Standex Reports First Quarter 2020 Financial Results
- Strength in Engineering Technologies, Hydraulics and Scientific
- Laneway Growth Revenues Increased 12% Year-Over-Year in 1Q20
- Working Capital Initiatives Continue To Drive Improved Free Cash Flow Metrics
- Restructuring On Plan for $3.8 million in Annualized Savings By End of 2Q20

SALEM, N.H., Nov. 5, 2019 /PRNewswire/ -- Standex International Corporation (NYSE: SXI) today reported financial results for the first quarter of fiscal year 2020 ending September 30, 2019.

 

Summary Financial Results - Total Standex



($M except EPS and Dividends)

1Q20

1Q19

Change

Net Sales

$196.4

$193.1

1.7%

Operating Income

$18.4

$22.6

-18.6%

Net Income from Continuing Ops

$12.5

$14.4

-13.3%





EBITDA

$27.7

$29.1

-4.7%

EBITDA margin

14.1%

15.1%

-100 bps

Adjusted EBITDA

$27.6

$30.7

-10.1%

Adjusted EBITDA margin

14.1%

15.9%

-180 bps





Diluted EPS

$1.00

$1.12

-10.7%

Adjusted EPS

0.97

1.21

-19.8%

Declared Dividends per share

0.22

0.20

10.0%





1Q Free Cash Flow

$1.3

($10.0)

NM

Net Debt to Adjusted EBITDA

0.9x

1.6x

-43.8%

*First quarter of fiscal 2019 results have been adjusted to reflect the disposition of the Cooking Solutions Group on April 1, 2019.

 

First Quarter Fiscal 2020 Results 

"First quarter results were in line with our previously communicated expectations. Performance in Engineering Technologies, Hydraulics and Scientific remained strong. The Engraving segment reported a significant sequential margin increase from the previous quarter on a modest sales gain.  Macro-economic headwinds continued to impact results, particularly in the Electronics segment.  Our cost restructuring efforts are on plan and we continue to identify additional productivity initiatives that will be implemented in fiscal 2020.  Finally, our working capital metrics improved resulting in a favorable free cash flow comparison year-over-year," commented President and Chief Executive Officer David Dunbar

"From an organic growth perspective, laneway sales revenue increased 12% year-over-year to $16.6 million  as our new offerings continue to resonate with customers.  We are also benefitting from the successful integration and performance of our recent acquisitions, GS Engineering and Agile Magnetics, as we continue to leverage our Standex Value Creation model.

"Our financial position remains strong with net debt to Adjusted EBITDA of under 1x and approximately $250 million in available liquidity. Working capital metrics improved in all of our business segments this quarter. Working capital turns increased 90 basis points to 5.4x, and importantly, we generated free cash flow of $1.3 million in the first quarter which historically has been a negative quarter for us. 

"In summary, despite the challenges we are experiencing from the macro environment that is impacting some of our end markets, we continue to make progress in transforming our higher margin businesses into significant platforms. Our ongoing focus on company-wide productivity enhancements provides further opportunity to drive profitable growth.  In addition, our financial strength positions us well to invest in an active pipeline of high return internal projects and attractive acquisition opportunities.  Our capital allocation approach will remain disciplined and balanced as we pursue these new opportunities," concluded Mr. Dunbar.

Outlook

In the second fiscal quarter of 2020, the Company expects its financial performance to be similar to first quarter results.  For the third fiscal quarter, the expectation is for a sequential and year-over-year improvement in both revenue and operating income.

The Company's outlook assumes continued weakness in the Electronics segment particularly in Asia, improved Engraving segment performance, and continued growth in the Engineering Technologies and Scientific businesses.  As the previously announced restructuring contributes at its full run rate, the Company expects to further leverage its cost structure in the third quarter.

First Quarter Segment Operating Performance

Engraving (20% of sales; 23% of segment operating income)

 


1Q20

1Q19

% Change

Engraving ($M)




Net sales

$38.4

$36.0

6.8%

Operating Income

6.5

7.5

-13.4%

Operating Margin

17.0%

21.0%


Adj. Operating Income*

6.5

8.0

-18.3%

Adj. Operating Margin*

17.0%

22.2%


* 1Q19 excludes $0.5 million of purchase accounting expenses.

 

Overall sales grew 6.8% with contributions from recent acquisitions more than offsetting an organic decline of 5.5% and the 2.4% negative impact of foreign currency.  Although declining year-over-year, segment margin increased over 300 basis points sequentially compared to 4Q19 and reflected the improved performance primarily in our North American operations as well as contribution from growth laneways in lasers and tool finishing.  The decrease in adjusted operating income of $1.5 million year-over-year was largely due to the lower level of new roll-outs in the automotive sector and acquisition-related, non-cash amortization expense.  

In second quarter fiscal 2020, Standex expects year-over-year improvement due to increased automotive model roll-outs, continued contribution from the GS Engineering acquisition and completion of the restructuring actions announced in 3Q19.

Electronics (24% of sales; 28% of segment operating income)

 


1Q20

1Q19

% Change

Electronics ($M)




Net sales

$46.6

$51.5

-9.4%

Operating Income

8.1

12.8

-36.7%

Operating Margin

17.4%

24.9%


 

The 9.4% decline in sales was primarily due to continued lower demand in the Company's end markets such as automotive as well as distributor de-stocking.  The sales decline was mostly focused within the reed switch and sensor markets in Asia and was partially offset by growth in our magnetics business.  The 36.7% decrease in operating income year-over-year reflected lower sales volume and the impact of material inflation.

In 2Q20, the Company expects Electronics sales volume to decline year-over-year, although be sequentially similar to first quarter revenue levels, as the aforementioned end market weakness and material inflation issues continue to impact results. The segment continues to build a very strong and broad-based pipeline of new business opportunities that is expected to have a sequentially increasing contribution in fiscal 2020.  Aside from previously announced cost saving measures, Standex is pursuing additional productivity and cost efficiency initiatives.

Engineering Technologies (12% of sales; 11% of segment operating income)

 


1Q20

1Q19

% Change

Engineering ($M)




Net sales

$24.6

$20.8

18.6%

Operating Income

3.4

1.8

89.2%

Operating Margin

13.6%

8.5%


 

Engineering Technologies revenue grew 18.6% over 1Q19 with continued strength in Aviation, Space and Defense. Operating income increased 89.2% year-over-year as the segment successfully leveraged both the volume growth and ongoing productivity improvements in manufacturing processes and efficiency initiatives. 

Standex expects revenue and operating income growth year-over-year to continue in 2Q20 driven by continued favorable end-market strength in its core markets and additional productivity improvements.

Hydraulics (7% of sales; 9% of segment operating income)

 


1Q20

1Q19

% Change

Hydraulics ($M)




Net sales

$13.7

$12.5

9.7%

Operating Income

2.5

1.6

59.6%

Operating Margin

18.4%

12.6%


 

Sales for the Hydraulics segment increased 9.7% year-over-year due to continued strong OEM demand, particularly in the North American refuse market. Income from operations increased 59.6% year-over-year due to the combination of volume leverage and the impact of ongoing efficiency initiatives. 

In 2Q20 the Company expects Hydraulics revenue to stay flat and operating income to improve slightly year-over-year.  Standex continues to focus on growing its aftermarket presence from its current level of approximately 15% of segment revenue.

Food Service Equipment (37% of sales; 29% of segment operating income)

 


1Q20

1Q19

% Change

Food Service ($M)




Net sales

$73.0

$72.3

0.9%

Operating Income

8.4

6.7

25.6%

Operating Margin

11.5%

9.2%


 

The  increase in sales reflected growth in Scientific and Merchandising primarily due to demand in retail channels offset by lower sales in the Refrigeration and Pumps segments.  The 25.6% increase in operating income was due to both overall higher product volume in Scientific and favorable product mix at Merchandising.

The Company expects that commercial refrigeration sales will be lower year-over-year in 2Q20 as finished goods inventory levels are further rebuilt to meet customer demand following the warehouse facility fire in 4Q19.  In 2Q20, Standex also expects continued strength in Scientific end markets.

Capital Allocation

  • Capital Expenditures: In first quarter fiscal 2020 Standex's cash capital expenditures were $7.0 million compared to $7.5 million in the first fiscal quarter of 2019.  The Company revised its expectation for fiscal 2020 capital spending to be between approximately $31 to $34 million from $33 to $34 million.
  • Dividends: On October 24, the Company declared a quarterly cash dividend of $0.22 per share, a 10% year-over-year increase.  The dividend will be payable on November 26, 2019 to shareholders of record November 12, 2019. 

Balance Sheet and Cash Flow Highlights

  • Net Debt: Standex had net debt of $98.7 million at September 30, 2019 compared to $104.5 million at the end of the fiscal fourth quarter in 2019.  Net debt consisted primarily of long-term debt of $190 million and cash and equivalents of $90.2 million of which $76.9 million was held by foreign subsidiaries. Standex repatriated $9.2 million in 1Q20 and expects to repatriate $35 million in total in fiscal 2020.  The Company's net debt to Adjusted EBITDA leverage ratio was 0.9x at the end of first fiscal quarter 2020.
  • Cash Flow: Net cash provided by continuing operating activities for the three months ended September 30, 2019 was $8.3 million compared to net cash used by continuing operating activities of $2.6 million in the prior year. Cash provided by operating activities reflected improved working capital management driven by focused collection efforts and improved inventory turns and accounts payable management.

The Company generated free cash flow after capital expenditures of $1.3 million compared to negative free cash flow of $10.0 million in 1Q19.

Conference Call Details

Standex will host a conference call for investors tomorrow, November 6, 2019 at 8:30 a.m. ET. On the call, David Dunbar, President and CEO, and Ademir Sarcevic, CFO, will review the Company's financial results and business and operating highlights. Investors interested in listening to the webcast and viewing the slide presentation should log on to the "Investors" section of Standex's website under the subheading, "Events and Presentations", located at www.standex.com.

To listen to the teleconference playback, please dial (877) 344-7529 in the U.S. or (412) 317-0088 internationally; the passcode is 10136152.  The audio playback via phone will be available through November 13, 2019. A replay of the webcast will also be available on the Company's website shortly after the conclusion of the presentation online. The webcast 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

In addition to the financial measures prepared in accordance with generally accepted accounting principles ("GAAP"), the Company uses certain non-GAAP financial measures, including non-GAAP adjusted income from operations, non-GAAP adjusted net income from continuing operations, free operating cash flow, EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted EBITDA, adjusted EBITDA to net debt, and adjusted earnings per share. The attached financial tables reconcile non-GAAP measures used in this press release to the most directly comparable GAAP measures. The Company believes that the use of non-GAAP measures including the impact of restructuring charges, purchase accounting, insurance recoveries, discrete tax events, and acquisition costs help investors to obtain a better understanding of our operating results and prospects, consistent with how management measures and forecasts the Company's performance, especially when comparing such results to previous periods.  An understanding of the impact in a particular quarter of specific restructuring costs, acquisition expenses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect.  Non-GAAP measures should be considered in addition to, and not as a replacement for, the corresponding GAAP measures, and may not be comparable to similarly titled measures reported by other companies.

About Standex

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

 

 

Standex International Corporation

Consolidated Statement of Operations












Three Months Ended





September 30,


(In thousands, except per share data)



2019



2018










Net sales


$

196,438


$

193,080


Cost of sales



128,154



123,828


Gross profit



68,284



69,252










Selling, general and administrative expenses



48,675



45,472


Restructuring costs



1,479



447


Acquisition related costs



734



688


Other operating (income) expense, net



(1,045)



-










Income from operations



18,441



22,645










Interest expense



2,121



2,244


Other (income) expense, net



(916)



201


Total



1,205



2,445










Income from continuing operations before income taxes



17,236



20,200


Provision for income taxes



4,786



5,842


Net income from continuing operations



12,450



14,358










Income (loss) from discontinued operations, net of tax



(11)



1,499










Net income


$

12,439


$

15,857










Basic earnings per share:








Income from continuing operations


$

1.01


$

1.13


Income (loss) from discontinued operations



-



0.12


Total


$

1.01


$

1.25










Diluted earnings per share:








Income from continuing operations


$

1.00


$

1.12


Income (loss) from discontinued operations



-



0.12


Total


$

1.00


$

1.24










Average Shares Outstanding








   Basic



12,345



12,716


   Diluted



12,403



12,808










 

 

Standex International Corporation

Condensed Consolidated Balance Sheets











September 30,



June 30,

(In thousands)



2019



2019








ASSETS







Current assets:







  Cash and cash equivalents


$

90,244


$

93,145

  Accounts receivable, net



114,038



119,589

  Inventories



98,359



88,645

  Prepaid expenses and other current assets



20,297



30,872

  Income taxes receivable



1,444



1,622

    Total current assets



324,382



333,873








Property, plant, equipment, net



147,408



148,024

Intangible assets, net



114,854



118,660

Goodwill



281,149



281,503

Deferred tax asset



12,853



14,140

Operating lease right of use asset



42,079



-

Other non-current assets



26,567



25,689

    Total non-current assets



624,910



588,016








Total assets


$

949,292


$

921,889








LIABILITIES AND STOCKHOLDERS' EQUITY













Current liabilities:







  Accounts payable


$

66,651


$

72,603

  Accrued liabilities



63,631



62,648

  Income taxes payable



4,306



5,744

Current Liabilities- Discontinued Operations



124



620

    Total current liabilities



134,712



141,615








Long-term debt



188,895



197,610

Operating lease long term liabilities



34,192



-

Accrued pension and other non-current liabilities


118,572



118,351

    Total non-current liabilities



341,659



315,961








Stockholders' equity:







  Common stock



41,976



41,976

  Additional paid-in capital



68,196



65,515

  Retained earnings



828,226



818,282

  Accumulated other comprehensive loss



(141,549)



(137,278)

  Treasury shares



(323,928)



(324,182)

     Total stockholders' equity



472,921



464,313








Total liabilities and stockholders' equity


$

949,292


$

921,889

 

 

Standex International Corporation and Subsidiaries

Statements of Consolidated Cash Flows




Three Months Ended




September 30,

(In thousands)



2019



2018








Cash Flows from Operating Activities







Net income


$

12,439


$

15,857

Income (loss) from discontinued operations



(11)



1,499

Income from continuing operations



12,450



14,358








Adjustments to reconcile net income to net cash provided by operating activities:







   Depreciation and amortization



8,380



6,655

   Stock-based compensation



2,757



2,157

    Non-cash portion of restructuring charge



(122)



13

    Life insurance benefit



(1,302)



-

Contributions to defined benefit plans



(241)



(252)

Net changes in operating assets and liabilities



(13,607)



(25,502)

Net cash provided by operating activities - continuing operations



8,315



(2,571)

Net cash provided by (used in) operating activities - discontinued operations



99



3,560

Net cash provided by (used in) operating activities



8,414



989

Cash Flows from Investing Activities







    Expenditures for property, plant and equipment



(7,034)



(7,465)

    Expenditures for acquisitions, net of cash acquired



-



(96,828)

    Proceeds from insurance recovery



9,000



-

    Other investing activities



376



2,332

Net cash (used in) investing activities continuing operations



2,342



(101,961)

Net cash provided by investing activities- discontinued operations



-



(232)

Net cash (used in) investing activities



2,342



(102,193)

Cash Flows from Financing Activities







    Proceeds from borrowings



25,700



139,500

    Payments of debt



(34,500)



(34,000)

    Activity under share-based payment plans



949



652

    Purchase of treasury stock



(771)



(837)

    Cash dividends paid



(2,463)



(2,287)

Net cash provided by (used in) financing activities



(11,085)



103,028








Effect of exchange rate changes on cash



(2,572)



(2,156)








Net changes in cash and cash equivalents



(2,901)



(332)

Cash and cash equivalents at beginning of year



93,145



109,602

Cash and cash equivalents at end of period


$

90,244


$

109,270

 

 

Standex International Corporation

Selected Segment Data












Three Months Ended





September 30,


(In thousands)



2019



2018


Net Sales








Engraving


$

38,431


$

35,979


Electronics



46,617



51,450


Engineering Technologies



24,644



20,784


Hydraulics



13,749



12,536


Food Service Equipment



72,997



72,331


Total


$

196,438


$

193,080










Income from operations








Engraving


$

6,537


$

7,547


Electronics



8,099



12,787


Engineering Technologies



3,359



1,775


Hydraulics



2,527



1,583


Food Service Equipment



8,372



6,668


Corporate



(9,285)



(6,580)


Restructuring



(1,479)



(447)


Acquisition Related Costs



(734)



(688)


Other operating (income) expense, net



1,045



-


Total Operating Income, as reported


$

18,441


$

22,645


 

 

Standex International Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures
















Three Months Ended








September 30,




(In thousands, except percentages)



2019



2018


% Change


Adjusted income from operations and adjusted
net income from continuing operations:










Income from operations, as reported


$

18,441


$

22,645


-18.6%


Adjustments:











Restructuring charges



1,479



447





Acquisition-related costs



734



688





Fire insurance recovery



(1,045)



-





Purchase accounting expenses



-



456




Adjusted income from operations


$

19,609


$

24,236


-19.1%


Interest and other income (expense), net



(1,205)



(2,445)





Life insurance benefit



(1,302)



-




Provision for income taxes



(4,786)



(5,842)





Tax impact of above adjustments



(325)



(460)




Net income from continuing operations, as adjusted


$

11,991


$

15,489


-22.6%













EBITDA and Adjusted EBITDA:










Net income from continuing operations, as reported


$

12,450


$

14,358




Add back:











Provision for income taxes



4,786



5,842





Interest expense



2,121



2,244





Depreciation and amortization



8,380



6,655




EBITDA


$

27,737


$

29,099


-4.7%


Adjustments:











Restructuring charges



1,479



447





Acquisition-related costs



734



688





Fire insurance recovery



(1,045)



-





Life insurance benefit



(1,302)



-





Purchase accounting expenses



-



456




Adjusted EBITDA


$

27,603


$

30,690


-10.1%













Free operating cash flow:










Net cash provided by operating activities -
continuing operations, as reported


$

8,315


$

(2,571)




Less: Capital expenditures



(7,034)



(7,465)




Free operating cash flow


$

1,281


$

(10,036)




Net income from continuing operations



12,450



14,358




Conversion of free operating cash flow



10.3%



NM




 

 

Standex International Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures
















Three Months Ended




Adjusted earnings per share from continuing operations



September 30,






2019



2018


%
Change













Diluted earnings per share from continuing

operations, as reported


$

1.00


$

1.12


-10.7%













Adjustments:











Restructuring charges



0.09



0.02





Acquisition-related costs



0.04



0.04





Fire insurance recovery



(0.06)



-





Life insurance benefit



(0.10)



-





Purchase accounting expenses



-



0.03




Diluted earnings per share from continuing
operations, as adjusted


$

0.97


$

1.21


-19.8%


 

SOURCE Standex International Corporation

For further information: Ademir Sarcevic, CFO, (603) 893-9701, e-mail : InvestorRelations@Standex.com