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, 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 December
31, 2000 was 12,154,569.
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,
2000 and 1999 2
Consolidated Balance Sheets, December 31, 2000
and June 30, 2000 3
Statements of Consolidated Cash Flows for the
Six Months Ended December 31, 2000 and 1999 4
Notes to Financial Information 5-7
Item 2.
Management's Discussion and Analysis 8-10
Item 3.
Quantitative and Qualitative Disclosures About
Market Risk 11
PART II. OTHER INFORMATION:
Item 4.
Submission of Matters to a Vote of Security
Holders 12
Item 6.
Exhibits and Reports on Form 8-K 12
PART I. FINANCIAL INFORMATION
STANDEX INTERNATIONAL CORPORATION
Statements of Consolidated Income
(000 Omitted)
Three Months Ended Six Months Ended
December 31 December 31
2000 1999 2000 1999
Net Sales $158,652 $163,050 $309,931 $320,853
Cost of Products Sold 104,169 107,795 207,383 215,905
Gross Profit Margin 54,483 55,255 102,548 104,948
Selling, General and
Administrative Expenses 39,215 40,367 72,945 74,827
Income from Operations 15,268 14,888 29,603 30,121
Other Income/(Expense):
Gain on Stock Received 0 0 0 2,734
Interest Expense (3,060) (2,812) (6,008) (5,471)
Interest Income 63 64 180 224
Other Income/(Expense) - net (2,997) (2,748) (5,828) (2,513)
Income Before Income Taxes 12,271 12,140 23,775 27,608
Provision for Income Taxes 4,718 4,527 9,184 10,478
Net Income $7,553 $7,613 $14,591 $17,130
Earnings Per Share:
Basic $ .62 $ .59 $ 1.19 $ 1.33
Diluted $ .61 $ .59 $ 1.18 $ 1.33
Cash Dividends Per Share $ .21 $ .20 $ .41 $ .39
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
December 31 June 30
2000 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,442 $ 10,438
Receivables, net of allowances for
doubtful accounts 94,583 104,431
Inventories (approximately 45%
finished goods, 20% work in process,
and 35% raw materials and supplies) 110,058 112,201
Prepaid expenses 8,705 4,316
Total current assets 222,788 231,386
PROPERTY, PLANT AND EQUIPMENT 260,116 259,642
Less accumulated depreciation 147,289 147,505
Property, plant and equipment, net 112,827 112,137
OTHER ASSETS:
Prepaid pension cost 40,595 38,334
Goodwill, net 28,932 31,184
Other 11,430 11,159
Total other assets 80,957 80,677
TOTAL $416,572 $424,200
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion
of long-term debt $ 2,964 $ 2,356
Accounts payable 35,588 36,495
Income taxes 6,267 5,357
Accrued expenses 36,869 42,168
Total current liabilities 81,688 86,376
LONG-TERM DEBT (less current portion) 146,392 153,436
DEFERRED INCOME TAXES AND OTHER LIABILITIES 19,486 19,573
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 9,232 9,275
Retained earnings 372,850 363,303
Accumulated other comprehensive income (9,470) (7,965)
Less cost of treasury shares (245,582) (241,774)
Total stockholders' equity 169,006 164,815
TOTAL $416,572 $424,200
STANDEX INTERNATIONAL CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
Six Months Ended
December 31
2000 1999
Cash Flows from Operating Activities:
Net income $14,591 $17,130
Depreciation and amortization 6,852 6,968
Net changes in assets and liabilities 1,125 (1,219)
Net Cash Provided by Operating Activities 22,568 22,879
Cash Flows from Investing Activities:
Expenditures for property and equipment (8,651) (9,304)
Other 845 124
Net Cash Used for Investing Activities (7,806) (9,180)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 928 7,006
Payments of debt (7,363) (7,747)
Cash dividends paid (5,043) (5,019)
Purchase of treasury stock (6,134) (3,946)
Other, net 2,281 909
Net Cash Used for Financing Activities (15,331) (8,797)
Effect of Exchange Rate Changes on Cash (427) (128)
Net Change in Cash and Cash Equivalents (996) 4,774
Cash and Cash Equivalents at Beginning of Year 10,438 5,909
Cash and Cash Equivalents at December 31 $9,442 $10,683
Supplemental Disclosure of Cash Flow Information:
Cash paid during the six months for:
Interest $5,083 $5,534
Income taxes $8,274 $9,539
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, 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.
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
2000 1999 2000 1999
Basic Average Shares Outstanding 12,202 12,820 12,245 12,851
Effect of Dilutive Securities:
Stock Options 153 90 151 75
Diluted Average Shares Outstanding 12,355 12,910 12,396 12,926
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, 2000 and 1999 were as follows:
2000 1999
Quarter 12,223 12,849
Year-to-date 12,301 12,870
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, 2000 and 1999, comprehensive income
totaled approximately $13,085,000 and $16,321,000, respectively.
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.
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
Reserve beginning balance $1,036 $3,775 $ 597 $5,408
Expended:
Cash 421 176 597
Non-cash (disposals
and write-offs) 3,021 3,021
Total 421 3,021 176 3,618
Estimated costs to be
incurred $ 615 $ 754 $ 421 $ 1,790
The Company believes that all remaining costs will be incurred by the end
of fiscal 2001.
6. 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 2000 1999 2000 1999
Food Service $ 36,856 $ 34,058 $ 73,577 $ 71,841
Industrial 61,723 66,570 126,121 133,620
Consumer 60,073 62,422 110,233 115,392
Total $158,652 $163,050 $309,931 $320,853
Income From Operations
Three Months Ended Six Months Ended
December 31 December 31
Segment 2000 1999 2000 999
Food Service $ 3,659 $ 2,314 $ 6,868 $ 5,828
Industrial 7,478 7,217 15,218 14,594
Consumer 6,252 7,844 11,643 14,794
Corporate (2,121) (2,487) (4,126) (5,095)
Total $15,268 $14,888 $29,603 $30,121
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. The Company assesses the
effectiveness of its hedge instruments on a quarterly basis. 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 December 31, 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 three month
or six month periods ended December 31, 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 six months of fiscal 2001 the Company invested $8.7
million in plant and equipment, paid down $7.4 million of debt, repurchased
$6.1 million of the Company's Common Stock and paid out $5 million in cash
dividends to the Company's shareholders. These expenditures were primarily
funded with net operating cash flows of $22.6 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 - 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 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 December 31, 2000
As compared to the Quarter Ended December 31, 1999
Net sales for the quarter ended December 31, 2000 decreased by
approximately $4.4 million or 2.7% from sales of $163.1 million for the
quarter ended December 31, 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 $2.8 million or
8.2% more than the prior year. The increase reflected a general
improvement in the segment following a difficult 12 months. Consumer
segment net sales decreased to $60.1 million from $62.4 million in the
prior period. The decrease was primarily the result of the impact of lower
housing starts on our Air Distribution business. Industrial segment net
sales decreased $4.9 million to $61.7 million. The decrease was reflective
of the economic slowdown within the automotive industry, and a general
reduction in inventory levels by customers in the industrial marketplace.
The gross profit margin percentage (GPMP) was unchanged at approximately
34% for the quarters ended December 31, 2000 and 1999. Small increases in
the Food Service and Industrial segments' GPMP were partially offset by a
decrease in the Consumer segment GPMP.
Consolidated selling, general and administrative expenses (SG&A) remained
stable at 24.7% of net sales. Slight increases in the Food Service and
Consumer segments' SG&A were offset by a decrease in the Industrial
segment.
An increase of 8.8% in interest expense for the quarter was a result of an
increase in interest rates when compared to the previous year partially off-
set by a decrease in average outstanding debt.
Pre-tax income increased to $12.3 million in the current period versus
$12.1 million in the comparable prior period. The effective tax rate
increased to 38.4% compared to 37.3% in the prior year since a larger
portion of the Company's income this year was generated in higher taxed
countries.
As a result of the above, net income was $7.6 million for both quarters
ended December 31, 2000 and 1999.
Six Months Ended December 31, 2000
As Compared to the Six Months Ended December 31, 1999
For the six months ended December 31, 2000, sales totaled $309.9 million
compared to $320.9 million for the previous fiscal year. The decrease in
sales is a result of the general economic slowdown readily apparent in all
economic reports. The effect of changes in average foreign exchange rates
from December 31, 1999 to December 31, 2000 was not significant.
Net sales in the Food Service segment increased by $1.7 million for reasons
described in the discussion of the quarterly results. Consumer segment net
sales decreased by $5.2 million or 4.5%, and Industrial segment net sales
decreased by $7.5 million or 5.6%. The decrease in the Consumer segment
sales is the direct result of the Air Distribution business being impacted
by lower housing starts. Industrial segment net sales were adversely
affected by an economic slowdown in the automotive sector and customer
efforts to reduce inventory levels.
The Company's GPMP remained stable at approximately 33%. Changes in
segment GPMPs were not individually significant.
Consolidated SG&A remained unchanged as a percentage of net sales at
approximately 23%. Segment variances were not individually significant and
generally reflected the changes in sales.
As a result of the above, operating income was $29.6 million compared to
$30.1 million in the prior year, a decrease of 1.7%.
During the prior 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.
Interest expense increased by 9.8% or $0.6 million in the latest six-month
period compared to the same period last year for the same reasons described
in the quarterly discussion.
Pre-tax income decreased to $23.8 million from $27.6 in the prior year.
The effective tax rate increased slightly to 38.6% from 38% in the
comparable prior period primarily for the same reason described in the
quarterly discussion.
Due to the above factors, net income was $14.6 million compared to $17.1
million in 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, 2000 to December 31,
2000.
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 31, 2000. Two matters were voted upon at the meeting: the
election of directors and the approval of the appointment of
independent auditors of the Company. A third matter, a shareholder
proposal entitled "Maximize Value Resolution" was not properly
presented and therefore not considered at the meeting.
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
William R. Fenoglio 10,030,953 586,782
Walter F. Greeley 10,027,637 590,098
C. Kevin Landry 10,021,861 595,874
H. Nicholas Muller, III, Ph.D. 9,420,526 1,197,209
Edward J. Trainor 8,787,416 1,830,319
Proposal II (Appointment of Deloitte & Touche LLP as independent auditors)
For Against Abstain
10,467,428 116,509 33,798
Proposal III (Maximize Value Resolution)
For Against Abstain No Vote
1,063,054 8,324,205 207,387 1,023,089
ITEM 6. Exhibits and Reports on Form 8-K
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, 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: February 12, 2001 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: February 12, 2001 /s/ Edward F. Paquette
Edward F. Paquette
Vice President/CFO