickel shell, laser engraving, Architexture, and tool finishing all realized increased sales of 39% which were partially offset by lower sales in traditional services. We anticipate another challenging quarter as fewer new automotive platforms are forecasted to be launched. However, the Company expects demand in both the automotive and non-automotive markets to rebound beginning in the first fiscal quarter of 2020 as there are a number of scheduled new product launches by customers which should lead to increased sales in all regions.

Net sales for the nine months ended March 31, 2019 increased by $11.1 million, or 11.1%, when compared to the prior year. The Tenibac acquisition contributed $14.2 million, or 14.1% to the group’s overall sales increases for

the year. Foreign exchange had a negative impact of 4.6%, or $4.7 million. New service offerings within the group including tool finishing, laser engraving, Architexture, and nickel shell all had a positive impact on organic growth and helped offset declines in traditional services.

Income from operations for the third quarter of 2019 decreased by $2.7 million, or 37.7%, when compared to the prior year. The decrease was primarily due to an unfavorable geographic mix, lower automotive sales in North America, reduced demand at our higher profit China facilities due to concerns regarding trade conflicts, and the increased costs associated with the integration process following the Tenibac acquisition. Due to the lower profitability in the quarter, we have announced a restructuring program to close underperforming sites and reduce administrative headcount. We anticipate that these actions will save $2.7 million on an annual basis upon completion of the activities.

Income for the nine months ended March 31, 2019 decreased by $2.9 million, or 13.1%. Profitability within the group for the year has been negatively impacted as customers of our China locations have been negatively impacted by a reduction in their export demand due to the impact of tariffs. The Engraving group is investing in and promoting new technologies that we anticipate will facilitate improved operating income results in future quarters as these technologies are implemented throughout our worldwide Engraving network.

Electronics Group


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$ 50,197	$ 51,213	(2.0%)	$154,347	$144,082	7.1%
Income from operations	9,418	11,221	(16.1%)	32,581	31,774	2.5%
Operating income margin	18.8%	21.9%		21.1%	22.1%

Net sales in the third quarter of fiscal year 2019 decreased $1.0 million, or 2.0%, when compared to the prior year quarter. Organic growth declined 4.8% partially offset by acquisition growth of 6.0%. Currency impacts reduced sales by $1.6 million, or 3.2%. Sales were down in Europe and Asia and mostly flat in North America as geographic softness was partially offset by new business. Growth was strong in the industrial markets but offset by weakness due to tariffs and reduced demand in automotive and distribution markets. We anticipate a challenging sales comparison in the fourth quarter as bookings are down in all regions partially offset by new business opportunities in our product pipeline.

Net sales for the first nine months ended March 31, 2019 increased $10.3 million, or 7.1%, when compared to the prior year. Sales increased $6.2 million, or 4.3%, due to the Agile Magnetics acquisition. The currency effect decreased sales by $2.9 million, or 2.0%. Organic sales growth was $6.9 million, or 4.8% for the first nine months when compared to the prior year as sales in all major geographic areas during the first two quarters of the fiscal year were higher with growth mostly in industrial and distribution markets.

Income from operations in the third quarter of fiscal year 2019 decreased $1.8 million, or 16.1%, when compared to the prior year quarter. The earnings decrease was due to product mix and increased expenses such as materials cost and wage inflation partially offset by various operating efficiency initiatives. In anticipation of lower demand, we have initiated a restructuring program to reduce administrative headcount which will cost approximately $0.5 million and generate savings of $1.1 million per year upon implementation.

Income from operations for the first nine months ended March 31, 2019, increased $0.8 million, or 2.5%, when compared to the prior year. The increase is due to the profit on sales volume increases as well as operating cost savings initiatives partially offset by material and wage inflationary cost increases and product mix. The Company currently expects sales for the calendar year will remain at levels similar to those in the fiscal third quarter. As a result, Standex has initiated efforts focused on G&A expense reduction as well as actions targeting increased productivity and reduced material spend.

Engineering Technologies Group


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$ 27,467	$ 23,426	17.3%	$ 71,818	$ 65,621	9.4%
Income from operations	2,800	1,155	142.4%	6,636	3,879	71.1%
Operating income margin	10.2%	4.9%		9.2%	5.9%

Net sales in the third quarter of fiscal year 2019 increased by $4.0 million, or 17.3%, when compared to the prior year quarter. Sales distribution by market for the quarter was as follows: 46% aviation, 27% space, 11% energy, 10% defense, 6% medical and other markets. Aviation sales increased by $0.8 million compared to the prior period due to higher sales on the A320 NEO program. Sales in the defense market were up $0.9 million due to an increase in sales to the Navy Nuclear segment. Energy sales increased by $2.0 million due to higher sales to the Oil and Gas market. Based on our backlog, we anticipate growth in aviation, space, and defense markets in our fourth quarter.

Net sales for the nine months ended March 31, 2019 increased by $6.2 million, or 9.4%, when compared to the prior year. Aviation sales increased by $1.0 million due to higher customer demand. Energy related sales were up $3.7 million due to higher demand in the project based Oil and Gas segment. Defense related sales improved by $0.7 million from the prior year due to higher volume in the Navy Nuclear and Missile segments of the market.

Income from operations in the third quarter of 2019 increased by $1.6 million, or 142.4%, when compared to the prior year quarter. Margins improved as a result of higher volume and continued manufacturing process improvements. We anticipate higher comparative operating income performance based on projected volumes in the fourth quarter and continued realization of manufacturing efficiencies.

Income from operations for the nine months ended March 31, 2019 increased by $2.8 million, or 71.1%, when compared to the prior year. The increase in operating income was the result of improvements in plant operating efficiencies along with higher sales volume. In the fourth quarter, Standex expects to continue to benefit from increased demand in the Aviation, Space, and Defense markets. Operating income is expected to increase as a result of this volume increase as well as continued productivity improvement efforts.

Hydraulics Group


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$15,106	$12,878	17.3%	$39,758	$34,969	13.7%
Income from operations	2,242	1,749	28.2%	5,753	5,138	12.0%
Operating income margin	14.8%	13.6%		14.5%	14.7%

Net sales in the third quarter of fiscal year 2019 increased $2.2 million, or 17.3%, when compared to the prior year quarter. The increase is primarily due to strong demand from original equipment manufacturers (“OEM’s”) in the refuse space along with new refuse applications. Specifically, our new pack eject cylinder for front end loading garbage trucks and other applications continue to receive market acceptance by OEMs.

Net sales for the nine months ended March 31, 2019 increased $4.8 million, or 13.7%, when compared to the prior year. Similar to the results of the quarter, the sales increase is due to market share gains in the refuse OEM marketplace. The Company expects end market demand to remain positive due to ongoing strong demand from construction and infrastructure projects.

Income from operations in the third quarter of fiscal year 2019 increased $0.5 million, or 28.2%, when compared to the prior year quarter. The operating income increase was driven by top line volume growth which was partially offset by material cost increases due to tariffs on material components purchased from China.

Income from operations for the nine months ended March 31, 2019 increased $0.6 million, or 12.0%, when compared to the prior year. The operating income increase was driven by the sales volume increases during the first nine months particularly in the refuse market. Operating income increases were partially offset by higher material costs, driven by tariffs on purchased material components from China, and higher manufacturing overhead for the year to date period.

~~Food Service Equipment~~Engineering Technologies Group

Three Months Ended

Nine Months Ended

March 31,

%

March 31,

%
(In thousands, except percentages)
2018

2017

Change

2018

2017

Change
Net sales
$     95,482

$     92,730

3.0%

$   295,796

    $ 277,582

6.6%
Income from operations
         6,785

         7,418

(8.5%)

       25,051

         24,112

3.9%
Operating income margin
7.1%

8.0%

8.5%

8.7%


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$ 27,467	$ 23,426	17.3%	$ 71,818	$ 65,621	9.4%
Income from operations	2,800	1,155	142.4%	6,636	3,879	71.1%
Operating income margin	10.2%	4.9%		9.2%	5.9%

Net sales in the third quarter of fiscal year ~~2018~~2019 increased by $4.0 million, or 17.3%, when compared to the prior year quarter. Sales distribution by market for the quarter was as follows: 46% aviation, 27% space, 11% energy, 10% defense, 6% medical and other markets. Aviation sales increased by $0.8 million compared to the prior period due to higher sales on the A320 NEO program. Sales in the defense market were up $0.9 million due to an increase in sales to the Navy Nuclear segment. Energy sales increased by $2.0 million due to higher sales to the Oil and Gas market. Based on our backlog, we anticipate growth in aviation, space, and defense markets in our fourth quarter.

Income from operations for the nine months ended March 31, 2019 increased by $2.8 million, or ~~3.0%~~71.1%, when compared to the prior year. The increase in operating income was the result of improvements in plant operating efficiencies along with higher sales volume. In the fourth quarter, Standex expects to continue to benefit from increased demand in the Aviation, Space, and Defense markets. Operating income is expected to increase as a result of this volume increase as well as continued productivity improvement efforts.

Hydraulics Group


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$15,106	$12,878	17.3%	$39,758	$34,969	13.7%
Income from operations	2,242	1,749	28.2%	5,753	5,138	12.0%
Operating income margin	14.8%	13.6%		14.5%	14.7%

Net sales in the third quarter of fiscal year 2019 increased $2.2 million, or 17.3%, when compared to the prior year quarter. The increase ~~was~~is primarily ~~through organic sales growth, up $2.1 million or 2.3%. Refrigeration Solutions sales were up 7.0% on~~due to strong ~~sales growth~~demand from original equipment manufacturers (“OEM’s”) in the ~~drug retail, dollar store,~~refuse space along with new refuse applications. Specifically, our new pack eject cylinder for front end loading garbage trucks and ~~quick serve restaurant (“QSR”) chains. Cooking Solutions sales decreased 7.5% in the quarter primarily driven~~other applications continue to receive market acceptance by product rationalization and slower sales to select major dealers. Our Specialty Solutions sales increased by 8.5% with strong volume in our beverage and merchandising segments, particularly in the European market. Overall, Food Service Equipment sales showed continued improvement toward the latter part of the quarter and we anticipate this trend to continue over the next quarter as seasonal momentum builds.OEMs.

Net sales in the nine months ended March 31, 2018 increased $18.2 million, or 6.6%, when compared to the prior year. Organic sales contributed growth of $7.5 million, or 2.7%, while acquisitions added $9.5 million, or 3.4%. Refrigeration organic sales increased on growth in drug retail, dollar store, and QSR chains. Cooking sales were down due to product rationalization and slower sales to select major dealers. Specialty Solutions sales increased by 9.1%, driven by general market growth, partially offset by foreign exchange declines.

Income from operations in the third quarter of fiscal 2018 decreased by $0.6 million, or 8.5%, when compared to the prior year quarter, as on-going process improvements were more than offset by increased freight costs and product mix. Looking forward, we believe our restructuring efforts will lead to better operating results in the fourth quarter and into the next fiscal year.

Income from operations in the nine months ended March 31, 2018 increased $0.9 million, or 3.9%, when compared to the prior year. Current year increases were primarily a result of the absence of purchase accounting expenses in the prior year of $1.1 million.

~~Engraving Group~~

Three Months Ended

Nine Months Ended

March 31,

%

March 31,

%
(In thousands, except percentages)
2018

2017

Change

2018

2017

Change
Net sales
$ 33,749

$ 25,492

32.4%

$ 100,457

$ 78,084

28.7%
Income from operations
7,030

6,003

17.1%

21,246

19,910

6.7%
Operating income margin
20.8%

23.5%

21.1%

25.5%

Net sales for the third quarter of 2018 increased by $8.3 million, or 32.4%, when compared to the prior year quarter. Organic sales increased $2.4 million, or 9.3%. Acquisitions contributed $3.3 million, or 13.1%. Foreign exchange had a positive impact of $2.5 million, or 9.9%. Sales in the North American market increased 8.4% as new auto platform launches accelerated as anticipated in the quarter. Sales in Asia grew 5.0%, but were offset by decreases in the European markets due to project timing. Backlog increased mainly due to OEM program shifting.

Net sales for the nine months ended March 31, ~~2018~~2019 increased ~~by $22.4~~$4.8 million, or ~~28.7%~~13.7%, when compared to the prior year. Similar to the results of the quarter, the sales increase is due to market share gains in the refuse OEM marketplace. The Company expects end market demand to remain positive due to ongoing strong demand from construction and infrastructure projects.

Income from operations for the nine months ended March 31, 2019 increased $0.6 million, or 12.0%, when compared to the prior year. The Piazza Rosa acquisition contributed $9.3 million, or 11.9%. Foreign exchange had a positive impact of 6.1%, or $4.8 million. New services, including tool finishing, had a positive impact on organic growth. Together with increased demandoperating income increase was driven by the sales volume increases during the first nine months particularly in the ~~automotive~~refuse market. Operating income increases were partially offset by higher material costs, driven by tariffs on purchased material components from China, and ~~non-automotive markets, we expect to see continued growth in all regions next quarter.~~

~~Income from operations~~higher manufacturing overhead for the ~~third quarter of 2018 increased by $1.0 million, or 17.1%, when compared~~year to the prior year. This increase primarily resulted from sales volume and the impact of the Piazza Rosa acquisition. Engraving has made substantial investments in promoting new technologies such as nickel shell, Architexture, laser engraving, and tool finishing which are critical to the long-term growth of this segment.date period.

Income for the nine months ended March 31, 2018 increased by $1.3 million, or 6.7%. Year-to-date income was impacted by $0.2 million of purchase accounting expenses and costs associated with the new technology investments.

Engineering Technologies Group

Three Months Ended

Nine Months Ended

March 31,

%

March 31,

%
(In thousands, except percentages)
2018

2017

Change

2018

2017

Change
Net sales
$     23,426

$     23,678

     (1.1%)

$     65,621

$     60,948

7.7%
Income from operations
         1,140

2,442

(53.3%)

3,836

5,815

   (34.1%)
Operating income margin
4.9%

10.3%

5.8%

9.5%


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$ 27,467	$ 23,426	17.3%	$ 71,818	$ 65,621	9.4%
Income from operations	2,800	1,155	142.4%	6,636	3,879	71.1%
Operating income margin	10.2%	4.9%		9.2%	5.9%

Net sales in the third quarter of fiscal year ~~2018 decreased~~2019 increased by ~~$0.3~~$4.0 million, or ~~1.1%~~17.3%, when compared to the prior year quarter. Sales distribution by market for the quarter was as follows: 46% aviation, 27% space, 11% energy, 10% defense, 6% medical and other markets. Aviation sales increased by ~~$1.0~~$0.8 million compared to the prior period due to ~~the~~higher sales ~~ramp~~ on the ~~General Electric LEAP engine programs, offset by customer initiated timing delays due to issues in turbo fan programs.~~A320 NEO program. Sales in the defense market were up $0.9 million due to ~~contract awards received~~an increase in sales to the ~~missile segment of the market. Sales in the energy market decreased~~Navy Nuclear segment. Energy sales increased by ~~$2.7~~$2.0 million due to ~~reductions in demand. Looking forward, we expect customer delays will continue~~higher sales to ~~impact~~ the ~~fourth quarter; however, based~~Oil and Gas market. Based on ~~current customer forecasts,~~our backlog, we anticipate ~~these programs to ramp-up starting~~growth in ~~the first quarter of 2019.~~aviation, space, and defense markets in our fourth quarter.

Net sales for the nine months ended March 31, ~~2018~~2019 increased by ~~$4.7~~$6.2 million, or ~~7.7%~~9.4%, when compared to the prior year. Aviation sales increased by ~~22.9%~~$1.0 million due to ~~increased~~higher customer demand. ~~Total launch vehicle sales were up by 4.6% due to an increase in the development programs for the manned launch segment.~~ Energy related sales were ~~down $3.6~~up $3.7 million due to ~~lower power generation demand.~~higher demand in the project based Oil and Gas segment. Defense related sales improved by ~~$1.0~~$0.7 million from the prior year due to ~~increased sales to~~higher volume in the ~~defense markets.~~Navy Nuclear and Missile segments of the market.

Income from operations in the third quarter of ~~2018 decreased~~2019 increased by ~~$1.3~~$1.6 million, or ~~53.3%~~142.4%, when compared to the prior year quarter. Margins ~~were negatively impacted by lower~~improved as a result of higher volume and continued manufacturing process improvements. We anticipate higher comparative operating income performance based on projected volumes in ~~both oil~~the fourth quarter and ~~gas and aviation, lower margins on development programs in space and margin pressure on legacy aviation engine programs.~~continued realization of manufacturing efficiencies.

Income from operations for the nine months ended March 31, ~~2018 decreased~~2019 increased by ~~$2.0~~$2.8 million, or ~~34.0%, when compared to the prior year. The decrease in operating income is due to legacy aviation pricing pressures and unfavorable changes in product mix.~~

~~Electronics Group~~

Three Months Ended

Nine Months Ended

March 31,

%

March 31,

%
(In thousands, except percentages)
2018

2017

Change

2018

2017

Change
Net sales
$ 51,208

$ 32,308

58.5%

$ 144,030

$ 91,455

57.5%
Income from operations
11,173

6,499

71.9%

31,628

19,064

65.9%
Operating income margin
21.8%

20.1%

22.0%

20.8%

Net sales in the third quarter of fiscal year 2018 increased $18.9 million, or 58.5%, when compared to the prior year quarter. Organic sales increased $4.3 million, or 13.3%. North America sales were higher with improvements in power distribution and other markets. The Europe business continued to be strong with increasing demand across most markets. Asia sales increased with strong demand for sensor product applications. Exchange rates positively impacted sales by $2.2 million, or 6.9%. Sales increased $12.4 million, or 38.2%, due to the Standex Electronics Japan acquisition.

Net sales for the nine months ended March 31, 2018 increased $52.6 million, or 57.5%, when compared to the prior year. Organic sales increased by $11.5 million, or 12.5%. Organic growth occurred in all major geographic areas. Foreign exchange rates positively affected sales by $4.0 million, or 4.4%. Sales increased $37.1 million, or 40.6%, due to the Standex Electronics Japan acquisition. Looking forward, existing backlog combined with the strength of quoting activity on new business opportunities leads us to anticipate continued growth in the fourth quarter.

Income from operations in the third quarter of fiscal year 2018 increased $4.7 million, or 71.9%, when compared to the prior year quarter. Earnings improvements for the quarter were due to the higher organic sales as well as the acquisition impact and operational cost efficiencies. Due to the strategic significance of this segment, we continue to invest in automation and projects to increase capacity to meet growth expectations.

~~Income from operations for the nine months ended March 31, 2018 increased $12.6 million, or 65.9%~~71.1%, when compared to the prior year. The increase in operating income was the result of improvements in plant operating efficiencies along with higher sales volume. In the fourth quarter, Standex expects to continue to benefit from increased demand in the Aviation, Space, and Defense markets. Operating income is ~~due~~expected to ~~the higher organic sales, the acquisition impact and~~increase as a result of this volume increase as well as continued ~~operational cost improvements.~~productivity improvement efforts.

Hydraulics Group

Three Months Ended

Nine Months Ended

March 31,

%

March 31,

%
(In thousands, except percentages)
2018

2017

Change

2018

2017

Change
Net sales
$ 12,878

$ 10,507

22.6%

$ 34,969

$   30,100

16.2%
Income from operations
     1,728

1,674

3.2%

5,076

     4,782

6.1%
Operating income margin
13.4%

15.9%

14.5%

15.9%


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$15,106	$12,878	17.3%	$39,758	$34,969	13.7%
Income from operations	2,242	1,749	28.2%	5,753	5,138	12.0%
Operating income margin	14.8%	13.6%		14.5%	14.7%

Net sales in the third quarter of fiscal year ~~2018~~2019 increased ~~$2.4~~$2.2 million, or ~~22.6%~~17.3%, when compared to the prior year quarter. The increase is primarily due to strong demand from ~~OEM’s~~original equipment manufacturers (“OEM’s”) in the refuse space ~~and solid orders from the North American dump markets. New products and applications in both the~~along with new refuse ~~and dump markets also contributed to the growth.~~applications. Specifically, our new pack eject cylinder for front end loading garbage trucks and ~~others has achieved~~other applications continue to receive market acceptance by OEMs.

Net sales for the nine months ended March 31, ~~2018~~2019 increased ~~$4.9~~$4.8 million, or ~~16.2%~~13.7%, when compared to the prior year. Similar to the ~~trending for~~results of the quarter, the sales increase is due to market share gains in the refuse OEM ~~marketplace and steady growth in the North American dump markets. Moving forward we anticipate~~marketplace. The Company expects end market demand ~~in our end markets~~ to remain positive due to ongoing strong demand from construction and infrastructure projects. ~~We expect additional market share gains at the OEM level and aftermarket distribution partners.~~

Income from operations in the third quarter of fiscal year ~~2018~~2019 increased ~~$0.1~~$0.5 million, or ~~3.2%~~28.2%, when compared to the prior year quarter. ~~Strong~~The operating income increase was driven by top line volume growth ~~and efficiency gains in the Tianjin China factory were mostly~~which was partially offset by material cost ~~increases. We have implemented price~~ increases ~~which should partially offset material price increases. However, proposed~~due to tariffs on ~~certain products we manufacture in China and import into the US could have a negative impact on earnings.~~material components purchased from China.

Income from operations for the nine months ended March 31, ~~2018~~2019 increased ~~$0.3~~$0.6 million, or ~~6.1%~~12.0%, when compared to the prior year. The operating income increase was driven by the ~~revenue growth~~sales volume increases during the first nine months particularly in the refuse market. Operating income increases were partially offset by higher material ~~costs.~~costs, driven by tariffs on purchased material components from China, and higher manufacturing overhead for the year to date period.

Food Service Equipment Group


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Net sales	$63,866	$ 70,881	(9.9%)	$ 204,855	$ 221,853	(7.7%)
Income from operations	3,559	5,546	(35.8%)	15,417	19,834	(22.3%)
Operating income margin	5.6%	7.8%		7.5%	8.9%

Net sales for the third quarter of 2019 decreased $7.0 million or 9.9% when compared to the prior year quarter. Organic sales growth declined 9.4% while foreign exchange had a negative 0.5% effect on sales. The organic sales decrease was driven by our Refrigeration business where sales declined over 17.3% primarily due to three factors: lower volume in the retail channel (drug, retail, and dollar stores), slow market conditions for non-buying group dealers, and reduced sales to large chains. The Refrigeration sales declines were partially offset by sales gains of 13.3% in Scientific due to new product launches. Standex expects a sequential, seasonal revenue increase in the next quarter, but with continued weakness in Refrigeration. In addition, the Company continues to pursue productivity improvements to address the current market conditions. The Company is also actively pursuing new Refrigeration business opportunities as well as continuing to promote its new Scientific, pump and display merchandizer product offerings.

Net sales for the nine months ended March 31, 2019 decreased $17.0 million or 7.7% from the same period last year. The Refrigeration group experienced a 14.8% sales decrease in the first nine months of fiscal year 2019 due to a lower number of scheduled store remodels and higher number of store closures in addition to the factors described above. Additionally, pump business sales have declined as compared to prior year due to sales decreases in the European espresso market. Sales declines in Refrigeration and the pump business were partially offset by Scientific sales increases of 12.1% due to increased sales to retail pharmacy customers.

Income from operations decreased $2.0 million or 35.8% in the third quarter of fiscal 2019. The decrease in operating income is primarily due to decreased sales volume and cost structure issues within the Refrigeration business, which are being addressed.

Income from operations for the nine months ended March 31, 2019 decreased $4.4 million or 22.3% from the same period in the prior year. This reflected a combination of decreased volume, higher material prices in the pump business, and cost structure issues in Refrigeration which we are addressing through a consolidation of certain production facilities.

Corporate and Other

Three Months Ended

Nine Months Ended

March 31,

%

March 31,

%
(In thousands, except percentages)
2018

2017

Change

2018

2017

Change
Income (loss) from operations:

Corporate
$ (5,938)

$ (6,160)

(3.6%)

$ (19,917)

$ (19,244)

3.5%
Acquisition-related costs
(1,254)

(5,422)

(76.9%)

(2,962)

(6,925)

(57.2%)
Restructuring
(1,337)

(1,019)

31.2%

(6,307)

(3,077)

105.0%


	Three Months Ended			Nine Months Ended
	March 31,		%	March 31,		%
(In thousands, except percentages)	2019	2018	Change	2019	2018	Change
Income (loss) from operations:
Corporate	$(6,104)	$(5,733)	(6.4%)	$(17,847)	$(19,090)	6.5%
Acquisition-related costs	(805)	(1,254)	35.8%	(2,352)	(2,962)	20.6%
Restructuring	(549)	(1,060)	48.2%	(1,173)	(5,792)	79.7%

Corporate expenses in the third quarter of fiscal year ~~2018 decreased~~2019 increased by ~~$0.2~~$0.4 million, or ~~3.6%~~6.5%, when compared to the prior year quarter primarily due to ~~the costs of a legal settlement of $0.8 million in the prior year.~~increased strategic consulting services partially offset by reduced incentive compensation expenses.

Corporate expenses for the nine months ended March 31, ~~2018, increased~~2019, decreased by ~~$0.7~~$1.2 million, or ~~3.5%~~6.5%, when compared to the prior ~~year. The increase costs to support our transition from a holding to an operating company.~~year primarily due reduced incentive compensation expenses.

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

Liquidity and Capital Resources

At March 31, ~~2018,~~2019, our total cash balance was ~~$96.3~~$96.0 million, of which ~~$87.3~~$78.5 million was held by foreign subsidiaries. During the year, we have repatriated $43.2 million to the United States from our foreign subsidiaries. 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.

Net cash provided by continuing operating activities for the nine months ended March 31, ~~2018,~~2019, was ~~$28.8~~$25.0 million compared to net cash provided by continuing operating activities of ~~$31.5~~$26.9 million in the prior year. We generated ~~$59.2~~$59.5 million from income statement activities and used ~~$25.4~~$34.5 million of cash to fund working capital and other balance sheet increases. Cash flow used in continuing investing activities for the nine months ended March 31, ~~2018,~~2019 totaled ~~$28.0~~$112.1 million. Uses of investing cash consisted primarily of capital expenditures of ~~$21.4~~$17.8 million and ~~$10.4~~$96.8 million for ~~Piazza Rosa~~the acquisitions of Agile and other acquisition activities. These uses of investing cash were partially offset by $2.2 million from proceeds of life insurance and $1.4 million from the net proceeds of the sale of a building in Cincinnati, Ohio. We leased back the Cincinnati, Ohio building and, as a result of the transaction, recorded a $0.7 million deferred gain that will be

~~amortized over the initial operating lease term which expires in May 2019.~~Tenibac. Cash inflows provided by financing activities for the nine months ended March 31, ~~2018~~2019 were ~~$1.9~~$72.5 million and included net borrowings of ~~$9.7~~$99.0 million partially offset by cash paid for dividends of ~~$6.6~~$7.3 million, ~~and other stock based activity, including~~ stock repurchases of ~~$1.2 million.~~ $19.2 million, and an earnout payment of $0.9 million due to the Piazza Rosa sellers.

~~The~~During the second quarter of fiscal year 2019, the Company entered into a five-year Amended ~~its~~and Restated Credit Agreement ~~(“Credit Facility”~~(“credit agreement”, or ~~“facility”~~“facility”) ~~in December 2014. This five-year Credit Facility~~. The facility has a borrowing limit of $500 million which is an increase of $100 million from the prior facility’s $400 million ~~which~~limit. The facility can be increased by an amount of up to ~~$100~~$250 million, in accordance with specified ~~conditions.~~conditions contained in the agreement. The facility also includes a $10 million sublimit for swing line loans and a ~~$30~~$35 million sublimit for letters of credit.

Under the terms of the Credit Facility, we will 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 will depend upon both the undrawn amount remaining available under the facility and the ~~Company’s~~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 will increase.

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. The facility contains customary representations, warranties and restrictive covenants, as well as specific financial covenants. A significant drop in our adjusted earnings (as defined in our Credit Facility) would limit the amount of indebtedness that could be outstanding at the end of any fiscal quarter which could hinder our ability to make acquisitions or otherwise limit our long-term growth prospects. Failure to comply with this covenant could result in an acceleration of the debt maturity. As of March 31, ~~2018,~~2019, the Company has used ~~$8.9~~$7.4 million against the letter of credit sub-facility and had the ability to borrow ~~$186.1~~$175.9 million under the facility based on our current trailing twelve-month EBITDA. The ~~Company’s~~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:

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”~~Facility”), to interest expense for the trailing twelve months of at least 2.75:1, an improvement over the interest coverage ratio of 3.0:1.1 permitted under the previous agreement. 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, an increase from the prior agreement’s $7.5 million ~~and~~cap on restructuring expenses. The new facility continues to allow unlimited non-cash charges including purchase accounting and goodwill adjustments. At March 31, ~~2018,~~2019, the ~~Company’s~~Company’s Interest Coverage Ratio was ~~11.97:~~8.22:1.

Leverage Ratio - The ~~Company’s~~Company’s ratio of funded debt to trailing twelve month Adjusted EBITDA per the ~~facility,~~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, ~~2018,~~2019, the ~~Company’s~~Company’s Leverage Ratio was ~~1.84:~~2.02:1.

As of March 31, ~~2018,~~2019, we had borrowings under our facility of ~~$205.0~~$293.0 million and the effective rate of interest for outstanding borrowings under the facility was ~~2.98%~~3.71%. Subsequent to the end of the third quarter, on April 1^st, we collected $106.9 million in connection with the sale of our Cooking Solutions Group and substantially all of these proceeds were used to repay borrowings under our facility.

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 ~~2018~~fiscal year 2019 capital spending to be between ~~$28.0~~$35.0 and ~~$30.0~~$36.0 million which includes amounts not spent in ~~2017~~fiscal year 2018 and includes ~~between $2.4 and $2.2~~$0.8 million for our recent ~~acquisition in Italy.~~ acquisitions. We also expect that ~~fiscal year 2018~~ depreciation and amortization expense will be between ~~$21.0~~$21.5 and ~~$22.0~~$22.5 million and ~~$8.0~~$8.5 and ~~$9.0~~$9.5 million, respectively.

In order to manage our interest rate exposure, we are party to ~~$75.0~~$85.0 million of active floating to fixed rate swaps. These swaps convert our interest payments from LIBOR to a weighted average rate of ~~1.74%~~2.11%.

The following table sets forth our capitalization at March 31, ~~2018~~2019 and June 30, ~~2017:~~2018:


(In thousands)		March 31, 2018		June 30, 2017		March 31, 2019		June 30, 2018
Long-term debt	$	204,726	$	191,976	$	291,725	$	193,772
Less cash and cash equivalents		96,325		88,566		96,041		109,602
Net debt (cash)		108,401		103,410
Net debt						195,684		84,170
Stockholders' equity		446,407		408,664		479,617		450,795
Total capitalization	$	554,808	$	512,074	$	675,301	$	534,965

We sponsor a number of defined benefit and defined contribution retirement plans. The U.S. pension plan is frozen for substantially all participants. We have evaluated the current and long-term cash requirements of these plans, and our existing sources of liquidity are expected to be sufficient to cover required contributions under ERISA and other governing regulations.

The fair value of the Company's U.S. defined benefit pension plan assets was ~~$192.7~~$183.6 million at March 31, ~~2018,~~2019, as compared to ~~$195.3~~$191.0 million at the most recent measurement date, which occurred as of June 30, ~~2017.~~2018. The next measurement date to determine plan assets and benefit obligations will be on June 30, ~~2018.~~2019.

The Company expects to pay ~~$6.9~~$1.3 million in contributions to its defined benefit plans during fiscal ~~2018.~~2019. Contributions of $0.3 million and $0.8 million were made during the three ~~and nine months ended March 31, 2018 compared to $0.3~~andninemonths endedMarch31, 2019equaltothe$0.3 million and ~~$1.0~~$0.8 million during the three ~~and nine months ended March 31, 2017,~~andninemonths endedMarch31, 2018, respectively. Required contributions of $0.8 million will be paid to the ~~Company’s~~Company’s U.K. defined benefit plan during ~~2018.~~2019. The Company also expects to make contributions during the current fiscal year of $0.2 million and $0.3 million to its unfunded defined benefit plans in the U.S. and Germany, respectively. ~~Subsequent to~~ Any subsequent plan contributions will depend on the ~~end~~results of ~~the third quarter, the Company made a $5.5 million contribution to its defined benefit plan in the U.S. to accelerate tax benefits afforded to the Company by recent tax law changes.~~future actuarial valuations.

We have an insurance program in place to fund supplemental retirement income benefits for five retired executives. Current executives and new hires are not eligible for this program. At March 31, ~~2018,~~2019, the underlying policies had a cash surrender value of ~~$17.1~~$17.8 million and are reported net of loans of ~~$8.6~~$8.7 million for which we have the legal right of ~~offset, these amounts are reported net on our balance sheet.~~offset.

Other Matters

Inflation –Certain of our expenses, such as wages and benefits, occupancy costs and equipment repair and replacement, are subject to normal inflationary pressures. Inflation for medical costs can impact both our ~~reserves for self-insured medical plans~~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 ~~manage~~control worker compensation insurance medical ~~costs~~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 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.

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

Environmental Matters – To the best of our knowledge, we believe that we are presently in substantial compliance with all existing applicable environmental laws and regulations and do not anticipate any instances of non-compliance that will have a material effect on our future capital expenditures, earnings or competitive position.

Seasonality – We are a diversified business with generally low levels of seasonality, however our fiscal third quarter typically has a comparatively lower level of sales and profitability.

Employee Relations – The Company has labor agreements with ~~several~~four union locals in the United States and several European employees belong to European trade unions. ~~There are three~~None of the union contracts in the U.S. ~~that~~ will expire during fiscal ~~year 2018. We are currently negotiating one contract and are in the planning phase for other negotiations.~~2019.

Critical Accounting Policies

The condensed consolidated financial statements include the accounts of Standex International Corporation and all of its subsidiaries. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions in certain circumstances that affect amounts reported in the accompanying condensed consolidated financial statements. Although we believe that materially different amounts would not be reported due to the accounting policies adopted, the application of certain accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. Our Annual Report on Form 10-K for the year ended June 30, ~~2017~~2018 lists a number of accounting policies which we believe to be the most critical.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Risk Management

We are exposed to market risks from changes in interest rates, commodity prices and changes in foreign currency ~~exchange.~~rates. To reduce these risks, we selectively use, from time to time, financial instruments and other proactive management techniques. We have internal policies and procedures that place financial instruments under the direction of the Treasurer and restrict all derivative transactions to those intended for hedging purposes only. The use of financial instruments for trading purposes (except for certain investments in connection with the non-qualified defined contribution plan) or speculation is strictly prohibited. The Company has no majority-owned subsidiaries that are excluded from the consolidated financial statements. Further, we have no interests in or relationships with any special purpose entities.

Exchange Rate Risk

We are exposed to both transactional risk and translation risk associated with exchange rates. Our overall transactional risk is mitigated, in large part, by natural hedges developed with locally denominated debt service on intercompany accounts. In the nine months ended March 31, ~~2018,~~2019, net sales to external customers in our consolidated sales not transacted in functional currency were ~~3.6%~~2.9%. We also mitigate certain of our foreign currency exchange rate risks by entering into forward foreign currency contracts from time to time. The contracts are used as a hedge against anticipated foreign cash flows, such as dividend payments, loan payments, and materials purchases, and are not used for trading or speculative purposes. The fair values of the forward foreign currency exchange contracts are sensitive to changes in foreign currency exchange rates, as an adverse change in foreign currency exchange rates from market rates would decrease the fair value of the contracts. However, any such losses or gains would generally be offset by corresponding gains and losses, respectively, on the related hedged asset or liability. At March 31, ~~2018,~~2019, the fair value, in the aggregate, of the ~~Company’s~~Company’s open foreign exchange contracts was a liability of ~~$6.0~~$3.7 million.

Our primary translation risk is with the Euro, British Pound Sterling, ~~Peso,~~ Japanese Yen and Chinese Yuan. A hypothetical 10% appreciation or depreciation of the value of any these foreign currencies to the U.S. Dollar at March 31, ~~2018,~~2019, would not result in a material change in our operations, financial position, or cash flows. We hedge our most significant foreign currency translation risks primarily through cross currency swaps and other instruments, as appropriate.

Interest Rate Risk

Our interest rate exposure is limited primarily to interest rate changes on our variable rate borrowings. From time to time, we will use interest rate swap agreements to modify our exposure to interest rate movements. The ~~Company’s~~Company’s currently effective swap agreements convert our base borrowing rate on ~~$75.0~~$85.0 million of debt due under our Credit Agreement from a variable rate equal to LIBOR to a weighted average rate of ~~1.74%~~2.11% at March 31, ~~2018.~~2019.

The ~~Company’s~~Company’s effective rate on variable-rate borrowings, including the impact of interest rate swaps, under the revolving credit agreement increased from ~~2.41%~~3.29% at June 30, ~~2017~~2018 to ~~2.98%~~3.71% at March 31, ~~2018.~~2019.

Concentration of Credit Risk

We have a diversified customer base. As such, the risk associated with concentration of credit risk is inherently minimized. As of March 31, ~~2018,~~2019, no one customer accounted for more than 5% of our consolidated outstanding receivables or of our sales.

Commodity Prices

The Company is exposed to fluctuating market prices for all commodities used in its manufacturing processes. Each of our segments is subject to the effects of changing raw material costs caused by the underlying commodity price ~~movements.~~movements and the impact that any tariffs may have on such commodities. 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.

The Engineering Technologies, Food Service Equipment, Electronics, and Hydraulics Groups are all sensitive to price increases for steel products, other metal commodities and petroleum based products. In the past year, we have experienced price fluctuations for a number of materials including steel, copper wire, other metal commodities, refrigeration components and foam insulation. 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’~~divisions’ respective competitors and the timing of their price increases.

ITEM 4.

CONTROLS AND PROCEDURES

At the end of the period covered by this Report, the management of the Company, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the ~~Company’s~~Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“(“Exchange ~~Act”~~Act”)). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the ~~Company’s~~Company’s disclosure controls and procedures were effective as of March 31, ~~2018~~2019 in ensuring that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's ("SEC") rules and forms, and that such information is accumulated and communicated to the ~~Company’s~~Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

SEC guidance permits the exclusion of an evaluation of the effectiveness of a registrant's disclosure controls and procedures as they relate to the internal ~~controls~~control over financial reporting for an acquired business during the first year following such acquisition. As discussed in Note 2 to the consolidated financial statements contained in this Report, the Company acquired all of the outstanding stock of Regional Mfg. Specialists, Inc. (now named Agile Magnetics, Inc.) and Tenibac-Graphion, Inc. during the ~~Piazza Rosa Group. This acquisition represents~~last year. These acquisitions represent approximately ~~1.5%~~4.0% and ~~1.4%~~3.4% of the Company's consolidated continuing operations revenue for the three and nine months ended March 31, ~~2018,~~2019, respectively, and approximately ~~1.8%~~13.8% of the Company's consolidated assets at March 31, ~~2018.~~2019. Management's evaluation and conclusion as to the effectiveness of the design and operation of the ~~Company’s internal~~Company’s disclosure controls ~~over financial~~

~~reporting~~and procedures as of March 31, ~~2018~~2019 excludes any evaluation of the internal control over financial reporting of ~~the Piazza Rosa Group.~~Agile Magnetics and Tenibac-Graphion Inc.

There was no change in the Company's internal control over financial reporting during the quarterly period ended March 31, ~~2018~~2019 that has materially affected or is reasonably likely to materially affect the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c)

The following table provides information about purchases by the Company of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act:

Issuer Purchases of Equity Securities¹

Quarter Ended March 31, 2018

Period

(a) Total number of shares (or units) purchased

(b) Average price paid per share (or unit)
(c) Total number of shares (or units) purchased as part of publicly announced plans or programs
(d) Maximum number (or appropriate dollar value) of shares (or units) that may yet be purchased under the plans or programs
January 1 - January 31, 2018

416

$     104.50

                     416

$               87,757,997

February 1 – February 28, 2018

391

$     101.71

391

87,718,229

March 1 – March 31, 2018

     -

$                -

-

              87,718,229

       Total

     807

$       103.15

807

$               87,718,229


Issuer Purchases of Equity Securities¹
Quarter Ended March 31, 2019
Period	(a) Total number of shares (or units) purchased	(b) Average price paid per share (or unit)	(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or appropriate dollar value) of shares (or units) that may yet be purchased under the plans or programs
January 1 - January 31, 2019	-	$ -	-	$ 67,938,406

February 1 – February 28, 2019	1,312	$ 79.28	1,312	67,834,396

March 1 – March 31, 2019	-	$ -	-	67,834,396

Total	1,312	$ 79.28	1,312	$ 67,834,396

⁽¹⁾ The Company has a Stock Buyback Program (the ~~“Program”~~“Program”) which was originally announced on January 30, 1985 and most recently amended on April 26, 2016. Under the Program, the Company was authorized to repurchase up to an aggregate of $100 million of its shares. Under the program, purchases may be made from time to time on the open market, including through 10b5-1 trading plans, or through privately negotiated transactions, block transactions, or other techniques in accordance with prevailing market conditions and the requirements of the Securities and Exchange Commission. The ~~Board’s~~Board’s authorization is open-ended and does not establish a timeframe for the purchases. The Company is not obligated to acquire a particular number of shares, and the program may be discontinued at any time at the ~~Company’s~~Company’s discretion.

ITEM 6.EXHIBITS

(a)~~Exhibits~~

(a)

Exhibits

31.1

31.1Principal Executive ~~Officer’s~~Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

31.2Principal Financial ~~Officer’s~~Officer’s Certification Pursuant to Rule 13a-14(a)/15d-14(a) and Pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002~~2002..

32Principal Executive Officer and Principal Financial Officer Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002~~2002..

101

The following materials from this Quarterly Report on Form 10-Q, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statement of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and ~~(v)~~(vi) Notes to Unaudited Condensed Consolidated Financial Statements.

ALL OTHER ITEMS ARE INAPPLICABLE

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		STANDEX INTERNATIONAL CORPORATION

Date:	~~May 1, 2018~~April 30, 2019	/s/ THOMAS D. DEBYLE
		Thomas D. DeByle
		Vice President/Chief Financial Officer
		(Principal Financial & Accounting Officer)

Date:	~~May 1, 2018~~April 30, 2019	/s/ SEAN C. VALASHINAS
		Sean C. Valashinas
		Chief Accounting Officer/Assistant Treasurer

`PART I.`FINANCIAL INFORMATION
ITEM 1

STANDEX INTERNATIONAL CORPORATION
Condensed Consolidated Balance Sheets

(In thousands, except per share data)	March 31, 2018 (unaudited)		June 30, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	96,325		$	88,566
Accounts receivable, net of reserve for doubtful accounts of		132,505			127,060
$2,534 and $2,406 at March 31, 2018 and June 30, 2017
Inventories		131,589			119,401
Prepaid expenses and other current assets		10,154			8,397
Income taxes receivable		1,301			2,469
Deferred tax asset		-			14,991
Total current assets		371,874			360,884
Property, plant, and equipment, net		147,782			133,160
Intangible assets, net		103,052			102,503
Goodwill		254,703			242,690
Deferred tax asset		10,234			1,135
Other non-current assets		28,631			27,304
Total non-current assets		544,402			506,792
Total assets	$	916,276		$	867,676

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	82,621		$	96,487
Accrued liabilities		63,539			58,694
Income taxes payable		2,820			4,783
Total current liabilities		148,980			159,964
Long-term debt		204,726			191,976
Accrued pension and other non-current liabilities		116,163			107,072
Total non-current liabilities		320,889			299,048
Stockholders' equity:		��
Common stock, par value $1.50 per share, 60,000,000
shares authorized, 27,984,278 issued, 12,710,243 and
12,662,661 outstanding at March 31, 2018 and June 30, 2017		41,976			41,976
Additional paid-in capital		60,031			56,783
Retained earnings		751,136			716,605
Accumulated other comprehensive loss		(115,267)			(115,938)
Treasury shares: 15,274,035 shares at March 31, 2018
and 15,321,617 shares at June 30, 2017		(291,469)			(290,762)
Total stockholders' equity		446,407			408,664
Total liabilities and stockholders' equity	$	916,276		$	867,676

See notes to unaudited condensed consolidated financial statements

		Preliminary Allocation		Adjustments		Adjusted Allocation
		September 30, 2017				March 31, 2018
Fair value of business combination:
Cash payments	$	12,889	$	-	$	12,889
Less: cash paid to satisfy acquired debt		(2,833)		-		(2,833)
Total	$	10,056	$	-	$	10,056
Identifiable assets acquired and liabilities assumed:
Other acquired assets	$	2,678	$	1,664	$	4,342
Inventories		637		(2)		635
Property, plant, and equipment		5,005		-		5,005
Identifiable intangible assets		4,087		(1)		4,086
Goodwill		6,218		(1,643)		4,575
Liabilities assumed		(7,387)		-		(7,387)
Deferred taxes		(1,182)		(18)		(1,200)
Total	$	10,056	$	-	$	10,056

		Preliminary Allocation				Final Allocation
		March 31, 2017		Adjustments		March 31, 2018
Fair value of business combination:
Cash payments	$	137,676	$	-	$	137,676
Less: cash acquired		(8,521)		-		(8,521)
Total	$	129,155	$	-	$	129,155
Identifiable assets acquired and liabilities assumed:
Other acquired assets	$	12,497	$	(2,158)	$	10,339
Inventories		7,387		816		8,203
Property, plant, and equipment		12,703		5,503		18,206
Identifiable intangible assets		53,800		(2,400)		51,400
Goodwill		75,985		3,449		79,434
Liabilities assumed		(10,811)		(8,468)		(19,279)
Deferred taxes		(22,406)		3,258		(19,148)
Total	$	129,155	$	-	$	129,155

	(Unaudited Pro Forma)				(Unaudited Pro Forma)
	Three Months ended March 31,				Nine Months Ended March 31,
In thousands	2018		2017		2018		2017
Net Sales	$	216,743	$	200,423	$	640,873		$	587,496
Net Income	$	12,820	$	12,944	$	24,191		$	41,653

Earnings per share:
Basic	$	1.01	$	1.02	$	1.91		$	3.29
Diluted	$	1.00	$	1.01	$	1.89		$	3.26


Effective Date	Reported June 30, 2018	ASC 606 Adjustments	As Adjusted July 1, 2018
Inventories	$ 127,223	$ (574)	$ 126,649
Accounts receivable	134,228	703	134,931
Accrued liabilities	65,575	1,502	67,077
Deferred income taxes	26,816	(340)	26,476
Retained earnings	761,430	(1,033)	760,397


	Three Months Ended March 31, 2019
	As Presented		Impact of ASC 606		Balances Without adoption of ASC 606
Net sales	$	193,771	$	(3,324)	$	190,447
Cost of sales		131,981		(2,460)		129,521
Gross profit		61,790		(864)		60,926
Provision for income taxes		3,833		(250)		3,583
Income from continuing operations		7,304		(614)		6,690
Income (loss) from discontinued operations, net of income taxes		18,965		-		18,965
Net income (loss)	$	26,269	$	(614)	$	25,655
	Nine Months Ended March 31, 2019
	As Presented		Impact of ASC 606		Balances Without adoption of ASC 606
Net sales	$	582,380	$	(9,179)	$	573,201
Cost of sales		384,402		(7,742)		376,660
Gross profit		197,978		(1,437)		196,541
Provision for income taxes		13,535		(416)		13,119
Income from continuing operations		34,071		(1,021)		33,050
Income (loss) from discontinued operations, net of income taxes		21,450		195		21,645
Net income (loss)	$	55,521	$	(826)	$	54,695


	Three Months Ended
Revenue by Product Line	March 31, 2019		March 31, 2018
Refrigeration	$	46,883	$	52,245
Merchandising & Display		7,662		8,814
Pumps		9,321		9,822
Total Food Service Equipment		63,866		70,881

Engraving Services		34,505		30,375
Engraving Products		2,630		3,374
Total Engraving		37,135		33,749

Engineering Technologies Components		27,467		23,426

Electronics		50,197		51,213

Hydraulics Cylinders and System		15,106		12,878

Total Revenue by Product Line	$	193,771	$	192,147


		Three Months Ended	Nine Months Ended
Net sales		March 31, 2019	March 31, 2019
United States	$	126,910	381,615
Asia Pacific		25,608	81,649
EMEA⁽¹⁾		37,271	105,775
Other Americas		3,982	13,341
Total	$	193,771	582,380


Timing of Revenue Recognition	Three Months Ended
	March 31, 2019		March 31, 2018
Products and services transferred at a point in time	$	184,950	$	187,970
Products transferred over time		8,821		4,177
Net Sales	$	193,771	$	192,147


	Balance at Beginning of Period	Additions	Deductions	Balance at End of Period
Nine months ended March 31, 2019
Contract assets:
Accounts receivable	$ 5,655	$ 23,500	$ 24,844	$ 4,311
Unbilled services	5,904	13,708	8,938	10,674
Contract liabilities:
Customer deposits	2,552	4,612	1,881	5,283

	June 30, 2017			Acquisitions	Translation Adjustment		March 31, 2018
Food Service Equipment	$	63,464	$	-	$	-		$	63,464
Engraving		20,000		4,575		461			25,036
Engineering Technologies		44,120		-		695			44,815
Electronics		112,047		533		5,749			118,329
Hydraulics		3,059		-		-			3,059
Total	$	242,690	$	5,108	$	6,905		$	254,703


	June 30, 2018			Discontinued Operations		Continuing Ops - June 30, 2018			Acquisitions		Translation Adjustment			March 31, 2019
Food Service Equipment	$	63,464	$		(40,011)		$	23,453	$	-		$	-		$	23,453
Engraving		27,194			-			27,194		34,281			(376)			61,099
Engineering Technologies		44,247			-			44,247		-			(119)			44,128
Electronics		113,798			-			113,798		15,614			(708)			128,704
Hydraulics		3,059			-			3,059		-			-			3,059
Total	$	251,762	$		(40,011)		$	211,751	$	49,895		$	(1,203)		$	260,443

Currency	March 31, 2018	June 30, 2017
USD	64,558	73,000
Euro	21,300	21,335
Pound Sterling	6,750	6,962
Peso	54,000	54,000
Canadian	20,600	20,600

Issuer Purchases of Equity Securities¹
Quarter Ended March 31, 2018
Period	(a) Total number of shares (or units) purchased	(b) Average price paid per share (or unit)	(c) Total number of shares (or units) purchased as part of publicly announced plans or programs	(d) Maximum number (or appropriate dollar value) of shares (or units) that may yet be purchased under the plans or programs
January 1 - January 31, 2018	416	$ 104.50	416	$ 87,757,997

February 1 – February 28, 2018	391	$ 101.71	391	87,718,229

March 1 – March 31, 2018	-	$ -	-	87,718,229

Total	807	$ 103.15	807	$ 87,718,229

Revenue recognized in the period from:

March 31, 2019

Three months ended

Nine months ended

Amounts included in the contract liability balance at the beginning of the period