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 September 30, 2013

[  ]

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)

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 telephone number, including area code)

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 [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 [  ]

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 accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [  ]                  

       Accelerated filer [X]                    

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 November 5, 2013 was 12,768,833

STANDEX INTERNATIONAL CORPORATION

INDEX

Page No.

PART I.

FINANCIAL INFORMATION:

Item 1.

Unaudited Condensed Consolidated Balance Sheets as of

September 30, 2013 and June 30, 2013

2

Unaudited Condensed Consolidated Statements of Operations for the

Three Months Ended September 30, 2013 and 2012

3

Unaudited Condensed Consolidated Statements of Comprehensive Income for the

Three Months Ended September 30, 2013 and 2012

4

Unaudited Condensed Consolidated Statements of Cash Flows for the

Three Months Ended September 30, 2013 and 2012

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management's Discussion and Analysis of Financial Condition and

Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

24

Item 4.

Controls and Procedures

26

PART II.

OTHER INFORMATION:

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 6.

Exhibits

27

PART I.  FINANCIAL INFORMATION
ITEM 1
STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except per share data)		September 30, 2013			June 30, 2013
ASSETS
Current assets:
Cash and cash equivalents		$	46,055		$	51,064
Accounts receivable, net			101,938			102,268
Inventories			89,840			84,956
Prepaid expenses and other current assets			9,103			7,776
Income taxes receivable			1,420			-
Deferred tax asset			12,378			12,237
Total current assets			260,734			258,301
Property, plant, and equipment, net			94,369			95,020
Goodwill			113,499			111,905
Intangible assets, net			26,264			25,837
Other non-current assets			20,628			19,510
Total non-current assets			254,760			252,272
Total assets		$	515,494		$	510,573
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable		$	59,246		$	69,854
Accrued expenses			50,844			46,981
Income taxes payable			3,603			1,638
Total current liabilities			113,693			118,473
Long-term debt			50,067			50,072
Accrued pension and other non-current liabilities			47,478			51,040
Total non-current liabilities			97,545			101,112
Stockholders' equity:
Common stock, par value $1.50 per share - 60,000,000
shares authorized, 27,984,278 issued, 12,641,682 and
12,549,806 outstanding at September 30, 2013 and June 30, 2013			41,976			41,976
Additional paid-in capital			37,732			37,199
Retained earnings			554,087			546,031
Accumulated other comprehensive loss			(60,116)			(65,280)
Treasury shares (15,342,596 shares at September 30, 2013
and 15,434,472 shares at June 30, 2013)			(269,423)			(268,938)
Total stockholders' equity			304,256			290,988
Total liabilities and stockholders' equity		$	515,494		$	510,573
See notes to unaudited condensed consolidated financial statements

2

STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Operations
		Three Months Ended
		September 30,
(In thousands, except per share data)		2013			2012
Net sales		$	183,573		$	183,386
Cost of sales			124,457			124,141
Gross profit			59,116			59,245
Selling, general, and administrative expenses			41,425			41,384
Restructuring costs			3,806			235
Total operating expenses			45,231			41,619
Income from operations			13,885			17,626
Interest expense			(560)			(651)
Other non-operating income (expense)			454			(36)
Income from continuing operations before income taxes			13,779			16,939
Provision for income taxes			3,666			5,014
Income from continuing operations			10,113			11,925
Income (loss) from discontinued operations, net of income taxes			(1,031)			(95)
Net income (loss)		$	9,082		$	11,830
Basic earnings (loss) per share:
Continuing operations		$	0.80		$	0.95
Discontinued operations			(0.08)			(0.01)
Total		$	0.72		$	0.94
Diluted earnings (loss) per share:
Continuing operations		$	0.79		$	0.93
Discontinued operations			(0.08)			(0.01)
Total		$	0.71		$	0.92
Cash dividends per share		$	0.08		$	0.07
See notes to unaudited condensed consolidated financial statements

3

STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Comprehensive Income
	Three Months Ended
	September 30,
(In thousands)	2013				2012
Net income (loss)	$	9,082		$	11,830
Other comprehensive income (loss):
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs	$	(956)		$	(307)
Amortization of unrecognized costs		1,423			2,200
Derivative instruments:
Change in unrealized gains and (losses)		(90)			(261)
Amortization of unrealized gains and (losses) into interest expense		267			261
Foreign currency translation adjustments		4,529			2,830
Other comprehensive income (loss) before tax	$	5,173		$	4,723
Income tax provision (benefit):
Defined benefit pension plans:
Actuarial gains (losses) and other changes in unrecognized costs	$	567		$	77
Amortization of unrecognized costs		(509)			(804)
Derivative instruments:
Change in unrealized gains and (losses)		34			99
Amortization of unrealized gains and (losses) into interest expense		(101)			(99)
Income tax provision benefit to other comprehensive income (loss)	$	(9)		$	(727)
Other comprehensive income (loss), net of tax		5,164			3,996
Comprehensive income (loss)	$	14,246		$	15,826
See notes to unaudited condensed consolidated financial statements

4

STANDEX INTERNATIONAL CORPORATION
Unaudited Condensed Consolidated Statements of Cash Flows
		Three Months Ended
		September 30,
(In thousands)		2013			2012
Cash flows from operating activities
Net income		$	9,082		$	11,830
(Income) loss from discontinued operations			1,031			95
Income from continuing operations			10,113			11,925
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			3,770			3,830
Stock-based compensation			849			803
Non-cash portion of restructuring charge			3,294			-
Contributions to defined benefit plans			(358)			(3,564)
Net changes in operating assets and liabilities			(16,416)			(3,485)
Net cash provided by (used in) operating activities - continuing operations			1,252			9,509
Net cash (used in) operating activities - discontinued operations			(309)			(1,241)
Net cash provided by (used in) operating activities			943			8,268
Cash flows from investing activities
Expenditures for property, plant, and equipment			(4,250)			(4,905)
Expenditures for acquisitions, net of cash acquired			-			(38,535)
Other investing activity			10			-
Net cash (used in) investing activities			(4,240)			(43,440)
Cash flows from financing activities
Borrowings on revolving credit facility			17,700			56,000
Payments of revolving credit facility			(17,700)			(40,000)
Activity under share-based payment plans			72			68
Excess tax benefit from share-based payment activity			1,470			1,694
Purchases of treasury stock			(3,045)			(5,372)
Cash dividends paid			(1,004)			(876)
Net cash provided by (used in) financing activities			(2,507)			11,514
Effect of exchange rate changes on cash and cash equivalents			795			713
Net change in cash and cash equivalents			(5,009)			(22,945)
Cash and cash equivalents at beginning of year			51,064			54,749
Cash and cash equivalents at end of period		$	46,055		$	31,804
See notes to unaudited condensed consolidated financial statements

5

STANDEX INTERNATIONAL CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1)

Management Statement

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the results of operations for the three months ended September 30, 2013 and 2012, the cash flows for the three months ended September 30, 2013 and 2012 and the financial position of the Company at September 30, 2013.  The interim results are not necessarily indicative of results for a full year.  The unaudited condensed consolidated financial statements and notes do not contain information which would substantially duplicate the disclosures contained in the audited annual consolidated financial statements and notes for the year ended June 30, 2013.  The condensed consolidated balance sheet at June 30, 2013 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.  The financial statements contained herein should be read in conjunction with the Annual Report on Form 10-K and in particular the audited consolidated financial statements for the year ended June 30, 2013.  Unless otherwise noted, references to years are to the Company’s fiscal years.

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.

2)

Acquisition

In July 2012, the Company acquired Meder electronic AG (“Meder”), a German manufacturer of magnetic reed switch, reed relay, and reed sensor products. Meder, whose products and geographic markets are complementary to Standex Electronics, is reported under the Electronics Products Group.  This investment substantially broadens the global footprint, product line offerings, and end-user markets of the Electronics segment.

The Company paid $43.2 million in cash for 100% of the equity of Meder.  Acquired intangible assets of $8.2 million consist of $3.4 million of trademarks, which are indefinite-lived, and $4.8 million of customer relationships, which are amortized over a period of 10 years.  Acquired goodwill of $12.1 million is not deductible for income tax purposes due to the nature of the transaction.  The Company finalized the purchase price allocation during the quarter ended December 31, 2012.

The components of the fair value of the Meder acquisition, including the initial allocation of the purchase price and subsequent measurement period adjustments, are as follows (in thousands):

	Preliminary Allocation			Adjustments			Meder Electronic
Fair value of business combination:
Cash payments	$	42,103		$	1,078		$	43,181
Less: cash acquired		(3,568)			-			(3,568)
Total	$	38,535		$	1,078		$	39,613
Identifiable assets acquired and liabilities assumed:
Current Assets	$	20,246		$	-		$	20,246
Property, plant, and equipment		10,651			409			11,060
Identifiable intangible assets		8,200			-			8,200

6

Goodwill		11,131			932			12,063
Other non-current assets		222			-			222
Liabilities Assumed		(8,682)			40			(8,642)
Deferred taxes		(3,233)			(303)			(3,536)
Total	$	38,535		$	1,078		$	39,613

3)

Discontinued Operations

In pursuing our business strategy we have divested certain businesses and recorded activities of these businesses as discontinued operations.  In December 2011, the Company entered into a plan to divest its Air Distribution Products (“ADP”) business unit in order to allow the Company to focus its financial assets and managerial resources on its remaining portfolio of businesses.  On March 30, 2012, the Company completed the sale of the ADP business.  The Company has received notice that its obligations under a guarantee provided to the buyers of ADP were triggered as a result of its withdrawal from a multi-employer pension plan in which the Company previously participated.  As a result, the Company has recorded a charge of $1.2 million in excess of the value of the guarantee already recorded. 

Assets and liabilities related to discontinued operations appear in the Condensed Consolidated Balance Sheets are as follows (in thousands):

		September 30, 2013			June 30, 2013
Current assets		$	639		$	483
Other non-current assets			3,000			3,000
Accrued expenses			3,576			795
Accrued pension and other non-current liabilities			1,657			3,219

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

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

7

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

During the three months ended September 30, 2013, there were no transfers of assets or liabilities between level 1 and level 2 of the fair value measurement hierarchy.  The 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 September 30, 2013 and June 30, 2013 consisted of the following (in thousands):

		September 30, 2013
		Total			Level 1			Level 2			Level 3
Assets
Marketable securities - deferred compensation plan		$	2,539		$	2,539		$	-		$	-
Foreign exchange contracts			464			-			464			-
Liabilities
Interest rate swaps		$	1,709		$	-		$	1,709		$	-
Foreign exchange contracts			2,109			-			2,109			-
		June 30, 2013
		Total			Level 1			Level 2			Level 3
Assets
Marketable securities - deferred compensation plan		$	2,478		$	2,478		$	-		$	-
Foreign exchange contracts			37			-			37			-
Liabilities
Interest rate swaps		$	1,875		$	-		$	1,875		$	-
Foreign exchange contracts			1,443			-			1,443			-

5)

Inventories

Inventories are comprised of the following (in thousands):

		September 30, 2013			June 30, 2013
Raw materials		$	41,143		$	37,906
Work in process			25,477			24,112
Finished goods			23,220			22,938
Total		$	89,840		$	84,956

Distribution costs associated with the sale of inventory are recorded as a component of selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations and were $5.8 million and $5.9 million for the three months ended September 30, 2013 and 2012, respectively.

6)

Goodwill

Changes to goodwill during the three months ended September 30, 2013 were as follows (in thousands):

8

			June 30, 2013							September 30, 2013
		Gross		Accumulated Impairment		Net				Translation Adjustment			Net
Food Service Equipment Group		$	63,729	$	(17,939)	$	45,790			$	4		$	45,794
Engraving Group			20,614		-		20,614				99			20,713
Engineering Technologies Group			10,861		-		10,861				682			11,543
Electronics Products Group			31,582		-		31,582				809			32,391
Hydraulics Products Group			3,058		-		3,058				-			3,058
Total		$	129,844	$	(17,939)	$	111,905			$	1,594		$	113,499

7)

Intangible Assets

Intangible assets consist of the following (in thousands):

		Customer Relationships			Trademarks			Other			Total
September 30, 2013
Cost		$	32,439		$	12,986		$	4,921		$	50,346
Accumulated amortization			(20,409)			-			(3,673)			(24,082)
Balance, September 30, 2013		$	12,030		$	12,986		$	1,248		$	26,264
June 30, 2013
Cost		$	31,850		$	12,878		$	4,228		$	48,956
Accumulated amortization			(19,529)			-			(3,590)			(23,119)
Balance, June 30, 2013		$	12,321		$	12,878		$	638		$	25,837

Amortization expense for the three months ended September 30, 2013 and 2012 was $0.7 million and $0.6 million, respectively.  At September 30, 2013, amortization expense is estimated to be $2.0 million in the remainder of 2014, $2.3 million in 2015, $1.9 million in 2016, $1.5 million in 2017, $1.4 million in 2018, and $4.2 million thereafter.

8)

Debt

As of September 30, 2013, the Company’s debt is due as follows (in thousands):

Fiscal Year
2014		$                    15
2015		15
2016		15
2017		50,015
2018		7
Thereafter		-
		$             50,067

9

Bank Credit Agreements

The Company has in place a five-year $225 million unsecured Revolving Credit Facility (“Credit Agreement”, “the facility”), which expires in January 2017 and includes a letter of credit sub-facility with a limit of $30 million and a $100 million accordion feature.  As of September 30, 2013 the Company has used $10.8 million against the letter of credit sub-facility.  The Company had the ability to borrow $164.1 million under the facility.

At September 30, 2013, the carrying value of the current borrowings under the facility approximated fair value.

9) Derivative Financial Instruments

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 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 effective swap agreements convert the base borrowing rate on $45 million of debt due under our revolving credit agreement from a variable rate equal to LIBOR to a weighted average fixed rate of 2.40% at September 30, 2013.  The fair value of the swaps recognized in accrued expenses and in other comprehensive income is as follows (in thousands):

									Fair Value
Effective Date		Notional Amount			Fixed Rate		Maturity		September 30, 2013			June 30, 2013
June 1, 2010		$	5,000,000		2.495%		May 24, 2015		$	(185)		$	(205)
June 1, 2010			5,000,000		2.495%		May 24, 2015			(185)			(205)
June 8, 2010			10,000,000		2.395%		May 26, 2015			(352)			(389)
June 9, 2010			5,000,000		2.340%		May 26, 2015			(172)			(190)
June 18, 2010			5,000,000		2.380%		May 24, 2015			(175)			(194)
September 21, 2011			5,000,000		1.280%		September 21, 2013			-			(14)
September 21, 2011			5,000,000		1.595%		September 22, 2014			(69)			(83)
March 15, 2012			10,000,000		2.745%		March 15, 2016			(571)			(595)
									$	(1,709)		$	(1,875)

The Company reported no losses for the three months ended September 30, 2013, 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 foreign sales, foreign purchases of materials, and loan payments to and from subsidiaries.  The Company enters into such contracts for hedging purposes only.  For hedges of intercompany loan payments, the Company has not elected hedge accounting due to the general short-term nature and predictability of the transactions, and records derivative gains and losses directly to the statement of operations.  At September 30, 2013 and June 30, 2013, the Company had outstanding forward contracts related

10

to hedges of intercompany loans with net unrealized (losses) of ($1.6) million and ($1.4) million, respectively, which approximate the unrealized gains and losses on the related loans.  The notional amounts of the Company’s forward contracts, by currency, are as follows:

		Notional Amount
		(in native currency)
Currency		September 30, 2013		June 30, 2013
Euro		45,679,064		48,349,064
British Pound Sterling		2,000,000		2,580,289
Canadian Dollar		3,600,000		3,600,000

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

	Assets Derivatives
	September 30 ,2013					June 30,2013
Derivative designated as	Balance					Balance
hedging instruments	Sheet					Sheet
	Line Item			Fair Value		Line Item			Fair Value
Foreign exchange contracts	Other Assets		$	464		Other Assets		$	37

	Liability Derivatives
	September 30 ,2013					June 30,2013
Derivative designated as	Balance					Balance
hedging instruments	Sheet					Sheet
	Line Item			Fair Value		Line Item			Fair Value
Interest rate swaps	Accrued Liabilities		$	1,709		Accrued Liabilities		$	1,875
Foreign exchange contracts	Accrued Liabilities			2,109		Accrued Liabilities			1,443
			$	3,818				$	3,318

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
		September 30,
		2013			2012
Interest rate swaps		$	(90)		$	(261)

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

11

Details about Accumulated									Affected line item
Other Comprehensive		Three Months Ended							in the Statements
Income (Loss) Components		September 30,							of Operations
		2013			2012
Interest rate swaps		$	267		$	261			Interest expense

10)

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 pension plan for U.S. salaried employees was frozen as of December 31, 2007, and participants in the plan ceased accruing future benefits.  The Company’s pension plan was frozen for substantially all remaining participants as of July 31, 2013, and replaced with a defined contribution benefit plan.  Net Periodic Benefit Cost for the Company’s U.S. and Foreign pension benefit plans for the three months ended September 30, 2013 and 2012 consisted of the following components (in thousands):

	U.S. Plans						Non-U.S. Plans
	Three Months Ended						Three Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Service cost	$	85		$	176		$	11		$	10
Interest cost		2,810			2,735			414			417
Expected return on plan assets		(3,378)			(3,698)			(370)			(336)
Recognized net actuarial loss		1,172			1,894			196			226
Amortization of prior service cost		15			26			-			(14)
Net periodic benefit cost	$	704		$	1,133		$	251		$	303

The Company expects to pay $1.5 million in contributions to the plans during 2014 of which $0.4 million were made during the first quarter of 2014.  Contributions of $3.6 million were made during the three months ended September 30, 2012, which included a $3.25 million voluntary contribution made in July 2012, retroactive to June 2012, in order to take advantage of legislation that allowed our U.S. plan to be 100% funded under Pension Protection Act rules at June 30, 2012.

11)

Income Taxes

The Company's effective tax rate for the three months ended September 30, 2013 was 26.6% compared with 29.6% for same period last year.  The lower effective tax rate in the first quarter of 2014 was primarily due to the impact of a decrease in the statutory tax rate in the United Kingdom on deferred tax liabilities recorded in prior periods.

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
		September 30,

12

		2013		2012
Basic - Average shares outstanding		12,573		12,559
Effect of dilutive securities:
Unvested stock awards		196		251
Diluted - Average shares outstanding		12,769		12,810

Earnings available to common stockholders are the same for computing both basic and diluted earnings per share.  No options to purchase common stock were excluded as anti-dilutive from the calculation of diluted earnings per share for the three months ended September 30, 2013 and 2012, respectively.  

35,514 and 33,111 performance stock units are excluded from the diluted earnings per share calculation as the performance criteria have not been met for the three months ended September 30, 2013 and 2012, respectively.

13)

Comprehensive Income (Loss)

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

		September 30, 2013			June 30, 2013
Foreign currency translation adjustment		$	8,274		$	3,745
Unrealized pension losses, net of tax			(67,332)			(67,857)
Unrealized losses on derivative instruments, net of tax			(1,058)			(1,168)
Total		$	(60,116)		$	(65,280)

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 management does not believe that the outcome of any of the currently existing legal matters will have a material impact on the Company’s consolidated financial position, results of operations or cash flow.  The Company accrues for losses related to a claim or litigation when the Company’s management considers a potential loss probable and can reasonably estimate such potential loss.

15)

Industry Segment Information

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

•

Food Service Equipment Group– an aggregation of seven operating segments that manufacture and sell commercial food service equipment.

•

Engraving Group – provides mold texturizing, roll engraving and process machinery for a number of industries.

•

Engineering Technologies Group – provides customized solutions in the fabrication and machining of engineered components for the aerospace, energy, aviation, medical, oil and gas, and general industrial markets.

•

Electronics Products Group – manufacturing and selling of electronic components for applications throughout the end-user market spectrum.

•

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

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Net sales and income (loss) from continuing operations by segment for the three months ended September 30, 2013 and 2012 were as follows (in thousands):

		Three Months Ended September 30,
		Net Sales						Income from Operations
		2013			2012			2013			2012
Segment:
Food Service Equipment Group		$	105,344		$	109,323		$	8,790		$	13,348
Engraving Group			25,027			23,356			4,773			4,552
Engineering Technologies Group			17,265			15,730			2,082			1,693
Electronics Products Group			28,144			27,839			5,138			3,088
Hydraulics Products Group			7,793			7,138			1,174			971
Restructuring costs									(3,806)			(235)
Corporate									(4,266)			(5,791)
Sub-total		$	183,573		$	183,386		$	13,885		$	17,626
Interest expense									(560)			(651)
Other non-operating income									454			(36)
Income from continuing operations before income taxes								$	13,779		$	16,939

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).

16) 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
		September 30, 2013
		Involuntary Employee Severance and Benefit Costs			Other			Total
2014 Restructuring initiatives		$	351		$	3,383		$	3,734
Prior year initiatives			72			-			72
		$	423		$	3,383		$	3,806
		Three Months Ended
		September 30, 2012
		Involuntary Employee Severance and Benefit Costs			Other			Total
Prior year initiatives		$	218		$	17		$	235

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2014 Restructuring Initiatives

On August 23, 2013 the Company announced a consolidation of its Cheyenne, Wyoming plant into its Mexico facility and other Cooking Solutions operations in North America.  The Company expects to record a pre-tax restructuring charge related to the Food Service Equipment segment during fiscal 2014 in the range of $7.5 to $8.0 million, which includes a non-cash charge of $3.3 million related to the impairment of long-lived assets recorded during the first quarter of fiscal year 2014.

Activity in the reserves related to fiscal year 2014 restructuring initiatives is as follows (in thousands):

		Involuntary Employee Severance and Benefit Costs			Other			Total
Restructuring liabilities at June 30, 2013		$				-		$	-
Additions and adjustments			351			89			440
Payments			(266)			(83)			(349)
Restructuring liabilities at September 30, 2013		$	85		$	6		$	91

Prior Year Initiatives

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

		Involuntary Employee Severance and Benefit Costs			Other			Total
Restructuring liabilities at June 30, 2013		$	10			-		$	10
Additions and adjustments			72			-			72
Payments			(82)			-			(82)
Restructuring liabilities at September 30, 2013		$	-		$	-		$	-

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

		Three Months Ended
		September 30, 2013
		Involuntary Employee Severance and Benefit Costs			Other			Total
Food Service Equipment Group		$	18		$	3,328		$	3,346
Engraving Group			245		$	7			252
Electronics Products Group			160		$	48			208
		$	423		$	3,383		$	3,806
		Three Months Ended
		September 30, 2012

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		Involuntary Employee Severance and Benefit Costs			Other			Total
Engraving Group		$	218		$	17		$	235

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" within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements may be identified by the use of forward-looking terminology such as “should,” “could,” "may," “will,” “expect," "believe," "estimate," "anticipate," ”intends,” "continue," or similar terms or variations of those terms or the negative of those terms.  There are many factors that affect the Company’s business and the results of its operations and may cause the actual results of operations in future periods to differ materially from those currently expected or desired.  These factors include, but are not limited to material adverse or unforeseen legal judgments, fines, penalties or settlements, conditions in the financial and banking markets, including fluctuations in exchange rates and the inability to repatriate foreign cash, general and international recessionary economic conditions, including the impact, length and degree of the current slow growth conditions on the customers and markets we serve and more specifically conditions in the food service equipment, automotive, construction, aerospace, energy, transportation and general industrial markets, lower-cost competition, the relative mix of products which impact margins and operating efficiencies, both domestic and foreign, in certain of our businesses, the impact of higher raw material and component costs, particularly steel, petroleum based products and refrigeration components, an inability to realize the expected cost savings from restructuring activities, 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, the inability to achieve the savings expected from the sourcing of raw materials from and diversification efforts in emerging markets, the inability to attain expected benefits from strategic alliances or acquisitions and the inability to achieve synergies contemplated by the Company.  Other factors that could impact the Company include changes to future pension funding 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 services for diverse commercial and industrial market segments.  We have five reportable segments: Food Service Equipment Group, Engraving Group, Engineering Technologies Group, Electronics Products Group, and the Hydraulics Products Group.  Our business objective is to provide value-added, technology-driven solutions to our customers.  Our strategic objective, which we refer to as “Focused Diversity,” is to 1) identify those businesses which are best able to meet our objectives, and invest in them by taking advantage of both organic growth and acquisition opportunities and 2) pursue operational excellence in order to improve operating margins and working capital management.

As part of this ongoing strategy, in the first quarter of fiscal 2014, the Company, in our efforts to reduce cost and improve productivity across the Food Service Equipment Group, announced that we are consolidating the Cooking Solutions Cheyenne, Wyoming plant into its Mexico facility and other Cooking Solutions operations

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in North America.  The Cheyenne consolidation is on track to be complete by fiscal year end.  We expect to realize $4 million per year in annual savings and to benefit from about 75% of the savings rate in the first half of 2015 and from the full annualized run rate in the second half of that year.

During the first quarter of fiscal 2013, the Company acquired Meder electronic AG.  The acquisition, which more than doubled the size of our Electronics Products Group, allowed us to complement our existing electronics business with significantly broadened product line offerings, end-user markets, and manufacturing support that will enhance our global footprint for sales coverage and profitable growth.

Our business strategy emphasizes organic growth initiatives in addition to the completion of strategic acquisitions.  The development and execution of top line initiatives that provide opportunities for market share gains is a top priority for each of our businesses.  Our business units are actively engaged in initiating new product introductions, value engineering and performance enhancements for existing products, expansion of product offerings through private labeling and sourcing agreements, geographic expansion of sales coverage, the development of new sales channels, leveraging strategic customer relationships, development of energy efficient products, creating new applications for existing products and technology, and next generation products and services for our end-user markets.

In addition to the continued implementation of our business strategy, we have successfully taken substantial measures over a period of more than four years to reduce our cost structure.  We have achieved this through company-wide and targeted headcount reductions, low cost manufacturing and value-added engineering initiatives, plant consolidations, procurement savings, and improved productivity in all aspects of our operations.  These measures have been the principal factors in allowing the Company to significantly improve margins and profitability, even though sales have only recently returned to the levels existing before the onset of the 2008 macroeconomic recession.  As we move into fiscal year 2014 we continue to evaluate our products and production process.  We see benefits in a migration of similar projects and repetitive programs where we can utilize our strengths in cost savings to increase overall margins.  In addition to the focus on improving our cost structure, we have improved the Company’s liquidity through better working capital management, and the sale of excess land and buildings.

Because of the diversity of the Company’s businesses, end user markets and geographic locations, management does 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 unit serves niche markets and attempts to identify trends other than general business and economic conditions which are specific to their businesses and which could impact their 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”) including net sales, income from operations, backlog, effective income tax rate, and gross profit margin.  A discussion of these KPIs is included within the discussion 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 the discussed KPI.  We believe that the discussion of these items provides enhanced information to investors by disclosing their consequence on the overall trend in order to provide a clearer comparative view of the KPI where 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 to the KPI amount that would have existed regardless of our acquisition.  Sales resulting from synergies between the acquisition 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.

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Results from Continuing Operations

		Three Months Ended
		September 30,
(Dollar amounts in thousands)		2013			2012
Net sales	$	183,573		$	183,386
Gross profit margin		32.2%			32.3%
Income from operations		13,885			17,626
Backlog (realizable within 1 year)		127,802			126,313

Net Sales
	Three Months Ended
(In thousands)	September 30, 2013
Net sales, prior period	$                           183,386
Components of change in sales:
Effect of exchange rates	855
Organic sales change	(668)
Net sales, current period	$                           183,573

Net sales for the first quarter of 2014 increased $0.2 million, or 0.1%, when compared to the prior year quarter.  This change was due to organic sales decreases, primarily from the Food Service Equipment Group of $3.9 million, partially offset by favorable foreign exchange of $0.9 million and organic sales growth at the Engraving Group of $1.7 million, and Engineering Technologies Group of $1.5 million.

Gross Profit Margin

Our gross profit margin decreased 10 basis points from 32.3% to 32.2% in the first quarter of 2014, when compared to the prior year quarter.  Gross margin in the first quarter of 2014 was negatively impacted by operational issues and an inventory adjustment at the Food Service Equipment Group.

Selling, General, and Administrative Expenses

Selling, General, and Administrative Expenses for the first quarter of 2014 were $41.4 million, or 22.6% of sales, compared to $41.4 million, or 22.6% of sales, during the prior year quarter.  Our efforts to tightly control expenses and to maintain a lean headcount profile have resulted in a constant SG&A rate.

Income from Operations

Income from operations for the first quarter of 2014 was $13.9 million compared to $17.6 million during the prior year quarter.  The decrease of $3.7 million or 21.2% is primarily the result of restructuring charges at the Food Service Equipment Group related to a non-cash impairment charge associated with the announced closure of the Cheyenne, Wyoming facility.

Interest Expense

Interest expense for the first quarter of 2014 was $0.6 million compared to $0.7 million during the prior year quarter.  The decrease of 14.0% is attributable to lower average borrowings during the quarter.

Income Taxes

The Company's effective tax rate for the three months ended September 30, 2013 was 26.6% compared with 29.6% for same period last year.  The lower effective tax rate in the first quarter of 2014 was primarily due to the impact of a decrease in the statutory tax rate in the United Kingdom on deferred tax liabilities recorded in prior periods.

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In September 2013, the U.S. Department of the Treasury and the Internal Revenue Service released final regulations relating to guidance on applying tax rules to amounts paid to acquire, produce, or improve tangible personal property as well as rules for materials and supplies.   These final regulations will be effective for Standex's fiscal year ending June 30, 2015.  The Company is currently assessing these rules and the impacts to the financial statements, if any. 

Backlog

Backlog increased $1.5 million, or 1.2%, to $127.8 million at September 30, 2013, from $126.3 million at September 30, 2012.  The overall increase is attributable to increased backlog from the Hydraulics Products Group of 51.6%, Engraving Group of 11.9% and Engineering Technologies Group of 7.9%, partially offset by decreases within the Electronics Products Group of 6.6%, and Food Service Equipment Group of 5.4%.

Segment Analysis

Food Service Equipment Group

	Three Months Ended
	September 30,				%
(in thousands, except percentages)	2013		2012		Change
Net sales	$   105,344		$   109,323		-3.6%
Income from operations	8,790		13,348		-34.1%
Operating income margin	8.3%		12.2%

Net sales in the first quarter of fiscal year 2014 decreased $4.0 million, or 3.6%, when compared to the prior year quarter.  The sales decrease was due to approximately 3% declines in both the Refrigerated Solutions Business and Cooking Solutions Group where the softness of the markets coupled with the lapping of roll outs in both the C-Store and Drug Retail markets negatively impacted the company’s sales.  Sales strengthened in the Cooking Solutions Group retail segment in the US, however demand in the United Kingdom Cooking Solutions retail market remained soft as customers continued to restrict capital spending. We are continuing our strategy to drive revenue growth by expanding our portfolio of new products, having launched a new line of countertop griddles and charbroilers in the first quarter and through our anticipated expansion of combi oven products in the third and fourth quarter of fiscal year 2014.  Our Specialty Solutions Group saw a sales decrease of 6.6%, principally driven by softness in the custom fabrication business.  This softness was driven by a slowdown in government related projects and a temporary slowdown of a key chain customer that is expected to resume to normal levels in the second quarter.

Income from operations for the first quarter of fiscal year 2014 decreased $4.6 million, or 34.1%, when compared to the prior year quarter.  Food Service Equipment group’s profitability was impacted by lower volume of $4 million for a $1 million profit impact and operational issues at the custom products business of $3.6 million.  The issues at the custom products business revolved around unfavorable sales mix, machine downtime and an inventory write-down.  We believe these are one time issues at our custom products business and will not repeat going forward.

Engraving Group

	Three Months Ended
	September 30,				%
(in thousands, except percentages)	2013		2012		Change
Net sales	$     25,027		$     23,356		7.2%
Income from operations	4,773		4,552		4.9%
Operating income margin	19.1%		19.5%

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Net sales in the first quarter of fiscal year 2014 increased by $1.7 million, or 7.2%, when compared to the prior year quarter.  The increase is primarily driven by organic growth of $1.5 million and favorable foreign exchange of $0.2 million.  Mold texturizing sales to the automotive sector strengthened worldwide and increased approximately 11% year-over-year. Mold texturizing sales grew in all three major markets of North America, Europe, and China.  Sales in the roll plate engraving and machinery business were down as customers appeared to be delaying capital investments.  Emerging markets continue to be the focus of our growth strategy for Engraving, where the expansion of Mold-Tech operations corresponds to the needs of our automotive customers.  Strategically, we are continuing to invest in the development of new mold texturizing technologies and production capabilities that improve the quality and precision of our texturizing services.

Income from operations in the first quarter of fiscal year 2014 increased by $0.2 million, or 4.9%, when compared to the prior year quarter.  The increase is a result of strong performance in the Mold-Tech businesses, worldwide, partially offset by the effect of reduced volume and unfavorable product mix at roll plate and engraving and machinery businesses.

Engineering Technologies Group

	Three Months Ended
	September 30,				%
(in thousands, except percentages)	2013		2012		Change
Net sales	$     17,265		$     15,730		9.8%
Income from operations	2,082		1,693		23.0%
Operating income margin	12.1%		10.8%

Net sales in the first quarter of fiscal year 2014 increased by $1.5 million, or 9.8%, when compared to the prior year quarter.  The increase is primarily the result of organic growth of $1.6 million, partially offset by unfavorable foreign exchange of $0.1 million.  Sales in the oil and gas market increased 60% year-over-year reflecting the project-driven nature of this business which is largely driven by the timing and funding of offshore oil and gas production floating platforms.  Sales in the land-based gas turbine, defense and aviation markets are up 30% mainly due to increased sales to one of our large Original Equipment Manufacturers, “OEM”, customers in the gas turbine markets and increased sales of our single-piece lipskins for engine nacelles in the aviation markets.  These increases were partially offset by a decrease in aerospace sales.  We continue to pursue new growth opportunities in the aviation and aerospace markets where we are seeing good growth potential on the manned and unmanned flight side of the aerospace market.

Income from operations in the first quarter of 2014 increased by $0.4 million, or 23.0%, when compared to the prior year quarter.  The increase is primarily due to volume increases, a favorable product mix, and improvements in manufacturing efficiencies.

Electronics Products Group

	Three Months Ended
	September 30,				%
(in thousands, except percentages)	2013		2012		Change
Net sales	$     28,144		$     27,839		1.1%
Income from operations	5,138		3,088		66.4%
Operating income margin	18.3%		11.1%

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