FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1997 Commission File
Number 1-7233
STANDEX INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-0596149
(State of incorporation) (I.R.S. Employer Identification No.)
6 MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079
(Address of principal executive offices) (Zip Code)
(603) 893-9701
(Registrant's telephone number, including area code)
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 reports), 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 September 30, 1997 was 13,107,285.
STANDEX INTERNATIONAL CORPORATION
I N D E X
PART I.
FINANCIAL INFORMATION: Page No.
Statements of Consolidated Income for the
Three Months Ended September 30, 1997 and 1996 2
Consolidated Balance Sheets, September 30,
1997 and June 30, 1997 3
Statements of Consolidated Cash Flows for the
Three Months Ended September 30, 1997 and 1996 4
Notes to Financial Information 5
Management's Discussion and Analysis 6-7
PART II. OTHER INFORMATION: 8
<TABLE>
Form 10-Q
PART I. FINANCIAL INFORMATION
STANDEX INTERNATIONAL CORPORATION
Statements of Consolidated Income
(000 Omitted)
<CAPTION>
Three Months Ended
September 30
1997 1996
<S> <C> <C>
Net Sales $141,061 $140,199
Cost of Products Sold 95,196 95,579
Gross Profit Margin 45,865 44,620
Selling, General & Administrative Expenses 31,473 30,242
Income from Operations 14,392 14,378
Other Income/(Expense):
Interest Expense (2,092) (2,123)
Interest Income 119 72
Other Income/(Expense) - net (1,973) (2,051)
Income Before Income Taxes 12,419 12,327
Provision for Income Taxes 4,760 4,785
Net Income $7,659 $ 7,542
Earnings Per Share $ .58 $ .56
Cash Dividends Per Share $ .19 $ .18
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
<CAPTION>
September 30 June 30
1997 1997
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $8,917 $6,149
Receivables net of allowances for
doubtful accounts 90,758 86,852
Inventories (approximately 45%
finished goods, 25% work in
process, and 30% raw material and
supplies) 111,434 109,454
Prepaid expenses 10,198 4,631
Total current assets 221,307 207,086
PROPERTY, PLANT AND EQUIPMENT 223,700 223,519
Less accumulated depreciation 139,416 137,921
Property, plant and equipment, net 84,284 85,598
OTHER ASSETS:
Prepaid pension cost 24,823 24,320
Goodwill, net 14,896 15,195
Other 10,698 8,839
Total other assets 50,417 48,354
TOTAL $356,008 $341,038
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 2,704 $2,030
Accounts payable 35,259 31,380
Income taxes 8,489 4,481
Accrued expenses and other 28,377 32,249
Total current liabilities 74,829 70,140
LONG-TERM DEBT (less current portion
included above) 120,975 112,347
DEFERRED INCOME TAXES AND OTHER LIABILITIES 16,662 17,366
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Paid-in capital 5,822 5,663
Retained earnings 319,075 313,908
Cumulative translation adjustment (2,996) (1,082)
Less cost of treasury shares (220,335) (219,280)
Total stockholders' equity 143,542 141,185
TOTAL $356,008 $341,038
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
<CAPTION>
Three Months Ended
September 30
1997 1996
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 7,659 $7,542
Depreciation and amortization 3,262 3,181
Net changes in assets and liabilities (11,386) (9,376)
Net Cash (Used for) Provided by
Operating Activities (465) 1,347
Cash Flows from Investing Activities:
Expenditures for property and equipment (2,319) (2,586)
Other (10) 18
Net Cash Used for Investing Activities (2,329) (2,568)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 9,437 9,036
Net payments of debt (135) (2,592)
Cash dividends paid (2,492) (2,418)
Purchase of treasury stock (1,417) (2,982)
Other, net 521 627
Net Cash Provided by Financing Activities 5,914 1,671
Effect of Exchange Rate Changes on Cash (352) 112
Net Change in Cash and Cash Equivalents 2,768 562
Cash and Cash Equivalents at Beginning of Year 6,149 5,147
Cash and Cash Equivalents at September 30 $8,917 $5,709
Supplemental Disclosure of Cash Flow Information:
Cash paid during the three months for:
Interest $3,011 $3,025
Income taxes $ 752 $1,353
</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
months ended September 30, 1997 and 1996.
2. Per Share Calculation
Shares (in thousands) used in per share data are as
follows:
September 30
1997 1996
Earnings 13,278 13,574
Cash Dividends 13,115 13,436
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 and other matters
generally incidental to its business. Management has
evaluated each matter based, in part, upon the advice of
its independent environmental consultants and in-house
counsel and has recorded an appropriate provision for the
resolution of such matters in accordance with Statement
of Financial Accounting Standards No. 5, "Accounting for
Contingencies." Management believes that such provision
is sufficient to cover any future payments, including
legal costs, under such proceedings.
4. Acquisition
On October 6, 1997, the Company completed the acquisition of
the net assets of ACME Manufacturing Company for an
undisclosed amount of cash. ACME Manufacturing is a
manufacturer of heating, ventilation, and air conditioning
pipe, duct, and fittings for the home building industry in the
Northeast, Mid-West, and Southern United States. ACME, with
annual sales of approximately $60 million, has seven
manufacturing facilities. The acquisition will be accounted
for as a purchase and was not significant with respect to the
Company's consolidated financial statements.
STANDEX INTERNATIONAL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
MATERIAL CHANGES IN FINANCIAL CONDITION
During the quarter ended September 30, 1997, net proceeds from
additional borrowings of $9.4 million were used to purchase $1.4
million of the Company's Common Stock, invest $2.3 million in
plant and equipment and pay out $2.5 million of cash dividends to
the Company's shareholders.
On October 6, 1997, the Company acquired the net assets of ACME
Manufacturing Company for an undisclosed amount of cash (see
Footnote 4). The acquisition of this operation was financed from
existing bank credit agreements.
The Company intends to continue its policy of using its funds to
make acquisitions when conditions are favorable, invest in
property, plant and equipment, pay dividends and purchase its
Common Stock.
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 128
"Earnings per Share." This standard changes the method of
calculating earnings per share and is effective December 15,
1997. The Company has evaluated this standard and does not
expect its adoption to have a significant effect on the Company's
earnings per share.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The Company
has reviewed both of these standards and does not expect their
adoption to have a significant effect on the Company's operating
results or disclosure requirements.
OPERATIONS
Quarter Ended September 30, 1997
as compared to the Quarter Ended September 30, 1996
For the first quarter ended September 30, 1997, Net Sales
increased by $862,000 as compared to the first quarter of the
prior year. Management believes the majority of fluctuations in
Net Sales reported by each segment are primarily due to changes
in unit volumes. In addition, although changes in the average
foreign exchange rates from September 30, 1996 to September 30,
1997 have had a positive impact on Net Sales for the quarter, the
total effect was not significant.
Net Sales in the Food Service segment remained flat as compared
to the prior year. However, there was significant growth in
sales at one division due to increased demand which was offset by
the absence of sales from a division which was disposed of in the
second half of fiscal 1997. The Consumer segment reported an
increase of $1.4 million in Net Sales due to improved demand and
acquisitions made during fiscal 1997. The Industrial segment
reported a reduction of $1 million in Net Sales due primarily to
the disposition of two product lines in the second half of fiscal
1997 and continued sluggishness in some of the Company's European
operations.
The Gross Profit Margin Percentage increased to 32.5%, as
compared to the prior year's percentage of 31.8%. The Consumer
and Industrial segments reported minor changes in their Gross
Profit Margin Percentages none of which was individually
significant. However, the Food Service segment reported a Gross
Profit Margin of 28.7% versus the prior year's 27.2% primarily
due to reduced costs.
For the three months ended September 30, 1997, Selling, General
and Administrative Expenses increased by $1.2 million, or 4.1%.
None of the fluctuations reported by the Company's three segments
were individually significant and corresponded respectively to
the changes in Net Sales discussed above.
Interest income and interest expense for the first quarter of
fiscal 1998, remained approximately the same as reported in the
prior year.
The above factors resulted in a $92,000 increase in Income Before
Income Taxes as compared to the same period of the prior year.
The effective tax rate in the first quarter decreased from 38.8%
in fiscal 1997 to 38.3% in fiscal 1998 due to several factors,
none of which was individually significant.
As a result of the above, Net Income for the first quarter of
fiscal 1998 increased $117,000, or 1.6%, over the same period in
the prior year.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(n) Employment Agreement, effective September
1, 1997, between the Company and Edward F. Paquette
27 Financial Data Schedule
(b) Standex filed no reports on Form 8-K with the
Securities and Exchange Commission during the first
quarter of the fiscal year ended September 30, 1997.
ALL OTHER ITEMS ARE INAPPLICABLE.
Form 10-Q
STANDEX INTERNATIONAL CORPORATION
S I G N A T U R E S
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: November 12, 1997 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: November 12, 1997 /s/ Lindsay M. Sedwick
Lindsay M. Sedwick
Sr. Vice President of Finance/CFO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 8,917
<SECURITIES> 0
<RECEIVABLES> 93,309
<ALLOWANCES> 2,551
<INVENTORY> 111,434
<CURRENT-ASSETS> 221,307
<PP&E> 223,700
<DEPRECIATION> 139,416
<TOTAL-ASSETS> 356,008
<CURRENT-LIABILITIES> 74,829
<BONDS> 120,975
0
0
<COMMON> 41,976
<OTHER-SE> 101,566
<TOTAL-LIABILITY-AND-EQUITY> 356,008
<SALES> 141,061
<TOTAL-REVENUES> 141,180
<CGS> 95,196
<TOTAL-COSTS> 95,196
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,092
<INCOME-PRETAX> 12,419
<INCOME-TAX> 4,760
<INCOME-CONTINUING> 7,659
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,659
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
EXHIBIT 10(n)
EMPLOYMENT AGREEMENT
THIS IS AN AGREEMENT made and entered into as of this 2nd day
of June, 1997, by and between STANDEX INTERNATIONAL CORPORATION,
a Delaware corporation, with its principal office in Salem, New
Hampshire (hereinafter referred to as "Employer"), and
- ------------------ EDWARD F. PAQUETTE --------------------
of Milton, Massachusetts (hereinafter referred to as
"Executive").
WHEREAS, Employer is desirous of obtaining the services of
Executive as Chief Financial Officer when the present Chief
Financial Officer retires in June, 1998; and
WHEREAS, Executive is desirous of accepting such position;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties herein contained, it is agreed by and
between the parties as follows:
1. Employment. Employer hereby agrees to employ Executive, and
Executive agrees to be so employed, commencing September 1, 1997
on a full-time basis, initially as Assistant to the President and
commencing July 1, 1998, as Chief Financial Officer or in such
other senior executive, managerial or supervisory capacity,
subject to the direction and control of the Chief Executive
Officer of Employer, said employment being upon the terms and
conditions herein set forth.
2. Term. The term of this Agreement shall be four years from
September 1, 1997 to August 31, 2001.
3. Best Efforts. Executive agrees, as long as this Agreement
is in effect, to devote his best efforts and his full time and
attention to the business of Employer and to the performance of
such executive, managerial and supervisory duties assigned to
him.
4. Non-Compete. Except as set forth in the third paragraph of
this Section 4, Executive shall not, as long as this Agreement is
in effect, engage in, or be interested in, in any active
capacity, any business other than that of Employer or any
affiliate, associate or subsidiary corporation of Employer.
In addition, except as set forth in the third paragraph of
this Section 4, Executive shall not for a period of two years
after the termination of employment with Employer (whether such
termination is by reason of the expiration of this Agreement or
for any other reason) compete with or directly or indirectly own,
control, manage, operate, join or participate in the ownership,
control, management or operation of any business which competes
with any present or future business of Employer at the time of
such termination.
No provision contained in this Section 4 shall restrict
Executive from making investments in other ventures which are not
competitive with Employer, or restrict Executive from engaging,
during non-business hours, in any other such non-competitive
business or restrict Executive from owning less than five per
cent of the outstanding securities of companies which compete
with any present or future business of Employer and which are
listed on a national stock exchange or actively traded on the
NASDAQ National Market System.
5. Compensation; Benefits. Employer agrees to compensate
Executive for his services at a minimum annual base salary of
$225,000. Such base salary shall be payable at least monthly and
shall be increased as determined (in its sole discretion) by
Employer.
Executive shall also be entitled to participate in the
Standex Executive Bonus Program and in such other benefit plans
and programs as are made available to executives of the Employer,
provided, however, Executive agrees that he will not be entitled
to participate in the Standex International Corporation
Retirement Plan. Executive shall be entitled to use an
automobile furnished at the expense of Employer in accordance
with Employer's policy on this subject, as such policy shall be
revised from time to time.
6. Stock Options. The Employee agrees to grant the following
stock options to Executive:
A. Incentive Stock Options. In September, 1997, in January,
1998 and in January, 1999, the Employer will grant an amount of
incentive stock options to Executive determined by dividing the
applicable market price of Standex Common Stock on the New York
Stock Exchange into $100,000 and rounding that result down to the
nearest 100 shares. The above options will vest 50% at the end
of the first anniversary of the date of grant and 50% at the end
of the second anniversary. The terms of each of these options
will be five years.
B. Non-Statutory. In September, 1997, the Employer will grant
a non-statutory stock option to Executive covering 15,000 shares
of Standex Common Stock at an exercise price of $5.00 below the
market price of the stock at the time. Vesting on this option
will occur 1/3 on the first anniversary of the date of grant, 1/3
on the second anniversary and 1/3 on the third anniversary. The
term of the option will be ten years.
C. Option Grants in Accordance with Plan. All option grants
mentioned in A and B above shall be made under the provisions of
the Standex International Corporation 1994 Stock Option Plan.
7. Termination.
A. Death. Executive's employment shall terminate forthwith
upon his death and all liability of Employer under this Agreement
or otherwise shall thereupon cease except for any compensation
for past services remaining unpaid and for benefits due to
Executive's estate or to others under the terms of any benefit
plan or agreement then in effect.
B. Disability. In the event that Executive becomes
substantially disabled during the term of this Agreement for a
period of six consecutive months so that he is unable, in the
reasonable opinion of Employer, to perform the services as
contemplated herein, then Employer, at its option, may terminate
Executive's employment and this Agreement upon at least six (6)
additional months advance written notification to Executive.
Until such termination option is exercised or as otherwise
mutually agreed in writing, Executive will continue to receive
his full salary and fringe benefits during any period of illness
or other disability, regardless of duration.
C. Material Breach. In the event of a material breach of the
terms of this Agreement by Executive or Employer, the non-
breaching party may cause this Agreement to be terminated on
ninety days advance written notice, provided, however, that
termination by Employer for material breach following a change of
control, as defined in Section 15, shall be effective only upon
twelve (12) months prior written notice. Employer may remove
Executive from all duties and authority commencing on the first
day of any such notice period, however, payment of compensation
and participation in all benefits shall continue through the last
day of such notice period.
D. Termination for Convenience by Executive. At any time prior
to the commencement of the term of this Agreement as well as
during the term, the Executive may terminate this Agreement, for
any reason or for no reason, with at least ninety days advance
written notice to the Employer. Executive's base salary and
benefits shall be continued through his selected date of
termination.
E. Termination for Convenience by Employer. At any time prior
to the commencement of the term of this Agreement as well as
during the term, the Employer may terminate this Agreement, for
any reason or for no reason, with at least ninety days advance
written notice to Executive provided the Employer pays the
following severance to Executive (depending on when the
termination occurs):
(1) If the termination occurs prior to the commencement of the
term, one year's base pay shall be paid over the course of the
twelve months following termination;
(2) If the termination occurs after the commencement of the
term, but prior to August 31, 1998, the balance of the base pay
which Executive would have earned during the first year of this
Agreement (September 1st to August 31st) if he had not been
terminated will be paid to Executive over that period of time
plus one-half of one year's base pay will be paid over the course
of the following six months;
(3) If the termination occurs after August 31, 1998, one-half of
one year's base pay will be paid to Executive over the course of
the six months following the termination.
F. Legal Expenses. It is further agreed that Employer will pay
all reasonable legal expenses of Executive in the event that
Executive defends or brings any action under this Agreement,
provided, however, that Employer shall not be obligated to pay
the legal expenses of Executive if, in good faith, the Board of
Directors determines that, Executive acted in a manner Executive
believed to be adverse to the best interests of Employer or that
Executive should have known that his conduct was unlawful.
Notwithstanding such a determination, the Board shall be
obligated to reimburse Executive for said legal expenses if he
successfully defends or successfully prosecutes his case.
8. Notices. Any notice to be given pursuant to this Agreement
shall be sent by certified mail, postage prepaid, or by fax or
delivered in person to the parties at the following addresses or
at such other address as either party may from time to time in
writing designate:
To Executive: Edward F. Paquette
88 Columbine Road
Milton, Massachusetts 02186
To Employer: Standex International Corporation
6 Manor Parkway
Salem, New Hampshire 03079
Attention: Edward J. Trainor
9. Invention and Trade Secret Agreement. Executive agrees that
he will execute an Invention and Trade Secret Agreement
simultaneously with the execution of this Agreement. That
Invention and Trade Secret Agreement shall remain in full force
and effect while this Agreement is in effect and, as provided in
the Invention and Trade Secret Agreement, after termination
hereof.
10. Specific Performance. It is acknowledged by both parties
that damages will be an inadequate remedy to Employer in the
event that Executive breaches or threatens to breach his
commitments under Section 4 or under the Invention and Trade
Secret Agreement. Therefore, it is agreed that Employer, may
institute and maintain an action or proceeding to compel the
specific performance of the promises of Executive contained
herein and therein. Such remedy shall, however, be cumulative,
and not exclusive, to any other remedy which Employer may have.
11. Survival. The obligations contained in Sections 4 and 10
shall survive the termination of this Agreement. In addition,
the termination of this Agreement shall not affect any of the
rights or obligations of either party arising prior to or at the
time of the termination of this Agreement or which may arise by
any event causing the termination of this Agreement.
12. Covenants Severable. In the event that any covenant of this
Agreement shall be determined invalid or unenforceable and the
remaining provisions can be given effect, then such remaining
provisions shall remain in full force and effect.
13. Entire Agreement; Amendment. This Agreement supersedes any
employment understanding or agreement (except the Invention and
Trade Secret Agreement) which may have been previously made by
Employer or its respective subsidiaries or affiliates with
Executive. This Agreement, together with the Invention and Trade
Secret Agreement, represents all the terms and conditions and the
entire agreement between the parties hereto with respect to the
employment of Executive by Employer. This Agreement may be
modified or amended only by written agreement signed by Employer
and Executive.
14. Assignment. This Agreement is personal between Employer and
Executive and may not be assigned; provided, however, that
Employer shall have the absolute right at any time, or from time
to time, to sell or otherwise dispose of its assets or any part
thereof or to reconstitute the same into one or more subsidiary
corporations or divisions or to merge, consolidate or enter into
similar transactions. In the event of any such transaction, the
term "Employer" as used herein shall mean and include such
successor corporation.
15. Change of Control.
A. In the event of a change in control of Employer required to
be reported under Item 6(e) of Schedule 14A of Regulation 14A of
the Securities Exchange Act of 1934, Executive may terminate his
employment at any time if there is a change in his general area
of responsibility, title or place of employment, or if his salary
or benefits are lessened or diminished.
Following a change of control of Employer, any
termination of Executive's employment by Executive pursuant
to the immediately preceding sentence, then:
(i) Executive shall be promptly paid a lump sum payment equal to
his current annual base salary plus the amount of the most recent
annual bonus paid to him, if any; and
(ii) Executive shall become 100% vested in all options which
have been granted to him under the provisions of Section 6; and
(iii) All life insurance and medical plan benefits covering
the Executive shall be continued at the expense of Employer for
the one-year period following such termination.
16. Governing Law; Binding Nature of Agreement. This Agreement
shall be construed in accordance with the laws of the State of
New Hampshire and shall be binding upon and inure to the benefit
of the parties hereto, their respective heirs, executors,
administrators, successors and assigns.
IN WITNESS WHEREOF, Employer has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized
and its corporate seal to be hereto affixed, and Executive has
executed the within instrument as a sealed document, all as of
the day and year first above written.
STANDEX INTERNATIONAL CORPORATION
By: /S/ Edward J. Trainor
Edward J. Trainor, President
Attest:
/S/ Deborah A. Rosen
Deborah A. Rosen
Assistant Secretary
/S/ Edward F. Paquette
Edward F. Paquette
Witness:
______________________________
