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 December 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 December
31, 1997 was 13,029,309.
STANDEX INTERNATIONAL CORPORATION
I N D E X
PART I. FINANCIAL
INFORMATION: Page No.
Statements of Consolidated Income for the Three
and Six Months Ended December 31, 1997 and 1996 2
Consolidated Balance Sheets, December 31, 1997
and June 30, 1997 3
Statements of Consolidated Cash Flows for the Six
Months Ended December 31, 1997 and 1996 4
Notes to Financial Information 5
Management's Discussion and Analysis 6-8
PART II. OTHER INFORMATION: 9
<TABLE>
PART I. FINANCIAL INFORMATION
STANDEX INTERNATIONAL CORPORATION
Statements of Consolidated Income
(000 Omitted)
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net Sales $168,090 $152,315 $309,151 $292,514
Cost of Products Sold 111,309 100,108 206,505 195,687
Gross Profit Margin 56,781 52,207 102,646 96,827
Selling, General &
Administrative Expenses 40,640 37,153 72,113 67,395
Income from Operations 16,141 15,054 30,533 29,432
Other Income/(Expense):
Interest Expense (2,878) (2,213) (4,970) (4,336)
Interest Income 106 82 225 154
Other Income/(Expense) - net (2,772) (2,131) (4,745) (4,182)
Income Before Income Taxes 13,369 12,923 25,788 25,250
Provision for Income Taxes 5,047 4,796 9,807 9,581
Net Income $8,322 $8,127 $15,981 $15,669
Earnings Per Share:
Basic $.64 $.61 $1.22 $1.17
Diluted $.63 $.60 $1.21 $1.16
Cash Dividends Per Share $.19 $.19 $.38 $.37
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
<CAPTION>
December 31 June 30
1997 1997
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $11,361 $6,149
Receivables net of allowances for doubtful
accounts 100,491 86,852
Inventories (approximately 45% finished goods,
25% work in process, and 30% raw materials
and supplies) 120,074 109,454
Prepaid expenses 7,384 4,631
Total current assets 239,310 207,086
PROPERTY, PLANT AND EQUIPMENT 249,501 223,519
Less accumulated depreciation 143,155 137,921
Property, plant and equipment, net 106,346 85,598
OTHER ASSETS:
Goodwill, net 28,937 15,195
Prepaid pension cost 25,809 24,320
Other 10,374 8,839
Total other assets 65,120 48,354
TOTAL $410,776 $341,038
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $3,202 $2,030
Accounts payable 37,413 31,380
Income taxes 6,805 4,481
Accrued expenses and other 31,391 32,249
Total current liabilities 78,811 70,140
LONG-TERM DEBT (less current portion
included above) 166,982 112,347
DEFERRED INCOME TAXES AND OTHER LIABILITIES 16,876 17,366
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 6,089 5,663
Retained earnings 324,921 313,908
Cumulative translation adjustment (771) (1,082)
Less cost of treasury shares (224,108) (219,280)
Total stockholders' equity 148,107 141,185
TOTAL $410,776 $341,038
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
<CAPTION>
Six Months Ended
December 31
1997 1996
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $15,981 $15,669
Depreciation and amortiza tion 6,771 6,435
Net changes in assets and liabilities (8,758) (375)
Net Cash Provided by Operating Activities 13,994 21,729
Cash Flows from Investing Activities:
Expenditures for property and equipment (8,428) (6,444)
Expenditures for acquisitions (46,769) (3,566)
Other (6) 133
Net Cash Used for Investing Activities (55,203) (9,877)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 56,150 2,744
Net payments of debt (343) (3,665)
Cash dividends paid (4,968) (4,958)
Purchase of treasury stock (6,130) (6,399)
Other, net 1,728 3,738
Net Cash Provided by (Used for) Financing
Activities 46,437 (8,540)
Effect of Exchange Rate Changes on Cash (16) 183
Net Change in Cash and Cash Equivalents 5,212 3,495
Cash and Cash Equivalents at Beginning of Year 6,149 5,147
Cash and Cash Equivalents at December 31 $11,361 $8,642
Supplemental Disclosure of Cash Flow Information:
Cash paid during the six months for:
Interest $ 4,596 $4,348
Income taxes $ 7,483 $7,770
</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 six months ended December 31, 1997 and 1996.
2. Per Share Calculation
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128, "Earnings Per
Share." This standard changes the method of calculating and presenting
earnings per share, and was adopted by the Company in the current
quarter. Accordingly, the earnings per share as presented in the
Statements of Consolidated Income have been retroactively restated for
all periods presented.
The following table sets forth the number of shares (in thousands) used
in the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended
December 31 December 31
1997 1996 1997 1996
Basic - Average Shares Outstanding 13,050 13,375 13,080 13,395
Effect of Dilutive Securities:
Stock Options 187 172 174 168
Diluted - Average Shares
Outstanding 13,237 13,547 13,254 13,563
Both basic and diluted income are the same for computing earnings per
share.
Cash dividends per share have been computed based on the shares
outstanding at the time the dividends were paid. The shares (in
thousands) used in this calculation for the six months ended December
31, 1997 and 1996 are 13,074 and 13,399, respectively.
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 SFAS No. 5, "Accounting for Contingencies." Management
believes that such provision is sufficient to cover any future payments,
including legal costs, under such proceedings.
4. Acquisitions
On October 6, 1997, the Company completed the acquisition of the net
assets of ACME Manufacturing Company for cash and a note. 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.
In addition, during the second quarter, the Company purchased for cash
certain assets of an unrelated company's hardware product line which is
complementary to an existing Standex division. Both acquisitions were
accounted for as purchases, and, accordingly, the purchase price was
allocated to the assets acquired based on their fair value and resulted
in the recognition of goodwill of approximately $14,000,000.
STANDEX INTERNATIONAL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
MATERIAL CHANGES IN FINANCIAL CONDITION
During the six months ended December 31, 1997, net operating cash flows of
$14 million and proceeds from additional borrowings of $56.2 million were
used to purchase $6.1 million of the Company's Common Stock, invest $8.4
million in plant and equipment, pay out $5.0 million of cash dividends to
the Company's shareholders and pay $46.8 million for acquisitions.
During the second quarter of 1998 the Company acquired 100% of the net
assets of ACME Manufacturing Company and certain assets of the hardware
product line of an unrelated company. Both of these acquisitions were
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 June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (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.
OPERATIONS
Quarter Ended December 31, 1997
as compared to the Quarter Ended December 31, 1996
For the second quarter ended December 31, 1997, Net Sales increased by
$15.8 million as compared to the second quarter of the prior year. This
represents the highest second quarter sales level in the Company's history.
Acquisitions accounted for the majority of this increase but were partially
off-set by the absence of sales of businesses disposed of in the second
half of the prior year. Management believes the majority of fluctuations
in Net Sales reported by each segment, excluding these acquisition, are
primarily due to changes in unit volumes and consumer demand. In addition,
although changes in the average foreign exchange rates from December 31,
1996 to December 31, 1997 have had a negative impact on Net Sales for the
quarter, the total effect was not significant.
Net Sales in both the Food Service and Industrial Segments remained
approximately the same as the prior year. There was, however, significant
growth in sales at several divisions as a result of increased demand which
was offset by the absence of sales from dispositions made in the second
half of 1997 and continued sluggishness in some of our European companies.
The Consumer Segment reported an increase of $16.2 million in Net Sales due
to acquisitions and improved demand.
The Gross Profit Margin Percentage (GPMP) decreased to 33.8%, as compared
to the prior year's percentage of 34.3%. The GPMP reported in the Consumer
Segment fell to 36.1%, a decline from the prior year's percentage of 40.0%
primarily due to a combination of lower margins in a seasonal business and
lower initial margins of an acquisition. The GPMP reported in the
Industrial Segment also fell from the previous year's percentage of 33.6%
to 32.3%, reflecting competitive pressures encountered by certain
operations in Europe. However, the Food Service Segment reported an
increase in GPMP from 28.0% in 1997 to 29.2% in 1998 as a result of reduced
costs.
Selling, General and Administrative Expenses (SG&A) decreased to 24.2% of
Net Sales for the second quarter of 1998 as compared to 24.4% for the same
period in the prior year. None of the fluctuations reported by the
Company's three segments were individually significant; such fluctuations
were in line with the changes in Net Sales discussed above.
Interest Expense increased by 30%, or $665,000, as compared to the second
quarter of 1997 due mainly to increased borrowings and higher interest
rates.
The above factors resulted in a $446,000 increase in Income Before Income
Taxes as compared to the same period of the prior year. The effective tax
rate in the second quarter increased from 37.1% in 1997 to 37.8% in 1998
due to several factors, none of which was individually significant.
As a result of the above, Net Income for the second quarter of 1998
increased $195,000, or 2.4%, over the same period in the prior year.
Six Months Ended December 31, 1997
as compared to the Six Months Ended December 31, 1996
Net Sales for the six months ended December 31,1997 increased $16.6 million
as compared to the same period of the prior year. As stated in the
discussion of quarterly results, the majority of this increase ($14.7
million) resulted from acquisitions. Net Sales for both the Food Service
and Industrial Segments remained flat as compared to the prior year. While
increased demand resulted in higher sales at several divisions in both
segments, these increases were offset by the absence of sales from
dispositions made in the second half of 1997. The Consumer Segment
reported an increase of $17.7 million in Net Sales due to acquisitions and
improved demand.
The Gross Profit Margin Percentage (GPMP) for the six months ended December
31, remained the same (at approximately 33%) for both the current and prior
year. The Food Service Segment reported GPMP of 28.9%, compared to the
prior year percentage of 27.6%, reflecting reduced costs. The Consumer
Segment reported a decline in GPMP from 38.3% in 1997 to 35.8% in 1998
primarily for the same reasons enumerated in the discussion of quarterly
results. GPMP in the Industrial Segment was approximately the same (at
33%) as compared to the prior year.
Selling, General and Administrative Expenses (SG&A) rose to 23.3% of Net
Sales for the six months ended December 31, 1997 as compared to 23% of Net
Sales for the same period of 1997. None of the fluctuations reported by
the Company's three segments were individually significant, and such
fluctuations were in line with the changes in Net Sales discussed above.
Interest Expense increased by $634,000 as compared to the prior year, due
to increased borrowings and higher interest rates.
For the six months ended December 31, 1997, Income Before Taxes increased
$538,000 for the reasons described above. The Company's effective tax rate
was almost the same as the prior year's effective tax rate.
Due to the factors described above, Net Income for the six months ended
December 31, 1997 increased $312,000, or 2%, when compared to the same
period of the prior year.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on October 28,
1997. Three matters were voted upon at the meeting: the election of
directors, the adoption of a new Employee Stock Purchase Plan and the
approval of the appointment of independent auditors of the Company. The
name of each director elected at the meeting and the number of votes cast
as to each matter are as follows:
Proposal 1 (Election of Directors)
Nominee For Withheld
William R. Fenoglio 10,825,746 140,246
Walter F. Greeley 10,832,902 133,090
C. Kevin Landry 10,797,302 168,690
H. Nicholas Muller, III Ph.D. 10,789,451 176,541
Edward J. Trainor 10,818,930 147,062
Proposal 2 (Adoption of Employee Stock Purchase Plan)
For Against Abstain
10,711,802 195,615 58,576
Proposal 3 (Appointment of Auditors)
For Against Abstain
10,888,826 28,795 48,371
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended December 31, 1997.
ALL OTHER ITEMS ARE INAPPLICABLE
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: February 12, 1998 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: February 12, 1998 /s/ Lindsay M. Sedwick
Lindsay M. Sedwick
Sr. Vice President of Finance/CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 11,361
<SECURITIES> 0
<RECEIVABLES> 103,471
<ALLOWANCES> 2,980
<INVENTORY> 120,074
<CURRENT-ASSETS> 239,310
<PP&E> 249,501
<DEPRECIATION> 143,155
<TOTAL-ASSETS> 410,776
<CURRENT-LIABILITIES> 78,811
<BONDS> 166,982
0
0
<COMMON> 41,976
<OTHER-SE> 106,131
<TOTAL-LIABILITY-AND-EQUITY> 410,776
<SALES> 309,151
<TOTAL-REVENUES> 309,376
<CGS> 206,505
<TOTAL-COSTS> 206,505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,970
<INCOME-PRETAX> 25,788
<INCOME-TAX> 9,807
<INCOME-CONTINUING> 15,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,981
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 0
</TABLE>
