News Release
| Standex Reports First-Quarter Fiscal 2009 Financial Results |
Company Reports 33% Growth in Net Income from Continuing Operations SALEM, N.H.--(BUSINESS WIRE)--Oct. 29, 2008--Standex International Corporation (NYSE:SXI) today reported financial results for the first quarter of fiscal year 2009.
-- Net sales for the first quarter of fiscal 2009 increased 2.9%
to $180.7 million from $175.5 million in the first quarter of
fiscal 2008.
-- Income from operations for the first quarter of fiscal 2009,
including a $4.3 million pre-tax restructuring expense, was
$10.8 million, which compares with $10.8 million in the first
quarter of last year. Excluding the charge, the company
reported a 39% increase in non-GAAP income from operations to
$15.1 million in the first quarter of fiscal 2009. The $4.3
million pre-tax expense related to the closure of three
facilities and included severance and other employee benefit
termination costs and expenses associated with the relocation
of production capacity to other Company facilities.
-- Net income from continuing operations for the first quarter of
fiscal 2009, including the $4.3 million restructuring charge
and a $1.1 million benefit from a life insurance policy for a
former executive, increased 33% to $7.1 million, or $0.57 per
diluted share. This compares with $5.3 million, or $0.43 per
share, in the first quarter of fiscal 2008. Excluding the
restructuring charge and insurance benefit, the company
reported a 69% increase in non-GAAP net income from continuing
operations to $9.0 million, or $0.72 per share for the first
quarter of fiscal 2009. A reconciliation of net income and
earnings per share from reported GAAP amounts to non-GAAP
amounts is included later in this release.
-- Net income for the first quarter of fiscal 2009 was $5.0
million, or $0.40 per diluted share, compared with net income
of $5.9 million, or $0.48 per diluted share, in the first
quarter of fiscal 2008. Net income for the first quarter of
fiscal 2009 includes the aforementioned restructuring charge
and insurance benefit as well as a $3.0 million expense ($2.0
million net of tax) charged to discontinued operations related
to the Company's environmental remediation activity in
Cleveland, Ohio. The expense brings the total accrual for the
clean-up to $5 million, which is the Company's best estimate
at this time of the total clean-up cost. Two insurance
companies that had provided general property liability
coverage to Standex during the years that the alleged
contamination occurred have agreed to reimburse the Company
for defense expenses incurred during the clean-up process
under a standard reservation of rights. Thus far, they have
not agreed to indemnify the Company to cover the costs of the
remediation.
-- EBITDA (earnings before interest, income taxes, plus
depreciation and amortization) increased 2.8% to $15.7 million
in the first quarter of fiscal 2009 from $15.2 million in the
first quarter a year ago. Excluding the restructuring expense
and insurance benefit, EBITDA for the quarter was $18.9
million, up 24% versus the prior year quarter.
-- Net working capital (defined as accounts receivable plus
inventories less accounts payable) was $135.8 million at the
end of the first quarter of fiscal 2009 compared with $129.3
million in the prior year. Working capital turns decreased to
5.3 turns from 5.4 turns for the first fiscal quarter of 2008.
Net working capital for the first quarter included $923,000 of
working capital associated with the acquisition of BG Labs,
which was completed during the first quarter.
-- Net debt (defined as short-term debt plus long-term debt less
cash) increased to $115.3 million at September 30, 2008 from
$106.0 million at June 30, 2008. The Company's balance sheet
leverage ratio of net debt to total capital was 34.4% at
September 30, 2008 compared with 32.2% at June 30, 2008.
Comments on the First Quarter and Segment Discussions
"Standex performed well in the first quarter of the new fiscal year, reporting a 69% increase in non-GAAP net income from continuing operations on 2.9% sales growth," said President and CEO Roger Fix. "Engineered Products led the operating groups in sales growth while ADP and Engraving reported excellent bottom-line results." The Food Service Equipment Group posted first-quarter, year-over-year sales growth of 4.9%. Operating income was essentially flat primarily due to product mix. "Our Food Service Equipment Group continued to report steady growth in sales with particularly strong demand for our walk-in coolers and freezers," said Fix. "Profitability in the Food Service group was impacted by sales mix. During the quarter the Refrigerated Solutions businesses experienced higher sales volumes of lower margin coolers and freezers and lower sales volumes of higher-margin scientific products and reach-in cabinets. In the Cooking Solutions businesses we experienced lower sales of higher margin cooking solutions products due to delayed orders from a large quick service restaurant chain and softness from the casual dining and independent pizzeria segment." "As we progress throughout the year in a slowing market for food service equipment, we will continue to drive market share gains and reduce costs," added Fix. "Our growth initiatives include diversifying our revenues into new international markets, such as Canada, South America and the Middle East as well as introducing innovative equipment and launching product adaptations for new applications." The Engraving Group generated sales growth of 5.7% year-over-year in the first quarter with strong operating leverage contributing to an 91.2% year-over-year increase in operating income. "Our excellent operating income growth in the first quarter outpaced a moderate year-over-year sales increase as a result of our efforts to consolidate facilities, reduce costs and improve productivity," said Fix. "In addition to productivity improvements and cost reductions, we successfully completed the consolidation of two roll engraving facilities in North America into our Richmond, Virginia plant. We plan to continue to take actions to increase operating leverage by driving down costs." (1) "We saw steady sales volume in North America and exited the quarter with a good backlog, giving us reason for optimism about the near-term prospects for this business,"(1) added Fix. "Internationally, after a strong fourth quarter for overseas sales, we have begun to see some automotive platform delays that we expect will continue for the near term.(1) Going forward, in addition to supporting our traditional customers from our locations in North America and Europe, we will continue to execute on our strategy of securing long-term growth in emerging markets, such as Turkey and China." Engineered Products Group revenue for the first quarter increased by 15.8% year-over-year and operating income grew by 6.6%. "Spincraft started the fiscal year with another quarter of good revenue growth," said Fix. "We continue to see strong demand from the energy, aerospace and aviation end markets. Operating income for Spincraft lagged sales growth due to two factors. First, each quarter in fiscal 2008 included milestone payments related to a long-term contract with an aerospace customer. These payments have been completed, resulting in a difficult comparison in the first quarter and the remainder of fiscal 2009. To a lesser extent, our year-over-year operating income was affected by an unusually high level of lower margin product sales. During the quarter, we secured new contracts for scheduled hardware deliveries through calendar year 2012 with Boeing and Lockheed Martin for the Delta IV and Atlas V heavy lift rocket programs, respectively." "Electronics revenues were essentially flat as we experienced good demand from the industrial and aviation and aerospace markets, but saw continued softness from the housing sector and accelerating weakness in the automotive sector," added Fix. "We reported double-digit operating income growth from electronics despite the flat sales as a result of aggressive cost reduction initiatives, such as material substitutions, plant consolidations and increased use of low cost manufacturing in Mexico and China. We will continue to focus on improving margin performance in this business." Hydraulics Products Group revenues for the quarter decreased 7.5% year-over-year due to continued depressed market conditions and operating income declined 1.9% year-over-year. "While the demand environment remains weak for off-road heavy construction vehicles in the U.S., we are focused on capitalizing on long-term opportunities for this business both domestically and abroad," said Fix. "We are making progress in ramping up our new manufacturing capability in Tianjin, China to produce telescopic hoists for sale in China and for export to other Asia-Pacific markets and Europe. Initial prototype production will occur in the current second quarter and we are on track to begin shipments in the second half of the fiscal year." "In addition to increasing international volume, we are focused on initiatives to improve our margins," added Fix. "For example, during the quarter we also made significant investments in automation initiatives that we expect will contribute to margins in the second half of the year."(1) Air Distribution Products Group ("ADP") sales for the quarter declined by 13.0% as a result of the continued severe downturn in the new residential construction market. Operating income climbed 683.9%. "ADP's significant growth in operating income was primarily due to price increases implemented to offset future anticipated material cost increases," said Fix. "During the quarter we successfully consolidated the sales and production activities of our Bartonville, Illinois facility into our Minnesota and Georgia ADP locations with minimal customer disruption and we are on track to begin realizing annualized cost savings of approximately $2.2 million in the current second fiscal quarter."(1) "We believe that we are achieving market share gains, even in this very difficult environment,"(1) added Fix. "We are outperforming the market and we know that we have penetrated new major HVAC wholesalers in targeted markets. We expect the group to operate profitably in the second quarter as we continue to benefit from lower cost on hand metal inventory, but expect to be focused on maintaining breakeven in the second half of fiscal 2009 as we begin to utilize higher cost metal currently on order."(1) Business Outlook "Our performance for the first quarter was in line with our expectations, and we have made good progress in increasing market share in each of our segments while taking actions to improve margins across the organization," said Fix. "Going forward, we remain focused on these initiatives as we face economic headwinds as well as continuing challenges from the off-road heavy construction vehicle and housing markets. In this environment, we will strive to reduce costs through lean manufacturing, low-cost sourcing and manufacturing, plant consolidations and investments in automation. At the same time, we will aggressively pursue short- and long-term opportunities to drive market share gains, broaden our geographic presence into international markets, and capitalize on demand in many of our markets." Conference Call Details Standex will host a conference call for investors today, Wednesday, October 29, at 9:30 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 web cast 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 38378283. 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 and non-GAAP net income from continuing operations 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, Air Distribution Products Group, Engineered Products Group, Engraving Group and Hydraulics Products Group with operations in the United States, Europe, Canada, Australia, Singapore, Mexico, Brazil 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 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 new residential construction market, reduced capital spending by customers, successful expansion and automation of manufacturing capabilities and diversification efforts in emerging markets, the ability to achieve cost savings through lean manufacturing and low cost sourcing, effective completion of plant consolidations and the other factors discussed in the Annual Report of Standex on Form 10-K for the fiscal year ending June 30, 2007, 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
Non-GAAP Financial Measure Reconciliations
1st Quarter 2009
----------------------------------------------------------------------
--------------------------------------------------------
Net Income Diluted Earnings per Share
--------------------------- ----------------------------
--------------------------- ----------------------------
FY09 FY08 % Change FY09 FY08 % Change
--------------------------- ----------------------------
GAAP Net
Income From
Continuing
Operations $ 7,095 $ 5,316 33.5% $ 0.57 $ 0.43 33.2%
Add:
Restructuring
(Tax
Affected) $ 2,981 $ 0.24
Less:
Insurance
Benefit (Tax
Affected) $(1,084) $ (0.09)
--------------------------------------------------------
Income from
Continuing
Operations
Before
Special
Items $ 8,992 $ 5,316 69.1% $ 0.72 $ 0.43 68.8%
========================================================
----------------- ------------------
EBITDA Free Cash Flow
----------------- ------------------
----------------- ------------------
FY09 FY08 FY09 FY08
----------------- ------------------
Net Income $ 4,994 $ 5,921 $ 4,994 $ 5,921
Discontinued
Operations 2,101 (605) 2,101 (605)
Taxes 2,709 3,008 2,709 3,008
Interest
Expense 1,718 2,675 1,718 2,675
Depreciation 3,274 3,223 3,274 3,223
Amortization 879 1,025 879 1,025
----------------- ------------------
EBITDA 15,675 15,247 15,675 15,247
================= ==================
Change in
Working
Capital (11,258) 2,107
CAPEX (1,872) (2,730)
------------------
Free Cash
Flow 2,545 14,624
==================
Add:
Restructuring 4,321 0 4,321 0
Less:
Insurance
Benefit (1,084) 0 (1,084) 0
----------------- ------------------
EBITDA & FCF
Before
Special
Items $18,912 $15,247 $ 5,782 $14,624
================= ==================
Operating
Income 10,751 10,846
FCF to
Operating
Income 23.7% 134.8%
Adjusted FCF
to Operating
Income 53.8% 134.8%
STANDEX INTERNATIONAL CORPORATION
Segment Reporting Data
Three Months
Net Revenues: Ended September 30,
-------------------
(in thousands) Net Sales
-------------------------------------------------- -------------------
2008 2007
--------- ---------
Food Service Equipment $101,756 $ 96,961
Air Distribution Products 23,788 27,350
Engraving Group 21,568 20,403
Engineered Products 25,255 21,804
Hydraulics Products 8,328 9,002
Corporate and Other -- --
--------- ---------
Total $180,695 $175,520
--------- ---------
Three Months
Ended September 30,
-------------------
Income from Operations: Income From
Operations
-------------------
(in thousands) 2008 2007
--------- ---------
Food Service Equipment $ 9,670 $ 9,648
Air Distribution Products 3,112 397
Engraving Group 2,430 1,271
Engineered Products 3,106 2,914
Hydraulics Products 1,196 1,219
--------- ---------
Subtotal 19,514 15,449
Restructuring charge (4,321) --
Corporate (4,442) (4,603)
--------- ---------
Total Income from Operations $ 10,751 $ 10,846
========= =========
STANDEX INTERNATIONAL CORPORATION
----------------------------------------------------------------------
Consolidated Condensed Statement of Income
----------------------------------------------------------------------
Three Months Ended
September 30
(In thousands, except per share data) 2008 2007
------------------
Net Sales 180,695 175,520
Cost of Sales 123,577 125,925
--------- --------
Gross Profit 57,118 49,595
Operating Expenses:
Selling, general and administrative expenses 42,046 38,749
Restructuring Charges 4,321 -
--------- --------
Income from operations 10,751 10,846
Interest Expense 1,718 2,675
Other non-operating expense/(income) (771) (153)
--------- --------
9,804 8,324
Provision for Taxes 2,709 3,008
--------- --------
Net Income from Continuing Operations 7,095 5,316
Income/(Loss) from discontinued operations, net of
taxes (2,101) 605
--------- --------
Net Income 4,994 5,921
--------- --------
Basic earnings per share
Continuing Operations 0.58 0.43
Discontinued Operations (0.17) 0.05
--------- --------
Total 0.41 0.48
========= ========
Diluted earnings per share:
Continuing Operations 0.57 0.43
Discontinued Operations (0.17) 0.05
--------- --------
Total 0.40 0.48
========= ========
Average Shares Outstanding
---------------------------------------------------
Weighted average shares, basic 12,309 12,256
Weighted average shares, diluted 12,465 12,439
STANDEX INTERNATIONAL CORPORATION
Consolidated Condensed Balance Sheet
----------------------------------------------------------------------
September 30, June 30,
2008 2008
------------- ---------
ASSETS
Current assets:
Cash and cash equivalents $21,862 $28,657
Accounts receivable, net 105,103 103,055
Inventories 94,841 87,619
Prepaid expenses and other current assets 4,575 3,337
Income tax receivable - 983
Deferred tax asset 13,544 13,032
------------- ---------
Total current assets 239,925 236,683
------------- ---------
Property, plant, equipment 111,962 116,565
Intangible assets 26,417 27,473
Goodwill 119,561 120,650
Prepaid pension cost 2,841 1,972
Other non-current assets 20,522 19,691
------------- ---------
Total non-current assets 281,303 286,351
------------- ---------
Total assets $521,228 $523,034
------------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $3,571 $28,579
Accounts payable 64,186 66,174
Accrued expenses 43,891 50,286
Income taxes payable 1 -
Current liabilities - discontinued
operations 6,360 2,701
------------- ---------
Total current liabilities 118,009 147,740
------------- ---------
Long-term debt - less current portion 133,586 106,086
Accrued pension and other non-current
liabilities 49,321 46,050
------------- ---------
Total non-current liabilities 182,907 152,136
------------- ---------
Stockholders' equity:
Common stock 41,976 41,976
Additional paid-in capital 27,132 27,158
Retained earnings 435,566 433,435
Accumulated other comprehensive income (22,344) (17,531)
Treasury shares (262,018) (261,880)
------------- ---------
Total stockholders' equity 220,312 223,158
------------- ---------
Total liabilities and stockholders' equity $521,228 $523,034
------------- ---------
Summary Cash Flow Data
Three Months Ended
Sept 30 Sept 30
2008 2007
------------- ---------
Cash flows provided by operating activities $(2,951) $13,245
Cash flows provided by investing activities (1,012) 6,225
Cash flows used in financing activities (1,032) (16,077)
Effects of exchange rate changes on cash (1,800) (1,191)
------------- ---------
Net change in cash and cash equivalents (6,795) 2,202
Beginning cash and cash equivalents 28,657 24,057
------------- ---------
Ending cash and cash equivalents $21,862 $26,259
============= =========
Supplementary Financial Data
Three Months Ended
Sept 30 Sept 30
2008 2007
------------- ---------
Net working capital $135,758 $129,333
Working capital turns 5.3 5.4
Inventory Turns 5.4 5.3
A/R days sales outstanding 53.0 56.0
A/P days payable outstanding 40.0 41.0
Capital Expenditures, for the three months
ended $1,872 $2,730
Depreciation 3,274 3,223
Amortization of intangibles 879 1,025
Net debt 115,295 128,563
CONTACT: Standex International Corporation
Thomas DeByle, CFO, 603-893-9701
InvestorRelations@Standex.com
SOURCE: Standex International Corporation
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