roastme
BKI Worldwide manufactures ovens/rotisseries for supermarkets,
restaurants, delicatessens and convenience stores.
[photo shows a BKI oven/rotisserie]
driveme
Standex Engraving provides the rolls and texturizing molds that
enhance automotive interiors.
[photo shows a Ford dashboard]
comfortme
Standex Air Distribution Products manufactures high quality heating
and air conditioning ductwork for your home.
[photo shows duct product]
what's essential to you?
developme
Standard Publishing's Baby Blessings product line not only teaches
Christian values to young children, but also provides parents with a
powerful developmental tool that is based on pioneering university
research findings on how children learn.
[photo shows a selection of Baby Blessings books]
chillme
Master-Bilt Products manufactures a variety of cold cases for the
beverage and frozen food industry.
[photo shows a reach in freezer case]
liftme
Custom Hoists manufactures multi stage hydraulic cylinders for
construction dump trucks and dump trailers.
[photo shows a dump truck in the lift position]
Standex 2000 Annual Report to Shareholders
FINANCIAL HIGHLIGHTS
2000 Highlights
Standex is a global, multi-industry company that manufactures and
markets products through 16 business units and 91 facilities in 14
countries. Our strategy is to make synergistic acquisitions and
invest in businesses that generate solid revenues and earnings
streams, and then to reinvest for long-term growth - while providing
attractive current returns to our shareholders.
We operate in three broad business segments. Our Food Service and
Consumer businesses are well positioned to capitalize on trends that
reflect new ways of living, working and shopping. Our Industrial
businesses typically serve niche OEM markets, so many of our products
and services are invisible to consumers and end-users. Yet we
typically add functionality, competitive advantage and market appeal
that are critical to the quality and value of the finished product.
Standex International. We make essential products that add value to
your world.
<TABLE>
FINANCIAL PERFORMANCE
Net Sales
1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C>
562,679 564,623 616,180 641,400 637,049
Diluted Earnings
Per Share
1996 1997 1998 1999 2000
As reported * 2.21 2.00 2.13 2.36 2.39
As adjusted ** 2.21 2.00 1.52 2.41 2.17
EBITDA
1996 1997 1998 1999 2000
As reported * 68,790 62,849 68,809 74,698 73,759
As adjusted ** 68,790 62,849 56,051 75,714 71,062
Return on Equity
1996 1997 1998 1999 2000
As reported * 22.8% 19.1% 19.3% 19.0% 18.5%
As adjusted ** 22.8% 19.1% 13.8% 19.3% 16.8%
Note A
EBITDA consist of earnings before interest expense, income taxes,
depreciation and amortization, less interest and other income and
loss on disposition of business. EBITDA is presented because we
believe it is an indicator of our ability to incur and service debt,
and a similar formula is used by our lenders in determining
compliance with financial covenants. However, EBITDA should not be
considered as an alternative to cash flow from operating activities,
as a measure of liquidity or as an alternative to net income as a
measure of operating results in accordance with generally accepted
accounting principles.
* As reported in the Financial Statements
** As adjusted: Fiscal Year 2000 amounts exclude a non-recurring net
after tax gain of $1.7 million or 13 cents per share related to the
demutualization of an insurance company and Fiscal Years 2000, 1999
and 1998 include a net after tax restructuring of $4.4 million or 35
cents per share charge, a $600,000 or 5 cents per share credit, and
an $8.0 million or 61 cents per share charge, respectively.
</TABLE>
WHAT'S ESSENTIAL TO YOU?
Standex makes over 48,000 Industrial, Food Service and Consumer
products that are essential to your everyday life.
Standex International 2000 Annual Report 1
WHAT'S ESSENTIAL TO YOU?
letter to our shareholders
Standex International Corporation experienced a mixed year. Your
Company celebrated 30 years on the New York Stock Exchange and
increased the quarterly dividend for the 27th time in the past 30
years - an enviable record. A major shift, however, from "old
economy" stocks to "new economy" stocks occurred in the financial
markets. Prices paid for "old economy" stocks such as Standex
declined markedly, while money flowed into high tech investments,
many of which were actually reporting losses. This resulted in an
extreme disparity in price/earnings relationships which we believe
will eventually correct itself. In the meantime, we have been
continually examining strategic alternatives in order to release some
of the unrecognized value in Standex.
For the fiscal year ended June 30, 2000, Standex's annual sales
totaled $637.0 million, a slight decline from last year's record
shipments of $641.4 million. After taking into account approximately
$10.8 million of fiscal 1999 shipments from product lines which were
subsequently disposed of, sales for fiscal year 2000 increased
approximately 1%. Earnings, prior to accounting for an unusual gain
and a restructuring charge, were $2.39 per share compared with $2.36
per share on a comparable basis for the previous fiscal year. The
Company experienced solid earnings growth in both our Industrial
Group and our Consumer Group, but realized a significant earnings
shortfall in the Food Service Group. Overall, our margins remain
strong at 33%.
We submitted bids on four major acquisition opportunities during the
year, none of which were consummated. The prices ultimately paid for
these businesses would have been highly dilutive to our earnings and
would have taken several years to be accretive with considerable
risk. We are continuing to seek larger acquisitions with synergistic
and growth possibilities toward our goal of larger, more focused,
business units.
Standex International 2000 Annual Report 2
industrial
food Service
consumer
Officers and Directors ringing the opening bell commemorating 30
years on the New York Stock Exchange.
corporate officers [photo shows Board of Directors, Corporate
Officers and the President of the NYSE clapping after the bell
ringing ceremony]
[number next to name represents their location in the above described
photo]
1 Edward J. Trainor
President and Chief Executive Officer
2 Thomas L. King
Chairman of the Board
3 Edward F. Paquette
Vice President and Chief Financial Officer
4 David R. Crichton
Executive Vice President/Operations
5 Deborah A. Rosen
Vice President, General Counsel and Secretary
The Balance Sheet remains strong with a current ratio of 2.7 to 1,
and a debt to capital ratio of 48.6%. Book value per share reached a
new record of $13.37 per share. A strong cash flow allowed the
Corporation to invest $22.8 million in capital expenditures, pay
$10.0 million in dividends, and repurchase $12.8 million of Standex
common stock while maintaining the debt/capital ratio virtually
unchanged. Excluding the restructuring charge of $4.4 million and the
$1.7 million demutualization gain, return on sales was 4.8% and
return on equity was 18.5%.
The future continues to look promising and our backlogs remain
strong. Our emphasis on operations improvement and technology
development in our Industrial Group is really paying dividends. A
modest rebound in the Food Service sector combined with continuing
good performance for the Consumer and Industrial Groups, should
position us well for the year ahead.
The employees of Standex should be complimented for their efforts and
dedication this past year during a very difficult market environment.
/s/Edward J. Trainor
Edward J. Trainor
President and Chief Executive Officer
/s/Thomas L. King
Thomas L. King
Chairman of the Board
Standex International 2000 Annual Report 3
WHAT'S ESSENTIAL TO YOU?
reliability and functionality
What does it take to compete in today's OEM marketplace-where
customers' expectations and sophistication are constantly increasing?
How will you help them maximize manufacturing efficiency, reduce time
to market, increase end-user satisfaction, satisfy global demand,
and-last but never least-reduce costs?
At the Standex Industrial Group, we help our customers address these
challenges every day by making their products more useful, appealing
and cost-effective to manufacture. From tiny electronic coils and
switches, to precisely machined multi-ton rocket components, to
hoists and casters, to elegant and distinctive product textures
-Standex innovation, expertise and service can add essential quality
and reliability your customers will value.
We're proving it daily at businesses like the recently formed Standex
Engraving Group, which consolidates the sophisticated capabilities of
Roehlen Embossing and our Mold-Tech unit under a single global
banner. With 25 plants in 14 countries and a progressive R&D team,
the unit is the world's leader in texturizing and the only truly
global texturizing resource. We're capitalizing on this position by
focusing on comprehensive texturizing solutions, delivered through
the industry's most extensive network-and the most advanced
technology.
A significant portion of the unit's business is the creation and
delivery of systems that produce manufacturing rolls, plates and
machines that apply textures and patterns to products like vinyl
siding, wall coverings, fine writing papers, and even leather
basketballs and footballs used by your favorite sports teams-and the
kids in the neighborhood. Of increasing importance, however, is the
unit's pioneering work in digitized texturizing: capturing or
creating
Standex International 2000 Annual Report 4
graspme
Standex Engraving provides the texture for making mobile phones
easier to hold.
[photo shows a mobile phone]
illuminateme
Standex Electronics provides the starters for streetlights throughout
the world.
[photo shows a street light and street light starter]
industrial
food service
consumer
informme
Standex Electronics makes a variety of sensors that convey
information about fuel, water and oil levels in your automobile.
[photo shows a variety of sensors]
driveme
Standex Engraving texturizes rolls and molds that enhance automotive
interiors.
[photo shows a family consisting of a father holding a baby with a
son, mother and daughter in front of a Ford dashboard]
WHAT'S ESSENTIAL TO YOU?
digital images of textures using 3-D optical scanning, and using
those images to drive lasers that engrave the textures on rolls and
molds for companies in the global OEM marketplace. Plans call for the
creation of a worldwide network of design centers, which will house
the digitizing technology needed to partner with customers and
generate highly customized texturizing solutions. Sophisticated CAD
modeling technology will allow the customer to view each texture in
advance, before a model is made. The software developed at these
centers will be transmitted via high speed Internet links to
manufacturing centers, where molds, rolls and patterns will be laser-
engraved for the customer at a plant close to that customer's own
facility.
The benefits to the customer are many, but the most significant
advantage is dramatically reduced time-to-market, a competitive
advantage in the fast-moving consumer world. Patterns and textures
that used to take weeks to create will eventually be available on a
worldwide basis in a matter of days.
One of Standex's most impressive technologies can be found in the
Spincraft unit, where multi-ton sheets of metal are precisely formed
and machined to create fuel tank domes and other key components for
the global aerospace industry. Spincraft recently introduced a
patented forming process that allows weld-free domes to be made with
significantly smaller blank sizes, reducing raw material costs by up
to 50%. It's a technological edge that will serve the unit well in
the commercial launch market and Space Shuttle programs, where
Spincraft is partnering with global industry leaders in the design
and development process.
connectme
Spincraft provides a variety of launch vehicle components that are
critical to placing telecommunication satellites into orbit.
[photo shows a satellite]
launchme
Spincraft manufactures rocket engine combustion chambers and fuel
tank components for commercial launch vehicles as well as the Space
Shuttle program.
[photo shows a combustion chamber and a rocket in launch]
deliverme
Jarvis Caster Group manufactures casters and wheels for luggage carts
for all the major hotels in the world.
Brass Birdcager Cart courtesy of Forbes Industries, Ontario, CA.
[photo shows the Brass Birdcage Cart] [photo to left -bellman]
liftme
Custom Hoists manufactures multi stage hydraulic cylinders for
construction dump trucks and dump trailers.
[photo shows a dumb truck in the up position]
reliabilityandfunctionality
industrial
food service
consumer
packageme
Eastern Engraving, a division of Standex Engraving, provides textured
rolls to package designers.
[photo shows a variety of products who use the Eastern Engraving
textured rolls]
bindme
James Burn International provides double-loop wire binding products
to the printing industry.
[photo shows materials with binds from Jams Burn International]
gripme
Standex Engraving makes the rolls that put the pebbled texture on
footballs used by the NFL and the NCAA.
[photo shows a football with the pebbled roll ]
Another unit undergoing strategic refocusing is James Burn
International, the maker of a wide range of binding products,
including the Wire-Or double-loop wire binding systems. The emergence
of the print-on-demand market has created significant new
opportunities for the unit, which is focusing on becoming the low-
cost supplier to the trade bindery and digital print markets.
Standex Electronics' core competency is in designing and building
electronic components that can withstand the rigors of our customers'
automated manufacturing processes. The company is a leading supplier
of reed switches, sensors, miniature coils, magnetic components and
connectors for a wide range of applications. The unit is aggressively
expanding into new markets where OEMs are seeking the enhanced
productivity that these automated manufacturing techniques offer.
At Jarvis Caster Group, we make over 6,000 products that help
virtually everything that rolls, roll better-from the luggage carts
at hotels to the shopping carts at your local supermarket, and with
new lean manufacturing programs at our plants, we're making our
products better, faster and more efficiently.
A commitment to product and service enhancements is paying off at
Custom Hoists, which makes hydraulic telescopic cylinders for dump
trucks and trailers. Sales are growing significantly faster than the
market as a whole, propelled by the exceptional reliability of new
cylinder designs-and a warranty that is twice as long as the industry
average. Because downtime can be especially costly to a small
trucking or excavating company, the unit provides same-day delivery
of replacement cylinders. These factors, coupled with on-time
delivery rates for new cylinders of nearly 100%, are winning Custom
Hoists a loyal following among distributors and manufacturers as well
as operators.
Standex International 2000 Annual Report 7
WHAT'S ESSENTIAL TO YOU?
flavor and freshness
When you pick out a pastry or order an espresso or you pick up a
ready-to-eat dinner, it's likely that your enjoyment is being
enhanced by a product from the Standex Food Service Group. You'll
find Standex products in supermarkets, gourmet shops, convenience
stores, bakeries and institutional kitchens across the U.S., and
increasingly, worldwide. Our refrigerator cases, cooking equipment,
even pumps used in soft drink and espresso machines are all designed
to enhance freshness, flavor, texture or appetite appeal, essential
factors that contribute to your satisfaction and convenience.
chillme
Master-Bilt manufactures a variety of cold cases for the beverage and
frozen food industry.
[photo of a reach in freezer]
In fact, Standex products play an essential role in helping consumers
adapt to today's busy lifestyles, which leave little time for
shopping, cooking and traditional family meals. Among dual-earner
families in the U.S. and Europe, home meal replacement (HMR) has
provided an answer. You're part of the HMR trend if you've ever
stopped by a supermarket or restaurant and brought home a complete
meal to go, and given the quality, variety and sophistication of
these meals, you've probably done it more than once.
One reason for the appeal of these meals: the commercial food
preparation equipment made by Standex's BKI Worldwide unit. This
global business has manufacturing locations in the U.S. and England,
as well as a global distribution
Standex International 2000 Annual Report 8
displayme
preserveme
Federal Industries manufactures a full range of refrigerated display
cases used by restaurants, bakeries, and candy stores.
[photo shows an Bob Evans employee in front of a refrigerated display
case by Federal Industries]
warmme
BKI Worldwide, in addition to manufacturing ovens/rotisseries,
manufactures a full range of cook and hold serving display cases for
delis, restaurants and supermarkets.
[photo shows a cook and hold serving display case by BKI]
industrial
food service
consumer
WHAT'S ESSENTIAL TO YOU?
network. BKI systems, which include ovens/rotisseries, pressure
fryers, low-temperature cook-and-hold ovens and heated display
cases-can be found in thousands of supermarkets, restaurants,
institutional food kitchens, delicatessens and convenience stores
around the world.
But Standex adds enjoyment and convenience to your life in other
ways. For example, our Procon Products unit probably made the pump
that dispensed your espresso this morning or soft drink at lunch.
With state-of-the-art operations in the U.S. and Europe, Procon is a
global company that uses robotic systems and direct numerical control
technologies to maximize efficiency and quality-and to ensure
adequate capacity in a world where demand for gourmet coffee is on
the rise.
Standex's Master-Bilt Products or Federal Industries units may well
have manufactured the refrigerated or heated display case from which
you chose your meal. Federal Industries has enjoyed a strong market
position for over sixty years, becoming an established leader in
merchandising and display cases for restaurants, supermarkets,
convenience stores, bakeries, delis and confectionery shops. Our
growth and success have been driven by our commitment to customizing
and manufacturing modular merchandising and presentation systems that
match each retailer's design concept. Because our customers' products
are presented more distinctively and attractively, sales increase and
satisfied consumers keep coming back for more.
roastme
BKI Worldwide manufactures ovens/rotisseries for supermarkets,
restaurants, delicatessens and convenience stores.
[photo of a BKI oven/rotisserie and chef standing to its left]
disposeofme
USECO's Red Goat Disposers line is a mainstay product in heavy-duty
applications.
[photo shows a Red Goat Disposer]
coolme
Master-Bilt makes a large variety of walk-in and reach-in
refrigerated display cases for supermarkets, convenience stores and
drug stores.
[photo shows walk-in refrigerated display cases]
flavorandfreshness
industrial
food service
consumer
deliverme
USECO's Unitron V provides a food delivery system that maintains
flavor and freshness for hot and cold products in institutional
settings such as hospitals, schools, prisons and nursing homes.
[photo shows a USECO Unitron V delivery system]
carbonateme
Procon Products' pumps are used in carbonated beverage dispensing
machines as well as espresso machines.
[photo shows a soft drink cup with a Procon pump]
prepareme
General Slicing provides a variety of products utilized in the
preparation and sale of cold cuts, vegetables, cheese, etc.
[photo shows a General Slicing food slicer]
Master-Bilt was one of the first companies to build refrigeration
units with precise temperature control, an essential factor in
healthful food storage. A leader in designing equipment that
maximizes food safety by minimizing temperature fluctuations, Master-
Bilt systems include refrigerated cabinets, cases, display units and
modular walk-in refrigerator/freezers-as well as an expansion into
refrigerated warehouse systems. You'll see the Master-Bilt name in
supermarkets, convenience stores, restaurants and drug stores across
the country-and when you do, you'll know that Standex is at work.
Our USECO division is even helping to increase the appeal of the food
served by hospitals, schools, colleges and correctional facilities.
Its Unitron V Feeding System is specifically designed for
institutions that prepare food in one location and serve it in
another. The system was the first in the U.S. to use convection-
reheating technology, which preserves more of the food's texture and
flavor. This innovative approach uses circulating air to selectively
reheat chilled entrees while preserving the cold items such as
salads, juices and desserts. As a result, both hot and cold food
temperatures can be maintained on the same tray.
Standex International 2000 Annual Report 11
WHAT'S ESSENTIAL TO YOU?
home and family
The spiritual well being of your family, the comfort of your home,
the quality of the products you buy-most people would list all these
among their essential concerns. At the Standex Consumer Group, they
are our essential concerns as well.
Quality-of-life issues are complex and highly personal, and helping
consumers successfully address them represents a significant business
opportunity for a company that does so responsibly and sensitively.
At Standex Consumer Group, we strive to deliver quality products that
represent real value-and reflect the most important values-of the
majority of American consumers.
Nowhere is that commitment more evident-or more completely
fulfilled-than in our Standard Publishing and Bereanr Christian
Stores units. These businesses are among our oldest, and steadily
growing units, melding traditional biblically based values with the
most sophisticated of today's merchandising, multimedia and Internet
techniques. Together, these businesses place Standex in the forefront
of companies that are benefiting from the reemergence of religion in
America.
Berean's mission is to become "the dominant Christian retailer" in
all of its 18 markets, which means providing both churches and the
general public with a wide range of products, from best-selling
Christian books, gift ideas and music to liturgical supplies. To keep
pace with rapidly evolving retailing trends and consumer tastes,
Berean has just introduced a new store format. Averaging over 15,000
square feet, Bereanr stores increasingly offer a shopping experience
that provides a sense of community and comfort, with cafes, sitting
comfortme
Standex Air Distribution Products manufactures high quality heating
and air conditioning ductwork for your home.
[photo shows a construction worker with a blueprint of a house and
duct products in the background]
industrial
food service
consumer
WHAT'S ESSENTIAL TO YOU?
inspireme
Berean Christian Stores offers a broad range of products including
bibles, books, music gifts, art, clothing and church supplies.
[photo is of the Berean Christian Store located in Fresno, CA]
entertainme
Berean Christian Stores offers its customers a center of knowledge
and activity for the Christian community.
[photo is the entertainment section of the Berean Christian Store
located in Mesa, AZ]
readme
Standard Publishing is a leading source of bibles and books used by
pastors, youth ministers, Sunday school teachers, families and
individuals to develop and sustain Christian values.
[photo is of the Standard Lesson Commentary books]
nourishme
Standex Direct offers consumers the convenience of buying farm-fresh
fruit, selected produce and specialty packaged foods via direct mail,
telephone or the Internet.
[photo is of three grapefruit sections]
areas and music listening stations-an experience similar in style and
quality to that offered by other major national booksellers. The goal
is to provide a center of knowledge and activity for the Christian
community in an inviting atmosphere where customers will enjoy
spending time as well as shopping.
A similar strategy can be seen at the unit's Web site:
www.bereanchristianstores.com. Filled with news, reviews, and links
with a range of other Christian resources, the site is far more than
a mere catalogue of products. It is a gateway to a congenial Internet
experience-and fully comparable in quality and impact with the best
Internet booksellers.
Also serving the Christian marketplace is Standard Publishing, one of
the country's leading publishers of biblically based books, CDs,
videos and study curricula. Its Vacation Bible School programs are
among the most widely used, and it publishes magazines with a weekly
circulation exceeding 170,000. Among the first Christian publishers
to explore the power of new media, the unit has developed a range of
CD-ROM/book combinations that have become industry bestsellers.
Building on this experience, and its long-standing strength in the
children's market, Standard Publishing has adopted a new strategy
that emphasizes careful market segmentation, with a special focus on
the dynamic childhood and young-adult markets.
Standex International 2000 Annual Report 14
homeandfamily
industrial
food service
consumer
teachme
Standard Publishing creates teaching materials for Vacation Bible
Schools (VBS). "Road Rally 2000" was this year's theme.
[photo is of the Road Rally 2000 VBS package]
developme
Standard Publishing's Baby Blessings product line not only teaches
Christian values to young children, but also provides parents with a
powerful developmental tool that is based on pioneering university
research findings on how children learn.
[photo shows books from the Baby Blessings product line along with a
baby holding Baby Blessings books]
If you've recently built or remodeled a home, there's an excellent
chance that another Standex business helped your contractor take care
of one essential: the heating/air conditioning system. Our Standex
Air Distribution Products unit designs and manufactures products for
controlling airflows and improving air quality in your home. With
nine manufacturing facilities across the U.S., we are in an excellent
position to capitalize on the dynamic home building and renovation
market-and to offer national and regional HVAC wholesalers and
distributors ready availability of top-quality, price-competitive
products. Through a "best practices" program developed as part of the
integration of recent acquisitions, we have significantly enhanced
the efficiency of our manufacturing processes. In addition, new
proprietary machine capabilities have enabled us to develop some of
the industry's most energy-efficient fittings, an important
competitive advantage in a conservation-conscious marketplace with
increasingly stringent building codes.
Like many families, yours may enjoy the convenience and sense of
discovery offered by mail order catalogues. Standex Direct's six
catalogue units offer consumers a way to purchase a range of fresh
and prepared gourmet foods-by phone or via the Internet, 24 hours a
day. Our goal is to realize the marketing and cross-selling
opportunities represented by our six mailing lists, and to maximize
operating efficiencies by integrating fulfillment and logistics
capabilities.
Standex International 2000 Annual Report 15
management's discussion and analysis
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.
Liquidity and Capital Resources
During the fiscal year ended June 30, 2000, the Company invested
$22.8 million in plant and equipment, purchased $12.8 million of its
common stock and paid out $10.0 million in cash dividends to
shareholders. These expenditures were primarily funded by net
operating cash flows.
Net cash provided by operating activities was $44.2 million in 2000,
an increase of $7.1 million as compared to $37.1 million in 1999. An
increase of $6.0 million in the amount of cash used to fund accounts
receivable was offset by a decrease of $8.1 million in cash used for
inventories; a focused effort by management served to partially
reduce inventory levels. In addition, a restructuring charge, which
is described below and in the Notes to the Consolidated Financial
Statements, was recorded in the current year, and affected cash flows
by approximately $4.2 million resulting in a reduction in inventories
and an increase in accrued liabilities. These were somewhat offset by
a decrease in accrued income taxes.
As of June 30, 2000, the Company had the ability to borrow an
additional $91.9 million under existing bank credit agreements. The
Company believes that this resource, along with the Company's
internally generated funds, will be sufficient to meet anticipated
cash funding needs for the foreseeable future. The Company's existing
bank credit agreements are described in the Notes to the Consolidated
Financial Statements.
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.
Fiscal 2000 as Compared to Fiscal 1999
Net sales for the year ended June 30, 2000 of $637 million represents
a decrease of $4.4 million or 0.7% from sales of $641.4 million for
the year ended June 30, 1999. The previous year included $10.8
million of sales from divisions that were disposed of in fiscal 1999.
The effect, on net sales, of changes in the average foreign exchange
rates was not significant.
For the year ended June 30, 2000 net sales in the Food Service
Segment decreased by $7.7 million or 5.1% from the prior year. The
decrease was, to a large extent, due to delays in healthcare projects
caused by funding constraints and a slowdown in orders resulting from
consolidations within the supermarket industry. Net sales in the
Consumer Segment increased by $4.5 million or 2.1% from the prior
year, which included $4.3 million in sales of a division which was
disposed of in fiscal 1999. The increase is the result of additional
stores in the Berean division and increased customer demand in the
Standard Publishing and Standex Air Distribution Products divisions.
Net sales in the Industrial Segment were $272.2 million for the year
ended June 30, 2000 compared to $273.3 million for 1999. Fiscal Year
1999 included $6.5 million in sales of divisions that were disposed
of in 1999. Customer demand increases, in the Spincraft, Custom
Hoists, Standex Electronics, and North American Mold-Tech divisions,
were offset by weakening demand in the James Burn, Jarvis Caster
Group, and European Mold-Tech divisions.
The overall gross profit margin percentage ("GPMP") remained
essentially the same (32.9% vs. 32.8%) for the current and prior
year. The Food Service Segment GPMP decreased to 29.3% from 31.0% in
the prior year primarily due to the sales shortfalls described above.
The Consumer Segment GPMP remained virtually the same at 37.2% in
2000 versus 37.1% in 1999, and the Industrial Segment GPMP increased
slightly to 30.6% from the prior year's 30.1%.
Consolidated selling, general and administrative ("SG&A") expenses
remained stable overall at approximately 23% of net sales. None of
the fluctuations in SG&A reported by the Company's three segments
were individually significant and corresponded with the changes in
net sales discussed above.
In June 2000, the Company recorded a restructuring charge of $5.4
million before taxes. The restructuring plan involves the: (1)
disposal, closing or elimination of certain under-performing and
unprofitable operating plants, product lines, manufacturing processes
and businesses; (2) realignment and consolidation of certain
marketing and distribution activities; and (3) other cost containment
actions,
Standex International 2000 Annual Report 16
management's discussion and analysis
including selective personnel reductions. This charge, a significant
portion of which was non-cash, is more fully described in the Notes
to the Consolidated Financial Statements. Also, during the current
fiscal year, 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.
An increase of less than $200,000 in interest expense for the year
was due primarily to a slight increase in average net borrowings.
As a result of the above factors, income before income taxes was
$46.9 million compared to $51.5 million in the prior year. The
effective tax rate increased to 40.9% as compared to 39.1% in the
prior year since a greater portion of the Company's income was
generated in higher taxed countries. Net income decreased $3.7
million or 11.7% from the prior year.
Fiscal 1999 as Compared to Fiscal 1998
Net sales for the year ended June 30, 1999 increased $25.2 million as
compared to the same period in the prior year. The majority of this
increase came from the added sales of ACME Manufacturing Company
(ACME) which was acquired in October 1997. These added sales were
partially offset by the absence of sales from the Doubleday Bros.
product lines that were disposed of in the prior year. Excluding the
acquisition and dispositions, management believes the majority of
fluctuations in net sales reported by each segment were the result of
changes in unit volumes and consumer demand. In addition, although
changes in the average foreign exchange rates from 1998 to 1999 had a
negative effect on net sales in 1999, the total effect of such
changes was not significant.
For the year ended June 30, 1999, the Food Service Segment reported a
slight decrease in net sales as compared to the prior year. This
decline was mainly due to the closure of a Nevada operation and
sluggish demand in the beverage dispensing industry. Net sales in the
Industrial Segment were flat as compared to the same period in the
prior year. While most divisions in the Industrial Segment posted
solid increases over last year, the poor performance of our binding
division and the absence of sales from the disposition of Doubleday
Bros. in the second half of fiscal 1998 offset these gains. The
Consumer Segment's net sales increased by $26.0 million when compared
to fiscal 1998 due to the acquisition of ACME, as noted above, and
improved demand. Except for a small decline in one unit, all Consumer
divisions experienced improved customer demand.
The gross profit margin percentage ("GPMP") remained essentially the
same (32.8% vs. 32.5%) for the current and prior year. The Food
Service Segment reported a GPMP of 31.3%, as compared to the prior
year percentage of 29.7%; this was the result of the disposition of a
Nevada operation and reduced costs at several companies. The GPMP
reported in the Industrial Segment was 31.1%, a small decline from
the previous year's percentage of 31.9%. Continued poor performance
from the Company's binding division offset solid positive
performances at most of the other Industrial divisions. The Consumer
Segment's GPMP remained relatively unchanged at 35.4% in fiscal 1999
versus 35.6% in fiscal 1998.
Selling, general and administrative expenses ("SG&A") increased by
$3.6 million when compared to the same period in the prior year. The
majority of this increase ($2.9 million) was from the additional SG&A
expenses of ACME, and the remainder was due primarily to the addition
of two Berean Bookstores during fiscal 1998. None of the remaining
fluctuations in SG&A reported by the Company's three segments were
individually significant and corresponded with the changes in net
sales discussed above.
A restructuring credit of $1,016,000 was recorded in the second half
of fiscal 1999 and related to a $12.8 million restructuring charge
recorded in the fourth quarter of fiscal 1998. This credit is more
fully described in the Notes to the Consolidated Financial
Statements.
Interest expense increased by 3.5%, or $376,000, when compared to
fiscal 1998 as the Company incurred a full year of interest charges
on the increased borrowings related to the ACME acquisition as
compared to nine months in the prior year and moderately higher
interest rates.
The above factors resulted in an $18.4 million increase in income
before income taxes for the year ended June 30, 1999. The effective
tax rate in fiscal 1999 did not vary from what was reported in fiscal
1998 (39.1%); as a result, net income rose $11.2 million or 55.6%
when compared to the same period in the prior year.
Other Matters
Inflation
Inflation has not been a significant factor in fiscal 2000, 1999 and
1998 mainly due to fairly stable labor and material costs.
Standex International 2000 Annual Report 17
management's discussion and analysis
Environmental Matters
The Company is party to various claims and legal proceedings,
generally incidental to its business and has recorded an appropriate
provision for the resolution of such matters. As explained more fully
in the Notes to the Consolidated Financial Statements, the Company
does not expect the ultimate disposition of these matters to have a
material adverse effect on its financial statements.
New Accounting Pronouncements
In June 1998, the Financial Accounting 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 the Consolidated Financial
Statements.
In December 1999, the Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements." SAB No. 101 summarizes certain
of the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements and will be
effective for the Company in fiscal 2001. Management is currently
evaluating the effect of adopting SAB No. 101 on the Consolidated
Financial Statements.
Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to market risk associated with changes in
foreign currency exchange rates and interest rates. The Company
mitigates certain of its foreign currency exchange rate risk by
entering into forward foreign currency contracts. These contracts are
primarily used as a hedge against anticipated foreign cash flows,
such as dividend and loan payments, and are not used for trading or
speculative purposes. The fair value of the forward foreign currency
exchange contracts is sensitive to changes in foreign currency
exchange rates, as an adverse change in foreign currency exchange
rates from market rates would decrease the fair value of the
contracts. However, any such losses or gains would generally be
offset by corresponding gains and losses, respectively, on the
related hedged asset or liability. Due to the absence of forward
foreign currency contracts at June 30, 2000, the Company did not have
any fair value exposure.
The Company's interest rate exposure is limited primarily to interest
rate changes on its variable rate borrowings. As of June 30, 2000, a
hypothetical 10% immediate increase in interest rates would increase
the Company's annual interest expense by $577,000. The Company has
interest rate swap agreements to fix the interest rate on $35 million
of its variable rate borrowings. At June 30, 2000, the fair value of
the Company's interest rate swap agreements would not be materially
affected by a 10% change in interest rates.
In addition to the $35 million of variable rate borrowings covered by
interest rate swap agreements, the Company also has $69 million of
long-term debt at fixed interest rates as of June 30, 2000. There
would be no immediate impact on the Company's interest expense
associated with its long-term debt due to fluctuations in market
interest rates. However, based on a hypothetical 10% immediate
decrease in market interest rates, the fair value of the Company's
long-term debt would be increased by approximately $4 million as of
June 30, 2000. Such fair value changes may affect the Company's
determination as to whether to retain, replace or retire its long-
term debt.
<TABLE>
Standex International 2000 Annual Report 18
five-year financial review
<CAPTION>
Standex International Corporation and Subsidiaries
(In thousands,
except per share data) 2000 1999 1998 1997 1996
Year Ended June 30
Summary of Operations
<S> <C> <C> <C> <C> <C>
Net sales $637,049 $641,400 $616,180 $564,623 $562,679
Gross profit margin 209,338 210,126 200,548 186,131 185,267
Interest expense 11,336 11,155 10,779 8,497 9,048
Income before income taxes 46,853 51,491 33,064 43,516 48,124
Provision for income taxes 19,150 20,130 12,915 16,597 17,410
Net income 27,703 31,361 20,149 26,919 30,714
Per Share Data
Net sales (diluted) 49.91 49.20 46.61 41.85 40.40
Earnings:
Basic 2.19 2.42 1.54 2.02 2.24
Diluted 2.17 2.41 1.52 2.00 2.21
Dividends paid 0.79 0.76 0.76 0.75 0.71
Book value 13.37 12.59 11.19 10.75 10.01
Average shares outstanding
Basic 12,672 12,972 13,072 13,337 13,736
Diluted 12,763 13,037 13,219 13,491 13,927
June 30 Financial Condition
Working capital 145,009 146,514 148,943 136,946 138,860
Current ratio 2.68 2.79 2.73 2.95 3.03
Property, plant and
equipment - net 112,137 104,783 102,973 85,598 86,616
Total assets 424,200 410,042 411,242 341,038 335,333
Long-term debt 153,436 148,111 163,448 112,347 113,822
Stockholders' equity 164,815 162,301 146,197 141,185 134,691
</TABLE>
<TABLE>
Sales and Earnings by Quarter
Year Ended June 30 (Unaudited)
<CAPTION>
2000 1999
(In thousands,
except per share data) FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $157,803 $163,050 $158,158 $158,038 $157,377 $171,171 $152,247 $160,605
Gross profit margin 49,693 55,255 51,924 52,466 49,917 58,611 50,655 50,943
Net income 9,517 7,613 6,460 4,113 7,957 9,404 6,631 7,369
Earnings per share
Basic 0.74 0.59 0.52 0.34 0.61 0.72 0.52 0.57
Diluted 0.74 0.59 0.51 0.33 0.61 0.72 0.51 0.57
</TABLE>
<TABLE>
Common Stock Prices and Dividends Paid
<CAPTION>
Common Stock Price Range
2000 1999 Divi
dends per Share
Year Ended June 30 High Low High Low 2000 1999
<S> <C> <C> <C> <C> <C> <C>
First quarter $29 $22-7/16 $29-9/16 $21-3/16 $0.19 $0.19
Second quarter 27 19-1/2 28-1/8 19-3/8 0.20 0.19
Third quarter 21-1/4 14-11/32 27-1/4 21-5/8 0.20 0.19
Fourth quarter 18 15-3/16 28-9/16 21-3/16 0.20 0.19
</TABLE>
<TABLE>
<CAPTION>
Distribution of the 2000 Sales Dollar
(In thousands)
<S> <C> <C>
Materials and services $364,546 57%
Wages, salaries and employee benefits 200,691 31
Depreciation and amortization 13,622 2
Interest on borrowed money 11,336 2
Income taxes 19,150 3
Reinvested in the Company 17,690 3
Dividends to stockholders 10,014 2
Total $637,049 100%
</TABLE>
Standex International 2000 Annual Report 19
<TABLE>
statements of consolidated income
<CAPTION>
Standex International Corporation and Subsidiaries
Year Ended June 30 2000 1999 1998
<S> <C> <C> <C>
Net Sales $637,048,705 $641,399,507 $616,180,090
Cost of Products Sold 427,710,922 431,273,630 415,632,167
Gross profit 209,337,783 210,125,877 200,547,923
Selling, General and Administrative 149,200,556 149,197,179 145,590,536
Restructuring charge (credit) 5,408,065 (1,015,762) 12,758,000
Income from Operations 54,729,162 61,944,460 42,199,387
Other income (expense)
Interest expense (11,336,430) (11,154,869) (10,779,015)
Interest and other income 749,903 701,672 1,993,533
Gain on stock received 2,710,647 - -
Net loss on disposition of a business - - (350,000)
Total (7,875,880) (10,453,197) (9,135,482)
Income Before Income Taxes 46,853,282 51,491,263 33,063,905
Provision for Income Taxes 19,150,000 20,130,000 12,915,000
Net Income $27,703,282 $31,361,263 $20,148,905
Earnings Per Share
Basic $ 2.19 $ 2.42 $ 1.54
Diluted $ 2.17 $ 2.41 $ 1.52
See notes to consolidated financial statements.
</TABLE>
<TABLE>
statements of consolidated stockholders' equity
<CAPTION>
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Treasury Stock Stockholders'
Year Ended June 30 Stock Capital Earnings Income Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1997 $41,976,417 $5,663,224 $313,908,303 $(1,082,401) 14,854,572 $(219,280,337) $141,185,206
Stock issued for
employee stock
options and stock
purchase plan, net
of related income
tax benefit 1,329,545 (150,813) 2,251,057 3,580,602
Stock issued in
conjunction with
acquisition 1,523,575 (100,418) 1,509,691 3,033,266
Treasury stock acquired 314,604 (10,177,761) (10,177,761)
Comprehensive income
Net income 20,148,905 20,148,905
Foreign currency
translation adjustment (1,646,188) (1,646,188)
Total comprehensive income 18,502,717
Dividends paid
(76 cents per share) (9,926,801) (9,926,801)
Balance, June 30, 1998 41,976,417 8,516,344 324,130,407 (2,728,589) 14,917,945 (225,697,350) 146,197,229
Stock issued for
employee stock
options and stock
purchase plan, net
of related income
tax benefit 641,320 (143,303) 2,181,706 2,823,026
Treasury stock acquired 314,074 (7,453,147) (7,453,147)
Comprehensive income
Net income 31,361,263 31,361,263
Foreign currency
translation adjustment (749,567) (749,567)
Total comprehensive income 30,611,696
Dividends paid
(76 cents per share) (9,878,260) (9,878,260)
Balance, June 30, 1999 41,976,417 9,157,664 345,613,410 (3,478,156) 15,088,716 (230,968,791) 162,300,544
Stock issued for
employee stock
options and stock
purchase plan, net
of related income
tax benefit 116,749 (126,628) 1,951,629 2,068,378
Treasury stock acquired 697,463 (12,756,934) (12,756,934)
Comprehensive income
Net income 27,703,282 27,703,282
Foreign currency
translation adjustment (4,486,875) (4,486,875)
Total comprehensive income 23,216,407
Dividends paid
(79 cents per share) (10,013,536) (10,013,536)
Balance, June 30, 2000 $41,976,417 $9,274,413 $363,303,156 $(7,965,031) 15,659,551 $(241,774,096) $164,814,859
See notes to consolidated financial statements.
</TABLE>
Standex International 2000 Annual Report 20
<TABLE>
consolidated balance sheets
<CAPTION>
Standex International Corporation and Subsidiaries
June 30 2000 1999
Assets
Current Assets
<S> <C> <C>
Cash and cash equivalents $10,437,856 $5,909,283
Receivables-less allowance of $3,400,000 in 2000
and $3,590,000 in 1999 104,430,867 97,871,014
Inventories 112,200,601 120,171,671
Prepaid expenses 4,316,186 4,202,170
Total current assets 231,385,510 228,154,138
Property, Plant and Equipment
Land and buildings 83,588,845 76,098,470
Machinery and equipment 176,053,677 172,814,389
Total 259,642,522 248,912,859
Less accumulated depreciation 147,505,496 144,129,886
Property, plant and equipment - net 112,137,026 104,782,973
Other Assets
Prepaid pension cost 38,334,036 32,623,677
Goodwill - net 31,184,247 32,110,262
Other 11,159,180 12,370,530
Total other assets 80,677,463 77,104,469
Total $424,199,999 $410,041,580
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of debt $2,356,563 $3,962,765
Accounts payable 36,494,649 35,975,395
Accrued payroll and employee benefits 18,567,875 18,221,481
Income taxes 5,357,062 5,847,300
Other 23,600,274 17,633,469
Total current liabilities 86,376,423 81,640,410
Long-Term Debt - less current portion 153,436,016 148,111,366
Deferred Income Taxes 16,610,000 14,736,000
Other Non-current Liabilities 2,962,701 3,253,260
Commitments and Contingencies
Stockholders' Equity
Common stock-authorized, 60,000,000 shares in 2000
and 1999; par value, $1.50 per share;
issued 27,984,278 shares in 2000 and 1999 41,976,417 41,976,417
Additional paid-in capital 9,274,413 9,157,664
Retained earnings 363,303,156 345,613,410
Accumulated other comprehensive income (7,965,031) (3,478,156)
Less cost of treasury shares: 15,659,551
shares in 2000 and 15,088,716 in 1999 (241,774,096) (230,968,791)
Total stockholders' equity 164,814,859 162,300,544
Total $424,199,999 $410,041,580
See notes to consolidated financial statements.
</TABLE>
Standex International 2000 Annual Report 21
<TABLE>
statement of consolidated cash flows
<CAPTION>
Standex International Corporation and Subsidiaries
Year Ended June 30
2000 1999 1998
Cash Flows from Operating Activities
<S> <C> <C> <C>
Net income $27,703,282 $31,361,263 $20,148,905
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,621,846 13,769,691 13,851,599
Profit improvement incentive plan (40,000) 286,201 780,058
Deferred income taxes 1,874,000 2,799,000 (1,882,000)
Net pension credit (1,998,000) (1,793,000) (2,353,000)
Loss (gain) on sale of investments, real
estate and equipment 203,520 205,594 (950,603)
Loss on disposition of business - - 350,000
Increase (decrease) in cash from changes in
assets and liabilities, net of effect of
acquisitions and dispositions:
Receivables - net (7,302,778) (1,337,293) (2,088,038)
Inventories 7,924,044 (219,258) (5,089,382)
Prepaid expenses and other assets (3,209,182) (1,005,113) 65,390
Accounts payable 333,749 (1,508,909) 2,807,411
Accrued payroll, employee benefits
and other liabilities 5,646,776 (5,767,318) 5,389,358
Income taxes (549,444) 332,490 1,215,228
Net cash provided by operating activities 44,207,813 37,123,348 32,244,926
Cash Flows from Investing Activities
Expenditures for property and equipment (22,786,886) (16,823,678) (19,849,069)
Expenditures for acquisitions, net
of cash acquired - (796,305) (49,277,002)
Proceeds from sale of investments, real estate
and equipment 857,689 1,517,468 2,483,933
Proceeds from disposition of businesses - 5,091,705 2,583,143
Net cash used for investing activities (21,929,197) (11,010,810) (64,058,995)
Cash Flows from Financing Activities
Proceeds from additional borrowings 12,828,803 25,000,000 52,213,051
Payments of debt (9,110,355) (39,868,747) (418,585)
Stock issued under employee stock option
and stock purchase plans 2,068,378 2,823,026 3,580,602
Cash dividends paid (10,013,536) (9,878,260) (9,926,801)
Purchase of treasury stock (12,756,934) (7,453,147) (10,177,761)
Net cash (used for) provided by
financing activities (16,983,644) (29,377,128) 35,270,506
Effect of Exchange Rate Changes on
Cash and Cash Equivalents (766,399) (82,443) (348,909)
Net Changes in Cash and Cash Equivalents 4,528,573 (3,347,033) 3,107,528
Cash and Cash Equivalents at Beginning of Year 5,909,283 9,256,316 6,148,788
Cash and Cash Equivalents at End of Year $10,437,856 $5,909,283 $9,256,316
Supplemental Disclosure of Cash Flow Information
Issued for acquisitions:
Stock $ - $ - $3,033,266
Notes payable - 500,000 271,704
Cash paid during the year for:
Interest 14,842,150 11,063,038 10,495,183
Income taxes 18,121,098 16,883,304 13,523,666
See notes to consolidated financial statements.
</TABLE>
Standex International 2000 Annual Report 22
notes to consolidated financial statements
Summary of Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the
accounts of Standex International Corporation and its subsidiaries.
Revenue Recognition
The Company generally recognizes product and related services revenue
when the price to the customer is fixed or determinable, the
collectibility of the invoice is evaluated and delivery has occurred.
Revenues under certain fixed price contracts are generally recorded
at the time deliveries are made or, in some cases, on a percentage of
completion basis.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments purchased
with a remaining maturity of three months or less. Such investments
are carried at cost, which approximates fair value, due to the short
period of time until maturity.
Inventories
Inventories are stated at the lower of first-in, first-out cost or
market.
Property, Plant and Equipment
Property, plant and equipment are depreciated over their estimated
useful lives using primarily the straight-line method.
Income Taxes
Deferred assets and liabilities are recorded for the expected future
tax consequences of events that have been included in the financial
statements or tax returns. Deferred tax assets and liabilities are
determined based on the differences between the financial statements
and the tax basis of assets and liabilities using enacted tax rates.
Goodwill
The excess of purchase price of acquired companies over the fair
value of net identifiable assets at date of acquisition has been
recorded as goodwill and is being amortized on a straight-line basis
over a forty-year period. Accumulated amortization aggregated
$11,102,000 and $10,016,000 at June 30, 2000 and 1999, respectively.
The Company annually evaluates the net balance of goodwill based on
the projected operating income of the respective businesses on an
undiscounted cash flow basis.
Foreign Currency Translation
Assets and liabilities of non-U.S. operations are translated into
U.S. dollars at year-end exchange rates. Revenues and expenses are
translated using average exchange rates. The resulting translation
adjustment is reported as a component of comprehensive income in the
Statements of Consolidated Stockholders' Equity. Gains and losses
from currency transactions are included in results of operations.
Forward Foreign Currency Exchange Contracts
Forward foreign currency contracts are used by the Company to protect
certain anticipated foreign cash flows, such as dividends and loan
payments from subsidiaries, against movements in the related exchange
rates. The Company sells the related foreign currency at a fixed
price for settlement on or before the date of the related receipt,
and thus protects the dollar value of the receipt. The Company enters
into such contracts for hedging purposes only. Accordingly, for
financial statement purposes gains or losses of forward contracts
entered into to hedge commitments are deferred until the position is
closed out. At June 30, 2000, the Company had no significant forward
foreign currency contracts.
Interest Rate Swap Agreements
The net differential to be paid or received under the Company's
interest rate swap agreements is accrued as interest rates change and
is recognized over the life of the agreements.
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables and
short-term cash investments. Credit risk with respect to trade
receivables is minimized because of the diversification of the
Company's operations, as well as its large customer base and its
geographical dispersion. Short-term cash investments are placed with
high credit-quality financial institutions or in short-duration, high
quality debt securities. The Company limits the amount of credit
exposure in any one institution or type of investment instrument. The
Company is also subject to credit risk exposure relating to its
interest rate swap agreements as described in the debt footnote
below.
Accounting Estimates
The preparation of the Company's Consolidated Financial Statements in
conformity with generally accepted accounting principles in the
United States of America necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate fair
value because of their short-term nature. The carrying amount of the
Company's debt instruments approximates fair value.
Standex International 2000 Annual Report 23
notes to consolidated financial statements
<TABLE>
Earnings Per Share
<CAPTION>
The following table sets forth the number of shares (in thousands)
used in the computation of basic and diluted earnings per share:
2000 1999 1998
Basic - Average
<S> <C> <C> <C>
Shares Outstanding 12,672 12,972 13,072
Effect of Dilutive
Securities -
Stock Options 91 65 147
Diluted - Average
Shares Outstanding 12,763 13,037 13,219
Both basic and dilutive income are the same for computing earnings
per share. Options, which were not included in the computation of
diluted earnings per share because to do so would have had an anti-
dilutive effect, totaled 731,103; 407,015 and 33,880 for the years
ended June 30, 2000, 1999 and 1998, respectively.
</TABLE>
Reclassifications
Certain prior year amounts have been reclassified to conform to the
2000 financial statement presentation.
New Accounting Pronouncements
In June of 1998, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133, as amended, 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 the consolidated
financial statements.
In December 1999, the Securities and Exchange Commission (the "SEC")
released Staff Accounting Bulletin ("SAB") No. 101, "Revenue
Recognition in Financial Statements." SAB No. 101 summarizes certain
of the SEC's views in applying generally accepted accounting
principles to revenue recognition in financial statements and will be
effective for the Company in fiscal 2001. Management is currently
evaluating the effect of adopting SAB No. 101 on the Consolidated
Financial Statements.
<TABLE>
Inventories
<CAPTION>
Inventories are comprised of (in thousands):
June 30 2000 1999
<S> <C> <C>
Raw materials $ 38,887 $ 40,180
Work in process 22,365 26,113
Finished goods 50,949 53,879
Total $112,201 $120,172
</TABLE>
<TABLE>
Debt
<CAPTION>
Debt is comprised of (in thousands):
June 30 2000 1999
<S> <C> <C>
Bank credit agreements $ 83,069 $ 71,847
Institutional investors
6.8% to 7.13%
(due 2001-2008) 67,857 75,000
Other 3.0% to 4.85%
(due 2001-2018) 4,867 5,227
Total 155,793 152,074
Less current portion 2,357 3,963
Total long-term debt $153,436 $148,111
</TABLE>
Bank Credit Agreements
The Company has a revolving credit agreement with eight banks. The
agreement provides for a maximum credit line of $175,000,000 until
May 2003, at which time outstanding loans will be due and payable. As
of June 30, 2000, the effective rate of interest under the agreement
was 7.19%. The Company is required to pay a commitment fee of 0.2% on
the average daily-unused amount. As of June 30, 2000, the Company had
borrowed $35 million under the agreement. At June 30, 1999, there
were no outstanding borrowings.
In addition, the Company has the option to borrow up to $175,000,000
on an unsecured short-term basis at rates which are based on LIBOR
and varied from 5.50% to 7.41% during 2000. Available borrowings
under the revolving credit agreement described above are reduced by
unsecured short-term borrowings. At June 30, 2000, the Company had
the ability to borrow an additional $91,931,000 under the
aforementioned bank credit agreements.
Institutional Investor Agreements
At June 30, 2000, the Company had a $25,000,000 note purchase
agreement with two institutional investors. The notes bear interest
at 6.8% annually and are due and payable in October 2008.
Additionally, the Company has a note purchase agreement with a third
institutional investor with a balance of $42,857,000 which bears
interest at 7.13% annually and is payable in annual installments of
$7,143,000.
Interest Rate Swap Agreements
The Company manages its debt portfolio by using interest rate swaps
to achieve an overall desired position of fixed and floating rate
debt to reduce certain exposures to interest rate fluctuations.
At June 30, 2000, the Company had three interest rate swap contracts
with an aggregate notional amount of $35.0 million. These agreements
convert variable rates to fixed rates ranging from 6.2% to 7.5% on
aggregate notional amounts of $25 million and $10 million maturing in
2002 and 2003, respectively.
Neither the Company nor the counterparties to the agreement, which
are prominent financial institutions, are required to collateralize
their respective obligations under these swaps. The Company is
exposed to loss if one or more of the
Standex International 2000 Annual Report 24
notes to consolidated financial statements
counterparties defaults. At June 30, 2000, Standex had no exposure to
credit loss on interest rate swaps. The Company does not believe that
any likely change in interest rates would have a material adverse
effect on its financial position, results of operations or cashflows.
Open interest rate contracts are reviewed regularly by the Company to
ensure that they remain effective as hedges of interest rate
exposure. Management believes that the fair values of the rate swap
agreements approximate the recorded amounts.
Loan Covenants and Repayment Schedule
The Company's loan agreements contain a limited number of provisions
relating to the maintenance of certain financial ratios and
restrictions on additional borrowings and investments.
The principal payments due under the institutional investor
agreements are expected to be funded through additional unsecured
short-term borrowings. Such borrowings, and the unsecured short-term
borrowings outstanding at June 30, 2000, may be refinanced by the
Company on a long-term basis under the revolving credit agreement. As
such, the short-term outstanding borrowings, which are not expected
to be paid within a year, including those expected to fund the
institutional investor principal payments, are classified as long-
term debt, and the debt repayment schedule as presented below, is
based on the terms of the revolving credit agreement.
Debt is due as follows: 2001, $2,357,000; 2002, $335,000; 2003,
$102,813,000; 2004, $7,503,000; 2005, $7,143,000; and thereafter,
$35,642,000.
<TABLE>
Accrued Payroll and Employee Benefits
<CAPTION>
This current liability caption consists of (in thousands):
June 30 2000 1999
<S> <C> <C>
Payroll $14,776 $14,989
Benefits 3,141 2,548
Taxes 651 684
Total $18,568 $18,221
</TABLE>
Commitments
The Company leases certain property and equipment under agreements
with initial terms ranging from one to twenty years. Rental expense
for the years ended June 30, 2000, 1999 and 1998 was approximately
$8,000,000; $7,900,000; and $7,500,000, respectively. At June 30,
2000, the minimum annual rental commitments under noncancelable
operating leases, principally real estate, were approximately: 2001,
$4,700,000; 2002, $3,700,000; 2003, $3,200,000; 2004, $2,800,000;
2005, $2,100,000; and thereafter, $5,800,000.
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.
<TABLE>
Income Taxes
<CAPTION>
The provision for income taxes consist of
(in thousands):
2000 1999 1998
Current:
<S> <C> <C> <C>
Federal $13,088 $10,583 $ 8,014
State 1,304 2,838 1,771
Non-U.S 2,884 3,910 5,012
Total 17,276 17,331 14,797
Deferred 1,874 2,799 (1,882)
Total $19,150 $20,130 $12,915
</TABLE>
<TABLE>
<CAPTION>
The components of income before income
taxes are as follows (in thousands):
2000 1999 1998
<S> <C> <C> <C>
U.S. Operations $42,694 $43,954 $23,872
Non-U.S.
Operations 4,159 7,537 9,192
Total $46,853 $51,491 $33,064
</TABLE>
<TABLE>
<CAPTION>
A reconciliation of the U.S. Federal income
tax rate to the effective income rate is as follows:
2000 1999 1998
<S> <C> <C> <C>
Statutory tax rate 35.0% 35.0% 35.0%
Non-U.S 2.6 (.2) (2.5)
State taxes 3.8 3.9 3.0
Other items, net (.5) .4 3.6
Effective income
tax rate 40.9% 39.1% 39.1%
</TABLE>
<TABLE>
<CAPTION>
Significant components of the company's net deferred
tax liability are as follows (in thousands):
2000 1999
Deferred tax liabilities:
<S> <C> <C>
Accelerated depreciation $ 8,933 $ 7,950
Net pension credit 13,086 11,570
Other items 1,120 1,056
Deferred tax assets:
Expense accruals (5,544) (5,531)
Restructuring charge (456) -
Compensation costs (529) (309)
Net deferred tax liability $16,610 $14,736
</TABLE>
Standex International 2000 Annual Report 25
notes to consolidated financial statements
<TABLE>
<CAPTION>
Deferred taxes:
2000 1999 1998
<S> <C> <C> <C>
Accelerated depreciation $ 983 $(1,575) $(1,448)
Net pension credit 1,517 1,491 1,277
Compensation costs (220) 89 (15)
Restructuring charge (456) 2,846 (2,846)
Expense accruals (13) (600) 821
Other items 63 548 329
Total $1,874 $2,799 $(1,882)
</TABLE>
At June 30, 2000, accumulated retained earnings of non-U.S.
subsidiaries totaled $28,318,000. No provision for U.S. income and
foreign withholding taxes has been made because it is expected that
such earnings will be reinvested indefinitely or the distribution of
any remaining amount would be principally offset by foreign tax
credits. The determination of the withholding taxes that would be
payable upon remittance of these earnings and the amount of
unrecognized deferred tax liability on these unremitted earnings is
not practicable.
Industry Segment Information
The Company is composed of three product groups. These groups are
described on pages 4-15.
The Company has determined that it has three distinct reportable
segments: Food Service, Consumer and Industrial. These three segments
are managed separately, and the operating results of each segment are
regularly reviewed and evaluated separately by the Company's senior
management.
Net sales include only transactions with unaffiliated customers and
include no significant intersegment or export sales. Operating income
by segment and geographic area excludes general corporate and
interest expenses. Assets of the Corporate segment consist primarily
of cash, administrative buildings, equipment, prepaid pension cost,
goodwill and other non-current assets.
<TABLE>
<CAPTION>
Net Sales Depreciation and
Amortization
Year Ended June 30
(In thousands) 2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Food Service $144,089 $151,782 $155,706 $ 2,120 $ 2,134 $ 2,621
Consumer 220,724 216,272 192,051 3,765 3,800 3,291
Industrial 272,236 273,346 268,423 7,504 7,584 7,691
Corporate and
Other - - - 233 252 249
Total $637,049 $641,400 $616,180 $13,622 $13,770 $13,852
</TABLE>
<TABLE>
<CAPTION>
Assets Employed Capital Expenditures
As of and Year
Ended June 30
(In thousands) 2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Food Service $75,018 $77,331 $79,027 $ 2,018 $ 1,416 $ 2,598
Consumer 122,287 123,287 129,716 2,988 3,900 8,177
Industrial 184,457 176,853 172,886 17,604 11,048 8,904
Corporate and
Other 42,438 32,571 29,613 177 460 170
Total $424,200 $410,042 $411,242 $22,787 $16,824 $19,849
</TABLE>
<TABLE>
<CAPTION>
Income from Operations
Year Ended June 30 (In thousands) 2000 1999 1998
<S> <C> <C> <C>
Food Service $12,119 $17,498 $14,962
Consumer 25,426 24,171 23,765
Industrial 31,789 27,837 25,510
Corporate and Other (9,197) (8,578) (9,280)
Restructuring (charge) credit (5,408) 1,016 (12,758)
Total $54,729 $61,944 $42,199
</TABLE>
<TABLE>
<CAPTION>
Product Net Sales Information:
Year Ended June 30 (In thousands) 2000 1999 1998
Food preparation, storage and
<S> <C> <C> <C>
presentation products $225,768 $234,609 $234,505
Printing and publishing products 134,198 133,774 134,752
Home and road construction products 130,985 123,796 98,749
Aerospace, automotive and
electronic products 126,639 118,842 111,432
Miscellaneous 19,459 30,379 36,742
Total $637,049 $641,400 $616,180
</TABLE>
Standex International 2000 Annual Report 26
notes to consolidated financial statements
<TABLE>
<CAPTION>
Financial Data related to U.S. and non-U.S. operations:
U.S NON-U.S.
As of and Year Ended June 30
(In thousands) 2000 1999 1998 2000 1999 1998
<S> <C> <C> <C> <C> <C> <C>
Net Sales $547,553 $542,463 $517,586 $89,496 $98,937 $98,594
Income from Operations 61,320 59,945 52,604 8,014 9,561 11,633
Assets Employed 313,263 301,663 310,101 68,499 75,808 71,528
The Corporate segment and the restructuring credit and charge are
excluded from the above table.
</TABLE>
Employee Benefit Plans
Retirement Plans
The Company has defined benefit pension plans covering the majority
of its employees, including certain employees in foreign countries.
Plan assets are invested primarily in common stocks and fixed income
securities. The Company makes contributions generally equal to the
minimum amounts required by federal laws and regulations. Foreign
plans are funded in accordance with the requirements of regulatory
bodies governing each plan.
<TABLE>
<CAPTION>
The components of net pension credit are as follows (in thousands):
Year Ended June 30 2000 1999 1998
<S> <C> <C> <C>
Service cost $ 5,329 $ 5,049 $ 4,064
Interest cost 10,357 9,616 9,055
Expected return on plan assets (16,526) (15,283) (13,925)
Amortization of prior service cost 248 247 159
Recognized actuarial loss 340 326 67
Amortization of transition asset (1,746) (1,748) (1,773)
Total (1,998) (1,793) (2,353)
Curtailment/settlement 5 87 (784)
Net pension credit $(1,993) $(1,706) $(3,137)
</TABLE>
<TABLE>
<CAPTION>
The following table sets forth the funded status and amounts
recognized as of June 30, 2000 and 1999 for the Company's U.S. and
non-U.S. defined benefit pension plans (in thousands):
Year Ended June 30 2000 1999
Change in benefit obligation:
Benefit obligation,
<S> <C> <C>
beginning of year $148,170 $134,912
Service cost 5,329 5,049
Interest cost 10,357 9,616
Employee contributions 270 339
Amendments/settlements/curtailments 400 81
Actuarial (gain)/loss (11,442) 5,084
Foreign currency exchange rate changes (1,711) 222
Benefits paid (8,176) (7,133)
Benefit obligation, end of year $143,197 $148,170
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30 2000 1999
Change in plan assets:
Fair value of plan assets,
<S> <C> <C>
beginning of year $180,604 $181,017
Return on plan assets 9,714 4,693
Employer contribution 1,867 960
Employee contributions 270 339
Foreign currency exchange rate changes (1,152) 144
Benefits paid (7,481) (6,549)
Fair value of plan assets, end of year $183,822 $180,604
Fund status $ 40,625 $ 32,434
Unrecognized transition asset (3,144) (4,902)
Unrecognized net actuarial gain (4,898) (802)
Unrecognized prior service cost 2,788 2,641
Net amount recognized 35,371 29,371
Amounts recognized in the
balance sheet consist of:
Prepaid benefit cost 38,334 32,624
Accrued benefit liability (2,963) (3,253)
Net amount recognized $ 35,371 $ 29,371
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30 2000 1999
Weighted average assumptions as of June 30
<S> <C> <C>
Discount rate 6.25 - 8.00% 5.25 - 7.75%
Expected return on assets 8.75 - 10.00% 8.75 - 10.00%
Rate of compensation increase 4.00 - 4.50% 3.50 - 4.50%
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and
fair value of plan assets for pension plans with accumulated benefit
obligations in excess of plan assets were $7,436,000, $6,656,000 and
$0, respectively, as of June 30, 2000 and $13,555,000, $12,412,000
and $5,802,000, respectively, as of June 30, 1999.
Certain U.S. employees are covered by union-sponsored, collectively
bargained, multi-employer pension plans. Contributions and costs are
determined in accordance with the provisions of negotiated labor
contracts or terms of the plans. Pension expense for these plans was
$1,863,000, $1,967,000 and $1,706,000 in 2000, 1999, and 1998,
respectively.
Standex International 2000 Annual Report 27
notes to consolidated financial statements
Employees' Stock Ownership Plan
The Company had an Employee Stock Ownership Plan (ESOP) covering
certain salaried employees. Amounts provided for this plan were
approved by the Board of Directors and aggregated $1,500,000 and
$1,200,000 for the years ended June 30, 1999 and 1998, respectively.
Effective July 1, 1999, the Board of Directors approved the merger of
the ESOP and the Employee Savings Plans. The amount provided for the
ESOP component of the merged plan aggregated $1,200,000 for the year
ended June 30, 2000.
Employee Savings Plans
The Company has established 401(k) savings plans covering
substantially all of the Company's full-time domestic employees.
Under the provisions of the plans, employees may contribute a portion
of their compensation within certain limitations. The Company, at the
discretion of the Board of Directors, may make contributions on
behalf of its employees under these plans. Such contributions, if
any, become fully vested immediately. The Company contributions were
approximately $871,000 and $466,000 during 1999 and 1998,
respectively. Effective July 1, 1999, the Board of Directors approved
the merger of the ESOP and the Employee Savings Plans. The amount
provided for the Employee Savings Plans component of the merged plan
aggregated $919,000 for the year ended June 30, 2000.
Profit Improvement Participation Share Plan
The Company has maintained a profit improvement incentive plan in
which certain officers and employees participate. The plan is being
phased-out and, consequently, no new units have been awarded since
1995. Units under this plan were issued at the discretion of the
Compensation Committee of the Board of Directors and were assigned a
value equal to a multiple of earnings per share payable in five years
based upon the net increase in earnings per share over the five-year
period. Each fiscal year, amounts are charged or credited to
operations to reflect this liability. Amounts (credited) charged to
operations for the years ended June 30, 2000, 1999 and 1998 were
$(40,000), $286,000, and $780,000, respectively.
Postretirement Benefits Other Than Pensions
The Company sponsors unfunded postretirement medical and life plans
covering certain full-time employees who retire and have attained the
requisite age and years of service. Retired employees are required to
contribute toward the cost of coverage according to various rules
established by the Company.
The Company records postretirement benefits (such as health care and
life insurance benefits) during the years an employee provides
services.
<TABLE>
<CAPTION>
The following table sets forth the funded status of the Company's
postretirement benefit plans and accrued postretirement benefit cost
reflected in the Company's balance sheet at year end (in thousands):
Year Ended June 30 2000 1999
Change in benefit obligation:
<S> <C> <C>
Benefit obligation, beginning of year $7,961 $8,017
Service cost 137 77
Interest cost 638 558
Actuarial loss (gain) (532) (111)
Benefits paid (461) (580)
Benefit obligation, end of year 7,743 7,961
Fair value of plan assets - -
Funded status (7,743) (7,961)
Unrecognized net actuarial gain (1,859) (1,327)
Unrecognized transition obligation 5,800 6,244
Net amount recognized $(3,802) $(3,044)
</TABLE>
The assumed weighted average discount rate as of June 30, 2000 and
1999 was 8.00% and 7.25% respectively. The annual assumed rate of
increase in the per capita cost of covered health care benefits is
4.0% for retirees under age 65 in both 2000 and 1999 and is assumed
to remain at that level thereafter. A 1% increase in the assumed
health care cost trend rate would have increased the accumulated
benefit obligation by $654,000 and the net postretirement cost by
$83,000 in 2000.
<TABLE>
<CAPTION>
Net postretirement benefit costs are as follows (in thousands):
Year Ended June 30 2000 1999 1998
<S> <C> <C> <C>
Service cost $ 137 $ 77 $ 65
Interest cost 638 558 583
Amortization of transition
obligation 444 446 446
Net amortization and deferral - (45) (129)
Net postretirement benefit cost $1,219 $1,036 $965
</TABLE>
Stock Based Compensation and Purchase Plans
STOCK BASED COMPENSATION PLANS
Under incentive compensation plans, the Company is authorized to, and
has made grants of, stock options, restricted stock and performance
share units to provide equity incentive compensation to key
employees. At June 30, 2000, 1,369,751 shares of common stock were
reserved for issuance under these plans. Of this amount, and as noted
in the table below, 787,563 shares are for options granted but
unexercised and 131,714 shares are for restricted stock grants
outstanding.
Stock Option Plans
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation," encourages, but does not require companies
to record compensation cost for stock based employee compensation
plans at fair value. The Company has chosen to continue to account
for stock based compensation using the intrinsic value method
Standex International 2000 Annual Report 28
notes to consolidated financial statements
prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations.
Accordingly, the compensation cost of stock options is measured as
the excess, if any, of the quoted market price of the Company's stock
at the date of the grant over the option exercise price and is
charged to operations over the vesting period. Income tax benefits
attributable to stock options exercised are credited to capital in
excess of par value.
At June 30, 2000, the Company has made grants of options under
various Stock Option Plans. Generally, these options may be granted
at or below fair market value as of the date of grant and must be
exercised within the period prescribed by the Compensation Committee
of the Board of Directors at the time of grant but no later than ten
years from the date of grant. Certain options granted at fair value
can be exercised anytime after six months from the date of grant, and
other options can only be exercised in accordance with the vesting
schedules prescribed by the Committee.
Restricted Stock
The Company may award shares of restricted stock to eligible
employees at no cost, giving them in most instances all of the rights
of stockholders, except that they may not sell, assign, pledge or
otherwise encumber such shares and rights. Such shares and rights are
subject to forfeiture if certain employment conditions are not met.
During 2000 and 1999, the Company granted 123,814 and 7,900 shares,
respectively, of restricted stock to eligible employees. At June 30,
2000, restrictions on the stock lapse between 2001 through 2010.
Through June 30, 2000 restrictions on 2,400 shares have lapsed. The
compensation expense associated with the restricted shares at the
date of grant is charged to income ratably over the restriction
period. The Company recorded compensation expense related to
restricted stock awards of $610,000 and $20,000 for the years ended
June 30, 2000 and 1999, respectively.
Long-Term Compensation Program
Under a long-term compensation program adopted in year 2000, grants
of incentive performance share units (PSU's) are made annually to key
employees and are earned based on the achievement of certain overall
corporate financial performance targets over a three-year period. In
addition, stock options are awarded under this program at the fair
market value as of the date of grant. These options vest ratably over
five years and must be exercised within seven years. In certain
circumstances, such as retirement or a change in control, vesting of
the options granted are accelerated and PSU's are paid off on a pro-
rata basis. At June 30, 2000, under this program 50,300 shares were
subject to the restrictions related to the PSU's. Compensation
expense, if any, associated with the PSU's at the date of grant is
recorded to expense as the achievement of future performance
objectives appears likely.
<TABLE>
A summary of stock options issued under the plans is as follows:
<CAPTION>
Weighted
Average
Number Exercise
Year Ended June 30 of Options Price
Outstanding, June 30, 1997
<C> <C> <C>
($7.50 to $31.00 per share) 489,160 $20.51
Granted ($27.1875 to $32.1875
per share) 201,150 28.55
Exercised ($7.50 to
$31.00 per share) (79,554) 13.55
Canceled ($20.75 to
$31.5625 per share) (18,970) 29.54
Outstanding, June 30, 1998
($7.50 to $32.1875
per share) 591,786 23.89
Granted ($21.875 to
$25.875 per share) 92,700 25.64
Exercised ($7.50 to
$22.50 per share) (36,800) 10.42
Canceled ($24.75 to
$31.5625 per share) (17,031) 28.42
Outstanding, June 30, 1999
($9.00 to $32.1875 per share) 630,655 24.81
Granted ($16.4375 to
$23.375 per share) 228,700 22.82
Exercised ($9.00 to
$15.8125 per share) (31,550) 12.09
Canceled ($23.00 to
$31.5625 per share) (40,242) 27.91
Outstanding, June 30, 2000
($10.315 to $32.1875 per share) 787,563 24.58
Exercisable, June 30, 2000
($10.315 to $32.1875 per share) 448,167 $24.83
</TABLE>
Standex International 2000 Annual Report 29
notes to consolidated financial statements
<TABLE>
The following table sets forth information regarding options
outstanding at June 30, 2000:
<CAPTION>
Weighted Weighted Average
Weighted Average Number Exercise Prices
Number Range of Average Remaining Currently for Currently
of Options Exercise Prices Exercise Price Life (Years) Exercisable Exercisable
<C> <C> <S><C> <C> <C> <C> <C>
190,560 $10.315 - $23.00 $19.20 2 175,160 $19.34
204,334 23.00 - 23.375 23.17 6 2,068 23.00
132,017 23.375 - 27.1875 25.83 6 61,845 26.03
149,667 27.875 - 28.375 28.34 10 106,104 28.33
110,985 28.375 - 32.1875 29.86 6 102,990 29.88
787,563 $10.315 - $32.1875 $24.58 6 448,167 $24.83
</TABLE>
<TABLE>
<CAPTION>
As discussed above, the Company has chosen to continue to account for
stock based compensation using the intrinsic value method to measure
compensation expense. Had the Company used the fair value method to
measure compensation for grants after fiscal 1995, net income and
earnings per share would have been as follows:
Year Ended June 30
(In thousands) 2000 1999 1998
<S> <C> <C> <C>
Income Before Income Taxes $45,361 $50,009 $31,952
Provision for Income Taxes 19,008 20,030 12,850
Net Income $26,353 $29,979 $19,102
Earnings Per Share
Basic $ 2.08 $ 2.31 $ 1.46
Diluted $ 2.07 $ 2.30 $ 1.45
</TABLE>
<TABLE>
<CAPTION>
Options granted during 2000, 1999 and 1998 had a weighted average
grant date fair value of $11.55, $8.87 and $8.42, respectively. The
fair value of options on the grant date, including the valuation of
the option feature implicit in the Company's stock purchase plan, was
measured using the Binomial option pricing model. Key assumptions
used to apply this pricing model are as follows:
Year Ended June 30 2000 1999 1998
<S> <C> <C> <C>
Range of risk-free interest rates 5.72% 4.84% 5.74%
to 6.83% to 5.53% to 6.4%
Range of expected life of
option grants (in years) 3 to 7 2 to 7 9
Expected volatility of
underlying stock 30.6% 29.0% 17.1%
to 33.6% to 32.2% to 23.0%
Range of expected
quarterly dividends $0.19 $0.19 $0.19
(per share) to $0.20
</TABLE>
It should be noted that the option pricing model used was designed to
value readily tradable stock options with relatively short lives. The
options granted to employees are not tradable and have contractual
lives of up to ten years. However, management believes that the
assumptions used and the model to value the awards yields a
reasonable estimate of the fair value of the grants made under the
circumstances.
STOCK PURCHASE PLANS
Short-Term Incentive Program
Under an annual incentive program, key employee participants can opt
to purchase restricted stock at a discount to the market based on the
lower closing price on the date of the grant or the day the award is
paid out. The restrictions on the stock expire after three years. At
June 30, 2000, 11,726 shares of restricted stock are outstanding and
subject to restrictions that lapse between 2000 and 2001. The
compensation expense associated with this short-term incentive
program is charged to income ratably over the restriction period. The
Company recorded compensation expense related to this program of
$29,000 for the year ended June 30, 2000.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan which allows
employees to purchase shares of common stock of the Company at a 15%
discount from market value. Shares of stock reserved for the plan
were 173,906 at June 30, 2000. Shares purchased under this plan
aggregated 92,568, 106,506 and 71,261 in 2000, 1999 and 1998,
respectively.
Rights Agreement
The Company has a stock Rights Agreement for which purchase rights
have been distributed as a dividend at the rate of one right for each
share of common stock held. The rights may be exercised only if an
entity has acquired beneficial ownership of 15% or more of the
Company's common stock, or announces an offer to acquire 15% or more
of the Company.
Standex International 2000 Annual Report 30
notes to consolidated financial statements
Acquisitions and Dispositions
During fiscal 1998, the Company purchased two companies and a product
line for a total of $52,800,000 in cash, stock and a note. In October
1997, the acquisition of the net assets of ACME Manufacturing Company
for cash and a note was completed. ACME is a manufacturer of heating,
ventilation and air conditioning pipe, duct and fittings for the home
building industry. During the second quarter, the Company purchased a
hardware product line, which included inventory and machinery, of an
unrelated company. In March, the Company acquired ATR Coil Company,
Inc. for cash and shares of the Company's common stock. ATR Coil is a
manufacturer of electronic coils and windings for the industrial,
automotive and consumer markets.
<TABLE>
These transactions were accounted for as purchases and, accordingly,
the consolidated financial statements include the results of
operations of the acquired businesses from their respective
acquisition dates. The purchase price of the acquisitions was
allocated to the assets acquired based on their respective fair
market values and resulted in the recognition of goodwill of
approximately $18,500,000. If the acquisitions had occurred as of
July 1, 1997, the unaudited pro forma consolidated results of
operations would have been as follows:
<CAPTION>
Year Ended June 30, 1998
(In thousands except per share data)
<S> <C>
Net sales $632,771
Net income 20,702
Earnings per share:
Basic 1.58
Diluted 1.57
</TABLE>
As part of its restructuring, the Company sold three divisions in
fiscal 1999. These transactions are more fully described in the
Restructuring footnote below. In February 1998, the Company sold a
division for net proceeds of approximately $2,600,000 and a net loss
of $350,000.
Restructuring
In June 2000, the Company recorded a restructuring charge of
$5,408,000 before taxes. The restructuring plan involves the: (1)
disposal, closing or elimination of certain under-performing and
unprofitable operating plants, product lines, manufacturing processes
and businesses; (2) realignment and consolidation of certain
marketing and distribution activities; and (3) other cost containment
actions, including selective personnel reductions. The charge has
been recorded in the line item "Restructuring charge (credit)" in the
Statements of Consolidated Income. The components of the charge
include involuntary employee severance and benefits costs totaling
$1,036,000, asset impairments of $3,775,000 and shutdown costs of
$597,000. In 2000, $190,000 was paid in cash.
During fiscal 1998, the Company recorded a restructuring charge of
$12,758,000 before taxes. This action was intended to close, dispose
of, or liquidate certain small under-performing and unprofitable
plants, product lines and businesses. As part of this restructuring,
the Company sold for approximately $5,100,000 in cash and notes its
Christmas Tree Stand product line in December 1998, its SXI
Technologies division in January 1999 and its Williams Healthcare
division in April 1999.
<TABLE>
The following schedule reflects the Company's restructuring
activities in fiscal 1999 (in thousands):
<CAPTION>
Involuntary
Employee
Severance and Asset Shutdown
Benefits Costs Impairment Costs Total
Reserve beginning
<S> <C> <C> <C> <C>
balance $1,665 $10,061 $1,032 $12,758
Expended:
Cash 1,696 - 840 2,536
Non-cash (disposals
and write-offs) - 8,620 587 9,207
Total 1,696 8,620 1,427 11,743
Reduction and changes
in estimated costs $ (31) $1,441 $(395) $1,015
</TABLE>
Both the restructuring charge of $12,758,000 and the credit of
$1,015,762 noted above are shown in the line item "Restructuring
charge (credit)" in the Statements of Consolidated Income.
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for the years ended
June 30, 2000 and 1999 are set forth on page 19.
Standex International 2000 Annual Report 31
independent auditors' report
To the Board of Directors and Stockholders of Standex International
Corporation:
We have audited the accompanying consolidated balance sheets of
Standex International Corporation and subsidiaries as of June 30,
2000 and 1999, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the three years in
the period ended June 30, 2000. These financial statements are the
responsibility of the Corporation's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Standex
International Corporation and subsidiaries as of June 30, 2000 and
1999, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 2000, in
conformity with accounting principles generally accepted in the
United States of America.
/s/Deloitte & Touche
Boston, Massachusetts
August 15, 2000
Delotitte & Touche
[logo]
Corporate Headquarters
Standex International Corporation
6 Manor Parkway
Salem, NH 03079
(603) 893-9701
Facsimile: (603) 893-7324
http://www.standex.com
Common Stock
Listed on the New York Stock
Exchange (Ticker symbol:SXI)
Transfer Agent and Registrar:
Fleet National Bank c/o Equiserve
P.O. Box 8040
Boston, MA 02266-8040
(781) 575-3400
http://www.equiserve.com
Counsel
Hale and Dorr
60 State Street
Boston, MA 02109
Independent Auditors
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5022
Shareholder Services
Stockholders should contact Standex's Transfer Agent (Fleet National
Bank c/o Equiserve, P. O. Box 8040, Boston, MA 02266-8040) regarding
changes in name, address or ownership of stock; lost certificates or
dividends; and consolidation of accounts.
Form 10K
Shareholders may obtain a copy of Standex's Form 10K Annual Report,
as filed with the Securities and Exchange Commission without charge
by writing to: Standex Investor Relations Department, 6 Manor
Parkway, Salem, NH 03079.
Stockholder Meeting
The Annual Meeting of Stockholders will be held at 11:00 a.m. on
Tuesday, October 31, 2000 at FleetBoston, Auditorium, Main Lobby, 100
Federal Street, Boston, MA.
Standex International 2000 Annual Report 32
Design: Benes Brand Imaging Group, Lexington, MA
essential products for your world
BOARD OF DIRECTORS
Thomas L. King*
Chairman of the Board
Edward J. Trainor*
President and Chief Executive Officer
John Bolten, Jr.+ Consultant
David R. Crichton
Executive Vice President/Operations
Samuel S. Dennis 3d*+
Retired Partner, Hale and Dorr, Attorneys
William R. Fenoglio
Former President and Chief Executive Officer of Augat Inc.
Walter F. Greeley
Chairman, High Street Associates, An Investment Partnership
Daniel B. Hogan, Ph.D.
President, The Apollo Group, Management Consultants
C. Kevin Landry*
Managing Partner, T.A. Associates,
A Venture Capital Firm
H. Nicholas Muller, III, Ph.D.
President, CEO
Frank Lloyd Wright Foundation
Edward F. Paquette
Vice President and Chief Financial Officer
Sol Sackel
Former Senior Vice President of the Company
CORPORATE OFFICERS
Thomas L. King
Chairman of the Board
Edward J. Trainor
President and
Chief Executive Officer
David R. Crichton
Executive Vice President/Operations
Edward F. Paquette
Vice President and
Chief Financial Officer
Deborah A. Rosen
Vice President,
General Counsel and Secretary
Daniel C. Potter
Treasurer and Tax Director
Robert R. Kettinger
Corporate Controller
Steven G. Brown
Assistant Secretary
OPERATING DIVISIONS
INDUSTRIAL
David R. Crichton
Group Vice President
Industrial Group
Jarvis Caster Group
Can-Am Casters and Wheels
Standex Electronics
ATR Coil Company
James Burn
Custom Hoists
Spincraft
Standex Engraving Group
Eastern Engraving
Keller-Dorian
Mold-Tech
Roehlen Engraving
Standex GmbH
FOOD SERVICE
Jerry G. Griffin
Group Vice President
Food Service Group
BKI Worldwide
BKI USA
BKI Europe
Master-Bilt Products
Federal Industries
United Service Equipment Company
General Slicing
H.F. Coors China
Mason Candlelight
Procon Products
CONSUMER
Peter G. Gerstberger, Ph.D.
Group Vice President
Consumer Group
Standard Publishing
Bereanr Christian Stores
Standex Direct
Standex Air Distribution Products
Snappy/ACME/ALCO
*Member of Executive Committee
+Founder of Company
inspireme
Berean Christian Stores offers a broad range of products including
bibles, books, music gifts, art, clothing and church supplies.
[photo shows the Berean Christian Store located in Fresno, CA]
serveme
USECO's Unitron V provides a food delivery system that maintains
flavor and freshness for hot and cold products in institutional
settings such as hospitals, schools, prisons and nursing homes.
[photo is of the USECO Unitron V delivery system]
carbonateme
Procon Products' pumps are used in carbonated beverage dispensing
machines as well as espresso machines.
[photo shows a Procon pump]
bindme
James Burn International provides double-loop wire binding products
to the printing industry.
[photo shows materials with the James Burn International binding
products]
prepareme
General Slicing provides a variety of products utilized in the
preparation and sale of cold cuts, vegetables, cheese, etc.
[photo is of the General Slicing food]
deliverme
Jarvis Caster Group manufactures casters and wheels for luggage carts
for all the major hotels in the world.
Brass Birdcager Cart courtesy of Forbes Industries, Ontario, CA.
[photo shows the Brass Birdcage Card]
graspme
Standex Engraving provides the texture for making mobile phones
easier to use.
[photo shows a mobile phone]
STANDEX 6 MANOR PARKWAY SALEM, NH 03079
603.893.9701 www.standex.com
931-AR-00
