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, 1999 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, 1999 was 12,851,020.
STANDEX INTERNATIONAL CORPORATION
I N D E X
Page No.
PART I. FINANCIAL INFORMATION:
Item 1.
Statements of Consolidated Income for the Three
Months Ended September 30, 1999 and 1998 2
Consolidated Balance Sheets, September 30, 1999
and June 30, 1999 3
Statements of Consolidated Cash Flows for the
Three Months Ended September 30, 1999 and 1998 4
Notes to Financial Information 5-6
Item 2.
Management's Discussion and Analysis 7-8
Item 3.
Quantitative and Qualitative Disclosures About
Market Risk 9
PART II. OTHER INFORMATION:
Item 6.
Exhibits and Reports on Form 8-K 10
PART I. FINANCIAL INFORMATION
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Statements of Consolidated Income
(000 Omitted)
<CAPTION>
Three Months Ended
September 30
1999 1998
<S> <C> <C>
Net Sales $157,803 $157,377
Cost of Products Sold 108,110 107,460
Gross Profit 49,693 49,917
Selling, General and Administrative Expenses 34,460 34,217
Income from Operations 15,233 15,700
Other Income/(Expense):
Gain on Stock Received 2,734 0
Interest Expense (2,659) (2,857)
Interest Income 160 101
Other Income/(Expense) - net 235 (2,756)
Income Before Income Taxes 15,468 12,944
Provision for Income Taxes 5,951 4,987
Net Income $ 9,517 $ 7,957
Earnings Per Share:
Basic $ .74 $ .61
Diluted $ .74 $ .61
Cash Dividends Per Share $ .19 $ .19
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
<CAPTION>
September 30 June 30
1999 1999
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 4,011 $ 5,909
Receivables, net of allowances for
doubtful accounts 102,116 97,871
Inventories (approximately 45%
finished goods, 20% work in
process, and 35% raw materials
and supplies) 115,891 119,955
Prepaid expenses 11,748 4,774
Total current assets 233,766 228,509
PROPERTY, PLANT AND EQUIPMENT 250,501 248,913
Less accumulated depreciation 146,452 144,130
Property, plant and equipment, net 104,049 104,783
OTHER ASSETS:
Prepaid pension cost 33,230 32,624
Goodwill, net 31,837 32,110
Other 13,459 12,370
Total other assets 78,526 77,104
TOTAL $ 416,341 $410,396
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 4,621 $ 3,963
Accounts payable 37,063 35,975
Income taxes 9,885 6,202
Accrued expenses 32,683 35,855
Total current liabilities 84,252 81,995
LONG-TERM DEBT (less current portion
included above) 146,887 148,111
DEFERRED INCOME TAXES AND OTHER LIABILITIES 18,003 17,989
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 9,273 9,159
Retained earnings 352,681 345,613
Accumulated other comprehensive income (4,481) (3,478)
Less cost of treasury shares (232,250) (230,969)
Total stockholders' equity 167,199 162,301
TOTAL $ 416,341 $410,396
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
<CAPTION>
Three Months Ended
September 30
1999 1998
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 9,517 $ 7,957
Depreciation and amortization 3,493 3,690
Net changes in assets and liabilities (8,037) (12,001)
Net Cash (Used for)/Provided by Operating
Activities 4,973 (354)
Cash Flows from Investing Activities:
Expenditures for property and equipment (2,737) (4,103)
Other 113 552
Net Cash Used for Investing Activities (2,624) (3,551)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 6,614 3,626
Net payments of debt (7,180) (37)
Cash dividends paid (2,449) (2,486)
Purchase of treasury stock (1,615) (2,270)
Other, net 448 533
Net Cash Used for Financing Activities (4,182) (634)
Effect of Exchange Rate Changes on Cash (65) (116)
Net Changes in Cash and Cash Equivalents (1,898) (4,655)
Cash and Cash Equivalents at Beginning of Period 5,909 9,256
Cash and Cash Equivalents at September 30 $ 4,011 $ 4,601
Supplemental Disclosure of Cash Flow Information:
Cash paid during the three months for:
Interest $ 3,192 $ 3,541
Income taxes $ 2,268 $ 2,003
</TABLE>
NOTES TO FINANCIAL INFORMATION
1. Management Statement
The financial statements as reported in this 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, 1999 and 1998.
These financial statements should be read in conjunction with the
audited financial statements as of June 30, 1999. Accordingly, footnote
disclosures that would substantially duplicate the disclosures contained
in the latest audited financial statements have been omitted from this
filing.
<TABLE>
2. Per Share Calculation
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
September 30
1999 1998
Basic - Average Shares
<S> <C> <C>
Outstanding 12,883 13,046
Effect of Dilutive Securities:
Stock Options 59 67
Diluted - Average Shares
Outstanding 12,942 13,113
Both basic and diluted incomes are the same for computing earnings per
share.
</TABLE>
Cash dividends per share have been computed based on the shares
outstanding at the time the dividends were paid. The shares used in
this calculation for the three months ended September 30, 1999 and 1998
were 12,892,000 and 13,082,000, 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 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.Comprehensive Income
In addition to net income, the only item which would be included in
comprehensive income is foreign currency translation adjustments. For
the three months ended September 30, 1999 and 1998, comprehensive income
totaled approximately $8,514,000 and $7,487,000, respectively.
<TABLE>
5. Industry Segment Information
The Company is composed of three product segments. Net sales include
only transactions with unaffiliated customers and include no
intersegment sales. Operating income by segment excludes general
corporate expenses, interest expense, and the gain on stock received.
<CAPTION>
Income
Net Sales From Operations
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Food Service 37,783 38,193 3,525 4,281
Industrial 67,050 67,805 7,433 7,517
Consumer 52,970 51,379 6,988 5,767
Corporate (2,713) (1,865)
Total 157,803 157,377 15,233 15,700
</TABLE>
6. Other Income
During the current quarter, the Company received marketable stock of an
insurance company in which Standex owned life policies. The stock was
received pursuant to a plan to "demutualize" the insurance company by
converting from a mutual company to a stock company. The stock receipt
resulted in recognizing an unusual gain of $2,734,000 ($1,668,000 net of
taxes or 13 cents per share).
STANDEX INTERNATIONAL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Statements contained in the following "Management's Discussion and
Analysis" that are not based on historical facts are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms or variations of
those terms or the negative of those terms. There are many factors that
affect the Company's business and the results of its operations and may
cause the actual results of operations in future periods to differ
materially from those currently expected or desired. These factors include
uncertainties in competitive pricing pressures, general domestic and
international business and economic conditions and market demand.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the first quarter of fiscal 2000 the Company invested $2.7 million
in plant and equipment, paid dividends of $2.4 million, and purchased $1.6
million of the Company's Common Stock. These expenditures were primarily
funded with net operating cash flows of $5.0 million. The Company intends
to continue its policy of utilizing its funds to make acquisitions when
conditions are favorable, invest in property, plant and equipment, pay
dividends, and purchase its Common Stock.
Year 2000 Computer Issues - Under a program started in November 1997, the
Company conducted a review of its computer systems and identified the
programs and applications that were affected by the widely discussed
software problems associated with the Year 2000. As of September 30, 1999,
the Company's critical systems have either been appropriately modified and
tested or have been replaced with software that is Year 2000 compliant.
The total cost of modifying all programs, which has been charged to expense
(primarily in fiscal year 1998), was approximately $600,000.
The Company has also communicated with key suppliers, financial
institutions and others with which it and its various operating units do
business, to assure that such third parties are also timely addressing and
rectifying their "Year 2000" issues. However, the Company believes it has
alternate vendors who could provide for the Company's needs if current
vendors are negatively impacted.
New Accounting Pronouncements - In June 1998 the Financial Standards Board
released Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS No.
133 establishes new standards of accounting and reporting for derivative
instruments and hedging activities and will be effective for the Company in
fiscal 2001. Management is currently evaluating the effect of adopting
SFAS No. 133 on its consolidated financial statements.
OPERATIONS
Quarter Ended September 30, 1999
as Compared to the Quarter Ended September 30, 1998
The first quarter of fiscal 2000 reflected only a small sales increase when
compared to the same quarter in fiscal 1999. However, taking into account
approximately $5.5 million of prior year's sales of product lines that were
disposed of during fiscal 1999, sales for the current year's first quarter
increased about 4%. This increase was primarily due to unit volume
increases and not price increases. In addition, the effect of changes in
average foreign exchange rates from the beginning of the quarter to the end
was not significant.
The Food Service segment experienced sales softness primarily in two areas:
a slowdown in one of its major convenience/drug store customers and an
industry wide softness in the beverage dispensing industry. This was
mitigated by moderate sales gains in other units of the segment. A three
percent ($1.6 million) sales rise was reflected in the Consumer segment as
a result of all divisions recording improved customer activity despite the
absence of a division sold during fiscal 1999. The Industrial segment
reflected flat sales as compared to the same quarter in the prior year.
However, after adjusting for approximately $4.2 million of prior year sales
of two product lines sold during fiscal 1999, sales of this segment rose
over five percent. Customer demand improved at a number of units, but
these increases were partially tempered by the continued sales shortfall at
the binding operation.
The Company's overall gross profit margin remained at 32%. All segments
reflected unchanged gross profit margins. As compared to the same quarter
last year, corporate-wide selling, general, and administrative expenses
(SG&A) remained unchanged as a percentage of sales. However, the Food
Service segment's SG&A did not decline in the same proportion as sales due
to fixed expenses; this reduced this segment's operational income. Plant
relocation expenses in the Industrial segment negatively impacted income,
but were partially offset by the cost cutting efforts at the binding
operation. The sales increase and relatively stable SG&A expenses of the
Consumer segment produced a 21% increase in operating income. Higher than
normal expenses (none of which were individually significant) were recorded
in the Corporate segment in the latest quarter.
During the current quarter, other income of $2.7 million was recorded
resulting from the receipt of marketable stock of an insurance company, in
which Standex owned life policies, that "demutualized" by converting from a
mutual company to a stock company. This gain is more fully described in
the Notes to Financial Information.
A decline of almost seven percent in interest expense was registered in the
latest quarter as compared to the same quarter last year. A reduction in
debt of $18.5 million between the two quarters accounts for this expense
decrease.
As a result of the above, income before income taxes rose 19.5%. Since the
effective tax rate for both quarters was the same at 38.5%, the resultant
net income increased by 19.6%.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a number of market risks, primarily the effects
of changes in foreign currency exchange rates and interest rates.
Investments in foreign subsidiaries and branches, and their resultant
operations, denominated in foreign currencies, create exposures to changes
in exchange rates. The Company's use of its bank credit agreements
creates an exposure to changes in interest rates. The effect of changes
in exchange rates and interest rates on the Company's earnings has been
relatively insignificant compared to other factors that also affect
earnings, such as business unit sales and operating margins. The Company
does not hold or issue financial instruments for trading, profit or
speculative purposes.
There have been no significant changes in the exposure to changes in both
foreign currency and interest rates.
PART II. OTHER INFORMATION
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 September 30, 1999.
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: November 10, 1999 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: November 10, 1999 /s/ Edward F. Paquette
Edward F. Paquette
Vice President/CFO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> SEP-30-1999
<CASH> 4,011
<SECURITIES> 0
<RECEIVABLES> 105,895
<ALLOWANCES> 3,779
<INVENTORY> 115,891
<CURRENT-ASSETS> 233,766
<PP&E> 250,501
<DEPRECIATION> 146,452
<TOTAL-ASSETS> 416,341
<CURRENT-LIABILITIES> 84,252
<BONDS> 146,887
0
0
<COMMON> 41,976
<OTHER-SE> 125,223
<TOTAL-LIABILITY-AND-EQUITY> 416,341
<SALES> 157,803
<TOTAL-REVENUES> 160,697
<CGS> 108,110
<TOTAL-COSTS> 108,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,659
<INCOME-PRETAX> 15,468
<INCOME-TAX> 5,951
<INCOME-CONTINUING> 9,517
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,517
<EPS-BASIC> 0.74
<EPS-DILUTED> 0.74
</TABLE>
