FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000 Commission File Number 1-7233
STANDEX INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-0596149
(State of incorporation) (I.R.S. Employer Identification No.)
6 MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079
(Address of principal executive offices) (Zip Code)
(603) 893-9701
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X . NO __.
The number of shares of Registrant's Common Stock outstanding on March
31, 2000 was 12,565,445.
STANDEX INTERNATIONAL CORPORATION
I N D E X
Page No.
PART I. FINANCIAL INFORMATION:
Item 1.
Statements of Consolidated Income for the
Three and Nine Months Ended March 31, 2000
and 1999 2
Consolidated Balance Sheets, March 31, 2000 and
June 30, 1999 3
Statements of Consolidated Cash Flows for the
Nine Months Ended March 31, 2000 and 1999 4
Notes to Financial Information 5-6
Item 2.
Management's Discussion and Analysis 7-9
Item 3.
Quantitative and Qualitative Disclosures About
Market Risk 10
PART II. OTHER INFORMATION:
Item 6.
Exhibits and Reports on Form 8-K 11
<TABLE>
PART I. FINANCIAL INFORMATION
<CAPTION>
STANDEX INTERNATIONAL CORPORATION
Statements of Consolidated Income
(000 Omitted)
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Sales $158,158 $152,247 $479,011 $480,795
Cost of Products Sold 106,234 101,592 322,139 321,612
Gross Profit Margin 51,924 50,655 156,872 159,183
Other Costs/(Income):
Selling, General and
Administrative Expenses 37,838 37,240 112,665 111,808
Restructuring Credit 0 (700) 0 (700)
Total 37,838 36,540 112,665 111,108
Income from Operations 14,086 14,115 44,207 48,075
Other Income/(Expense):
Gain on Stock Received 0 0 2,734 0
Interest Expense (2,820) (2,721) (8,291) (8,524)
Interest Income 83 78 307 305
Other Income/(Expense) - net (2,737) (2,643) (5,250) (8,219)
Income Before Income Taxes 11,349 11,472 38,957 39,856
Provision for Income Taxes 4,889 4,841 15,367 15,864
Net Income $ 6,460 $ 6,631 $23,590 $23,992
Earnings Per Share:
Basic $ .52 $ .52 $ 1.85 $ 1.85
Diluted $ .51 $ .51 $ 1.84 $ 1.84
Cash Dividends Per Share $ .20 $ .19 $ .59 $ .57
</TABLE>
<TABLE>
<CAPTION>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
March 31 June 30
2000 1999
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 9,280 $ 5,909
Receivables, net of allowances for
doubtful accounts 97,555 97,871
Inventories (approximately 45%
finished goods, 20% work in process,
and 35% raw materials and supplies) 115,865 119,955
Prepaid expenses 7,824 4,774
Total current assets 230,524 228,509
PROPERTY, PLANT AND EQUIPMENT 259,379 248,913
Less accumulated depreciation 148,705 144,130
Property, plant and equipment, net 110,674 104,783
OTHER ASSETS:
Prepaid pension cost 36,224 32,624
Goodwill, net 31,702 32,110
Other 12,679 12,370
Total other assets 80,605 77,104
TOTAL $421,803 $410,396
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 3,714 $ 3,963
Accounts payable 34,522 35,975
Income taxes 8,062 6,202
Accrued expenses 35,523 35,855
Total current liabilities 81,821 81,995
LONG-TERM DEBT (less current portion
included above) 152,283 148,111
DEFERRED INCOME TAXES AND OTHER LIABILITIES 17,802 17,989
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 9,347 9,159
Retained earnings 361,651 345,613
Cumulative translation adjustment (5,345) (3,478)
Less cost of treasury shares (237,732) (230,969)
Total stockholders' equity 169,897 162,301
TOTAL $ 421,803 $410,396
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
Nine Months Ended
March 31
2000 1999
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 23,590 $ 23,992
Depreciation and amortization 10,355 10,292
Net changes in assets and liabilities (4,011) (8,215)
Net Cash Provided by Operating Activities 29,934 26,069
Cash Flows from Investing Activities:
Expenditures for property and equipment (16,213) (11,665)
Expenditures for acquisitions and other 208 1,554
Net Cash Used for Investing Activities (16,005) (10,111)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 11,537 26,376
Net payments of debt (7,614) (32,176)
Cash dividends paid (7,552) (7,432)
Purchase of treasury stock (8,190) (6,712)
Other, net 1,614 1,324
Net Cash Used for Financing Activities (10,205) (18,620)
Effect of Exchange Rate Changes on Cash (353) 38
Net Change in Cash and Cash Equivalents 3,371 (2,624)
Cash and Cash Equivalents at Beginning of Year 5,909 9,256
Cash and Cash Equivalents at March 31 $ 9,280 $ 6,632
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months for:
Interest $ 8,854 $ 8,861
Income taxes $ 13,507 $ 13,584
</TABLE>
NOTES TO FINANCIAL INFORMATION
1. Management Statement
The financial statements as reported in this Form 10-Q reflect all
adjustments (including those of a normal recurring nature) which are, in
the opinion of management, necessary to a fair statement of results for
the three and nine months ended March 31, 2000 and 1999.
These financial statements should be read in conjunction with the
audited financial statements as of June 30, 1999. Accordingly, footnote
disclosures that would substantially duplicate the disclosures contained
in the latest audited financial statements have been omitted from this
filing.
<TABLE>
2. Per Share Calculation
<CAPTION>
The following table sets forth the number of shares (in thousands) used
in the computation of basic and diluted earnings per share:
Three Months Ended Nine Months Ended
March 31 March 31
2000 1999 2000 1999
Basic - Average Shares
<S> <C> <C> <C> <C>
Outstanding 12,649 12,946 12,779 12,999
Effect of Dilutive Securities:
Stock Options 72 59 74 65
Diluted - Average Shares
Outstanding 12,721 13,005 12,853 13,064
Both basic and diluted incomes are the same for computing earnings per
share.
</TABLE>
<TABLE>
Cash dividends per share have been computed based on the shares
outstanding at the time the dividends were paid. The shares (in
thousands) used in this calculation for the three and nine months ended
March 31, 2000 and 1999 were as follows:
2000 1999
<S> <C> <C>
Quarter 12,665 13,024
Year-to-date 12,801 13,039
</TABLE>
3. Contingencies
The Company is a party to various claims and legal proceedings related
to environmental and other matters generally incidental to its business.
Management has evaluated each matter based, in part, upon the advice of
its independent environmental consultants and in-house counsel and has
recorded an appropriate provision for the resolution of such matters in
accordance with Statement of Financial Accounting Standards No. 5,
"Accounting for Contingencies." Management believes that such provision
is sufficient to cover any future payments, including legal costs, under
such proceedings.
4.Comprehensive Income
In addition to net income, the only item which would be included in
comprehensive income is foreign currency translation adjustments. For
the nine months ended March 31, 2000 and 1999, comprehensive income
totaled approximately $21,723,000 and $24,430,000, respectively.
<TABLE>
5. Industry Segment Information
<CAPTION>
The Company is composed of three product segments. Net sales include
only transactions with unaffiliated customers and include no
intersegment sales. Operating income by segment excludes general
corporate expenses, interest expense and income, and the gain on stock
received.
Net Sales
Three Months Ended Nine Months Ended
March 31 March 31
Segment 2000 1999 2000 1999
<S> <C> <C> <C> <C>
Food Service $ 35,730 $ 34,27 $107,571 $110,514
Industrial 68,864 66,727 202,484 204,127
Consumer 53,564 51,244 168,956 166,154
Total $158,158 $152,247 $479,011 $480,795
</TABLE>
<TABLE>
<CAPTION>
Income From Operations
Three Months Ended Nine Months Ended
March 31 March 31
Segment 2000 1999 2000 1999
<S> <C> <C> <C> <C>
Food Service $ 3,169 $ 4,052 $ 8,997 $ 12,453
Industrial 7,688 7,156 22,282 22,948
Consumer 5,929 5,675 20,723 19,372
Corporate (2,700) (2,768) (7,795) (6,698)
Total $14,086 $14,115 $44,207 $48,075
</TABLE>
6. Other Income
During the quarter ended September 30, 1999, the Company received
marketable stock of an insurance company in which Standex owned life
policies. The stock was received pursuant to a plan to "demutualize"
the insurance company by converting from a mutual company to a stock
company. The stock receipt resulted in recognition of an unusual gain
of $2,734,000 ($1,668,000 net of taxes or 13 cents per share).
7.Restructuring Credit
In June 1998, the Company recorded a restructuring charge of $12,758,000
before taxes. The charge was recorded in the line item "Restructuring
Charge" on the Statement of Consolidated Income of the 1998 Annual
Report. In the quarter ended March 31, 1999, the restructuring reserve
was reduced by $700,000 to reflect a reduction in estimated costs. This
credit is shown in the Statements of Consolidated Income as
"Restructuring Credit."
STANDEX INTERNATIONAL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Statements contained in the following "Management's Discussion and
Analysis" that are not based on historical facts are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms or variations of
those terms or the negative of those terms. There are many factors that
affect the Company's business and the results of its operations and may
cause the actual results of operations in future periods to differ
materially from those currently expected or desired. These factors include
uncertainties in competitive pricing pressures, general domestic and
international business and economic conditions and market demand.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the first nine months of fiscal 2000 the Company invested $16.2
million in plant and equipment, purchased $8.2 million of the Company's
Common Stock and paid out $7.6 million in cash dividends to the Company's
shareholders. These expenditures were funded with net operating cash flows
of $29.9 million and $3.9 million of net additional borrowings.
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.
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 its consolidated financial statements.
OPERATIONS
Quarter Ended March 31, 2000
As compared to the Quarter Ended March 31, 1999
Net Sales for the quarter ended March 31, 2000 increased by approximately
$5.9 million or 3.9% from sales of $152.2 million for the quarter ended
March 31, 1999. The previous year's quarter included $1.2 million of sales
from divisions that were disposed in fiscal 1999. The effect, on Net
Sales, of changes in the average foreign exchange rates was not
significant.
Net Sales in the Food Service segment were approximately $1.5 million or
4.2% more than the prior year. The increase was the result of increased
customer demand in the Master-Bilt and Federal Industries divisions.
However, the segment continues to be negatively impacted by supermarket
consolidations and delays in healthcare projects. After adjusting for
divisions disposed of in fiscal 1999, Consumer segment Net Sales increased
by $3.6 million or 7.1%. The increases are attributable to additional
stores in the Berean division, and increased customer demand throughout the
other Consumer segment divisions. Industrial segment Net Sales increased
by $2.1 million or 3.2%. Increased customer demand in the Jarvis Caster,
Custom Hoists, and Electronics divisions coupled with some improvement in
the texturizing operations in this segment accounted for the increased
sales.
The Gross Profit Margin Percentage (GPMP) decreased slightly to 32.8% for
the quarter ended March 31, 2000 from 33.3% for the quarter ended March 31,
1999. The Food Service segment GPMP decreased to 30.1% from 33.2% in the
prior year due to the sales shortfalls caused by the supermarket
consolidations and delays in healthcare industry projects. The Consumer
segment GPMP decreased slightly to 37.5% from the prior year's 38.6% and
the Industrial segment GPMP increased to 30.6% from the prior year's 29.2%
due primarily to sales growth.
Consolidated Selling, General and Administrative expenses remained stable
overall at approximately 24% of Net Sales. None of the segment changes
were individually significant.
A restructuring credit of $700,000 that relates to a $12.8 million
restructuring charge (which was recognized in the fourth quarter of fiscal
1998) was recorded in the third quarter of fiscal 1999. This credit is
more fully described in the Notes to Financial Information.
An increase of 3.6% in Interest Expense for the quarter was a result of an
increase in interest rates as compared to the previous year partially
offset by a decrease in debt.
Pre-tax income was $11.3 million compared to $11.5 million in the prior
year. The effective tax rate was 43.1% compared to 42.2% in the prior year
since a larger portion of the Company's income this year was generated in
higher taxed countries than last year.
As a result of the above, net income for the quarter ended March 31, 2000
was $6.5 million compared to $6.6 million for the quarter ended March 31,
1999.
Nine Months Ended March 31, 2000
As Compared to the Nine Months Ended March 31, 1999
For the nine months ended March 31, 2000, sales totaled $479.0 million
compared to $480.8 million for the previous fiscal year, which included
$10.5 million from divisions which were disposed of in fiscal 1999. After
adjusting for the $10.5 million decrease due to dispositions, sales
increased by $8.7 million or 1.8%. The effect of changes in average
foreign exchange rates between periods was not significant.
Net Sales in the Food Service segment decreased by $2.9 million or 2.7% due
to delays in healthcare projects caused by funding constraints and a
slowdown in orders resulting from consolidations within the supermarket
industry. After adjusting for divisions disposed of in fiscal 1999,
Consumer segment Net Sales increased by $6.8 million or 4.2% and Industrial
segment Net Sales increased by $4.8 million or 2.4%. The Consumer segment
increases are the result of additional stores in the Berean division and
increased customer demand throughout the other Consumer segment divisions.
In the Industrial segment, increased customer demand in the Spincraft,
Custom Hoists, Jarvis Caster, and Electronics divisions accounted for the
increase in sales.
The Company's Gross Profit Margin Percentage (GPMP) remained stable at
approximately 33%. The Food Service segment GPMP decreased from 31.8% to
29.4% due to the decline of sales activity within the segment. The
Consumer segment GPMP increased to 37.7% from 37.2% in the prior year and
the Industrial segment GPMP decreased to 30.4% from 30.6% in the prior
year.
Consolidated Selling, General and Administrative expenses (SG&A) remained
unchanged as a percentage of Net Sales at just over 23%. None of the
segments reported significant variations from the prior year.
As stated in the discussion of quarterly results, the Company recorded a
$700,000 restructuring credit in the third quarter of the prior year.
As a result of the above, operating income was $44.2 million as compared to
$48.1 million in the prior year, a decrease of 8.1%.
During the first quarter of this year, other income showed a gain of $2.7
million resulting from the receipt of marketable stock of an insurance
company, in which Standex owned life policies, that "demutualized" by
converting from a mutual company to a stock company. This gain is more
fully described in the Notes to Financial Information.
A decline of 2.7% in Interest Expense was registered in the latest nine-
month period as compared to the same period last year. The reduction is
the result of a decrease in debt offset somewhat by an increase in interest
rates.
Pre-tax income was $39.0 million compared to $39.9 million in the prior
year. The effective tax rate decreased only slightly to 39.4% in the
current period from 39.8% in the prior year.
Due to the above factors, net income was $23.6 million compared to $24.0
million for the prior year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to a number of market risks, primarily the effects
of changes in foreign currency exchange rates and interest rates.
Investments in foreign subsidiaries and branches, and their resultant
operations, denominated in foreign currencies, create exposures to changes
in exchange rates. The Company's use of its bank credit agreements
creates an exposure to changes in interest rates. The effect of changes
in exchange rates and interest rates on the Company's earnings has been
relatively insignificant compared to other factors that also affect
earnings, such as business unit sales and operating margins. The Company
does not hold or issue financial instruments for trading, profit or
speculative purposes.
There have been no significant changes in the exposure to changes in both
foreign currency and interest rates from June 30, 1999 to March 31, 2000.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K with the Securities and
Exchange Commission during the quarter ended March 31, 2000.
ALL OTHER ITEMS ARE INAPPLICABLE
STANDEX INTERNATIONAL CORPORATION
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
STANDEX INTERNATIONAL CORPORATION
Date: May 12, 2000 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: May 12, 2000 /s/ Edward F. Paquette
Edward F. Paquette
Vice President/CFO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,280
<SECURITIES> 0
<RECEIVABLES> 101,604
<ALLOWANCES> 4,049
<INVENTORY> 115,865
<CURRENT-ASSETS> 230,524
<PP&E> 259,379
<DEPRECIATION> 148,705
<TOTAL-ASSETS> 421,803
<CURRENT-LIABILITIES> 81,821
<BONDS> 152,283
0
0
<COMMON> 41,976
<OTHER-SE> 127,921
<TOTAL-LIABILITY-AND-EQUITY> 421,803
<SALES> 479,011
<TOTAL-REVENUES> 482,052
<CGS> 322,139
<TOTAL-COSTS> 322,139
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,291
<INCOME-PRETAX> 38,957
<INCOME-TAX> 15,367
<INCOME-CONTINUING> 23,590
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<NET-INCOME> 23,590
<EPS-BASIC> 1.85
<EPS-DILUTED> 1.84
</TABLE>
