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 March 31, 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
March 31, 1997 was 13,288,079.
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, 1997 and 1996. . . . . . . . . . . . . . . . . 2
Consolidated Balance Sheet, March 31, 1997 and
June 30, 1996. . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Changes in Consolidated Cash Flows for the
Nine Months Ended March 31, 1997 and 1996. . . . . . . . . . . 4
Notes to Financial Information . . . . . . . . . . . . . . . . 5
Management's Discussion and Analysis . . . . . . . . . . . . . 6-8
PART II. OTHER INFORMATION . . . . . . . . . . . . . . . . . . 9
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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
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $130,454 $130,334 $422,968 $426,670
Cost of Products Sold 88,836 87,427 284,523 285,051
Gross Profit Margin 41,618 42,907 138,445 141,619
Selling, General & Admini-
strative Expenses 32,444 31,671 99,839 96,862
Income from Operations 9,174 11,236 38,606 44,757
Other Income/(Expense):
Interest Expense (2,064) (2,205) (6,400) (6,901)
Interest Income 102 155 256 397
Other Income/(Expense) - net (1,962) (2,050) (6,144) (6,504)
Income Before Income Taxes 7,212 9,186 32,462 38,253
Provision for Income Taxes 3,043 3,624 12,624 14,204
Net Income $ 4,169 $ 5,562 $ 19,838 $ 24,049
Earnings Per Share $ 0.31 $ 0.41 $ 1.47 $ 1.72
Cash Dividends per Share $ 0.19 $ 0.18 $ 0.56 $ 0.53
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheet
(000 Omitted)
<CAPTION>
March 31 June 30
1997 1996
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 7,412 $ 5,147
Receivables, net of allowance for doubtful accounts 80,185 88,567
Inventories (approximately 45% finished goods, 20%
work in process, and 35% raw materials and supplies) 110,676 109,720
Prepaid expenses 6,650 3,958
Total current assets 204,923 207,392
PROPERTY, PLANT AND EQUIPMENT 222,477 217,478
Less accumulated depreciation 136,623 130,862
Total property, plant and equipment 85,854 86,616
OTHER ASSETS:
Prepaid pension cost 23,556 20,744
Goodwill, net 15,254 14,656
Other 9,051 5,925
Total other assets 47,861 41,325
TOTAL $338,638 $335,333
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 2,308 $ 5,287
Accounts payable 28,637 29,202
Income taxes 4,254 1,567
Accrued expenses 30,879 32,476
Total current liabilities 66,078 68,532
LONG-TERM DEBT (less current portion included above) 115,083 113,822
DEFERRED INCOME TAXES AND OTHER LIABILITIES 16,197 18,288
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Paid-in capital 5,313 3,378
Retained earnings 309,346 296,991
Cumulative translation adjustment (1,025) (572)
Less cost of treasury shares (214,330) (207,082)
Total stockholders' equity 141,280 134,691
TOTAL $338,638 $335,333
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Statement of Consolidated Cash Flows
(000 Omitted)
<CAPTION>
Nine Months Ended
March 31
1997 1996
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 19,838 $ 24,049
Depreciation and amortization 9,633 9,273
Net changes in assets and liabilities (4,101) (7,553)
Net Cash Provided by Operating Activities 25,370 25,769
Cash Flows from Investing Activities:
Expenditures for property and equipment (9,479) (11,116)
Other 1,033 433
Net Cash Used for Investing Activities (8,446) (10,683)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 1,581 51,445
Net payments of debt (3,299) (44,135)
Cash dividends paid (7,483) (7,319)
Purchase of treasury stock (9,664) (18,346)
Other, net 4,351 2,566
Net Cash Used for Financing Activities (14,514) (15,789)
Effect of Exchange Rate Changes on Cash (145) (135)
Net Change in Cash and Cash Equivalents 2,265 (838)
Cash and Cash Equivalents at Beginning of Year 5,147 9,543
Cash and Cash Equivalents at March 31 $ 7,412 $ 8,705
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months for:
Interest $ 7,246 $ 6,748
Income taxes $ 11,537 $ 15,263
</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, 1997 and 1996.
2. Per Share Calculation
Shares (in thousands) used in per share data are as follows:
March 31
1997 1996
Earnings 13,534 14,019
Cash Dividends 13,362 13,810
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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONSOLIDATION AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
During the nine months ended March 31, 1997, net operating cash flows of
$25.4 million were used to purchase $9.7 million of the Company's Common
Stock, invest $9.5 million in plant and equipment and pay out $7.5 million
of cash dividends to the Company's shareholders.
During the first quarter of fiscal 1997, the Company acquired certain
assets of two companies: The Vidalia Onion Store and Salsa Express. In the
second quarter, the Company acquired 100% of the Common Stock of Fellowship
Bookstores. These purchases were primarily financed from operating cash
flows and from the issuance of Standex stock. Aggregate annual net sales
for these three acquisitions are approximately $9.1 million.
The Company intends to continue its policy of using its funds to acquire
property, plant and equipment, pay dividends, purchase its Common Stock and
make acquisitions when conditions are favorable.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets to be Disposed of." The Company has
evaluated this standard and determined that it will not materially affect
the Company's financial condition or operating results.
In October 1995, the Financial Accounting Standards Board issued 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) that such compensation costs be
measured based on the fair value of stock options awarded. The Company is
required to adopt this standard during fiscal year 1997. 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, since
management has determined that the latter provides the more accurate
presentation of costs associated with stock based compensation awards to
employees. As a result, compliance with this standard will have no impact
on the Company's 1997 financial statements, other than the required
additional footnote disclosure of the proforma effect of SFAS No. 123 on
net income and earnings per share.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This standard changes the method of calculating
earnings per share and is effective December 15, 1997; earlier adoption is
not permitted. The Company has evaluated this standard and determined that
it will not result in a significant change to the Corporation's earnings
per share.
OPERATIONS
Quarter Ended March 31, 1997
as compared to the Quarter Ended March 31, 1996
For the quarter ended March 31, 1997, Net Sales increased $120,000 when
compared to the same period of the prior year. Management believes the
majority of the fluctuations in Net Sales reported by each segment are
primarily due to changes in unit volumes. In addition, the effect of
changes in the average foreign exchange rates from March 31, 1996 to March
31, 1997 on Net Sales for the quarter was not significant.
The Graphics/Mail Order and Institutional segments reported growth in Net
Sales of $1.8 million and $1.1 million, respectively, due to improved
demand and acquisitions made during fiscal 1997. However, this growth was
offset by a decline in Net Sales from the Industrial segment of $2.8
million due to slowness within the economy reported by its European
operations and the disposition of a product line at the end of fiscal 1996.
The Gross Profit Margin Percentage declined to 31.9% for the third quarter
of fiscal 1997 as compared to 32.9% in the same period of the prior year.
All three segments reported decreases in the Gross Profit Margin Percentage
due to competitive pressures on pricing experienced by a few of the
operations within each segment, as well as restructuring costs at one of
the divisions within the Institutional segment.
For the quarter ended March 31, 1997, Selling, General and Administrative
Expenses (SG&A) rose $773,000, or 2.4%, to represent 24.9% of Net Sales for
the third quarter of fiscal 1997 as compared to 24.3% for the same period
of the prior year. The Institutional and Industrial segments reported
slight increases in SG&A. SG&A reported by the Graphics/Mail Order segment
rose 10%. The majority of this increase was attributable to acquisitions
within this segment; however, these costs were somewhat higher than
anticipated due to difficulties assimilating some of the acquisitions.
Management is taking steps to reduce these costs to a more acceptable
level.
Interest Expense decreased 6.4%, or $141,000, as compared to the third
quarter of fiscal 1996 due to a decrease in borrowings and lower interest
rates than those experienced in the same period of the prior year.
The above factors resulted in a $2.0 million decline in Income Before
Income Taxes as compared to the same period of the prior year. The
<PAGE>
effective tax rate in the third quarter rose to 42.2% from 39.4% reported
in the third quarter of the prior year due mainly to reduced availability
of foreign tax credits.
For the third quarter of fiscal 1997, Net Income decreased $1.4 million, or
25%, when compared to the same period of the prior year as a result of the
factors described above.
Nine Months Ended March 31, 1997
as compared to Nine Months Ended March 31, 1996
Net Sales for the nine months ended March 31, 1997, decreased $3.7 million
as compared to the same period of the prior year. 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.
The Graphics/Mail Order segment registered growth in Net Sales of $4.1
million due to increased demand and acquisitions made during fiscal 1997.
This sales growth was offset by declines in Net Sales reported by the
Institutional and Industrial segments. Net Sales from the Institutional
segment decreased $2.2 million mainly due to softness in some portions of
the food service sector and a decrease in demand for seasonal products.
The Industrial segment's Net Sales dropped $5.6 million due to factors
discussed in the analysis of results for the quarter.
For the nine months ended March 31, 1997, the Gross Profit Margin
Percentage declined to 32.7% from 33.2% reported in the same period of the
prior year. The Graphics/Mail Order segment's Gross Profit Margin
Percentage rose slightly. However, the Gross Profit Margin Percentages
reported by the Institutional and Industrial segments each decreased one
percentage point due to reduced sales volumes, competitive pressures on
pricing and restructuring costs at one of the divisions within the
Institutional segment.
Selling, General and Administrative Expenses (SG&A) rose $3.0 million to
represent 23.6% of Net Sales for the nine months ended March 31, 1997 as
compared to 22.7% of Net Sales for the same period of fiscal 1996. The
Institutional and Industrial segments reported slight increases in SG&A.
However, the Graphics/Mail Order segment reported an 8.6% increase in SG&A
due to the same factors described in the discussion of quarterly results.
Interest Expense declined $501,000 for the nine months ended March 31,
1997, primarily due to lower interest rates than those experienced in the
same period of the prior year.
For the nine months ended March 31, 1997, Income Before Income Taxes
decreased $5.8 million for the reasons described above. The effective tax
rate rose to 38.9% as compared to 37.1% for the nine months ended March 31,
1996 for the same reasons described in the discussion of quarterly results.
Due to the factors described above, Net Income for the nine months ended
March 31, 1997 decreased $4.2 million, or 17.5%, from the same period of
the prior year.
PART II. OTHER INFORMATION
NO APPLICABLE ITEMS.
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: May 12, 1997 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: May 12, 1997 /s/ Lindsay M. Sedwick
Lindsay M. Sedwick
Sr. Vice President of Finance/CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,412
<SECURITIES> 0
<RECEIVABLES> 83,108
<ALLOWANCES> 2,923
<INVENTORY> 110,676
<CURRENT-ASSETS> 204,923
<PP&E> 222,477
<DEPRECIATION> 136,623
<TOTAL-ASSETS> 338,638
<CURRENT-LIABILITIES> 66,078
<BONDS> 115,083
0
0
<COMMON> 41,976
<OTHER-SE> 99,304
<TOTAL-LIABILITY-AND-EQUITY> 338,638
<SALES> 422,968
<TOTAL-REVENUES> 423,224
<CGS> 284,523
<TOTAL-COSTS> 284,523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,400
<INCOME-PRETAX> 32,462
<INCOME-TAX> 12,624
<INCOME-CONTINUING> 19,838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,838
<EPS-PRIMARY> 1.47
<EPS-DILUTED> 1.47
</TABLE>
