FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 1994 Commission file number 1-7233 Standex International Corporation (Exact name of Registrant as specified in its charter) Delaware 31-0596149 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 6 Manor Parkway, Salem, New Hampshire 03079 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (603) 893-9701 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 report), 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, 1994 was 14,704,317. STANDEX INTERNATIONAL CORPORATION I N D E X Page No. PART I. FINANCIAL INFORMATION: Statements of Consolidated Income for the Three and Nine Months Ended March 31, 1994 and 1993 ..................... 2 Consolidated Balance Sheet, March 31, 1994 and June 30, 1993 ............................................ 3 Statement of Changes in Consolidated Cash Flows for the Nine Months Ended March 31, 1994 and 1993 ............... 4 Notes to Financial Information. ........................... 5 Management's Discussion and Analysis....................... 6-8 PART II. OTHER INFORMATION.................................. 9 Form 10-Q PART I. FINANCIAL INFORMATION STANDEX INTERNATIONAL CORPORATION Statement of Consolidated Income (000 Omitted) Three Months Ended Nine Months Ended March 31 March 31 1994 1993 1994 1993 Net Sales $130,892 $117,532 $391,723 $380,743 Cost of Products Sold 88,855 79,305 262,891 253,562 Gross Profit Margin 42,037 38,227 128,832 127,181 Selling, General & Adminis- trative Expenses 31,182 29,444 94,041 96,103 Income from Operations 10,855 8,783 34,791 31,078 Other Income/(Expense): Interest Expense (1,446) (1,616) (4,296) (4,638) Interest Income 118 343 315 717 Other Income/(Expense) - net (1,328) (1,273) (3,981) (3,921) Income Before Income Taxes 9,527 7,510 30,810 27,157 Provision for Income Taxes 3,296 2,23 Net Income $ 6,231 $ 5,277 $ 19,628 $ 17,394 Earnings Per Share $ .41 $ .32 $ 1.28 $ 1.05 Cash Dividends per Share $ .13 $ .105 $ .38 $ .305 STANDEX INTERNATIONAL CORPORATION Consolidated Balance Sheet (000 Omitted) March 31 June 30 1994 1993 ASSETS CURRENT ASSETS: Cash $ 3,236 $ 7,518 Receivables, net of allowances for doubtful accounts 81,647 75,451 Inventories (approximately 45% finished goods, 20% work in process, and 35% raw material and supplies) 101,547 95,478 Prepaid expenses 6,401 3,904 Total current assets 192,831 182,351 PROPERTY, PLANT AND EQUIPMENT 210,223 207,421 Less accumulated depreciation 121,883 116,502 Total 88,340 90,919 OTHER ASSETS Goodwill, net 16,337 17,288 Prepaid pension and other 19,437 18,011 Total 35,774 35,299 TOTAL $316,945 $308,569 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable and current portion of long-term debt $ 7,473 $ 10,714 Accounts payable 31,334 28,234 Income taxes 4,344 4,413 Accrued expenses 28,271 29,862 Total current liabilities 71,422 73,223 LONG-TERM DEBT (less current portion included above) 109,952 94,416 DEFERRED INCOME TAXES AND OTHER LIABILITIES 19,733 19,406 STOCKHOLDERS' EQUITY Common stock 41,976 41,976 Paid-in Capital 154 - Retained earnings 241,247 227,358 Cumulative translation adjustment (4,489) (946) Less cost of treasury shares (163,050) (146,780) Less loan to Stock Ownership Trust - (84) TOTAL STOCKHOLDERS' EQUITY 115,838 121,524 TOTAL $316,945 $308,569 STANDEX INTERNATIONAL CORPORATION STATEMENT OF CONSOLIDATED CASH FLOWS (000 OMITTED) Nine Months Ended March 31 1994 1993 Cash Flows from Operating Activities: Net income 19,628 17,394 Depreciation and amortization 9,170 10,074 Net changes in assets and liabilities (15,421) (1,495) Net Cash Provided by Operating Activities 13,377 25,973 Cash Flows from Investing Activities: Expenditures on property and equipment (9,256) (8,424) Other 1,493 365 Net Cash Used for Investing Activities (7,763) (8,059) Cash Flows from Financing Activities: Proceeds from additional borrowings 15,882 890 Payments of debt (3,587) (6,965) Cash dividends paid (5,740) (4,967) Purchase of treasury stock (18,772) (16,778) Stock issued under employee stock option and stock purchase plans 2,502 3,219 Other, net 2,740 419 Net Cash Used by Financing Activities (9,477) (24,182) Effect of Exchange Rate Changes on Cash (419) (560) Net Change in Cash (4,282) (6,828) Cash at Beginning of Year 7,518 10,891 Cash at March 31 3,236 4,063 Supplemental Disclosure of Cash Flows Information: Cash paid during the nine months for: Interest 4,254 4,693 Income taxes 11,251 11,505 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 nine months ended March 31, 1994 and 1993. 2. Per Share Calculation Shares (in thousands) used in per share data have been adjusted to reflect the May, 1993 two-for-one stock split and are as follows: March 31 1994 1993 Earnings 15,394 16,525 Cash Dividends 15,105 16,286 Earnings per share have been computed according to generally accepted accounting principles. Cash dividends per share have been computed based on the shares outstanding at the time the dividends were paid. 3. Contingencies The Company is a party to various claims and legal proceedings related to environmental matters generally incidental to its business. Management has evaluated each matter based upon the advice of its independent environmental consultants 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 the ultimate disposition of these matters will not have a material adverse effect on the Company's financial statements. 4. Adoption of Financial Accounting Standards Two statements of Financial Accounting Standards (SFAS) were adopted effective July 1, 1993. "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106) will result in an increase in annual operating expenses of approximately $640,000 in fiscal 1994. "Accounting for Income Taxes" (SFAS No. 109) did not have a material effect on the Company's financial statements. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONSOLIDATION AND RESULTS OF OPERATIONS MATERIAL CHANGES IN FINANCIAL CONDITION During the nine months ended March 31, 1994, the Company repurchased $18.8 million of its common stock, expended $9.3 million in plant and equipment and paid out $5.7 million in cash dividends to its shareholders. The increase in cash flows from operating activities for the nine months ending March 31, 1994 was generated by Net income and Depreciation and amortization. This was, however, partially off-set by a net increase in operating assets and liabilities since Accounts Receivable and Inventories increased $6.2 million and $6.1 million, respectively, resulting from increased business activity in the Institutional segment which is described below. These transactions were financed primarily from operating cash flows and from borrowings under the Company's existing bank credit agreements. The Company believes that existing cash flows and the current bank credit agreement are sufficient to meet its anticipated cash requirements for the foreseeable future. Two Statements of Financial Accounting Standards (SFAS) were adopted effective July 1, 1993. "Employer's Accounting for Postretirement Benefits Other Than Pensions" (SFAS No. 106) will result in an increase in annual operating expenses of approximately $640,000 in fiscal 1994. The implementation of "Accounting for Income Taxes" (SFAS No. 109) did not have a material effect on the Company's financial statements. "Employer's Accounting for Postemployment Benefits" (SFAS No. 112) was issued in November 1992 and management does not expect the implementation of this standard to have a material effect on the Company's financial statements. OPERATIONS Quarter Ended March 31, 1994 as compared to the Quarter Ended March 31, 1993 Net sales reached record levels for the quarter ended March 31, 1994. Net Sales increased $13.4 million, or 11.4%, when compared to the same period of the prior year. The Institutional and Graphics/Mail Order segments reported increased Net Sales of $11.9 million and $1.9 million, respectively. These improvements were offset by a modest decline ($400,000) in Net Sales reported by the Industrial segment. Within the Institutional segment, gains in Net Sales were reported by the majority of divisions. However, this segment's Master-Bilt division reported the single greatest improvement due to increased sales strength of a new product line which was introduced during fiscal year 1993. In the third quarter of fiscal 1994, a Gross Profit Margin Percentage of 32.1% was reported which is consistent with the percentage reported in the same period of the prior year of 32.5%. The Company's three segments reported only minor variations in Gross Profit Margin Percentages. OPERATIONS (Continued) Quarter Ended March 31, 1994 as compared to the Quarter Ended March 31, 1993 For the quarter ended March 31, 1994, Selling, General and Administrative Expenses increased $1.7 million, or 5.9%, to represent 23.8% of Net Sales as compared to 25.1% of Net Sales for the same period of the prior year. Due to the increased business activity in the Institutional segment, this segment's variable expenses increased $1.7 million for the quarter ended March 31, 1994. In the third quarter of fiscal 1994, Interest Expense decreased $170,000 as compared to the same period of fiscal 1993. Although borrowings have increased in fiscal 1994, interest expenses have declined due to the source of debt. Last year, a higher proportion of debt was serviced from outside the United States at higher interest rates. In the current year, a greater share of borrowings is serviced from the United States at lower interest rates. The above factors resulted in a $2.0 million, or 26.9%, increase in Income Before Taxes as compared to the same period of the prior year. The effective tax rate in the third quarter increased to 34.6% versus 29.7% reported in the same period of fiscal 1993. In the prior year, tax benefits generated by a U.K. subsidiary and foreign tax credits were greater than those experienced in the current quarter. As a result, the effective tax rate in the prior year was lower than the current quarter's effective tax rate. Net Income for the third quarter of fiscal 1994 increased $1 million, or 18.1%, when compared to the same period of the prior year due to the factors described above. Nine Months Ended March 31, 1994 as compared to Nine Months Ended March 31, 1993 Net Sales for the nine months ended March 31, 1994 reached a record level for any first nine month period in the Company's history. An $11 million increase, or a 2.9% improvement, in Net Sales was recorded as compared to the same period last year. The Institutional segment reported an increase in Net Sales of $20.3 million while the Graphics/Mail Order and Industrial segments each reported a decline in Net Sales of $7.6 and $1.7 million, respectively. The reason for the Institutional segment's improvement is the same as that described in the above discussion of quarterly results. The decline in Net Sales for the nine month period reported by the Graphics/Mail Order segment is primarily caused by the cyclical nature of one of its divisions. The European recession, particularlyin the automotive industry, and the weakness in the U.S. defense related industries are the primary reasons for the decreased Net Sales reported by the Industrial segment. For the nine months ended March 31, 1994, a Gross Profit Margin Percentage of 32.9% was reported as compared to 33.4% reported in the same period of the prior year. The Company's three segments reported only minor variations in Gross Profit Margin Percentages. OPERATIONS (Continued) Nine Months Ended March 31, 1994 as compared to Nine Months Ended March 31, 1993 Selling, General and Administrative Expenses (SG&A) decreased $2.1 million for the nine months ended March 31, 1994 when compared to the same period last year. Greater variable expenses reported by the Institutional segment were partially offset by cost reductions implemented by the Graphic/Mail Order segment due to this segment's decrease in Net Sales for the current nine month period. Also, non-recurring expenses of $1 million, none of which were individually significant, were recorded in the prior year. For the reasons described in the above discussion of quarterly results, Interest Expenses declined $342,000 for the nine months ended March 31, 1994, when compared to the same period of the prior year. The above factors resulted in a $3.7 million, or 13.5%, increase in Income Before Taxes as compared to the same period of the prior year. The effective tax rate for the nine months ended March 31, 1994, increased slightly to 36.3% as compared to 35.9% in the same period of fiscal 1993. The above caused an increase in Net Income of $2.2 million, or 12.8%, for the nine months ended March 31, 1994, as compared to the same period of the prior year. PART II. OTHER INFORMATION NO APPLICABLE ITEMS. Form 10-Q STANDEX INTERNATIONAL CORPORATION SIGNATURES 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, 1994 /s/ Robert R. Kettinger Robert R. Kettinger, Corporate Controller Date: May 11, 1994 /s/ Lindsay M. Sedwick Lindsay M. Sedwick, Vice President/Treasurer