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 December 31, 1999 Commission File Number 1-7233
STANDEX INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-0596149
(State of incorporation) (I.R.S. Employer Identification No.)
6 MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079
(Address of principal executive offices) (Zip Code)
(603) 893-9701
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X . NO __.
The number of shares of Registrant's Common Stock outstanding on December
31, 1999 was 12,764,737.
STANDEX INTERNATIONAL CORPORATION
I N D E X
Page No.
PART I. FINANCIAL INFORMATION:
Item 1.
Statements of Consolidated Income for the
Three and Six Months Ended December 31,
1999 and 1998 2
Consolidated Balance Sheets, December 31, 1999
and June 30, 1999 3
Statements of Consolidated Cash Flows for the
Six Months Ended December 31, 1999 and 1998 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 4.
Submission of Matters to a Vote of Security
Holders 11
Item 6.
Exhibits and Reports on Form 8-K 11
PART I. FINANCIAL INFORMATION
STANDEX INTERNATIONAL CORPORATION
Statements of Consolidated Income
(000 Omitted)
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
Net Sales $163,050 $171,171 $320,853 $328,548
Cost of Products Sold 107,795 112,560 215,905 220,020
Gross Profit Margin 55,255 58,611 104,948 108,528
Selling, General and
Administrative Expenses 40,367 40,351 74,827 74,568
Income from Operations 14,888 18,260 30,121 33,960
Other Income/(Expense):
Gain on Stock Received 0 0 2,734 0
Interest Expense (2,812) (2,946) (5,471) (5,803)
Interest Income 64 126 224 227
Other Income/(Expense) - net (2,748) (2,820) (2,513) (5,576)
Income Before Income Taxes 12,140 15,440 27,608 28,384
Provision for Income Taxes 4,527 6,036 10,478 11,023
Net Income $ 7,613 $ 9,404 $17,130 $17,361
Earnings Per Share:
Basic $ .59 $ .72 $ 1.33 $ 1.33
Diluted $ .59 $ .72 $ 1.33 $ 1.33
Cash Dividends Per Share $ .20 $ .19 $ .39 $ .38
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
December 31 June 30
1999 1999
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,683 $ 5,909
Receivables, net of allowances for
doubtful accounts 93,232 97,871
Inventories (approximately 45%
finished goods, 20% work in process,
and 35% raw materials and supplies) 116,580 119,955
Prepaid expenses 7,845 4,774
Total current assets 228,340 228,509
PROPERTY, PLANT AND EQUIPMENT 256,620 248,913
Less accumulated depreciation 149,296 144,130
Property, plant and equipment, net 107,324 104,783
OTHER ASSETS:
Prepaid pension cost 34,907 32,624
Goodwill, net 31,563 32,110
Other 13,178 12,370
Total other assets 79,648 77,104
TOTAL $ 415,312 $410,396
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 3,579 $ 3,963
Accounts payable 34,120 35,975
Income taxes 7,141 6,202
Accrued expenses 34,213 35,855
Total current liabilities 79,053 81,995
LONG-TERM DEBT (less current portion
included above) 147,754 148,111
DEFERRED INCOME TAXES AND OTHER LIABILITIES 17,939 17,989
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 9,328 9,159
Retained earnings 357,724 345,613
Cumulative translation adjustment (4,287) (3,478)
Less cost of treasury shares (234,175) (230,969)
Total stockholders' equity 170,566 162,301
TOTAL $415,312 $410,396
STANDEX INTERNATIONAL CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
Six Months Ended
December 31
1999 1998
Cash Flows from Operating Activities:
Net income $ 17,130 $ 17,361
Depreciation and amortization 6,968 7,506
Net changes in assets and liabilities (1,219) (8,394)
Net Cash Provided by Operating Activities 22,879 16,473
Cash Flows from Investing Activities:
Expenditures for property and equipment (9,304) (8,658)
Expenditures for acquisitions and other 124 749
Net Cash Used for Investing Activities (9,180) (7,909)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 7,006 26,804
Net payments of debt (7,747) (33,387)
Cash dividends paid (5,019) (4,958)
Purchase of treasury stock (3,946) (2,514)
Other, net 909 1,032
Net Cash Used for Financing Activities (8,797) (13,023)
Effect of Exchange Rate Changes on Cash (128) 268
Net Change in Cash and Cash Equivalents 4,774 (4,191)
Cash and Cash Equivalents at Beginning of Year 5,909 9,256
Cash and Cash Equivalents at December 31 $ 10,683 $ 5,065
Supplemental Disclosure of Cash Flow Information:
Cash paid during the six months for:
Interest $ 5,534 $ 5,471
Income taxes $ 9,539 $ 8,646
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 six months ended December 31, 1999 and 1998.
These financial statements should be read in conjunction with the
audited financial statements as of June 30, 1999. Accordingly, footnote
disclosures that would substantially duplicate the disclosures contained
in the latest audited financial statements have been omitted from this
filing.
2. Per Share Calculation
The following table sets forth the number of shares (in thousands) used
in the computation of basic and diluted earnings per share:
Three Months Ended Six Months Ended
December 31 December 31
1999 1998 1999 1998
Basic - Average Shares
Outstanding 12,820 13,005 12,851 13,030
Effect of Dilutive Securities:
Stock Options 90 68 75 68
Diluted - Average Shares
Outstanding 12,910 13,073 12,926 13,098
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 and six months ended
December 31, 1999 and 1998 were as follows:
1999 1998
Quarter 12,849 13,012
Year-to-date 12,870 13,047
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 six months ended December 31, 1999 and 1998, comprehensive income
totaled approximately $16,321,000 and $19,288,000, respectively.
5. Industry Segment Information
The Company is composed of three product segments. Net sales include
only transactions with unaffiliated customers and include no
intersegment sales. Operating income by segment excludes general
corporate expenses, interest expense and income, and the gain on stock
received.
Net Sales
Three Months Ended Six Months Ended
December 31 December 31
Segment 1999 1998 1999 1998
Food Service $34,058 $38,045 $71,841 $76,238
Industrial 66,570 69,607 133,620 137,400
Consumer 62,422 63,519 115,392 114,910
Total $163,050 $171,171 $320,853 $328,548
Income From Operations
Three Months Ended Six Months Ended
December 31 December 31
Segment 1999 1998 1999 1998
Food Service $2,314 $4,067 $ 5,828 $8,401
Industrial 7,217 8,379 14,594 15,792
Consumer 7,844 7,930 14,794 13,697
Corporate (2,487) (2,116) (5,095) (3,930)
Total $14,888 $18,260 $30,121 $33,960
6. Other Income
During the previous quarter, the Company received marketable stock of an
insurance company in which Standex owned life policies. The stock was
received pursuant to a plan to "demutualize" the insurance company by
converting from a mutual company to a stock company. The stock receipt
resulted in recognizing an unusual gain of $2,734,000 ($1,668,000 net of
taxes or 13 cents per share).
STANDEX INTERNATIONAL CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Statements contained in the following "Management's Discussion and
Analysis" that are not based on historical facts are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements may be identified by the use of
forward-looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms or variations of
those terms or the negative of those terms. There are many factors that
affect the Company's business and the results of its operations and may
cause the actual results of operations in future periods to differ
materially from those currently expected or desired. These factors include
uncertainties in competitive pricing pressures, general domestic and
international business and economic conditions and market demand.
MATERIAL CHANGES IN FINANCIAL CONDITION
During the first six months of fiscal 2000 the Company invested $9.3 in
plant and equipment, purchased $3.9 million of the Company's Common Stock
and paid out $5 million in cash dividends to the Company's shareholders.
These expenditures were funded with net operating cash flows of $22.9
million.
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 December 31, 1999
As compared to the Quarter Ended December 31, 1998
Net Sales for the quarter ended December 31, 1999 decreased by
approximately $8.1 million or 4.7% from the record sales of $171.2 million
for the quarter ended December 31, 1998. 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 $4.0 million or
10.5% less than the prior year. The shortfall was primarily the result of
delays in healthcare projects caused by funding constraints and Y2K
concerns, as well as a slow down in orders resulting from consolidations
within the supermarket industry. Consumer segment Net Sales were
relatively flat after adjusting for sales attributable to a division
disposed of in fiscal 1999. Industrial segment Net Sales, after adjustment
for the effect of approximately $2.3 million of sales attributable to
divisions disposed of in the prior year, decreased slightly. Some
softening was experienced in the European texturizing business, which had
been driven by an extremely strong automotive demand in the comparative
prior year's quarter. Both the Electronic and Spincraft divisions reported
record sales levels during the quarter as a result of higher customer
demand.
The Gross Profit Margin Percentage (GPMP) decreased slightly to 34% for the
quarter ended December 31, 1999 from 34.2% for the quarter ended December
31, 1998 due to the impact of the sales shortfall within the Food Service
segment. The Industrial and Consumer segment GPMPs remained relatively
level between years.
Consolidated Selling, General and Administrative expenses remained stable
overall. Decreases in the Food Service and Industrial segments were offset
by increases in the Consumer segment and in Corporate Services. None of
these changes were individually significant.
A decline of 4.5% in Interest expense for the quarter was a direct result
of a corresponding decrease in debt as compared to the previous year.
Pre-tax income was $12.1 million compared to $15.4 million in the prior
year. The effective tax rate was 37.3% compared to 39% in the prior year
since a larger portion of the Company's income this year was generated in
lower taxed countries than last year.
As a result of the above, net income for the quarter ended December 31,
1999 was $7.6 million compared to $9.4 million for the quarter ended
December 31, 1998.
Six Months Ended December 31, 1999
As Compared to the Six Months Ended December 31, 1998
For the six months ended December 31, 1999, sales totaled $320.9 million
compared to $328.5 million for the previous fiscal year, which included
$9.2 million from divisions which were disposed of in fiscal 1999. After
considering the $9.2 million decrease due to dispositions, sales increased
slightly by $1.6 million or .5%. The effect of changes in average foreign
exchange rates from December 31, 1998 to December 31, 1999 was not
significant.
Net Sales in the Food Service segment decreased by $4.4 million or 5.8% for
reasons described in the discussion of the quarterly results. After
adjusting for divisions disposed of in fiscal 1999, Consumer segment Net
Sales increased by $3.3 million or 2.9% and Industrial segment Net Sales
increased by $2.7 million or 2%. The Consumer segment increases are the
result of additional stores in the Berean division and increased customer
demand. In the Industrial segment, although the European texturizing
business reported decreased sales activity for the reasons described in the
quarterly discussion, both the Electronics and Spincraft divisions
reflected improved customer activity.
The Company's Gross Profit Margin Percentage (GPMP) remained stable at
approximately 33%. The Food Service segment GPMP decreased from 31% to 29%
due to the decline of sales activity within the segment. This Food Service
segment decrease was offset by small increases in the GPMP of divisions
within the Industrial and Consumer segments.
Consolidated Selling, General and Administrative expenses (SG&A) remained
unchanged as a percentage of Net Sales at approximately 23%. Decreases in
the Industrial and Consumer segments SG&A were offset by an increase in
Corporate SG&A. None of these variations were individually significant.
As a result of the above, operating income was $30.1 million as compared to
$33.9 million in the prior year, a decrease of 11%.
During the current six months, other income of $2.7 million was recorded
resulting from the receipt of marketable stock of an insurance company, in
which Standex owned life policies, that "demutualized" by converting from a
mutual company to a stock company. This gain is more fully described in
the Notes to Financial Information.
A decline of almost 6% in interest expense was registered in the latest six-
month period as compared to the same period last year. A reduction in debt
of approximately $8.5 million from a year ago accounted for the expense
decrease.
Pre-tax income was $27.6 million compared to $28.4 million in the prior
year. The effective tax rate decreased to 38% in the current period from
39% in the prior year for the reason discussed in the quarterly analysis.
Due to the above factors, net income was $17.1 million compared to $17.4
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 December 31,
1999.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of the Company was held on
October 26, 1999. Two matters were voted upon at the meeting: the
election of directors and the approval of the appointment of
independent auditors of the Company.
The name of each director elected at the meeting and the number of
votes cast as to each matter are as follows:
Proposal I (Election of Directors)
Nominee For Withheld
John Bolten, Jr. 10,444,585 258,456
David R. Crichton 10,433,573 269,968
Samuel S. Dennis 3d 10,443,404 260,137
Daniel B. Hogan, Ph.D. 10,448,937 254,604
Proposal II (Appointment of Deloitte & Touche LLP as independent auditors)
For Against Abstain
10,670,063 20,354 13,124
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 December 31, 1999.
ALL OTHER ITEMS ARE INAPPLICABLE
STANDEX INTERNATIONAL CORPORATION
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
STANDEX INTERNATIONAL CORPORATION
Date: February 9, 2000 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: February 9, 2000 /s/ Edward F. Paquette
Edward F. Paquette
Vice President/CFO