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, 2001 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, 2001 was 12,069,466.
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, 2001 and 2000 2
Consolidated Balance Sheets as of March 31, 2001
and June 30, 2000 3
Statements of Consolidated Cash Flows for the
Nine Months Ended March 31, 2001 and 2000 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 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 Nine Months Ended
March 31 March 31
2001 2000 2001 2000
Net Sales $140,233 $158,158 $450,164 $479,011
Cost of Products Sold 95,392 106,234 302,775 322,139
Gross Profit Margin 44,841 51,924 147,389 156,872
Selling, General and
Administrative Expenses 35,405 37,838 108,350 112,665
Income from Operations 9,436 14,086 39,039 44,207
Other Income/(Expense):
Gain on Stock Received 0 0 0 2,734
Interest Expense (2,914) (2,820) (8,922) (8,291)
Interest Income 76 83 256 307
Other Income/(Expense) - net (2,838) (2,737) (8,666) (5,250)
Income Before Income Taxes 6,598 11,349 30,373 38,957
Provision for Income Taxes 2,561 4,889 11,745 15,367
Net Income $ 4,037 $ 6,460 $18,628 $23,590
Earnings Per Share:
Basic $ .34 $ .52 $ 1.53 $ 1.85
Diluted $ .33 $ .51 $ 1.51 $ 1.84
Cash Dividends Per Share $ .21 $ .20 $ .62 $ .59
STANDEX INTERNATIONAL CORPORATION
Consolidated Balance Sheets
(000 Omitted)
March 31 June 30
2001 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,610 $ 10,438
Receivables, net of allowances for
doubtful accounts 91,113 104,431
Inventories (approximately 45%
finished goods, 20% work in
process, and 35% raw materials and
supplies) 105,483 112,201
Prepaid expenses 7,983 4,316
Total current assets 216,189 231,386
PROPERTY, PLANT AND EQUIPMENT 262,604 259,642
Less accumulated depreciation 150,450 147,505
Property, plant and equipment, net 112,154 112,137
OTHER ASSETS:
Prepaid pension cost 42,002 38,334
Goodwill, net 29,919 31,184
Other 10,280 11,159
Total other assets 82,201 80,677
TOTAL $410,544 $424,200
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current portion of long-term debt $ 2,818 $ 2,356
Accounts payable 28,059 36,495
Income taxes 3,631 5,357
Accrued expenses 38,074 42,168
Total current liabilities 72,582 86,376
LONG-TERM DEBT (less current portion included above) 149,799 153,436
DEFERRED INCOME TAXES AND OTHER LIABILITIES 19,690 19,573
STOCKHOLDERS' EQUITY:
Common stock 41,976 41,976
Additional paid-in capital 9,440 9,275
Retained earnings 374,344 363,303
Accumulated other comprehensive income (9,353) (7,965)
Less cost of treasury shares (247,934) (241,774)
Total stockholders' equity 168,473 164,815
TOTAL $410,544 $424,200
STANDEX INTERNATIONAL CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
(000 OMITTED)
Nine Months Ended
March 31
2001 2000
Cash Flows from Operating Activities:
Net income $18,628 $ 23,590
Depreciation and amortization 10,180 10,355
Net changes in assets and liabilities (721) (4,011)
Net Cash Provided by Operating Activities 28,087 29,934
Cash Flows from Investing Activities:
Expenditures for property and equipment (10,781) (16,213)
Expenditures for acquisitions and other 882 208
Net Cash Used for Investing Activities (9,899) (16,005)
Cash Flows from Financing Activities:
Proceeds from additional borrowings 4,190 11,537
Net payments of debt (7,365) (7,614)
Cash dividends paid (7,587) (7,552)
Purchase of treasury stock (9,160) (8,190)
Other, net 3,164 1,614
Net Cash Used for Financing Activities (16,758) (10,205)
Effect of Exchange Rate Changes on Cash (258) (353)
Net Change in Cash and Cash Equivalents 1,172 3,371
Cash and Cash Equivalents at Beginning of Year 10,438 5,909
Cash and Cash Equivalents at March 31 $11,610 $ 9,280
Supplemental Disclosure of Cash Flow Information:
Cash paid during the nine months for:
Interest $ 9,386 $ 8,854
Income taxes $13,471 $13,507
NOTES TO FINANCIAL INFORMATION
1. Management Statement
The financial statements as reported in 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, 2001 and 2000.
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 Nine Months Ended
March 31 March 31
2001 2000 2001 2000
Basic - Average Shares
Outstanding 12,108 12,649 12,199 12,779
Effect of Dilutive Securities:
Stock Options 187 72 163 74
Diluted - Average Shares
Outstanding 12,295 12,721 12,362 12,853
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 and nine months
ended March 31, 2001 and 2000 were as follows:
2001 2000
Quarter 12,114 12,665
Year-to-date 12,238 12,801
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 (SFAS) 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 that would be included in
comprehensive income is foreign currency translation adjustments. For
the nine months ended March 31, 2001 and 2000, comprehensive income
totaled approximately $17,240,000 and $21,723,000 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 683 504 1,187
Non cash
(disposals and write-offs) 1,779 1,779
Total 683 1,779 504 2,966
Estimated remaining costs
to be incurred $ 353 $1,996 $ 93 $2,442
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 Nine Months Ended
March 31 March 31
Segment 2001 2000 2001 2000
Food Service $ 35,966 $ 35,730 $109,543 $107,571
Industrial 54,766 68,864 180,887 202,484
Consumer 49,501 53,564 159,734 168,956
Total $140,233 $ 158,158 $450,164 $479,011
Income From Operations
Three Months Ended Nine Months Ended
March 31 March 31
Segment 2001 2000 2001 2000
Food Service $ 3,077 $ 3,169 $ 9,945 $ 8,997
Industrial 4,700 7,688 19,918 22,282
Consumer 3,434 5,929 15,077 20,723
Corporate (1,775) (2,700) (5,901) (7,795)
Total $ 9,436 $ 14,086 $ 39,039 $ 44,207
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. For the quarter ended March 31, 2001, the Company
completed an assessment of the cash flow hedge instruments and
determined these hedges to be highly effective. The Company also
determined the ineffective portion of the hedge to be immaterial.
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 March 31, 2001, 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 nine month periods ended March 31,
2001.
8. Subsequent Event
Effective April 1, 2001 the Company purchased all of the Common Stock
of ATC-Frost Magnetics Inc. of Oakville, Ontario, Canada for a
combination of stock and cash. The acquisition will be accounted for
as a purchase and was not significant with respect to the Company's
consolidated financial statements.
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 2001 the Company invested $10.8
million in plant and equipment, paid down $3.2 million of debt, repurchased
$9.2 million of the Company's Common Stock and paid out $7.6 million in
cash dividends to the Company's shareholders. These expenditures were
primarily funded with net operating cash flows of $28.1 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 was effective for the Company in fiscal 2001.
The adoption of SAB No. 101 did not have a material effect on the Company's
Consolidated Financial Statements.
OPERATIONS
Quarter Ended March 31, 2001
As Compared to the Quarter Ended March 31, 2000
Net sales for the quarter ended March 31, 2001 decreased by approximately
$17.9 million or 11.3% from sales of $158.2 million for the quarter ended
March 31, 2000 reflecting the economic slowdown apparent in the global
marketplace. 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 million were level with the
prior year. Consumer segment net sales decreased to $49.5 million from
$53.6 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 $14.1 million to $54.8 million. The
decrease was reflective of the slowdown within the automotive, trucking and
telecommunications industries.
The gross profit margin percentage (GPMP) decreased slightly to 32% from
33% in the prior year. Segment changes in GPMP were not individually
significant.
Consolidated selling, general and administrative expenses (SG&A) increased
to 25.2% of net sales from 23.9% in the prior period. However, SG&A
decreased by $2.4 million from the comparable quarter last year,
reflecting, in part, the impact of lower sales volumes and, in part, the
results of cost containment efforts. Each segment reflected these changes.
As a result of the above, operating income was $9.4 million compared to
$14.1 million in the prior year, a decrease of 33.0%.
An increase of 3.3% 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 decreased to $6.6 million in the current period versus $11.3
million in the comparable prior period. The effective tax rate decreased
to 38.8% compared to 43.1% in the prior year since a larger portion of the
Company's income this year was generated in lower taxed countries.
As a result of the above, net income was $4.0 million for the quarter ended
March 31, 2001 compared to $6.5 million for the quarter ended March 31,
2000.
Nine Months Ended March 31, 2001
As Compared to the Nine Months Ended March 31, 2000
For the nine months ended March 31, 2001, sales totaled $450.2 million
compared to $479.0 million for the previous fiscal year. The decrease in
sales reflect primarily the general economic slowdown apparent in the
global marketplace. The effect of changes in average foreign exchange
rates between periods was not significant.
Net sales in the Food Service segment increased by $2.0 million reflecting
a general improvement in the segment following a difficult twelve months.
Consumer segment net sales decreased by $9.2 million or 5.5%, and
Industrial segment net sales decreased by $21.6 million or 10.7%. The
decrease in the Consumer segment sales is primarily the result of the
impact of lower housing starts on our Air Distribution business.
Industrial segment net sales were adversely affected by slowdowns in the
automotive, trucking and telecommunications sectors.
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 24%. However, SG&A decreased by $4.3 million for the same
reasons as described in the quarterly discussion above. Segment variances
were not individually significant.
As a result of the above, operating income was $39.0 million compared to
$44.2 million in the prior year, a decrease of 11.7%.
During the prior nine 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 7.6% or $600,000 in the latest nine-month
period compared to the same period last year for the same reasons described
in the quarterly discussion.
Pre-tax income decreased to $30.4 million from $39.0 million in the prior
year. The effective tax rate decreased slightly to 38.7% from 39.4% in the
comparable prior period primarily for the same reason described in the
quarterly discussion.
Due to the above factors, net income was $18.6 million compared to $23.6
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 March 31, 2001.
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10. (a) Standex International Corporation Executive
Security Program between the Company and certain named
executive officers, as amended and restated effective January
31, 2001;
(b) Standex International Corporation Executive
Life Insurance Plan between the Company and certain named
executive officers, as amended and restated effective January
31, 2001.
(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, 2001.
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 11, 2001 /s/ Robert R. Kettinger
Robert R. Kettinger
Corporate Controller
Date: May 11, 2001 /s/ Edward F. Paquette
Edward F. Paquette
Vice President/CFO