FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996 Commission file number 1-7233
Standex International Corporation
(Exact name of Registrant as specified in its charter)
Delaware 31-0596149
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
6 Manor Parkway, Salem, New Hampshire 03079
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 893-9701
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
The number of shares of Registrant's Common Stock outstanding on March 31,
1996 was 13,518,532.
STANDEX INTERNATIONAL CORPORATION
I N D E X
Page No.
PART I. FINANCIAL INFORMATION:
Statements of Consolidated Income for the Three and Nine
Months Ended March 31, 1996 and 1995 ..................... 2
Consolidated Balance Sheet, March 31, 1996 and
June 30, 1995 ............................................ 3
Statement of Consolidated Cash Flows for the
Nine Months Ended March 31, 1996 and 1995 ............... 4
Notes to Financial Information. ........................... 5
Management's Discussion and Analysis....................... 6-8
PART II. OTHER INFORMATION.................................. 9
<TABLE>
Form 10-Q
PART I. FINANCIAL INFORMATION
STANDEX INTERNATIONAL CORPORATION
Statement of Consolidated Income
(000 Omitted)
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $130,334 $141,575 $426,670 $426,103
Cost of Products Sold 87,427 94,730 285,051 282,778
Gross Profit Margin 42,907 46,845 141,619 143,325
Selling, General & Admini-
strative Expenses 31,671 32,987 96,862 98,486
Income from Operations 11,236 13,858 44,757 44,839
Other Income/(Expense):
Net Gain on Disposition of
Businesses and Product Lines - - - 5,426
Interest Expense (2,205) (2,130) (6,901) (5,934)
Interest Income 155 159 397 438
Other Income/(Expense) - net (2,050) (1,971) (6,504) (70)
Income Before Income Taxes 9,186 11,887 38,253 44,769
Provision for Income Taxes 3,624 3,829 14,204 15,884
Net Income $ 5,562 $ 8,058 $ 24,049 $ 28,885
Earnings Per Share $ .41 $ .56 $ 1.72 $ 1.98
Cash Dividends per Share $ .18 $ .16 $ .53 $ .46
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheet
(000 Omitted)
<CAPTION>
March 31 June 30
__1996__ __1995_
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 8,705 $ 9,543
Receivables, net of allowances for doubtful accounts 82,912 90,492
Inventories (approximately 40% finished goods, 25% work
in process, and 35% raw material and supplies) 111,346 116,417
Prepaid expenses 6,159 3,895
Total current assets 209,122 220,347
PROPERTY, PLANT AND EQUIPMENT 216,424 210,139
Less accumulated depreciation 130,050 125,611
Total 86,374 84,528
OTHER ASSETS
Goodwill, net 14,828 15,297
Prepaid pension and other 25,918 22,530
Total 40,746 37,827
TOTAL $336,242 $342,702
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 4,785 $ 3,321
Accounts payable 26,964 36,414
Income taxes 3,413 4,472
Accrued expenses 31,695 33,005
Total current liabilities 66,857 77,212
LONG-TERM DEBT (less current portion included above) 117,690 111,845
DEFERRED INCOME TAXES AND OTHER LIABILITIES 18,774 21,293
STOCKHOLDERS' EQUITY
Common stock 41,976 41,976
Paid-in Capital 3,142 2,129
Retained earnings 292,760 276,031
Cumulative translation adjustment (44) 338
Less cost of treasury shares (204,913) (188,122)
Total stockholders' equity 132,921 132,352
TOTAL $336,242 $342,702
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
<CAPTION>
Nine Months Ended
March 31
1996 1995
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 24,049 $ 28,885
Depreciation and amortization 9,273 9,146
Net gain on disposition of businesses and
product lines - (5,426)
Net changes in assets and liabilities (7,553) (10,293)
Net Cash Provided by Operating Activities 25,769 22,312
Cash Flows from Investing Activities:
Expenditures for property and equipment (11,116) (9,292)
Proceeds from disposition of businesses - 13,589
Other 433 480
Net Cash (Used for) Provided by Investing Activities (10,683) 4,777
Cash Flows from Financing Activities:
Proceeds from additional borrowings 51,445 14,495
Net payments of debt (44,135) (13,547)
Cash dividends paid (7,319) (6,599)
Purchase of treasury stock (18,346) (19,365)
Other, net 2,566 3,237
Net Cash Used for Financing Activities (15,789) (21,779)
Effect of Exchange Rate Changes on Cash (135) 583
Net Change in Cash and Cash Equivalents (838) 5,893
Cash and Cash Equivalents at Beginning of Year 9,543 5,023
Cash and Cash Equivalents at March 31 $ 8,705 $ 10,916
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months for:
Interest 6,748 5,707
Income taxes 15,263 13,991
</TABLE>
NOTES TO FINANCIAL INFORMATION
1. Management Statement
The financial statements as reported in Form 10-Q reflect all adjustments
(including those of a normal recurring nature) which are, in the opinion
of management, necessary to a fair statement of results for the three and
nine months ended March 31, 1996 and 1995.
2. Per Share Calculation
Shares (in thousands) used in per share data are as follows:
March 31
1996 1995
Earnings 14,019 14,620
Cash Dividends 13,810 14,346
Earnings per share have been computed according to generally accepted
accounting principles.
Cash dividends per share have been computed based on the shares
outstanding at the time the dividends were paid.
3. Contingencies
The Company is a party to various claims and legal proceedings related to
environmental matters generally incidental to its business. Management
has evaluated each matter based, in part, upon the advice of its
independent environmental consultants and has recorded an appropriate
provision for the resolution of such matters in accordance with Statement
of Financial Accounting Standards (SFAS) No. 5, "Accounting for
Contingencies." Management believes that such provision is sufficient to
cover any future payments, including legal costs, under such proceedings.
<PAGE>
4. Additional Borrowings
In September, the Company negotiated a $50,000,000 unsecured loan
agreement with an institutional lender. The loan has a fixed interest
rate of 7.13% and is repayable in level, annual principal payments
beginning September, 1999 and ending September, 2005. The financial
covenants of the new loan agreement are similar to those under the
Company's revolving credit agreement. The proceeds of the loan were used
to reduce borrowings under the revolving credit agreement.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
During the nine months ended March 31, 1996, the Company negotiated a
$50 million unsecured loan agreement with an institutional lender. The
loan has a fixed interest rate of 7.13% and is repayable in level, annual
principal payments beginning September, 1999 and ending September, 2005.
The financial covenants of the new loan agreement are similar to those
under the Company's revolving credit agreement.
Net Income of $24.0 million and the proceeds from the new loan agreement
were used to reduce borrowings under the Company's revolving credit
agreement, fund operating activities, invest $11.1 million in plant and
equipment, purchase $18.3 million of the Company's Common Stock and pay out
$7.3 million of cash dividends to the Company's shareholders. The Company
believes that anticipated cash flows, along with current credit and loan
agreements, are sufficient to meet its anticipated cash requirements for
the foreseeable future.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." This standard requires expanded disclosure of
stock-based compensation arrangements with employees and encourages (but
does not require) compensation costs to be measured based on the fair value
of stock options awarded. The Company is not required to adopt this
standard until the fiscal year beginning July 1, 1996. At the current
time, the Company does not intend to adopt that portion of the standard
which is voluntary, but rather will continue the application of APB Opinion
No. 25.
OPERATIONS
Quarter Ended March 31, 1996
as compared to the Quarter Ended March 31, 1995
Management believes the fluctuations in Net Sales discussed below are
primarily due to changes in unit volumes. In addition, although variations
in the average foreign exchange rates from March 31, 1995 to March 31, 1996
have had a positive impact on Net Sales during the quarter, the total
effect was not significant.
For the quarter ended March 31, 1996, Net Sales declined $11.2 million, or
7.9%, when compared to the same period of the prior year. Improvements in
Net Sales reported by the Graphics/Mail Order and Industrial segments were
offset by a decline in Net Sales of $13.1 million reported by the
Institutional segment. A group of divisions within this segment have
experienced sluggish economic conditions within the U.S. markets they serve
and this has been compounded by weather related problems.
<PAGE>
The Gross Profit Margin Percentage declined slightly to 32.9% for the third
quarter of fiscal 1996 as compared to 33.1% in the same period of the prior
year. The Institutional segment reported a 2.3% decrease in the Gross
Profit Margin Percentage due to reorganization expenses and this segment's
decline in Net Sales which led to unabsorbed costs. The Graphics/Mail
Order and Industrial segments registered minor changes in their Gross
Profit Margin Percentages.
For the quarter ended March 31, 1996, Selling, General and Administrative
Expenses (SG&A) declined $1.3 million, or 4.0%. However, as a percentage
of Net Sales, SG&A increased slightly from 23.3% of Net Sales in the third
quarter of fiscal 1995 to 24.3% of Net Sales for the three months ended
March 31, 1996. All three segments reported a decrease in SG&A expenses.
However, the Institutional segment reported an increase in SG&A as a
percentage of Net Sales primarily due to the decline in Net Sales reported
for the period.
In the third quarter of fiscal 1996, Interest Expense increased slightly as
compared to the same period of the prior year.
The above factors resulted in a $2.7 million, or 22.7%, decline in Income
Before Income Taxes as compared to the same period of the prior year. The
effective tax rate in the third quarter rose to 39.4% from 32.2% reported
in the third quarter of the prior year. The third quarter of fiscal 1995
was positively impacted primarily by foreign tax credits generated by a UK
subsidiary which were not repeated in the current quarter.
For the third quarter of fiscal 1996, Net Income decreased $2.5 million, or
31%, when compared to the same period of the prior year as a result of the
factors described above.
Nine Months Ended March 31, 1996
as compared to Nine Months Ended March 31, 1995
For the nine months ended March 31, 1996, Net Sales increased $567,000. As
indicated in the discussion of quarterly results, management believes the
majority of the fluctuations in Net Sales discussed below are due to
changes in unit volumes. Also, the effect of changes in average foreign
exchange rates on operating results was not significant.
Due primarily to improved European economic conditions, the Graphics/Mail
Order segment reported growth in Net Sales of $7.0 million. This growth
was offset by a $5.8 million decline in Net Sales reported by the
Institutional segment for the reasons described in the discussion of
quarterly results. Despite gains reported by several foreign divisions
within the Industrial segment, a slight decline in Net Sales was reported
due to the sale of a German subsidiary in the first quarter of the prior
fiscal year.
For the nine months ended March 31, 1996, the Gross Profit Margin
Percentage remained relatively unchanged at 33.2% versus 33.6% reported in
the same period of the prior year. The Company's three segments reported
minor fluctuations in their Gross Profit Margin Percentages.
Selling, General and Administrative Expenses (SG&A) decreased $1.6 million,
or 1.6%, for the nine months ended March 31, 1996 when compared to the same
period last year. As a percentage of Net Sales, SG&A declined from 23.1%
of Net Sales to 22.7% of Net Sales in current fiscal year. All three
segments reported only slight increases or decreases in SG&A.
Interest Expense rose $967,000 for the nine months ended March 31, 1996
primarily due to higher interest rates during the first two quarters of
fiscal 1996 as compared to those experienced in the same period of the
prior fiscal year.
<PAGE>
During the nine months ended March 31, 1995, a net gain of $5.4 million was
reported due to the disposition of certain businesses and product lines.
This prior year gain, in addition to the factors described above, resulted
in a $6.5 million decrease in Income Before Income Taxes for the nine
months ended March 31, 1996.
The effective tax rate for the nine months ended March 31, 1996 increased
to 37.1% as compared to 35.5% in the same period of fiscal 1995 due mainly
to the factors described in the analysis of quarterly results.
For the nine months ended March 31, 1996, Net Income declined $4.8 million,
or 16.7%, when compared to the same period of the prior year due to the
factors described above.
PART II. OTHER INFORMATION
NO APPLICABLE ITEMS.
Form 10-Q
STANDEX INTERNATIONAL CORPORATION
SIGNATURES
Pursuant to the Requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
STANDEX INTERNATIONAL CORPORATION
Date: May 13, 1996 /s/ Robert R. Kettinger
Robert R. Kettinger, Corporate Controller
Date: May 13, 1996 /s/ Lindsay M. Sedwick
Lindsay M. Sedwick, Senior Vice President of
Finance/CFO
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,705
<SECURITIES> 0
<RECEIVABLES> 85,829
<ALLOWANCES> 2,917
<INVENTORY> 111,346
<CURRENT-ASSETS> 209,122
<PP&E> 216,424
<DEPRECIATION> 130,050
<TOTAL-ASSETS> 336,242
<CURRENT-LIABILITIES> 66,857
<BONDS> 117,690
0
0
<COMMON> 41,976
<OTHER-SE> 90,945
<TOTAL-LIABILITY-AND-EQUITY> 336,242
<SALES> 426,670
<TOTAL-REVENUES> 427,067
<CGS> 285,051
<TOTAL-COSTS> 285,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,901
<INCOME-PRETAX> 38,253
<INCOME-TAX> 14,204
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,049
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 0
</TABLE>
