FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 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
September 30, 2000 was 12,260,425.
STANDEX INTERNATIONAL CORPORATION
I N D E X
Page No.
PART I. FINANCIAL INFORMATION:
Item 1.
Statements of Consolidated Income for the
Three Months Ended September 30, 2000 and
1999 2
Consolidated Balance Sheets, September 30, 2000
and June 30, 2000 3
Statements of Consolidated Cash Flows for the
Three Months Ended September 30, 2000 and 1999 4
Notes to Financial Information 5-7
Item 2.
Management's Discussion and Analysis 8-9
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
September 30
2000 1999
<S> <C> <C>
Net Sales $151,279 $157,803
Cost of Products Sold 103,214 108,110
Gross Profit Margin 48,065 49,693
Selling, General and Administrative Expenses 33,730 34,460
Income from Operations 14,335 15,233
Other Income/(Expense):
Gain on Stock Received 0 2,734
Interest Expense (2,948) (2,659)
Interest Income 117 160
Other Income/(Expense) - net (2,831) 235
Income Before Income Taxes 11,504 15,468
Provision for Income Taxes 4,466 5,951
Net Income $ 7,038 $ 9,517
Earnings Per Share:
Basic $ .57 $ .74
Diluted $ .57 $ .74
Cash Dividends Per Share $ .20 $ .19
</TABLE>
<TABLE>
<CAPTION>
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
September 30 June 30
2000 2000
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 11,511 $ 10,438
Receivables, net of allowances for
doubtful accounts 100,782 104,431
Inventories (approximately 45%
finished goods, 20% work in process,
and 35% raw materials and supplies) 112,757 112,201
Prepaid expenses 11,541 4,316
Total current assets 236,591 231,386
PROPERTY, PLANT AND EQUIPMENT 257,798 259,642
Less accumulated depreciation 145,469 147,505
Property, plant and equipment, net 112,329 112,137
OTHER ASSETS:
Prepaid pension cost 39,542 38,334
Goodwill, net 29,403 31,184
Other 11,615 11,159
Total other assets 80,560 80,677
TOTAL $429,480 $424,200
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 2,313 $ 2,356
Accounts payable 36,417 36,495
Income taxes 8,911 5,357
Accrued expenses 35,020 42,168
Total current liabilities 82,661 86,376
LONG-TERM DEBT (less current portion
included above) 158,420 153,436
DEFERRED INCOME TAXES AND OTHER LIABILITIES 19,630 19,573
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 9,348 9,275
Retained earnings 367,864 363,303
Cumulative translation adjustment (7,086) (7,965)
Less cost of treasury shares (243,333) (241,774)
Total stockholders' equity 168,769 164,815
TOTAL $429,480 $424,200
</TABLE>
<TABLE>
STANDEX INTERNATIONAL CORPORATION
<CAPTION>
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
Three Months Ended
September 30
2000 1999
Cash Flows from Operating Activities:
<S> <C> <C>
Net income $ 7,038 $ 9,517
Depreciation and amortization 3,486 3,493
Net changes in assets and liabilities (6,988) (8,037)
Net Cash Provided by Operating Activities 3,536 4,973
Cash Flows from Investing Activities:
Expenditures for property and equipment (4,351) (2,737)
Other 898 113
Net Cash Used for Investing Activities (3,453) (2,624)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 12,129 6,614
Net payments of debt (7,188) (7,180)
Cash dividends paid (2,477) (2,449)
Purchase of treasury stock ( 3,076) (1,615)
Other, net 1,589 448
Net Cash (Used for)/Provided by
Financing Activities 977 (4,182)
Effect of Exchange Rate Changes on Cash 13 (65)
Net Change in Cash and Cash Equivalents 1,073 (1,898)
Cash and Cash Equivalents at Beginning of Year 10,438 5,909
Cash and Cash Equivalents at September 30 $ 11,511 $ 4,011
Supplemental Disclosure of Cash Flow Information:
Cash paid during the three months for:
Interest $ 3,368 $ 3,192
Income taxes $ 1,930 $ 2,268
</TABLE>
NOTES TO FINANCIAL INFORMATION
1. Management Statement
The financial statements as reported in this Form 10-Q reflect all
adjustments (including those of a normal recurring nature) which are, in
the opinion of management, necessary to a fair statement of results for
the three months ended September 30, 2000 and 1999.
These financial statements should be read in conjunction with the
audited financial statements as of June 30, 2000. 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
September 30
2000 1999
<S> <C> <C>
Basic - Average Shares Outstanding 12,293 12,883
Effect of Dilutive Securities:
Stock Options 147 59
Diluted - Average Shares Outstanding 12,440 12,942
Both basic and diluted incomes are the same for computing earnings per
share.
Cash dividends per share have been computed based on the shares
outstanding at the time the dividends were paid. The shares (in
thousands) used in this calculation for the three months ended
September 30, 2000 and 1999 were 12,383 and 12,892, respectively.
</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 three months ended September 30, 2000 and 1999, comprehensive income
totaled approximately $7,917,000 and $8,514,000, respectively.
<TABLE>
5. Restructuring Charge
In June 2000, the Company recorded a restructuring charge of $5,408,000
before taxes. The restructuring plan involved 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 was recorded in the line item
"Restructuring charge (credit)" on the Statements of Consolidated Income
of the 2000 Annual Report. As part of this restructuring the Company
sold for cash the assets and operations of its Keller-Dorian and Goyot
subsidiaries in September, 2000.
<CAPTION>
The following schedule reflects the Company's restructuring activities
(in thousands) since the charge was recorded:
Involuntary
Employee
Severance and Asset Shutdown
Benefit Costs Impairment Costs Total
<S> <C> <C> <C> <C>
Reserve beginning balance $1,036 $3,775 $ 597 $5,408
Expended:
Cash 275 - 135 410
Non-cash
(disposals and write-offs) 3,253 3,253
Total 275 3,253 135 3,663
Estimated costs to be incurred $ 761 $ 522 $ 462 $1,745
</TABLE>
<TABLE>
6. 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.
(000 Omitted)
Income
Net Sales From Operations
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Food Service $ 36,721 $ 37,783 $ 3,209 $ 3,525
Industrial 64,398 67,050 7,740 7,433
Consumer 50,160 52,970 5,391 6,988
Corporate (2,005) (2,713)
Total $151,279 $157,803 $14,335 $15,233
</TABLE>
7. Derivative Instruments and Hedging Activities
Effective July 1, 2000, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Standex 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. Standex designates its interest rate swaps as cash
flow hedge instruments, whose recorded value in the consolidated balance
sheet approximates fair market value. Forward foreign currency exchange
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 enters
into such contracts for hedging purposes only. The Company does not
hold or issue derivative instruments for trading purposes. At September
30, 2000, the Company had no significant forward foreign currency
contracts. The cumulative effect of a change in accounting principles
due to adoption of SFAS No. 133 as of July 1, 2000 did not have a
significant impact on earnings for the quarter ended September 30, 2000.
STANDEX INTERNATIONAL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Statements contained in the following "Management's Discussion and
Analysis" that are not based on historical facts are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms or variations of
those terms or the negative of those terms. There are many factors that
affect the Company's business and the results of its operations and may
cause the actual results of operations in future periods to differ
materially from those currently expected or desired. These factors include
uncertainties in competitive pricing pressures, general domestic and
international business and economic conditions and market demand.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the first quarter of fiscal 2001 the Company invested $4.4 million
in plant and equipment, purchased $3.1 million of the Company's Common
Stock and paid out $2.5 million in cash dividends to the Company's
shareholders. These expenditures were primarily funded with net operating
cash flows of $3.5 million and the balance from 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 - Effective July 1, 2000, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The adoption of SFAS
No. 133, which did not have a material effect on the Company's financial
position or results of operations, is more fully described in the Notes to
Financial Information.
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 the latter
part of fiscal 2001. Management expects that the adoption of SAB No. 101
will not have a material effect on the Consolidated Financial Statements.
OPERATIONS
Quarter Ended September 30, 2000
As compared to the Quarter Ended September 30, 1999
Net sales for the quarter ended September 30, 2000 decreased by
approximately $6.5 million or 4.1% for the quarter ended September 30,
1999. The effect, on net sales, of changes in the average foreign exchange
rates was not significant.
Net sales in the Food Service Segment of $36.7 million were approximately
$1.1 million or 2.8% less than the prior year; Consumer Segment net sales
decreased by 5.3% to $50.2 million from the prior year's $53 million; and
Industrial Segment net sales were $64.4 million versus $67.0 million in
fiscal 2000. The Food Service and Consumer Segment declines are primarily
attributable to general economic conditions including a slowdown in the
U.S. economy and the impact of consolidations taking place in retail
markets. A strong British Pound, that continues to make imports from Euro
currency countries more competitive in the U.K. and products manufactured
in the U.K. less competitive for export to Euro currency countries, had a
negative impact on Industrial Segment sales.
The Company's gross profit margin percentage ("GPMP") remained at 32% and
none of the segments reported significant changes in GPMP.
Consolidated selling, general and administrative expenses, while decreasing
by $730,000, remained stable overall as a percent of net sales at
approximately 22%. None of the segment changes were individually
significant.
During the quarter ended September 30, 1999, 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.
Interest expense for the current quarter increased $287,000 or 10.9% versus
the same quarter in the previous fiscal year due to an increase in interest
rates and an increase in average debt outstanding.
Pre-tax income was $11.5 million compared to $15.5 million in the prior
year. The effective tax rate increased only slightly to 38.8% in the
current period compared to 38.5% in the prior year.
As a result of the above, net income for the quarter ended September 30,
2000 was $7.0 million compared to $9.5 million for the quarter ended
September 30, 1999.
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, 2000 to September 30,
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 September 30, 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: November 14, 2000 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: November 14, 2000 /s/ Edward F. Paquette
Edward F. Paquette
Vice President/CFO
