Standex Reports 9% Sales Growth in Second Quarter Fiscal 2013
Standex Reports 9% Sales Growth in Second Quarter Fiscal 2013
- Q2 GAAP Operating Income Up 13.2% and Non-GAAP Q2 Operating Income Increases 15.0%
- Q2 GAAP EPS from Continuing Ops increases 8.9% to $0.86 and Q2 Non-GAAP EPS from Continuing Ops Grows 10.8% to $0.92
- Net Debt Reduced by $6 Million in Quarter on Strong Cash Generation; Net Debt to Capital at 9.8%
Second Quarter Fiscal 2013 Results from Continuing Operations
- Net sales increased 8.9% to $168.6 million from $154.9 million in the second quarter of fiscal 2012. Sales growth consisted of 8.5% from the Company's acquisition of Meder electronic and 0.5% organic growth offset by 0.1% of unfavorable foreign exchange.
- Income from operations was $16.3 million compared with $14.4 million in the second quarter of fiscal 2012. Operating income for the second quarter of 2013 included, pre-tax, $1.0 million of restructuring charges and acquisition-related costs of $0.1 million. The second quarter of 2012 included, pre-tax, $0.7 million of restructuring charges. Excluding these items from both periods, the Company reported non-GAAP second-quarter fiscal 2013 operating income of $17.3 million compared with $15.1 million in the year-earlier quarter, an increase of 15.0%.
- Net income from continuing operations was $11.0 million, or $0.86 per diluted share, including, after tax, $0.6 million of restructuring charges. This compares with second quarter 2012 net income from continuing operations of $10.1 million, or $0.79 per diluted share, which included, after tax, $0.5 million of restructuring charges. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations increased 11.3% to $11.7 million, or $0.92 per diluted share, from $10.5 million, or $0.83 per diluted share, in the second quarter of fiscal 2012.
- EBITDA (earnings before interest, income taxes, depreciation and amortization) was $20.4 million compared with $17.7 million in the second quarter of fiscal 2012. Excluding the previously mentioned items from both periods, EBITDA increased 16.5% to $21.4 million from $18.4 million in the second quarter of fiscal 2012.
- Net working capital (defined as accounts receivable plus inventories less accounts payable) was $129.9 million at the end of the second quarter of 2013, compared with $116.4 million a year earlier. Working capital turns were 5.2 for the second quarter of fiscal 2013, compared with 5.3 turns in the second quarter of fiscal 2012.
- The Company's net debt (defined as short-term debt plus long-term debt less cash) of $28.9 million compares with net debt of $35.0 million at September 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.
"We continued to demonstrate the success of our organic and acquisition growth strategies in the second quarter," said President and CEO Roger Fix. "We reported 9% year-over-year sales growth in the quarter due primarily to the performance of our Meder acquisition. Non-GAAP EPS from continuing operations grew 10.8% to $0.92, and we are now at an EBITDA run rate excluding special items of nearly $90 million. We also generated good cash flow, reduced our net debt by $6 million, and lowered our net debt-to-capital ratio. Given the macroeconomic challenges we experienced during the quarter in a number of our end user markets, we performed well in the second quarter."
Food Service Equipment Group sales decreased 0.2% year-over-year, with operating income increasing 0.2%.
"Continuing strength in sales to quick serve restaurant chains were substantially offset by softness at drug retail stores and a seasonal pause in demand from the dollar store segment during the quarter," said Fix. "We continue to expect full-year sales to dollar stores to be equal to or higher than in fiscal 2012, and we believe this segment will be a very good long-term opportunity for us.1 To enhance our competitiveness in the retail drug, dollar store and convenience store segments, we are value engineering our refrigerated merchandising cabinet product line to reduce material expenses while adding features, as well as realigning our manufacturing processes utilizing lean manufacturing techniques to lower labor costs."
"Demand further softened in the retail grocery segment in the UK as a result of the macro-economic conditions there, while we experienced lower sales to the US grocery store segment where customers are continuing to reduce capital spending," said Fix. "We have implemented staff reductions in this area given the lower expectations for volume. At the same time, we made progress in our effort to penetrate a greater number of major chains and dealers, both domestically and internationally, much like we did successfully on the refrigeration side of the business."
"While our beverage dispensing pump business continues to be affected by the weak economy in Europe, demand was strong at our custom merchandising businesses," said Fix.
Engraving Group sales increased 2.3% year-over-year, with 1.5% growth in operating income.
"Strength in demand for automotive program mold texturizing work in Europe and China offset weakness in North America," said Fix. "As we previously discussed, we believe that Engraving mold texturizing sales for fiscal 2013 will be flat compared to the excellent sales performance we reported in fiscal 2012 but that fiscal 2014 will be a record year for the segment.1 During the quarter we continued to make progress on our emerging economy strategy, which includes growing our infrastructure in China, Asia Pacific and South America. We completed the move into a bigger and better equipped facility in Brazil, we opened our new plant in Korea, we broke ground on a fourth facility in India and we committed to a new, larger Mexican facility in a region northwest of Mexico City that has become a growing center for automotive production."
"At our roll, plate and machinery businesses, we continue to see early signs of improvement driven by building product applications," said Fix.
Engineering Technologies Group sales grew 0.1% year-over-year, while operating income declined by 1.0%.
"The year-over-year comparison in the Engineering Technologies Group was made difficult by the shipment in Q2 fiscal 2012 of a large, high-margin order to the oil and gas market," said Fix. "This was offset by the impact of $0.7 million in operating income resulting from a retrospective payment from a customer in the space sector related to incremental costs recorded in cost of sales in prior periods which were attributable to customer-supplied materials. During the quarter we continued to see good quoting activity in the space sector for both developmental and production work for NASA as well as commercial space customers. We're also seeing good long-term opportunities in the land-based turbines market where we have been successful in broadening our customer base. In the aviation market, we are generating significant interest from customers seeking our capabilities for jet engine lipskins and a number of other components internal to jet engines for commercial aviation.1"
The Electronics Products Groupreported 122.5% year-over-year sales growth, with operating income increasing 127.0%.
"The excellent top- and bottom-line performance by the Electronics Products Group was driven by both the legacy electronics business as well as the Meder acquisition," said Fix. "At the legacy business, sales from new customer programs for magnetics and sensors continue to grow and more than offset soft reed switch sales in China and Asia Pacific. We have a robust pipeline for new products and customer programs that we expect will contribute to revenue in future quarters.1"
"The Meder integration is proceeding on plan, and we have completed the first round of training of engineers and sales people from both organizations about the respective product offerings," said Fix. "We're now working with our customers on the engineering test and evaluation process, and reactions have been enthusiastic. In addition to sales synergies, we're making progress in the realization of cost synergies in two specific areas. We have identified $0.5 million in material and procurement savings that will be implemented in the next 12 months, and we will begin to implement facility rationalizations in the second half of this fiscal year that will be completed early in fiscal 2014. These facility rationalizations should generate between $1.0 and $1.5 million of annualized cost savings.1"
TheHydraulics Products Group reported a 5.2% year-over-year sales decline, while operating income increased 23.3%.
"The North American market for dump trailer systems remained weak in the second quarter, as did export sales to Mexico, Australia and South America," said Fix. "Sales declines were tempered by continued growing demand from refuse handling applications as a result of our ongoing efforts to penetrate this market. Geographically, sales from our China operation, which has been instrumental in our ability to grow share in the refuse handling market, contributed to the second-quarter profit improvement. Operating income grew 23.3% due to cost reduction and productivity improvement initiatives as well as a greater mix of sales from China."
"We have performed well in the first two quarters of fiscal 2013 despite softening in demand from several of our end user market segments. We plan to continue to execute on our organic and acquisition growth strategies going forward.1 Each of our business units have a number of organic growth initiatives that we have been executing for the past several years including the introduction of new products and technologies, penetration of new end user and geographic markets and development of specific customer solutions which will continue to allow us to grow our top line through market share gains in what we expect will be generally a slow growth end user market environment.1 Following on the success of our Meder acquisition, we have a solid pipeline of acquisition candidates and dry powder on our balance sheet. While there may be short-term challenges in certain of our end markets, we are confident that we have the right strategy to continue to grow sales, increase profits and generate long-term shareholder value,1" concluded Fix.
Conference Call Details
Standex will host a conference call for investors today, February 1, 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 94784038. 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.
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, Korea, 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||Six Months Ended|
|December 31,||December 31,|
|Cost of sales||112,339||104,598||236,480||211,158|
|Selling, general and administrative expenses||39,037||35,193||80,421||71,303|
|Income from operations||16,268||14,376||33,894||30,490|
|Other (income) expense, net||(166||)||(94||)||(130||)||(285||)|
|Income from continuing operations before income taxes||15,859||14,042||32,798||29,875|
|Provision for income taxes||4,833||3,965||9,847||7,979|
|Net income from continuing operations||11,026||10,077||22,951||21,896|
|Income (loss) from discontinued operations, net of tax||(65||)||(14,193||)||(160||)||(14,054||)|
|Basic earnings per share:|
|Income from continuing operations||$||0.88||$||0.80||$||1.82||$||1.75|
|Loss from discontinued operations||(0.01||)||(1.13||)||(0.01||)||(1.12||)|
|Diluted earnings per share:|
|Income from continuing operations||$||0.86||$||0.79||$||1.79||$||1.72|
|Loss from discontinued operations||0.00||(1.11||)||(0.01||)||(1.11||)|
|Standex International Corporation|
|Statements of Consolidated Cash Flows|
Six Months Ended
|Cash Flows from Operating Activities|
|Loss from discontinued operations||160||14,054|
|Income from continuing operations||22,951||21,896|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization||7,765||6,788|
|Contributions to defined benefit plans||(3,876||)||(642||)|
|Net changes in operating assets and liabilities||(3,909||)||(20,400||)|
|Net cash provided by operating activities - continuing operations||24,656||9,012|
|Net cash (used in) operating activities - discontinued operations||(1,418||)||(2,456||)|
|Net cash provided by operating activities||23,238||6,556|
|Cash Flows from Investing Activities|
|Expenditures for property, plant and equipment||(9,723||)||(5,064||)|
|Expenditures for acquisitions, net of cash acquired||(39,613||)||-|
|Other investing activities||108||2,900|
|Net cash (used in) investing activities from continuing operations||(49,228||)||(2,164||)|
|Net cash provided by investing activities from discontinued operations||-||1,619|
|Net cash (used in) investing activities||(49,228||)||(545||)|
|Cash Flows from Financing Activities|
|Proceeds from borrowings||74,000||78,500|
|Payments of debt||(62,723||)||(64,000||)|
|Borrowings on short-term facilities (net)||-||(1,800||)|
|Activity under share-based payment plans||135||168|