Standex Reports 15% Sales Growth in First Quarter Fiscal 2013

Standex Reports 15% Sales Growth in First Quarter Fiscal 2013

  • Q1 GAAP Operating Income Up 9.4% and Non-GAAP Q1 Operating Income Increases 16.2%

  • Q1 GAAP EPS from Continuing Ops Flat at $0.93 and Q1 Non-GAAP EPS from Continuing Ops Grows 10.9% to $1.02

  • Company Raises Expectations for FY 2013 Accretion for Meder Acquisition to $0.15-$0.20 Per Share

SALEM, N.H.--(BUSINESS WIRE)-- Standex International Corporation today reported financial results for the first quarter ended September 30, 2012.

First Quarter Fiscal 2013 Results from Continuing Operations

  • Net sales increased 15.1% to $183.4 million from $159.3 million in the first quarter of fiscal 2012.

  • Income from operations was $17.6 million compared with $16.1 million in the first quarter of fiscal 2012. Operating income for the first quarter of 2013 included, pre-tax, $0.2 million of restructuring charges and $1.5 million of non-cash purchase accounting expenses. The first quarter of 2012 included, pre-tax, $0.5 million of restructuring charges. Excluding these items from both periods, the Company reported non-GAAP first-quarter fiscal 2013 operating income of $19.3 million compared with $16.6 million in the year-earlier quarter, an increase of 16.2%.

  • Net income from continuing operations was $11.9 million, or $0.93 per diluted share, including, after tax, $0.2 million of restructuring charges and $1.0 million of non-cash purchase accounting expenses. This compares with first quarter 2012 net income from continuing operations of $11.8 million, or $0.93 per diluted share, which included, after tax, $0.3 million of restructuring charges and $0.5 million of tax benefits. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations increased 12.7% to $13.1 million, or $1.02 per diluted share, from $11.6 million, or $0.92 per diluted share, in the first quarter of fiscal 2012.

  • EBITDA (earnings before interest, income taxes, depreciation and amortization) was $21.4 million compared with $19.8 million in the first quarter of fiscal 2012. Excluding the previously mentioned items from both periods, EBITDA increased 13.6% to $23.1 million from $20.4 million in the first quarter of fiscal 2012.

  • Net working capital (defined as accounts receivable plus inventories less accounts payable) was $131.2 million at the end of the first quarter of 2013, compared with $115.4 million a year earlier. Working capital turns were 5.6 for the first quarter of fiscal 2013, compared with 5.5 turns in the first quarter of fiscal 2012.

  • The Company's net debt (defined as short-term debt plus long-term debt less cash) of $35.0 million compares 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

"Fiscal 2013 began on solid footing with a strong top and bottom line performance in the first quarter," said President and CEO Roger Fix. "All five of our segments reported year-over-year sales growth, resulting in a 15.1% increase for the quarter, including 1.3% negative foreign exchange. Organic sales grew 7.7% and our Meder acquisition contributed 8.8% growth. On the bottom line, four of our five groups demonstrated year-over-year growth and Meder was accretive to earnings, despite the negative impact of purchase accounting. Non-GAAP operating income was up 16.2% and we reported non-GAAP EPS from continuing operations of $1.02 - tied with our quarterly record."

Segment Review

Food Service Equipment Group sales increased 4.9% year-over-year, with operating income increasing 7.6%.

"Strong demand at quick serve restaurant chains, drug retail stores and the dollar store segment drove double-digit sales growth at Refrigerated Solutions during the quarter," said Fix. "Standex's rack refrigeration offering continues to be very well received by consultants, large drugstores and large chains, and our value line of upright cabinets and under counter refrigeration products also contributed to sales growth this quarter. Our bottom-line performance in Refrigerated Solutions continues to improve and significantly outpaced sales growth in the first quarter."

"We believe our Cooking Solutions business is stabilizing as we reported flat operating income on a slight decline in revenue,1" said Fix. "We have increased our margins in Cooking Solutions as a result of the cost-reduction and productivity initiatives we have implemented during the past few quarters. On the top line, we continue to be affected by soft demand from the retail grocery segment in the UK as well as by lower sales to several US-based quick service chain customers."

"While our beverage dispensing pump business continues to be affected by the weak economy in Europe, we are seeing solid demand at our custom merchandising businesses," said Fix.

Engraving Group sales increased 7.6% year-over-year, with 17.4% growth in operating income. The majority of the negative currency impact recorded for the Company during the quarter occurred in the Engraving Group. On a constant currency basis Engraving Group sales grew 14.2% year over year.

"Broad-based customer demand at our mold texturizing business from automotive platforms drove our Engraving sales growth in the first quarter," said Fix. "For the past few quarters we have seen an increase in smaller automotive programs and model refreshes which have offset lower orders for major auto platform launches. Our Innovent and roll plate and machinery businesses reported year-over-year sales growth as a result of improving market conditions in the housing market."

"We made good progress during the quarter in executing on our emerging economy strategy, which focuses on expansion in China, Asia-Pacific and South America," said Fix. "Our move into a new facility in Brazil will be completed in the coming weeks. We have committed to a fourth location in India which should be operational in the third fiscal quarter, and we have committed to a building in South Korea which is expected to be operational in the second fiscal quarter1. Our emerging economy initiative continues to be a key component of our growth strategy for the Engraving Group."

Engineering Technologies Group sales grew 7.5% year-over-year, while operating income declined by 34.4%.

"Sales growth in Engineering Technologies was driven by strength in the aerospace, aviation and land-based turbine markets," said Fix. "This growth was partially offset by expected weaker sales to the oil and gas market, which we expect will remain soft into our third fiscal quarter1. In the first quarter of last year, we reported an exceptionally high level of sales to the oil and gas market, which had a negative effect on our year-over-year operating income comparison. In addition, our margins were negatively affected by a greater mix of low-margin developmental aerospace program shipments. We are making investments in this program work now in order to benefit in the future from very long-term high-margin sales.1"

The Electronics Products Groupreported 138.1% year-over-year sales growth, with operating income increasing 45.2%.

"Electronics Products Group growth was driven by a high single-digit sales increase at our legacy Standex Electronics business coupled with the contribution from the Meder acquisition," said Fix. "Sales growth at the legacy business was the result of successful new customer program launches which began in the second half of fiscal 2012. We are currently introducing additional new product and customer programs that should contribute to revenue in the quarters and years to come1. Partially offsetting the growth from new program initiatives was a softening in reed switch sales in China and Asia Pacific directly related to the slowing Chinese economy."

"We continue to be enthusiastic about our acquisition of Meder, which performed well in the third quarter," said Fix. "The integration is proceeding and we are conducting the initial training of engineers and salespeople from both organizations about the respective product offerings. Meder's financial performance, including the negative impact of purchase accounting, was actually accretive to our overall earnings in the first quarter. We have now finalized the purchase accounting treatment and are increasing our expectations for Meder's accretion in fiscal 2013 to between $0.15 - $0.20 per share.1"

The Hydraulics Products Group reported 0.9% year-over-year sales growth, with operating income increasing 43.6%.

"Our continued success in penetrating the refuse handling market offset a significant decline in demand from the North American market for dump trailer systems," said Fix. "Dump trailer operators are delaying capital spending on dump trailers due to concerns about the overall economic environment. Export sales were also weak in the quarter. While our sales were relatively flat, we turned in excellent operating income growth as a result of our cost reduction and productivity improvement initiatives."

Business Outlook

"During the first quarter of the new fiscal year, we continued to build on the successes of fiscal 2012. Those successes provide us with exciting opportunities to continue to execute on our Focused Diversity strategy, which centers on operating fewer more profitable business units, migrating to value-added engineered products and customer solutions, and pursuing operational excellence.1 While macro-economic factors give us reason to be cautious, we believe that our organic and acquisition growth initiatives position us well for success as we continue through fiscal 2013.1 We plan to leverage our strong balance sheet and lean cost structure to execute on our strategy and generate solid operating leverage and strong profitability,1" concluded Fix.

Conference Call Details

Standex will host a conference call for investors today, November 1, 2012 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 12201504. 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.

1Safe 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

September 30,

2012

2011

Net sales

$

183,386

$

159,306

Cost of sales

124,141

106,560

Gross profit

59,245

52,746

Selling, general and administrative expenses

41,384

36,110

Restructuring costs

235

522

Income from operations

17,626

16,114

Interest expense

651

472

Other (income) expense, net

36

(192

)

Total

687

280

Income from continuing operations before income taxes

16,939

15,834

Provision for income taxes

5,014

4,014

Net income from continuing operations

11,925

11,820

Income (loss) from discontinued operations, net of tax

(95

)

139

Net income

$

11,830

$

11,959

Basic earnings per share:

Income from continuing operations

$

0.95

$

0.95

Loss from discontinued operations

(0.01

)

0.01

Total

$

0.94

$

0.96

Diluted earnings per share:

Income from continuing operations

$

0.93

$

0.93

Loss from discontinued operations

(0.01

)

0.01

Total

$

0.92

$

0.94

Standex International Corporation and Subsidiaries

Statements of Consolidated Cash Flows

Three Months Ended
September 30,

2012

2011

Cash Flows from Operating Activities

Net income

$

11,830

$

11,959

Income (loss) from discontinued operations

(95

)

139

Income from continuing operations

11,925

11,820

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

Depreciation and amortization

3,830

3,527

Stock-based compensation

803

546

Contributions to defined benefit plans

(3,564

)

(138

)

Net changes in operating assets and liabilities

(3,485

)

(18,431

)

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

9,509

(2,676

)

Net cash used in operating activities - discontinued operations

(1,241

)

(2,761

)

Net cash provided by (used in) operating activities

8,268

(5,437

)

Cash Flows from Investing Activities

Expenditures for property, plant and equipment

(4,905

)

(2,258

)

Expenditures for acquisitions, net of cash acquired

(38,535

)

-

Other investing activities

-

384

Net cash (used in) investing activities from continuing operations

(43,440

)

(1,874

)

Net cash (used in) investing activities from discontinued operations

-

(18

)

Net cash (used in) investing activities

(43,440

)

(1,892

)

Cash Flows from Financing Activities

Proceeds from borrowings

56,000

65,000

Payments of debt

(40,000

)

(41,000

)

Borrowings on short-term facilities (net)

-

1,725

Activity under share-based payment plans

68

89

Excess tax benefit from share-based payment activity

1,694

500

Cash dividends paid

(876

)

(748

)

Purchase of treasury stock

(5,372

)

(3,361

)

Net cash provided by financing activities from continuing operations

11,514

22,205

Net cash provided by financing activities from discontinued operations

-

-

Net cash provided by financing activities

11,514

22,205

Effect of exchange rate changes on cash

713

(1,514

)

Net changes in cash and cash equivalents

(22,945

)

13,362

Cash and cash equivalents at beginning of year

54,749

14,407

Cash and cash equivalents at end of period

$

31,804

$

27,769

Standex International Corporation

Condensed Consolidated Balance Sheets

September 30,

June 30,

2012

2012

ASSETS

Current assets:

Cash and cash equivalents

$

31,804

$

54,749

Accounts receivable, net

103,405

99,432

Inventories, net

91,475

73,076

Prepaid expenses and other current assets

9,308

6,255

Income taxes receivable

-

3,568

Deferred tax asset

12,721

12,190

Total current assets

248,713

249,270

Property, plant, and equipment, net

95,333

82,563

Goodwill

112,849

100,633

Intangible assets, net

27,761

19,818

Deferred tax asset

5,767

6,618

Other non-current assets

19,527

20,909

Total non-current assets