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STANDEX INTERNATIONAL CORPORATIONl SALEM, NH 03079l TEL (603) 893-9701l FAX (603) 893-7324l WEB www.standex.com
Contact:
Thomas DeByle, CFO
FOR IMMEDIATE RELEASE
(603) 893-9701
email: InvestorRelations@Standex.com
STANDEX REPORTS 12% YEAR-OVER-YEAR REVENUE GROWTH IN SECOND QUARTER OF FISCAL 2011
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Reports fourth consecutive quarter of year-over-year revenue growth as all five business segments report year-over-year increases during the second quarter.
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Non-GAAP EPS increases by 37% year over year
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Earnings outpace sales growth as Company leverages lower cost structure
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Second quarter is seventh consecutive quarter of year-over-year operating income and EBITDA margin growth
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Net debt reduced by 9% sequentially to $46.3 million with net debt to capital ratio of 17.7%
SALEM, NH – January 28, 2011 . . . .Standex International Corporation(NYSE:SXI) today reported financial results for the second quarter of fiscal 2011 ended December 31, 2010.
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Net sales increased 12% to $155.5 million from $138.9 million in the second quarter of fiscal 2010.
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Income from operations was $13.0 million, compared with $10.3 million in the second quarter of fiscal 2010. Operating income for the second quarter of 2011 includes pretax, $0.5 million in restructuring expenses, a $0.3 million pretax gain on a real estate sale, and $0.2 million of pretax acquisition-related expenses. The second quarter of fiscal 2010 included a $1.5 million pretax restructuring charge, which was substantially offset by a $1.4 million pre-tax gain on the sale of property. Excluding these items from both periods, the Company reported non-GAAP second quarter of fiscal 2011 operating income of $13.4 million, compared to $10.3 million in the year-earlier quarter.
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Net income from continuing operations was $9.1 million, or $0.71 per diluted share, including a $0.3 million restructuring charge (after tax), a $0.2 million gain (after tax) from a real estate transaction, $0.2 million (after tax) in acquisition-related expenses, and a $0.3 million gain from discrete tax items. This compares with second-quarter 2010 net income from continuing operations of $6.4 million, or $0.51 per diluted share, including a $1.0 million after-tax restructuring charge and a $0.9 million gain from a real estate transaction. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations was $9.1 million, or $0.71 per diluted share, compared with $6.4 million, or $0.52 per diluted share in the same period last year.
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EBITDA (earnings before interest, income taxes, depreciation and amortization) was $16.5 million compared with $13.9 million in the second quarter of fiscal 2010. Excluding the previously mentioned items from both periods, EBITDA was $16.9 million compared with $13.9 million in the second quarter of fiscal 2010.
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Net working capital (defined as accounts receivable plus inventories less accounts payable) was $114.8 million at the end of the second quarter, compared with $103.5 million at the end of the second quarter in the prior year. Working capital turns were 5.4 turns for both the second quarter of fiscal 2011 and fiscal 2010.
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Net debt (defined as short-term debt plus long-term debt less cash) decreased to $46.3 million at December 31, 2010 from $50.7 million at September 30, 2010. The Company’s ratio of net debt to total capital was 17.7% at December 31, 2010, compared with 19.6% at September 30, 2010.
A reconciliation of net income, earnings per share, net income from continuing operations from reported GAAP amounts to non-GAAP amounts is included later in this release.
Management Comments
“Our sales momentum continued into the second quarter as we reported a 12% year-over-year increase with all five of our business segments reporting sales growth for the quarter,” said President and CEO Roger Fix. “This is now the fourth consecutive quarter of year-over-year sales improvement, and we are increasingly encouraged by positive quotation activity and order trends across most of our businesses.1 We also are pleased with the progress of our growth strategy, which focuses on both organic initiatives as well as acquisitions. Our recent acquisitions contributed close to 1% of our year-over-year sales growth this quarter and are performing at or above our expectations.”
“As we expected, our increased sales volume has translated into accelerated earnings for the Company overall,” added Fix. “Non-GAAP operating margin increased 120 bps to 8.6%, and represented the seventh consecutive quarter of year-over-year operating margin growth. Non-GAAP net income from continuing operations improved by 42% to $9.1 million and non-GAAP EPS grew by 37% to $0.71. We expect to continue to benefit from increasing leverage from sales growth as a result of our cost reduction and productivity improvement initiatives.1”
Segment Review
Food Service Equipment Grouprevenues increased by 12.3% year-over-year, with operating income growing 1.2% during this time. Sales outpaced operating income growth as a result of an unfavorable mix of products and services, as well as a lower sales price to metal cost ratio compared with an unusually favorable ratio in Q2 of 2010.
“Food Service Equipment sales growth was driven by strong performances across all of our business units,” said Fix. “The double-digit increase in sales is especially significant, considering that the overall North American food service equipment market is still contracting, although at a slower rate. We believe that our new product development efforts, comprehensive offerings and compelling value proposition are enabling us to take market share.1 The integration of Tri-Star products into our Baker’s Pride brand is proceeding well and we already have benefitted on the top line from this acquisition.”
“We expect that increased pricing in the market and our ongoing cost reduction initiatives will begin to have a positive effect on our bottom line at the Food Service Equipment Group in the next few quarters,1” said Fix.
TheEngraving Group’ssales increased by 4.7% year-over-year, with a 39.7% increase in operating income as a result of strong operating leverage.
“Very robust mold texturizing automotive demand in North America and China drove Engraving Products growth in the second quarter,” said Fix. “Additionally, we also saw strengthening demand for non-automotive mold texturizing applications and increased quotation activity for process machinery. Roll engraving was still somewhat soft. Our efforts to penetrate emerging economies are proceeding well as we experienced good growth in China, India and Brazil in the second quarter. We are very pleased with the success of our India acquisition thus far and the acquisition of S.A. Chemical Etching in Durban, South Africa, subsequent to the end of the quarter gives our Engraving business the distinction of operating on six continents, further demonstrating our global capabilities to our customers.”
“We achieved excellent operating leverage in the quarter and we continue to focus on cost control initiatives, including outsourcing machinery components and blank rolls to low cost suppliers on a global basis in order to further enhance our cost competitiveness in the market place and to drive improved profitability. We believe that the demand environment will be solid for the Engraving Products business for the remainder of fiscal 2011 and that we will continue to report good bottom-line results.1”
Engineering Technologies Group revenuefor the second quarter was up 9.0% year-over-year, while operating income increased by 32.6% due to strong sales leverage and previously completed cost reduction initiatives.
“An increase in aerospace and aviation shipments, partially offset by continued softness in the energy market, drove sales growth in Engineering Technologies this quarter,” said Fix. “We expect that while softness in energy could persist throughout calendar 2011, we are gaining market share at the three major gas turbine manufacturers in the U.S.1 This positions us well for growth when this end-user market begins to once again show growth. In addition, while there is still some uncertainty regarding the federal government’s funding for heavy lift launch vehicles, the U.S. Congress recently approved NASA funding that is favorable to Standex given the funding parameters and our current supply agreements.1 We expect that the softness in energy and the relative uncertainty in aerospace will result in a sales performance in calendar 2011 similar to calendar 2010, with growth resuming in 2012.1”
“For the second half of fiscal 2011, we expect to have a difficult comparison in the Engineering Technologies Group primarily as a result of unusually large shipments for an order related to our Teledyne Brown contract for NASA in the third quarter of last year,1” added Fix.”
TheElectronics and Hydraulics Group reported 36.5% year-over-year growth in revenues as operating income increased 187.7% due to substantial operating leverage.
“The Electronics and Hydraulics Group reported another excellent quarter of sales and operating income growth,” said Fix. “Increased sales at Electronics were driven by continued strong end-market demand coupled with our success in introducing new products, penetrating new geographic areas, and applying existing technologies into new applications and customers. At Hydraulics, the market recovery in North America is strong, and this represents the second consecutive quarter of year-over-year double digit growth. Customers are reacting very positively to our products being made in China and we expect to capitalize on opportunities both in the domestic Chinese market and for export into Southeast Asia, Australia and South America. We continue to be encouraged by the prospects for top- and bottom-line growth in this segment.1”
Air Distribution Products Group(“ADP”) sales increased 2.8% from the same period last year, and the business recorded an operating loss of $0.3 million in the quarter.
“While ADP continues to be affected by the downturn in the housing market, we are driving market share gains through our traditional products and customers, and adding new business through new products, penetrating new wholesaler accounts and expanding our presence in new geographic locations,” said Fix.
Business Outlook
“We are encouraged by the more broad based improvement that we are seeing in most of our end markets,” said Fix. While the third quarter is typically our slowest quarter seasonally, we still anticipate reporting year-over-year sales growth.1 Our earnings have accelerated as our end user markets have stabilized and we have gained traction from our top-line initiatives, and we expect to continue to capitalize on the leverage from our substantially improved cost structure.1 Our recent acquisitions have performed very well, and we are continuing to execute on our acquisition strategy, which centers on building larger, more competitive strategic operating platforms.”
Conference Call Details
Standex will host a conference call for investors today, Friday, January 28, at 10:00 a.m. ET. On the call, Roger Fix, president and CEO, and Thomas DeByle, CFO, will review the Company’s financial results and business and operating highlights. Investors interested in listening to the webcast should log on to the “Investor Relations” section of Standex’s website, located at www.standex.com. The Company's slide show accompanying the web cast audio also can be accessed via its website. To listen to the playback, please dial (888) 286-8010 in the U.S. or (617) 801-6888 internationally; the passcode is 65882484. The replay also can be accessed in the “Investor Relations” section of the Company’s website, located at www.standex.com.
Use of Non-GAAP Financial Measures
EBITDA, which is "Earnings Before Interest, Taxes, Depreciation and Amortization," non-GAAP income from operations, non-GAAP net income from continuing operations and free cash flow are non-GAAP financial measures and are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United
States. Standex believes that such information provides an additional measurement and consistent historical comparison of the Company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.
About Standex
Standex International Corporation is a multi-industry manufacturer in five broad business segments: Food Service Equipment Group, Air Distribution Products Group, Engineering Technologies Group, Engraving Group and Electronics and Hydraulics Group with operations in the United States, Europe, Canada, Australia, Singapore, Mexico, Brazil, Turkey, South Africa, India and China. For additional information, visit the Company's website at www.standex.com.
1Safe Harbor Language
Statements in this news release include, or may be based upon, management's current expectations, estimates and/or projections about Standex's markets and industries. These statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Actual results may materially differ from those indicated by such forward-looking statements as a result of certain risks, uncertainties and assumptions that are difficult to predict. Among the factors that could cause actual results to differ are uncertainty in conditions in the financial and banking markets, general domestic and international economy including more specifically increases in raw material costs, the ability to substitute less expensive alternative raw materials, the heavy construction vehicle market, the new residential construction market, the ability to continue to successfully implement productiv ity improvements, increase market share, access new markets, introduce new products, enhance our presence in strategic channels, the successful expansion and automation of manufacturing capabilities and diversification efforts in emerging markets, the ability to continue to achieve cost savings through lean manufacturing, cost reduction activities, and low cost sourcing, effective completion of plant consolidations and the other factors discussed in the Annual Report of Standex on Form 10-K for the fiscal year ending June 30, 2010, which is on file with the Securities and Exchange Commission, and any subsequent periodic reports filed by the Company with the Securities and Exchange Commission. In addition, any forward-looking statements represent management's estimates only as of the day made and should not be relied upon as representing management's estimates as of any subsequent date. While the Company may elect to update forward-looking statements at some point in the future, the Company and ma nagement specifically disclaim any obligation to do so, even if management's estimates change.
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Standex International Corporation |
Consolidated Statement of Operations |
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| Three Months Ended | | Six Months Ended |
| December 31, | | December 31, |
| 2010 | | 2009 | | 2010 | | 2009 |
Net sales | $155,523 | | $138,853 | | $312,582 | | $290,962 |
Cost of sales | 105,197 | | 94,157 | | 211,194 | | 197,078 |
Gross profit | 50,326 | | 44,696 | | 101,388 | | 93,884 |
| | | | | | | |
Selling, general and administrative expenses | 37,114 | | 34,362 | | 72,631 | | 68,935 |
Gain on sale of real estate | (292) | | (1,405) | | (3,368) | | (1,405) |
Restructuring costs | 457 | | 1,470 | | 1,438 | | 3,027 |
| | | | | | | |
Income from operations | 13,047 | | 10,269 | | 30,687 | | 23,327 |
| | | | | | | |
Interest expense | 472 | | 799 | | 1,181 | | 1,734 |
Other (income) expense, net | (67) | | 55 | | (55) | | (189) |
Total | 405 | | 854 | | 1,126 | | 1,545 |
| | | | | | | |
Income from continuing operations before income taxes | 12,642 | | 9,415 | | 29,561 | | 21,782 |
Provision for income taxes | 3,531 | | 3,023 | | 8,923 | | 7,003 |
Net income from continuing operations | 9,111 | | 6,392 | | 20,638 | | 14,779 |
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Income (loss) from discontinued operations, net of tax | (92) | | (438) | | (631) | | 957 |
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Net income | $9,019 | | $5,954 | | $20,007 | | $15,736 |
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Basic earnings per share: | | | | | | | |
Income from continuing operations | $0.73 | | $0.52 | | $1.65 | | $1.19 |
Income (loss) from discontinued operations | (0.01) | | (0.04) | | (0.05) | | 0.08 |
Total | $0.72 | | $0.48 | | $1.60 | | $1.27 |
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Diluted earnings per share: | | | | | | | |
Income from continuing operations | $0.71 | | $0.51 | | $1.62 | | $1.17 |
Income (loss) from discontinued operations | - | | (0.04) | | (0.05) | | 0.08 |
Total | $0.71 | | $0.47 | | $1.57 | | $1.25 |
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Standex International Corporation and Subsidiaries |
Statements of Consolidated Cash Flows |
| | Six Months Ended December 31, |
| | 2010 | | 2009 |
Cash Flows from Operating Activities | | | | |
Net income | | $20,007 | | $15,736 |
Income (loss) from discontinued operations | | (631) | | 957 |
Income from continuing operations | | 20,638 | | 14,779 |
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Adjustments to reconcile net income to net cash provided by operating activities: | | | | |
Depreciation and amortization | | 6,718 | | 7,386 |
Stock-based compensation | | 1,676 | | 1,745 |
Non-cash portion of restructuring charges | | 400 | | 1,117 |
(Gain) loss on sale of investments, real estate and equipment | | (3,368) | | (1,405) |
Net changes in operating assets and liabilities | | (3,365) | | 1,382 |
Net cash provided by operating activities - continuing operations | | 22,699 | | 25,004 |
Net cash used for operating activities - discontinued operations | | (979) | | (211) |
Net cash provided by operating activities | | 21,720 | | 24,793 |
Cash Flows from Investing Activities | | | | |
Expenditures for property, plant and equipment | | (3,412) | | (1,668) |
Expenditures for acquisitions, net of cash acquired | | (3,798) | | - |
Proceeds withdrawn from life insurance policies | | - | | 93 |
Other investing activities | | (1,127) | | - |
Proceeds from sale of real estate and equipment | | 4,871 | | 8,080 |
Net cash provided by (used for) investing activities from continuing operations | | (3,466) | | 6,505 |
Net cash provided by investing activities from discontinued operations | | - | | - |
Net cash provided by (used for) investing activities | | (3,466) | | 6,505 |
Cash Flows from Financing Activities | | | | |
Proceeds from revolving debt borrowings | | 25,000 | | 28,000 |
Payments of revolving debt | | (52,500) | | (54,500) |
Short-term borrowings, net | | 2,063 | | - |
Activity under share-based payment plans | | 177 | | 199 |
Excess tax benefit from share-based payment activity | | 194 | | - |
Cash dividends paid | | (1,378) | | (1,243) |
Purchase of treasury stock | | (4,814) | | (459) |
Net cash used for financing activities from continuing operations | | (31,258) | | (28,003) |
Net cash used for financing activities from discontinued operations | | -- | | -- |
Net cash used for financing activities | | (31,258) | | (28,003) |
| | | | |
Effect of exchange rate changes on cash | | 977 | | 150 |
| | | | |
| | | | |
Net changes in cash and cash equivalents | | (12,027) | | 3,445 |
Cash and cash equivalents at beginning of year | | 33,630 | | 8,984 |
Cash and cash equivalents at end of period | | $21,603 | | $12,429 |
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Standex International Corporation |
Condensed Consolidated Balance Sheets |
| | | | |
| | December 31, | | June 30, |
| | 2010 | | 2010 |
| | | | |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $21,603 | | $33,630 |
Accounts receivable, net | | 89,726 | | 92,520 |
Inventories, net | | 78,998 | | 69,554 |
Income tax receivables | | - | | 3,634 |
Prepaid expenses and other current assets | | 7,669 | | 5,346 |
Deferred tax asset | | 12,394 | | 12,351 |
Total current assets | | 210,390 | | 217,035 |
| | | | |
Property, plant, and equipment, net | | 92,051 | | 93,227 |
Intangible assets, net | | 16,813 | | 17,791 |
Goodwill | | 106,626 | | 102,804 |
Other non-current assets | | 17,557 | | 15,422 |
Total non-current assets | | 233,047 | | 229,244 |
| | | | |
Total assets | | $443,437 | | $446,279 |
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LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
| | | | |
Current liabilities: | | | | |
Short-term debt | | $ 2,063 | | $ - |
Accounts payable | | 53,930 | | 58,514 |
Accrued liabilities | | 41,006 | | 40,683 |
Income taxes payable | | 614 | | - |
Current liabilities – discontinued operations | | 2,038 | | 2,319 |
Total current liabilities | | 99,651 | | 101,516 |
| | | | |
Long-term debt | | 65,800 | | 93,300 |
Accrued pension and other non-current liabilities | 62,723 | | 59,400 |
Total non-current liabilities | | 128,523 | | 152,700 |
| | | | |
Stockholders' equity: | | | | |
Common stock | | 41,976 | | 41,976 |
Additional paid-in capital | | 31,031 | | 31,460 |
Retained earnings | | 463,904 | | 445,313 |
Accumulated other comprehensive loss | | (59,534) | | (66,456) |
Treasury shares | | (262,114) | | (260,230) |
Total stockholders' equity | | 215,263 | | 192,063 |
| | | | |
Total liabilities and stockholders' equity | | $443,437 | | $446,279 |
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Standex International Corporation |
Selected Segment Data |
| | | | | | | |
| Three Months Ended | | Six Months Ended |
| December 31, | | December 31, |
| 2010 | | 2009 | | 2010 | | 2009 |
Net Sales | | | | | | | |
Food Service Equipment | $91,976 | | $81,937 | | $185,293 | | $173,710 |
Air Distribution Products | 13,445 | | 13,074 | | 27,228 | | 27,396 |
Engraving | 20,805 | | 19,879 | | 41,443 | | 39,066 |
Engineering Technologies | 13,492 | | 12,382 | | 26,029 | | 27,018 |
Electronics and Hydraulics | 15,805 | | 11,581 | | 32,589 | | 23,772 |
Total | $155,523 | | $138,853 | | $312,582 | | $290,962 |
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Income from operations | | | | | | | |
Food Service Equipment | $9,943 | | $9,821 | | $21,127 | | $23,122 |
Air Distribution Products | (278) | | (354) | | (733) | | (259) |
Engraving | 3,383 | | 2,422 | | 7,320 | | 4,783 |
Engineering Technologies | 3,237 | | 2,441 | | 6,217 | | 5,271 |
Electronics and Hydraulics | 2,230 | | 775 | | 4,680 | | 1,561 |
Corporate | (5,303) | | (4,771) | | (9,854) | | (9,529) |
Total | $13,212 | | $10,334 | | $28,757 | | $24,949 |
