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Thomas DeByle
Chief Financial Officer
11 Keewaydin Drive
Salem, NH 03079
603-893-9701
email: Investorrelations@standex.com

Standex Reports 7.9% Sales Growth in Fourth Quarter Fiscal 2013

  • Reports $1.00 in EPS from Continuing Ops in Fourth Quarter, and $1.02 in Non-GAAP EPS from Continuing Ops
  • Reports $3.55 in EPS from Continuing Ops for FY 2013, and $3.70 in Non-GAAP EPS from Continuing Ops
  • Strong Cash Generation During Q4 Results in Net Cash Positive Position for Second Time in Standex History

Category:

Tuesday, August 27, 2013 8:23 am EDT

Dateline:

SALEM, N.H.

Public Company Information:

NYSE:
SXI
"summarized Fix.Engraving Group sales decreased 9.0% year-over-year, with operating income down 34.6%."

SALEM, N.H.--(BUSINESS WIRE)--Standex International Corporation (NYSE:SXI) today reported financial results for the fourth quarter ended June 30, 2013.

Fourth Quarter Fiscal 2013 Results from Continuing Operations

    • Net sales increased 7.9% to $183.3 million from $169.8 million in the fourth quarter of fiscal 2012.
    • Income from operations was $18.2 million compared with $18.5 million in the fourth quarter of fiscal 2012. Operating income for the fourth quarter of 2013 included $0.4 million in pre-tax restructuring charges. The fourth quarter of 2012 included, pre-tax, $0.2 million of restructuring charges and $0.5 million of acquisition-related costs. Excluding these items from both periods, the Company reported non-GAAP fourth quarter fiscal 2013 operating income of $18.6 million, compared with $19.2 million in the year-earlier quarter.

  • Net income from continuing operations was $12.7 million, or $1.00 per diluted share, including, after tax, $0.3 million of restructuring charges. This compares with fourth quarter 2012 net income from continuing operations of $13.5 million, or $1.05 per diluted share, which included, after tax, $0.2 million of restructuring charges, $0.3 million of acquisition-related costs, and $0.8 million in discrete tax benefits. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations decreased 1.4% to $13.0 million, or $1.02 per diluted share, from $13.2 million, or $1.02 per diluted share, in the fourth quarter of fiscal 2012.
  • EBITDA (earnings before interest, income taxes, depreciation and amortization) was $22.1 million compared with $22.1 million in the fourth quarter of fiscal 2012. Excluding the previously mentioned items from both periods, EBITDA decreased by 1.5% to $22.5 million from $22.8 million in the fourth quarter of fiscal 2012.
  • Net working capital (defined as accounts receivable plus inventories less accounts payable) was $117.4 million at the end of the fourth quarter of 2013, compared with $110.4 million a year earlier. Working capital turns were 6.2 for the fourth quarter of fiscal 2013, flat compared with the year-earlier quarter.
  • The Company closed the quarter with a net cash position of $1.0 million compared with net cash of $4.7 million at June 30, 2012.

A reconciliation of net income, earnings per share and net income from continuing operations from reported GAAP amounts to non-GAAP amounts is included later in this release.

Management Comments

“A strong contribution from the Meder Electronic acquisition drove sales growth of 7.9% in the fourth quarter amid softness in many of our end markets,” said President and CEO Roger Fix. “In addition to challenging end market dynamics, a difficult comparison with a very strong quarter in Engineering Technologies and Engraving a year ago combined to negatively affect our year-over-year organic growth and margin performance in the fourth quarter. Even with these headwinds, we are encouraged by Standex’s ability to generate substantial cash flow, and we ended the year with a net cash position for the second time in the Company’s history. For the year, we successfully capitalized on our focused diversity strategy and reported double-digit increase in sales to $701.3 million and achieved non-GAAP EPS of $3.70.”

Segment Review

Food Service Equipment Group sales increased 2.4% year-over-year, with operating income increasing 0.2%.

“On the refrigeration side of the business, strong sales to quick serve chains were offset by continued softness in the drug retail markets,” said Fix. “Our margins were pressured due to lower volume of drug retail sales and a greater mix of sales through our dealer channel. Because of changing market dynamics, we are taking actions to accelerate our end-user market expansion and to introduce new products at lower price points. We have recently completed a value engineering redesign and overhaul of our manufacturing process for our glass door merchandising cabinet product line, and we believe the resulting reduction in product cost will make us more competitive in retail drug stores as well as in new markets, such as dollar stores.1 During the quarter we began recognizing revenue from the commitment we received last quarter for 50% of the business of a large dollar store chain. This translates to between $8 and $10 million in incremental sales during a 12-month period.

“In Cooking Solutions, strong growth related to the quick serve restaurant and convenient store segments was offset by the ongoing slowdown in both the US and European grocery segments. There was incremental improvement in North America during the quarter, but the poor market conditions in the UK are expected to persist.1

“Our custom fabrication businesses continue to do well, while our Procon pump business is being negatively affected by soft European economic conditions,” added Fix.

“We recently announced that we will be consolidating our Cheyenne, Wyoming plant into our Mexico facility as well as into other Cooking Solutions operations in North America. We expect to take a charge in fiscal 2014 in the range of $7.5 to $8 million.1 Roughly $3 million of the charge is expected to be a non-cash impairment of the building.1 We anticipate this action will result in savings in the range of $4 to $4.5 million per year.1 We expect the consolidation to be substantially completed by the end of fiscal 2014, and to benefit from about 75% of the savings in the first half of 2015 and from the full annualized run rate in the second half of that year.1 In addition, over the next several months we will be opening a new finished goods distribution center for the Cooking Solutions group located in Dallas, TX which we expect will improve customer satisfaction and improve working capital management,1” said Fix.

“Looking at the food service group as a whole, during fiscal 2014 we’re undertaking two major projects – one in Refrigeration to diversify our customer base and introduce new lower cost products, and one in cooking to consolidate our operations to gain significant cost savings. These actions should have a significant effect on our growth and profitability at our Food Service segment in fiscal 2015,1” summarized Fix.

Engraving Group sales decreased 9.0% year-over-year, with operating income down 34.6%.

“Volumes declined in the quarter as mold texturizing sales in both North America and Europe softened as compared to record volumes realized in the prior year quarter,” said Fix. “As expected, we also continued to experience some disruption to shipments and incremental expenses associated with the relocation of our facility in Brazil. In addition to the deleveraging effect of lower volumes and the high fixed cost nature of the business, margins were affected by a greater mix of lower-margin sales at our mold texturizing and Innovent businesses.

“We expect strong mold texturizing growth in North America in fiscal 2014 based on the schedule for major automotive platform launches, with Europe being flat with the record year we reported in fiscal 2013.1 To prepare for future growth, we made good progress in the expansion of our mold texturizing production capabilities around the world. During the quarter we completed the move into our larger facility in Queretaro, Mexico, which is a growing center for automotive production. We also opened our fourth facility in India on schedule and continued to ramp production in Korea.”

Engineering Technologies Group sales decreased 5.2% year-over-year, while operating income decreased by 9.5%.

“Strong sales to land-based turbine customers was offset by lower sales in the oil and gas market, and margins also faced a difficult year-over-year comparison as the result of a large, high margin oil and gas order last year,” said Fix. “Our participation in the oil and gas business is largely connected to the timing and funding of large offshore oil and gas floating platforms, which can be very lumpy in nature. Therefore these projects will have a significant impact on the year-over-year quarterly performance of the Engineering Technologies Group. In the aviation market we continued growing sales of wing-based jet engine components and are in the process of securing a long-term contract for the A320 aircraft program that will solidify a leading position for Standex in the jet engine lipskin market. We also have developmental contracts for jet engine components in North America and Europe with major aircraft OEMs and we expect to receive production orders early in the next calendar year.1 Looking forward, we are anticipating good growth from the land-based turbine, space and aviation markets, with the oil and gas market remaining flat.1

Electronics Products Group reported 106.4% year-over-year sales growth, with operating income increasing 63.5%.

“The Meder acquisition continues to perform ahead of our expectations,” said Fix. “During the quarter, we completed the consolidation of the Standex Electronics facilities in Tianjin and the Meder sales office in Hong Kong into the Meder manufacturing facility in Shanghai on schedule. With the plant consolidation complete, we should benefit from the majority of the $4 million run rate of expected cost synergies in Q1, and then ramping to the full run rate by the end of the fiscal year.1 We have a number of new product and customer launches scheduled for 2014 in automotive, white goods and general industrial applications, and remain enthusiastic about our pipeline of new products and customer programs.1

The Hydraulics Products Group reported a 3.3% year-over-year sales increase, while operating income increased 13.9%.

“The increase in Hydraulics sales was driven by our success in penetrating the garbage truck refuse and roll off waste container markets,” said Fix. “This growth was largely offset by continued weakness in the dump trailer, dump truck and export markets. During the first quarter, we expect to complete the expansion of our hydraulics capacity at Standex’s Tianjin, China facility.1 This will enable us to capitalize on demand in the refuse and roll off container markets and provide increased capacity for low cost exports. We are launching a series of new products for the garbage truck refuse segment this year that are already generating positive customer response.”

Business Outlook

“We are focused on driving revenue growth through organic growth initiatives, such as new product development as well as expanding our end market and geographic presence,” said Fix. “The performance of our Meder acquisition highlights the success we’ve had in executing our acquisition strategy, and our balance sheet is in excellent condition to support additional growth through acquisitions. In addition, we are focused on bottom-line growth by making improvements to our operations and focusing on margin expansion. While we face headwinds in certain of our end markets, we are encouraged that we are taking the right steps to place Standex in the best position to capitalize on market opportunities and leverage sales growth into strong bottom-line performance.1

Conference Call Details

Standex will host a conference call for investors today, August 27, 2013 at 10:00 a.m. ET. On the call, Roger Fix, President and CEO, and Thomas DeByle, CFO, will review the Company’s financial results and business and operating highlights. Investors interested in listening to the webcast should log on to the “Investor Relations” section of Standex’s website, located at www.standex.com. The Company's slide show accompanying the webcast audio also can be accessed via its website. To listen to the playback, please dial (888) 286-8010 in the U.S. or (617) 801-6888 internationally; the passcode is 99958141. The replay also can be accessed in the “Investor Relations” section of the company’s website, located at www.standex.com.

Use of Non-GAAP Financial Measures

EBITDA, which is "Earnings Before Interest, Taxes, Depreciation and Amortization," non-GAAP income from operations, non-GAAP net income from continuing operations and free cash flow are non-GAAP financial measures and are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the Company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

About Standex

Standex International Corporation is a multi-industry manufacturer in five broad business segments: Food Service Equipment Group, Engineering Technologies Group, Engraving Group, Electronics Products Group, and Hydraulics Products Group with operations in the United States, Europe, Canada, Australia, Singapore, Mexico, Brazil, Argentina, Turkey, South Africa, India and China. For additional information, visit the Company's website at www.standex.com.

1 Safe Harbor Language

Statements in this news release include, or may be based upon, management's current expectations, estimates and/or projections about Standex's markets and industries. These statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may materially differ from those indicated by such forward-looking statements as a result of certain risks, uncertainties and assumptions that are difficult to predict. Among the factors that could cause actual results to differ are the impact of implementation of government regulations and programs affecting our businesses, unforeseen legal judgments, fines or settlements, uncertainty in conditions in the financial and banking markets, general domestic and international economy including more specifically increases in raw material costs, the ability to substitute less expensive alternative raw materials, the heavy construction vehicle market, the ability to continue to successfully implement productivity improvements, increase market share, access new markets, introduce new products, enhance our presence in strategic channels, the successful expansion and automation of manufacturing capabilities and diversification efforts in emerging markets, the ability to continue to achieve cost savings through lean manufacturing, cost reduction activities, and low cost sourcing, effective completion of plant consolidations, successful completion and integration of acquisitions and the other factors discussed in the Annual Report of Standex on Form 10-K for the fiscal year ending June 30, 2012, which is on file with the Securities and Exchange Commission, and any subsequent periodic reports filed by the Company with the Securities and Exchange Commission. 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.

Standex International Corporation
Consolidated Statement of Operations
         
  Three Months Ended Twelve Months Ended
  June 30, June 30,
  2013 2012 2013 2012
Net sales  183,275  $169,800   701,260  $634,640 
Cost of sales  125,265   112,499   475,164   426,156 
Gross profit  58,010   57,301   226,096   208,484 
         
Selling, general and administrative expenses  39,426   38,543   159,601   146,995 
Gain on sale of real estate  -   -   -   (4,776)
Restructuring costs  371   233   2,666   1,685 
         
Income from operations  18,213   18,525   63,829   64,580 
         
Interest expense  600   734   2,469   2,280 
Other (income) expense, net  49   (227)  128   (519)
Total  649   507   2,597   1,761 
         
Income from continuing operations before income taxes  17,564   18,018   61,232   62,819 
Provision for income taxes  4,864   4,532   15,910   15,912 
Net income from continuing operations  12,700   13,486   45,322   46,907 
         
Income (loss) from discontinued operations, net of tax  (204)  457   (474)  (16,002)
         
Net income $12,496  $13,943  $44,848  $30,905 
         
Basic earnings per share:        
Income from continuing operations  1.01  $1.08   3.61  $3.75 
Income (loss) from discontinued operations  (0.02)  0.04   (0.04)  (1.28)
Total $0.99  $1.12  $3.57  $2.47 
         
Diluted earnings per share:        
Income from continuing operations  1.00  $1.05   3.55  $3.67 
Income (loss) from discontinued operations  (0.02)  0.04   (0.04)  (1.25)
Total $0.98  $1.09  $3.51  $2.42 
         
Standex International Corporation
Condensed Consolidated Balance Sheets
     
  June 30, June 30,
  2013 2012
     
ASSETS    
Current assets:    
Cash and cash equivalents $51,064  $54,749 
Accounts receivable, net  102,268   99,432 
Inventories, net  84,956   73,076 
Prepaid expenses and other current assets  7,776   6,255 
Income taxes receivable  -   3,568 
Deferred tax asset  12,237   12,190 
Total current assets  258,301   249,270 
     
Property, plant, and equipment, net  95,020   82,563 
Goodwill  111,905   100,633 
Intangible assets, net  25,837   19,818 
Deferred tax asset  -   6,618 
Other non-current assets  19,510   20,909 
Total non-current assets  252,272   230,541 
     
Total assets $510,573  $479,811 
     
LIABILITIES AND STOCKHOLDERS' EQUITY    
     
Current liabilities:    
Accounts payable $69,854  $62,113 
Accrued liabilities  46,981   51,124 
Income taxes payable  1,638   3,548 
Total current liabilities  118,473   116,785 
     
Long-term debt  50,072   50,000 
Accrued pension and other non-current liabilities  51,040   70,119 
Total non-current liabilities  101,112   120,119 
     
Stockholders' equity:    
Common stock  41,976   41,976 
Additional paid-in capital  37,199   34,928 
Retained earnings  546,031   505,163 
Accumulated other comprehensive loss  (65,280)  (75,125)
Treasury shares  (268,938)  (264,035)
Total stockholders' equity  290,988   242,907 
     
Total liabilities and stockholders' equity $510,573  $479,811 
     
Standex International Corporation and Subsidiaries
Statements of Consolidated Cash Flows
  Twelve Months Ended June 30,
  2013 2012
Cash Flows from Operating Activities    
Net income $44,848   30,905 
Income (loss) from discontinued operations  (474)  (16,002)
Income from continuing operations  45,322   46,907 
     
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization  15,547   13,490 
Stock-based compensation  3,343   3,768 
Non-cash portion of restructuring charges  (31)  81 
Gain from sale of real estate  -   (4,776)
Net changes in operating assets and liabilities  (732)  (12,029)
Net cash provided by operating activities - continuing operations  63,449   47,441 
Net cash (used in) operating activities - discontinued operations  (3,268)  (3,775)
Net cash provided by operating activities  60,181   43,666 
Cash Flows from Investing Activities    
Expenditures for property, plant and equipment  (14,147)  (9,936)
Expenditures for acquisitions, net of cash acquired  (39,613)  - 
Proceeds from sale of real estate and equipment  28   5,207 
Other investing activities  1,045   (2,691)
Net cash (used in) investing activities from continuing operations  (52,687)  (7,420)
Net cash provided by investing activities from discontinued operations  -   16,004 
Net cash provided by (used in) investing activities  (52,687)  8,584 
Cash Flows from Financing Activities    
Proceeds from borrowings  121,000   210,500 
Payments of debt  (121,785)  (210,300)
Borrowings on short-term facilities (net)  -   (1,800)
Activity under share-based payment plans  279   316 
Excess tax benefit from share-based payment activity  1,991   649 
Cash dividends paid  (3,890)  (3,383)
Purchase of treasury stock  (8,509)  (5,521)
Net cash provided by (used in) financing activities  (10,914)  (9,539)
     
Effect of exchange rate changes on cash  (263)  (2,369)
     
Net changes in cash and cash equivalents  (3,683)  40,342 
Cash and cash equivalents at beginning of year  54,749   14,407 
Cash and cash equivalents at end of period $51,066  $54,749 
     
 
Standex International Corporation
Selected Segment Data
            
    Three Months Ended  Twelve Months Ended
    March 31,  March 31,
    2013 2012  2013 2012

Net Sales

           
Food Service Equipment   $103,131  $100,749   $394,878  $388,813 
Engraving    22,541   24,762    93,380   93,611 
Engineering Technologies    21,497   22,673    74,838   74,088 
Electronics Products    27,569   13,355    108,085   48,206 
Hydraulics Products    8,537   8,261    30,079   29,922 
Total   $183,275  $169,800   $701,260  $634,640 
            

Income from operations

           
Food Service Equipment   $11,138  $11,111    39,467  $39,613 
Engraving    3,203   4,896    15,596   17,896 
Engineering Technologies    4,493   4,964    13,241   14,305 
Electronics Products    4,178   2,556    16,147   8,715 
Hydraulics Products    1,597   1,402    4,968   4,403 
Restructuring    (371)  (233)   (2,666)  (1,685)
Building Gain    -   -    -   4,776 
Corporate    (6,025)  (6,171)   (22,924)  (23,443)
Total   $18,213  $18,525   $63,829  $64,580 
            
 
Standex International Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
                
     Three Months Ended   Twelve Months Ended  
     June 30,   June 30,  
     2013 2012 % Change 2013 2012 % Change
Adjusted income from operations and adjusted net income from continuing operations:              
Income from operations, as reported   $18,213  $18,525  -1.7% $63,829  $64,580  -1.2%
Adjustments:              
Restructuring charges    371   233     2,666   1,685   
Termination of Retiree Life Insurance    -   -     (2,278)  -   
Legal Settlement    -   -     2,809   -   
Acquisition-related costs    -   462     1,549   462   
Gain on sale of real estate    -   -     -   (4,776)  
Adjusted income from operations   $18,584  $19,220  -3.3% $68,575  $61,951  10.7%
Interest and other expenses    (649)  (507)    (2,597)  (1,761)  
Provision for income taxes    (4,864)  (4,532)    (15,910)  (15,912)  
Discrete tax items    -   (790)    (1,366)  (1,635)  
Tax impact of above adjustments    (109)  (240)    (1,390)  734   
Net income from continuing operations, as adjusted   $12,962  $13,151  -1.4% $47,312  $43,377  9.1%
               
EBITDA and Adjusted EBITDA:              
Income from continuing operations before income taxes, as reported   $17,564  $18,018    $61,232  $62,819   
Add back:              
Interest expense    600   734     2,469   2,280   
Depreciation and amortization    3,921   3,344     15,547   13,490   
EBITDA   $22,085  $22,096  0.0% $79,248  $78,589  0.8%
Adjustments:              
Restructuring charges    371   233     2,666   1,685   
Termination of Retiree Life Insurance    -   -     (2,278)  -   
Legal Settlement    -   -     2,809   -   
Acquisition-related costs    -   462     1,549   462   
Gain on sale of real estate    -   -     -   (4,776)  
Adjusted EBITDA   $22,456  $22,791  -1.5% $83,994  $75,960  10.6%
               
Free operating cash flow:              
Net cash provided by operating activities - continuing operations, as reported   $44,009  $24,312    $63,449  $47,441   
Add back: Voluntary pension contribution    -   6,000     3,250   6,000   
Less: Capital expenditures    (1,758)  (1,723)    (14,147)  (9,936)  
Free operating cash flow   $42,251  $28,589    $52,552  $43,505   
Net income from continuing operations    12,700   13,486     45,322   46,907   
Conversion of free operating cash flow    332.7%  212.0%    116.0%  92.7%  
               
 
Standex International Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
            
 Three Months Ended   Twelve Months Ended  
Adjusted earnings per share from continuing operationsJune 30,   June 30,  
2013 2012 %Change 2013 2012 %Change
            
Diluted earnings per share from continuing operations, as reported$1.00 $1.05  -4.8% $3.55  $3.67  -3.3%
            
Adjustments:           
Restructuring charges 0.02  0.01     0.15   0.09   
Termination of Retiree Life Insurance -  -     (0.13)  -   
Legal Settlement -  -     0.16   -   
Acquisition-related costs -  0.02     0.08   0.02   
Gain on sale of real estate -      -   (0.26)  
Other           
Discrete tax items -  (0.06)    (0.11)  (0.13)  
Diluted earnings per share from continuing operations, as adjusted$1.02 $1.02  0.0% $3.70  $3.39  9.1%
            

 

Contact:

Standex International Corporation
Thomas DeByle, 603-893-9701
CFO
InvestorRelations@Standex.com