Annual Report 1994
Institutional Products Group
Food service equipment
Air distribution products
Casters
Chiropractic tables and physical
therapy equipment
Industrial hardware
Restaurant china and candlelamps
Industrial Products Group
Texturizing Systems
Pumps
Converting and finishing machinery
Power metal spinning
Reed switches and relays
Inductors, connectors, and custom
electronic assemblies
Hydraulic cylinders
Graphics/Mail Order Group
Educational and religious publishing
and distribution
Commercial printing
Binding systems, business forms, office
supplies, and election materials
Mail order gift packages
On the cover:
Displayed on the cover of this year's Annual Report are three product lines
produced by Standex. The wide diversity of markets served by the Corporation
contributes to the overall stability of sales and earnings from year to year.
{FINANCIAL HIGHLIGHTS}
Year Ending June 30 1994 1993
Operations
Net Sales $529,399,483 $506,312,331
Net Income 27,147,163 24,011,998
Return on Sales 5.1% 4.7%
Return on Equity 22.8% 19.8%
Interest Expense 5,937,960 5,597,049
Interest Expense Coverage 8.1 7.7
Per Share Data*
Net Sales $34.62 $30.92
Earnings 1.78 1.47
Book Value 8.16 7.99
Dividends .52 .43
Average Shares Outstanding 15,293,351 16,375,964
*Adjusted for May, 1993 two-for-one stock split
{Profile}
Standex International is a diversified manufacturer producing and marketing a
wide variety of useful, quality products. The Company enjoys a broad and
well-balanced earnings base by virtue of its strong market position in selected
areas of operation.
Three Products Groups - Institutional Products, Industrial Products, and
Graphics/Mail Order - are comprised of nine operating divisions. The Company
operates 86 plants located in 14 countries, and its products are sold
throughout the world.
Standex's policy of balanced diversification - coupled with aggressive
management and conservative financial techniques - has enabled the Company to
achieve above average growth in sales and earnings since its founding in 1955.
In August of this year Standex paid its 120th consecutive quarterly dividend.
This represents 30 years of uninterrupted dividend payments since first
becoming a public corporation in 1964.
{one}
{TO OUR STOCKHOLDERS}
We are very pleased with the results for fiscal 1994. Despite lingering
weakness in many of our overseas markets, and difficult adjustments required by
the decline in U.S. defense spending, record levels were established for sales,
net income, return on equity, and earnings per share. These were very
gratifying results.
Operating Results:
For the fiscal year ended June 30th, Standex reported sales of $529,399,000 a
4.6% increase over fiscal year 1993 shipments of $506,312,000. Net Income rose
13.1% to $27,147,000, compared to $24,012,000 generated during the previous
fiscal year. With a reduced number of shares outstanding, earnings per share
increased by 21.1% to a new high of $1.78 per share up from $1.47 reported for
fiscal 1993. Return on equity reached 22.8%. This is a very solid return on
net worth for the types of markets in which Standex operates.
We continued to invest aggressively in the long term growth of our various
businesses. Over the past twelve months $13,238,000 was invested in new plant
and equipment in order to both expand and upgrade existing facilities. Over the
past five years, capital expenditures have totaled $66,147,000. The
Corporation's physical plant has never been in better shape. With worldwide
business becoming more competitive every day, efficient manufacturing
facilities are absolutely essential.
At the same time, a constantly increasing level of global trade offers strong
prospects for future growth. Just over the past several years, Standex
Divisions have developed substantial markets in Mexico for commercial
refrigeration equipment, casters, hydraulic cylinders, textured molds, and
bindery equipment. Shipments in all of these areas have been increasing
steadily.
Dividend Increase:
The Board of Directors increased the dividend twice during fiscal 1994, for a
total increase of 16.7%. This is an obvious reflection of the Board's
confidence in the basic earnings power of the Corporation, and continues a
policy of paying out to shareholders approximately one third of reported net
income. Standex has now paid uninterrupted quarterly dividends for 30 years.
The dividend has been increased 29 times over that same period.
Stockholder Return:
The Corporation continued to buy-in shares during fiscal 1994. During the
twelve months ended June 30, 1994, an additional 897,136 shares were purchased.
Since the inception of this program in fiscal 1985, a total of 16,462,841
shares have been acquired, for a total expenditure of $194,964,750. This works
out to an average cost of $11.84 per share and has cut the number of shares
outstanding by more than half. It is our intention to continue to buy in stock
whenever it appears advantageous to do so.
We are determined to create value for our shareholders and believe that the
dividend and stock buy-back policies which have been followed by the
Corporation have accomplished precisely that. By being broadly diversified,
Standex is fortunate in that it has a relatively stable and predictable level
of profitability. At the same time, the moderate growth which characterizes
many of our markets typically results in a cash flow in excess of our immediate
operating requirements. We have utilized this excess cash flow, coupled with a
judicious use of debt, to reduce the number of shares outstanding, and to
steadily increase the dividend paid on the remaining shares.
{two}
When this program was first implemented in fiscal 1985, Standex's stockholder
equity was $144,019,000, and the market capitalization was $166,248,000. Since
that date, the Corporation has repurchased $195 million of common stock and
paid out $68 million in dividends. A total of $263 million has been returned to
the shareholders either in the form of dividends paid out, or shares
repurchased. After that return, the market capitalization of the remaining
shares on June 30, 1994 had risen to $401 million.
Obviously, there are many elements which have to be considered in seeking to
balance both a short term desire for profit, and longer term considerations.
Our first priority has always been to provide ample financing for existing
operations in terms of both physical plant and working capital needs.
We are also constantly re-examining the total debt {Thomas L. King} which the
Corporation might reasonably be able to carry relative to projected cash flows.
Over the past four years, our interest expense coverage has been as follows:
Fiscal 1994 8.1 times
Fiscal 1993 7.7 times
Fiscal 1992 6.1 times
Fiscal 1991 5.1 times
With interest rates currently trending upward, this is obviously an area which
will be watched closely, but we anticipate that fiscal 1995 will generate a
strong free cash flow. During the year just ended, Standex experienced an
unusually large expansion of working capital requirements as a new
manufacturing facility came on stream with the attendant pipeline filling. We
do not foresee a similar expansion in the year ahead.
A Final Word:
Standex has been successful in operating a widely diverse group of companies
through a decentralized management structure, with a strong financial reporting
system, and tight control of cash. This has allowed the Corporation to prosper
during periods of economic expansion while, at the same time, providing
defensive qualities through periods of economic decline. During the recent
recession (1990-1991), Standex's earnings per share declined 5.4%. Since the
end of that recession in 1991, the earnings per share have increased by 69.5%.
We are pleased with the effectiveness of our current corporate structure, and
confident in the skills and dedication of an outstanding group of employees.
Thomas L. King
Chairman and Chief Executive Officer
{three}
{INSTITUTIONAL PRODUCTS GROUP}
The Institutional Products Group is composed of Standex Institutional Products
and Standex Commercial Products. During Fiscal 1994 these two Divisions
represented 46% of total Corporate sales and 50% of total operating income.
This compares with 42% of total Corporate sales and 46% of total operating
income during fiscal 1993.
Master-Bilt's two factories in Mississippi produce a complete line of
commercial refrigeration equipment, ranging from small ice-cream dipping
cabinets all the way up to large refrigerated warehouses. End users include
supermarkets, convenience stores, restaurants, dairies, florists and beverage
distributors.
Federal Industries manufactures both refrigerated and non-refrigerated display
cases for the food service industry. The Company enjoys a particularly strong
market position in the bakery industry with a broad line of proofers, dough
retarders and freezers.
Jarvis, which was originally acquired by Standex in 1968, is a major producer
of industrial casters and wheels for the North American market. Production
facilities are located in Massachusetts, Michigan and California, with assembly
and distribution sites in Montreal, Toronto and Vancouver. The Company has
achieved considerable success in limiting the market penetration of foreign
imports, and a major expansion of the Michigan factory was nearing completion
at fiscal year end.
BK Industries of South Carolina and Barbecue King of England produce pressure
fryers, commercial barbecue oven/rotisseries, cook and hold ovens, doughnut
fryers and display merchandisers. The U.K. market, which had been depressed,
recovered very nicely during the past year.
Williams Healthcare Systems, headquartered in Illinois, is the world's leading
manufacturer of chiropractic and traction tables. The Company also produces a
line of equipment for the related, but broader, physical therapy market.
Uncertainty on health care reform has held down domestic markets,
but exports have remained firm.
The Toastswell Company of St. Louis, Missouri manufactures a broad line of
commercial waffle bakers (shown on the front cover of this Annual Report), as
well as toasters, griddles and food warmers for the restaurant industry.
{Many Jarvis casters are equipped with a locking brake mechanism.}
{four}
{Institutional Products Group}
{Master-Bilt's new facility for manufacturing refrigerated beverage cases
became fully operational during fiscal 1994.} (picture of refrigerated beverage
cases at Master-Bilt facility in Pontotoc, Mississippi).
{Jarvis casters are used on many types of mobile equipment, such as that shown
in this hospital operating room.} (picture of caster on hospital cart).
{Barbecue King pressure fryers (foreground of picture) and commercial barbecue
ovens (background of picture) are widely utilized in fast food outlets and
delicatessens.}
{A line of Federal Industries' European-style bakery and deli cases (depicted
in picture) greatly enhances the presentation of merchandise.}
{five}
{Institutional Products Group}
{Snappy Air Distribution Products is a major supplier of pipe, duct and
fittings for heating, ventilating and air conditioning.} (picture of man
assembling pip and duct fittings).
{Industrial Products Group}
{Standex Electronics' magnetically actuated switch assemblies are found in many
consumer products, such as this GE refrigerator.} (picture of open side by
side GE refrigerator).
{Mold-Tech textures are employed to enhance both the durability and the
attractiveness of molded products.} (picture of handles, top and part of one
side of two suitcases).
{six}
National Metal Industries, located in Springfield, Massachusetts, is the
largest manufacturer of Christmas tree stands in the world. The Company also
produces a variety of fabricated metal products and specialty hardware
including copier work stations, metal storage cabinets and custom precision
stampings.
Snappy Air Distribution Products is headquartered in Minnesota with additional
production facilities in Colorado. The Company's highly automated factories
produce pipe, duct and fittings for heating, ventilating and air-conditioning
residential housing in the Midwestern and Southwestern United States.
Manufacturing efficiencies and aggressive marketing have enabled the Company to
steadily expand its market share and minimize the effect of cyclical
fluctuations in housing starts.
H.F. Coors, from its factory in California, produces china and cookware for
restaurants and hotels, while the Mason Candlelight Company of New Jersey
supplies candles and candlelamps to those same markets for table top lighting.
USECO and General Slicing are both located in Murfreesboro, Tennessee. USECO
custom designs and manufactures feeding systems for institutions with large
food service requirements such as hospitals, schools and correctional
institutions. General Slicing manufactures and/or distributes a variety of
slicers, meat grinders, vegetable shredders and heavy duty food waste
disposers. The fast food industry is a major customer.
{Industrial Products Group}
The Industrial Products Group includes Roehlen/Europe, Roehlen/North America,
Standex Precision Engineering and Standex Electronics. These Divisions
accounted for 28% of total Corporate sales and 30% of operating income
for fiscal 1994, compared with 29% of sales and 29% of income for the previous
fiscal year.
Mold-Tech is the world leader in the process of engraving textured patterns
on molds and dies. Operations encompass 19 separate facilities located in most
of the major tooling centers of North America, Europe and Australia. During
this past year, the 19th facility was opened in Singapore to serve the
burgeoning Asian market. Mold-Tech engraves tooling for a broad cross section
of world industries including automotive, computers, toys, housewares and
consumer electronics. Because of this, it frequently serves as a useful leading
indicator of future economic activity.
{Standex Electronics' magnetic proximity and liquid level switches are used in
both automotive and appliance applications.}
{seven}
Standex Electronics is headquartered in the United Kingdom with additional
production facilities located in the United States and Mexico. The Division is
a manufacturer of electronic components and assemblies for the automotive,
communications, refrigeration, industrial and military power supply, and
electronic filtering industries.
Spincraft is a leader in the power spinning of various metals. The front cover
shows a missile nose cone being spun from a flat disc of stainless steel. The
nose cone is being formed on a state-of-the-art CNC Spinning Lathe at a
temperature of 1800 Degrees Fahrenheit. The Company, with plants in Wisconsin
and Massachusetts, forms and fabricates a wide variety of alloys into
components utilized in gas turbines, aircraft engines, nuclear reactors and
many other products. The recent sharp decline in defense related orders has not
yet been offset by sufficient additional business in other markets.
B.F. Perkins is a prominent manufacturer of web product finishing machinery for
the paper, textile, magnetic tape and non-woven industries.
Custom Hoists, of Hayesville, Ohio, is a leading manufacturer of single
and double acting telescopic and piston rod hydraulic cylinders, which are used
in dump trucks, trash collection vehicles and other mobile units requiring
hydraulic power. After a cyclical downturn during the recent recession, the
Company's markets are currently quite strong.
Procon pumps are manufactured at plants located in Tennessee and in Ireland.
These rotary vane pumps are primarily utilized in North America for the
carbonation of soft drinks. In Europe, they also find wide usage in espresso
coffee machines. There is a constant search to find suitable new markets for
the pump, which currently include such widely diverse end uses as kidney
dialysis machines and welding coolant systems.
The two Roehlen Industries units enjoy a worldwide position of pre-eminence in
the use of Texturization to produce a variety of decorative effects on
plastics, rubber, paper, metal, wallboard, Melamine laminates and other
materials. The Texturization is produced through the use of engraved embossing
rolls and plates from plants located in the United States, Germany, France, the
United Kingdom, Spain, Portugal and Australia. Standex has been actively
involved in the engraving business since 1957.
{The Procon pump has enjoyed a reputation for reliability for over 40 years.}
(picture of front side of Procon pump).
{eight}
{Industrial Products Group}
{Custom Hoists' telescopic hydraulic cylinders are widely utilized by
manufacturers of dump trucks.} (picture of 3 dump trucks with truck beds
raised to upright position so that hydraulic cylinders are visible).
{Large versions of the Procon rotary vane pump power the water booster systems
essential to car washes.} (picture of car traveling through care wash as water
is being sprayed on it).
{At a factory in France, a worker engraves a roll to be used for embossing
wallpaper.} (picture of worker engraving a roll).
{nine}
{Graphics/Mail Order Group}
{Crest Fruit markets a broad variety of food items through catalog mailings.}
(picture of gift boxes, fresh and dried fruit).
{Standard Publishing's line of children's books find wide application in both
schools and homes.} (picture of classroom with a teacher holding an open book
so that children in the foreground of the picture can see it).
{James Burn's Wire-O binding is essential to materials which must be able to
lie flat.} (picture of Wire-O binding on 3 soft covered books).
{ten}
{Graphics/Mail Order Group}
The Graphics/Mail Order Group consists of Standard Publishing, James Burn
International and Crest Fruit Company. These three Divisions accounted for 26%
of Corporate sales and 20% of operating income during fiscal 1994. This
compares with 29% of sales and 25% of operating income during fiscal 1993.
Standard Publishing was founded in 1866, and has been part of Standex since
1955. Headquartered in Cincinnati, Ohio, Standard is the leading publisher of
non-denominational religious curricula and Vacation Bible School (VBS) programs
in the United States. The Company also operates a chain of Berean Christian
Stores which distribute religious literature and supplies (from Standard as
well as from other publishers) to churches, school systems, and individuals.
There is an ongoing search for high potential sites to locate additional
stores. Standard Publishing is also a major commercial printer. A substantial
amount of printing work is done for other religious publishers, as well as
direct mail catalogs and other materials (including this Annual Report) for
commercial and industrial accounts. Printing capacity was increased at
fiscal year end by the purchase of an additional large press.
Doubleday Bros. & Co. was founded in 1898 and is headquartered in Kalamazoo,
Michigan. The Company produces a broad range of custom continuous forms for
business as well as specialized forms and election supplies for county and
state governments.
James Burn International operates manufacturing facilities in the United
States, England and France with warehousing and distribution facilities in
Germany, Sweden and Spain. The Division manufactures two distinct mechanical
binding systems. Wire-O is a double loop wire binding system utilized in a
broad range of products including computer manuals, calendars, diaries and
cookbooks. Mult-O is a multiple ring mechanism used in high quality binders.
James Burn also designs and manufactures punches and wire binding machinery for
use with the Wire-O binding system.
Crest Fruit is located in the lush Rio-Grande Valley in Texas. Crest is the
nation's leading mail order marketer of Texas "Ruby Red" grapefruit. Product
offerings have been steadily expanded from the original citrus line and now
include a very broad variety of food items. Gift packages comprise much of the
business during the Christmas season, but sales are generated steadily
throughout the year through clubs which ship to members on a
regular basis.
{Crest Fruit's "Ruby Red" grapefruit are a unique treat for citrus lovers.}
{eleven}
{MANAGEMENT'S DISCUSSION AND ANALYSIS}
Liquidity and Capital Resources
During 1994, the Company repurchased $23.5 million of its Common Stock,
expended $13.2 million in property, plant and equipment and paid $7.8 million
in cash dividends to its stockholders. These transactions were financed from
internally generated funds and borrowings under the Company's existing bank
credit agreements which are described in the footnotes to the Consolidated
Financial Statements. The Company intends to continue its policy of using its
funds to acquire property, plant and equipment, pay dividends, purchase its
Common Stock and make acquisitions when conditions are favorable. Net Cash
Provided by Operating Activities was $18.2 million in 1994 as compared to
$36.5 million in 1993. The decrease of $18.3 million in 1994 from 1993 was
primarily due to changes in accounts receivable and inventory of $8.3 million
and $7.7 million, respectively. The increase in inventory was caused by the
growth in demand reported by the Institutional segment, which is discussed
below, and was required to meet anticipated sales requirements in fiscal
1995. The rise in accounts receivable was mainly due to the growth in fourth
quarter Net Sales reported by the Institutional segment. Due to the increase
in inventory, accounts payable increased $1.4 million which had a positive
effect on operating cash flows. Also, the effect of activity reported within
accrued payroll, employee benefits and other liabilities in 1993 resulted in
an increase in operating cash flows of $499,000 as compared to a decrease of
$3.2 million in 1994. This decline of $3.7 million in 1994 was due to many
factors none of which was individually significant. At June 30, 1994, the
Company had the ability to borrow an additional $25.9 million under existing
bank credit agreements. The Company believes that this resource, along with
the Company's internally generated funds, will be sufficient to meet its
anticipated needs for the foreseeable future.
Operations
Net Sales by Industry Segment
(In thousands) 1994 Change 1993 Change 1992
Graphics/Mail Order $138,738 (4.6)% $145,558 (1.1)% $147,117
Institutional 241,054 13.8 211,682 12.7 187,896
Industrial 149,607 .3 149,067 5.1 141,839
Operating Income by Industry Segment
(In thousands) 1994 Change 1993 Change 1992
Graphics/Mail Order $11,484 (13.9)% $13,342 11.7% $11,949
Institutional 28,379 12.9 25,125 23.1 20,405
Industrial 16,955 7.2 15,810 4.4 15,147
Fiscal 1994 as Compared to Fiscal 1993
Net Sales increased $23.1 million, or 4.6%, for the year ended June 30, 1994 as
compared to the fiscal year ended 1993. Changes in unit volume, and not prices,
were primarily responsible for the variation in Net Sales reported for each
segment. As shown in the table above, only the Graphics/Mail Order segment
reported a decline in Net Sales for the fiscal year ended June 30, 1994.
The Institutional segment reported record Net Sales for the year ended June 30,
1994 with a $29.4 million, or 13.8% increase. The majority of this segment's
divisions experienced improvement in Net Sales as compared to fiscal year 1993.
However, this segment's Master-Bilt Products division reported the single
greatest improvement due to the increased sales strength of a product line
which was introduced during fiscal year 1993. The Jarvis Caster Group and
Snappy Air Distribution Products also reported noteworthy rises in Net Sales
due to increased customer demand.
The Graphics/Mail Order segment registered a $6.8 million, or 4.6%, decline in
Net Sales partially due to the cyclical nature of its Doubleday Bros. & Co.
division. The sluggish European economy and the decline in the average annual
exchange rates of many European currencies against the dollar in 1994, as
compared to 1993, has resulted in a decrease in Net Sales reported by this
segment's James Burn Group. Net Sales reported by the Industrial segment rose
slightly in fiscal 1994. A noteworthy improvement in Net Sales was reported by
this segment's Standex Electronics division. However, this growth was offset by
a decline in Net Sales reported by other operations. The European recession,
particularly in the automotive industry, negatively impacted the Company's
Roehlen Industries - Europe operations. Also, weakness in U.S. defense related
industries has resulted in a decline in Net Sales reported by this segment's
Spincraft operations. The Gross Profit Margin percentage registered a slight
decrease from 33.2% in 1993 to 32.7% in 1994. The Gross Profit Margin
percentage reported by the Industrial and Graphics/Mail Order segments remained
consistent with the prior year. The Institutional segment reported a slight
decrease in the Gross Profit Margin percentage from 28.6% in 1993 to 28.1%
primarily due to competitive pressures on profit margins. Selling, General and
Administrative Expense (SG&A) rose approximately $1.1 million in 1994 as
compared to 1993. However, as a percentage of Net Sales, SG&A decreased from
24.3% in 1993 to 23.4%. The Institutional segment reported an increase in SG&A
in direct proportion with its growth in Net Sales. This increase was offset by
a decrease in expenses reported by the Graphics/Mail Order and Industrial
segments. Due to the respective decline and stabilization of Net Sales reported
by these two segments, management implemented cost reduction programs during
the year which resulted in a decline in these expenses. In 1994, a slight
decrease was experienced in Depreciation and Amortization Expenses. These
expenses were $12.5 million in 1994, versus $12.9 million in 1993. There were
no significant changes within any segment. Despite an increase in borrowings,
Interest Expense increased only slightly in 1994. This is primarily due to
lower interest rates in the first eight months of fiscal 1994 as compared to
the same period in 1993. The above resulted in an improvement in Income Before
Income Taxes of approximately $4.8 million, or 12.7%, in 1994 as compared to
1993. The effective tax rate remained fairly stable at 35.7% in 1994 which
represented a slight decline from the 35.9% effective tax rate reported in
1993. Due to the above factors, Net Income rose $3.1 million, or 13.1%.
Fiscal 1993 as Compared to Fiscal 1992
Net Sales increased $29.1 million, or 6.1%, in 1993 as compared to 1992.
Changes in unit volume, and not prices, were primarily responsible for the
variation in Net Sales reported for each segment.
As shown in the table above, all of the segments reported improvement in Net
Sales with the exception of the Graphics/Mail Order segment which declined
slightly. This was due to various factors none of which were significant.
With a $23.8 million, or 12.7%, growth in Net Sales as compared to 1992, the
Institutional segment reported record sales. The increase reported by this
segment was attributed to improved performances at several divisions including
BK Industries, the Jarvis Caster Group and Snappy Air Distribution Products.
Also, a $3.0 million increase in this Net Sales was attributable to the
acquisition of Toastswell in May 1992. However, the largest improvement in Net
Sales of $15.4 million was reported by this segment's Master-Bilt Products
division due to the introduction of a new product line.
The Industrial segment reported a $7.2 million, or 5.1%, increase in Net Sales.
Significant growth within the worldwide texturing product line accounted for
the majority of this segment's expansion in Net Sales. Also, Roehlen
Engraving's Net Sales increased primarily due to a 12 week strike in 1992 which
negatively affected Net Sales.
The Gross Profit Margin percentage registered a slight increase in 1993 to
33.2% from 32.8% in 1992. The Industrial segment's Gross Profit Margin
percentage rose to 33.5% versus 32.2% in 1992. The Institutional segment also
reported an increase from 28.0% in 1992 to 28.6% in 1993. The growth reported
by these two segments resulted primarily from increased quantities sold causing
an overall reduction in per unit costs. A decrease in the Gross Profit Margin
percentage was reported by the Graphics/Mail Order segment to 31.1% in 1993 as
compared to 32.2% in 1992. This reduction was primarily due to lower sales
volumes combined with competitive pressures on profit margins due to the
European recession.
Selling, General and Administrative Expense (SG&A) rose approximately $7.0
million in 1993 as compared to 1992. However, as a percentage of Net Sales,
SG&A remained stable at approximately 24.0% for both periods. The Industrial
and Institutional segments reported increases in SG&A primarily due to their
growth in Net Sales. These increases were partially offset by a decline in SG&A
reported by the Graphics/Mail Order segment. Due to the slight decline in this
segment's Net Sales, measures were taken to reduce costs through staff
reductions and reevaluation of marketing programs. In 1993, an increase was
experienced in Depreciation and Amortization Expenses. In 1993, these expenses
were $12.9 million versus $11.9 million in 1992. There were no significant
changes within any segment. Despite increased borrowings during 1993, Interest
Expense decreased approximately $1 million in 1993 as compared to 1992. This
was the result of lower interest rates in the United States where the Company
has most of its borrowings.
The above resulted in an improvement in Income Before Taxes of approximately
$3.8 million, or 11.3%, in 1993 as compared to 1992. The effective tax rate
increased slightly from 34.9% in 1992 to 35.9% in 1993. The tax rate for 1992
was lower than normal primarily due to the receipt of non-recurring executive
life insurance proceeds which were non-taxable. Due to the above factors, Net
Income rose $2.1 million, or 9.6%
Other Matters
Inflation has not been a significant factor in Net Income in recent years
because of the relatively modest rate of price increases in the economies of
the United States and of the other countries where the Company has operations.
Environmental matters
The Company is a party to various claims and legal proceedings, generally
incidental to its business and has recorded an appropriate provision for the
resolution of such matters. As explained more fully in the notes to the
consolidated financial statements, the Company does not expect the ultimate
disposition of the matters to have a material adverse effect on its financial
statements.
New Accounting Pronouncements
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting for Impairment of a
Loan," and SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company has evaluated the effects of these standards and
believes that they will not affect the Company's financial condition or
operating results.
{Five-Year Financial Review}
Standex International Corporation and Subsidiaries
(In thousands, except
per share data) 1994 1993 1992 1991 1990
Year Ended June 30
Summary of Operations
Net sales $529,399 $506,312 $477,216 $481,701 $460,192
Gross profit margin 172,979 168,309 156,727 156,787 149,084
Interest expense 5,938 5,597 6,565 7,902 8,269
Income before income taxes 42,222 37,450 33,659 32,620 34,766
Provision for income taxes 15,075 13,438 11,746 12,444 13,043
Net income** 27,147 24,012 21,913 20,176 22,723
Per Share Data*
Net sales 34.62 30.92 26.75 25.01 22.53
Earnings** 1.78 1.47 1.23 1.05 1.11
Dividends paid .52 .43 .38 .36 .34
Book value 8.16 7.99 8.27 7.71 7.34
Average shares outstanding 15,293 16,376 17,837 19,258 20,424
June 30
Financial Condition
Working capital 126,803 109,128 110,994 104,285 115,222
Current ratio 2.81 2.49 2.49 2.43 2.72
Property, plant
and equipment - net 89,697 90,919 94,871 86,182 85,870
Total assets 323,721 308,569 316,566 297,418 297,849
Long-term debt 112,854 94,416 86,699 70,133 72,978
Stockholders' equity 118,932 121,524 137,010 138,688 142,406
Sales and Earnings By Quarter
Year Ended June 30 (Unaudited)
(In thousands, except per share data)
1994 1993
First Second Third Fourth First Second Third Fourth
Net sales $127,338 $133,493 $130,892 $137,676 $127,051 $136,160 $117,532 $125,569
Gross profit margin 41,022 45,773 42,037 44,147 42,070 46,884 38,227 41,128
Net income 6,310 7,087 6,231 7,519 5,504 6,613 5,277 6,618
Earnings per share* .41 .46 .41 .50 .33 .40 .32 .42
Common Stock Prices and Dividends Paid*
Common Stock Price Range
1994 1993 Dividends Per Share
High Low High Low 1994 1993
First quarter $23-1/2 $18-1/2 $17-3/4 $14-5/8 $.12 $.09-1/2
Second quarter 27-3/4 20-1/8 19-1/4 17-1/4 .13 .10-1/2
Third quarter 29-5/8 24-7/8 21-3/4 18-1/2 .13 .10-1/2
Fourth quarter 30-3/8 25-5/8 22-1/4 .19 .14 .12
Distribution of the 1994 Sales Dollar
Materials and services $296,254,000 56%
Wages, salaries and employee benefits 172,507,000 33
Depreciation and amortization 12,478,000 3
Interest on borrowed money 5,938,000 1
Income taxes 15,075,000 3
Reinvested in the Company 19,346,000 3
Dividends to stockholders 7,801,000 1
Total $529,399,000 100%
*Adjusted for May, 1993 two-for-one stock split. **1990 includes $1,000,000
($.05 per share) related to the cumulative effect of the change in accounting
for income taxes.
{STATEMENTS OF CONSOLIDATED INCOME}
Standex International Corporation and Subsidiaries
Year Ended June 30 1994 1993 1992
Revenue
Net sales $529,399,483 $506,312,331 $477,216,161
Interest and other 1,842,432 579,143 2,133,478
Total revenue 531,241,915 506,891,474 479,349,639
Costs and Expenses
Cost of products sold 346,491,082 327,933,270 311,184,395
Selling, general and
administrative 124,113,059 123,041,550 116,019,462
Depreciation and
amortization 12,477,651 12,869,607 11,921,519
Interest 5,937,960 5,597,049 6,565,160
Total costs and expenses 489,019,752 469,441,476 445,690,536
Income Before Income Taxes 42,222,163 37,449,998 33,659,103
Provision for Income Taxes 15,075,000 13,438,000 11,746,000
Net Income $27,147,163 $24,011,998 $21,913,103
Earnings Per Share $1.78 $1.47 $1.23
{STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY}
Additional Cumulative
Paid-in Retained Translation Treasury Stock
Common Stock Capital Earnings Adjustment Shares Amount
Balance, June 30, 1991 $20,988,209 $5,619,642 $208,951,600 $ 2,990,882 4,999,085 $(98,350,822)
Stock issued for stock
options and employee stock
purchase plan net of related
income tax benefit 688,807 (294,379) 5,864,805
Treasury stock acquired 1,005,707 (26,086,257)
Net income 21,913,103
Dividends paid (38 cents
per share) (6,589,792)
Foreign currency translation
adjustment 1,859,485
Balance, June 30, 1992 20,988,209 6,308,449 224,274,911 4,850,367 5,710,413 (118,572,274)
Two-for-one stock split 20,988,208 (6,932,183) (14,056,025) 5,710,413
Stock issued for stock options
and employee stock purchase plan
net of related income tax benefit 623,734 (341,464) 3,687,670
Treasury stock acquired 1,688,447 (31,895,811)
Net income 24,011,998
Dividends paid (43 cents per
share) (6,872,400)
Foreign currency translation
adjustment (5,796,771)
Balance, June 30, 1993 41,976,417 0 227,358,484 (946,404) 12,767,809 (146,780,415)
Stock issued for stock options
and employee stock purchase plan
net of related income tax benefit 871,128 (263,275) 3,106,090
Treasury stock acquired 897,136 (23,532,338)
Net income 27,147,163
Dividends paid (52 cents per
share) (7,800,753)
Foreign currency translation
adjustment (2,467,417)
Balance, June 30, 1994 $41,976,417 $ 871,128 $246,704,894 $(3,413,821) 13,401,670 $(167,206,663)
Included in Stockholders' Equity at June 30, 1993 and 1992 are reductions of approximately $84,000 and $840,000 respectively, for a
loan receivable from the Employees' Stock Ownership Trust. Share amounts have been adjusted to reflect the May 1993 two-for-one
stock split, where appropriate.
See notes to consolidated financial statements.
{CONSOLIDATED BALANCE SHEETS}
Standex International Corporation and Subsidiaries
June 30 1994 1993
Assets
Current Assets
Cash and cash equivalents $5,023,401 $7,518,085
Receivables - less allowance of $2,587,000
in 1994 and $2,667,000 in 1993 83,380,665 75,451,372
Inventories 104,560,817 95,477,875
Prepaid expenses 3,987,588 3,903,716
Total current assets 196,952,471 182,351,048
Property, Plant and Equipment
Land and buildings 59,161,556 59,537,597
Machinery and equipment 154,401,695 147,882,972
Total 213,563,251 207,420,569
Less accumulated depreciation 123,866,069 116,501,554
Property, plant and equipment, at cost-net 89,697,182 90,919,015
Other Assets
Goodwill - net 16,256,690 17,287,356
Prepaid pension and other 20,814,502 18,011,237
Total other assets 37,071,192 35,298,593
Total $323,720,845 $308,568,656
Liabilities and Stockholders' Equity
Current Liabilities
Current portion of debt $9,575,506 $10,713,924
Accounts payable 28,711,360 28,233,791
Accrued payroll and employee benefits 18,208,413 18,710,802
Income taxes 2,772,976 4,412,538
Other 10,881,247 11,151,708
Total current liabilities 70,149,502 73,222,763
Long-Term Debt-less current portion 112,853,918 94,416,253
Deferred Income Taxes 13,769,000 12,974,000
Other Noncurrent Liabilities 8,016,470 6,431,320
Stockholders' Equity
Common Stock-authorized, 30,000,000 shares in 1994
and 1993; par value, $1.50 per share; issued
27,984,278 shares in 1994 and 1993 41,976,417 41,976,417
Additional paid-in capital 871,128 -
Retained earnings 246,704,894 227,358,484
Cumulative translation adjustment (3,413,821) (946,404)
Less cost of treasury shares: 13,401,670 shares
in 1994 and 12,767,809 in 1993 (167,206,663) (146,780,415)
Less loan receivable from Employees'
Stock Ownership Trust - (83,762)
Total stockholders' equity 118,931,955 121,524,320
Total $323,720,845 $308,568,656
See notes to consolidated financial statements.
{STATEMENTS OF CONSOLIDATED CASH FLOWS}
Standex International Corporation and Subsidiaries
Ended June 30 1994 1993 1992
Cash Flows from Operating Activities
Net income $27,147,163 $24,011,998 $21,913,103
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,477,651 12,869,607 11,921,519
Profit improvement incentive plan 3,662,698 3,064,838 2,420,137
Deferred income taxes 795,000 606,000 720,000
Net pension credit (837,000) (620,000) (959,000)
(Gain)loss on sale of investments,
real estate and equipment (1,045,123) 284,928 342,903
Gain on disposition of businesses - - (1,029,324)
Increase (decrease) in cash from changes
in assets and liabilities, net of effect of
acquisitions and dispositions:
Receivables-net (8,024,312) 261,099 (306,866)
Inventories (9,254,430) (1,534,022) (3,286,998)
Prepaid expenses and other assets (2,189,924) (969,571) (1,325,187)
Accounts payable 459,485 (981,692) 3,166,620
Accrued payroll, employee benefits and other liabilities (3,247,000) 498,789 1,035,755
Income taxes (1,706,496) (996,557) 228,850
Net cash provided by operating activities 18,237,712 36,495,417 34,841,512
Cash Flows from Investing Activities
Expenditures for property and equipment (13,237,820) (10,727,300) (15,652,779)
Expenditures for acquisitions - net of cash acquired - - (6,738,831)
Proceeds from sale of investments, real estate
and equipment 2,756,004 269,394 1,426,119
Proceeds from disposition of businesses - - 1,393,095
Net cash used for investing activities (10,481,816) (10,457,906) (19,572,396)
Cash Flows from Financing Activities
Proceeds from additional borrowings 23,502,040 10,978,583 25,529,124
Payments of debt (6,202,793) (6,165,189) (11,903,669)
Stock issued under employee stock option and
stock purchase plans 3,977,218 4,311,404 6,553,612
Cash dividends paid (7,800,753) (6,872,400) (6,589,792)
Purchase of treasury stock (23,532,338) (31,895,811) (26,086,257)
Payments on Employees' Stock Ownership Trust loan 83,762 755,939 671,532
Net cash used for financing activities (9,972,864) (28,887,474) (11,825,450)
Effect of Exchange Rate Changes on Cash and
Cash Equivalents (277,716) (522,585) 133,653
Net Changes in Cash and Cash Equivalents (2,494,684) (3,372,548) 3,577,319
Cash and Cash Equivalents at Beginning of Year 7,518,085 10,890,633 7,313,314
Cash and Cash Equivalents at End of Year $5,023,401 $7,518,085 $10,890,633
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest $5,856,833 $5,633,566 $7,343,214
Income taxes 15,919,562 13,718,741 11,075,201
See notes to consolidated financial statements.
{NOTES TO CONSOLIDATED FINANCIAL STATEMENTS}
Summary of Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Standex International Corporation and its subsidiaries.
Cash and Cash Equivalents
Includes highly liquid investments purchased with a remaining maturity of three
months or less. The recorded amount of cash equivalents approximates fair
market value.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market.
Property, Plant and Equipment
Property, plant and equipment are depreciated over their
estimated useful lives using primarily the straight-line method.
Goodwill
The excess of purchase price of acquired companies over the fair value of net
identifiable assets at date of acquisition has been recorded as goodwill and is
being amortized on a straight-line basis over a forty-year period. Accumulated
amortization aggregated $6,864,000 and $6,250,000 at June 30, 1994 and 1993,
respectively. The Company annually evaluates the net balance of goodwill based
on the projected operating income of the respective businesses on an
undiscounted cash flow basis.
Foreign Currency Translation
Assets and liabilities of non-U.S. operations are translated into U.S. dollars
at year-end exchange rates. Revenues and expenses are translated using average
exchange rates. The resulting translation adjustment is reported as a separate
component of stockholders' equity. Gains and losses from non-U.S. currency
transactions are included in results of operations.
Earnings Per Share
Earnings per share are computed based on the average number of shares and share
equivalents outstanding during the year. The weighted average number of shares
used in the determination of earnings per share was 15,293,351, 16,375,964 and
17,836,576 in 1994, 1993 and 1992, respectively. All references to share and
per share data have been adjusted to reflect the two-for-one stock split in
May, 1993.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 1994
financial statement presentation.
Inventories
Inventories are comprised of (in thousands):
1994 1993
Raw materials $36,765 $33,187
Work in process 25,598 21,648
Finished goods 42,198 40,643
Total $104,561 $95,478
Debt
Debt is comprised of (in thousands):
1994 1993
Bank credit agreements $109,095 $87,371
Institutional investors 8 3/4%
(Due 1995-1996)-unsecured 10,000 15,000
Other 1% to 11%
(Due 1995-2003) 3,335 2,759
Total 122,430 105,130
Less current portion 9,576 10,714
Total long-term debt $112,854 $94,416
Bank Credit Agreements
The Company has the option to borrow up to $135,000,000 on an unsecured
short-term basis at rates which are generally below the prime rate (such rates
varied from 3.4% to 4.5% during 1994). In addition, the Company has a revolving
credit agreement with four banks. The agreement provides for a maximum credit
line of $125,000,000 until December 31, 1997, at which time outstanding loans
will be due and payable. Borrowings under the agreement period would generally
bear interest at rates which approximate the prime rate. The Company is
required to pay a commitment fee of up to 1/2% on the average daily unused
amount. There were no borrowings outstanding under the revolving credit
agreement during 1994, 1993 or 1992.
Available borrowings under the bank agreements described above are reduced by
short-term borrowings. The following is a summary of borrowings under the
agreements (in thousands):
1994 1993 1992
Maximum month-end borrowings during
the year $109,095 $87,848 $77,466
Average aggregate
borrowings during
the year $97,351 $76,959 $63,192
Weighted average
interest rate for
borrowings out-
standing during
the year 3.8% 3.8% 5.5%
Available borrowings
at year-end $25,905 $37,629 $22,534
The Company may refinance the unsecured short-term borrowings on a long-term
basis under the revolving credit agreement discussed above. As such, the
short-term outstanding borrowings, which are not expected to be paid within a
year, are classified as long-term debt, and the debt repayment schedule, as
presented below, is based on the terms of the revolving credit agreement.
Management believes that the recorded amount of short-term borrowings
approximate their fair value.
Loan Covenants and Repayment Schedule
The Company's loan agreements contain provisions relating to the maintenance of
working capital and other financial ratios, restrictions on additional
borrowings, treasury stock purchases and payments of dividends. At June 30,
1994, retained earnings of $6,365,000 were available for dividends and other
distributions; this limitation will be augmented in the future by 50% of net
income subsequent to June 30, 1994. It is anticipated the debt to which this
covenant applies will be paid in full by September 30, 1994.
Debt is due as follows: 1995, $9,576,000; 1996, $5,375,000; 1997, $305,000;
1998, $106,075,000; 1999, $190,000; and thereafter $909,000.
Accrued Payroll and Employee Benefits
This current liability caption consists of (in thousands):
1994 1993
Payroll $13,138 $12,813
Benefits 3,540 4,377
Taxes 1,530 1,521
Total $18,208 $18,711
Commitments
The Company leases certain property and equipment under agreements with initial
terms ranging from one to twenty years. Rental expense for the years ended June
30, 1994, 1993 and 1992 was approximately $5,900,000, $5,400,000 and
$4,800,000, respectively. At June 30, 1994, the minimum annual rental
commitments under noncancelable operating leases, principally real estate, were
approximately: 1995, $3,700,000; 1996, $2,700,000; 1997, $1,600,000; 1998,
$1,100,000; 1999, $800,000; after 1999, $500,000.
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.
Income Taxes
Effective July 1, 1993, the Company adopted SFAS No. 109, "Accounting for
Income Taxes." Deferred assets and liabilities are recorded for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. The adoption of SFAS No. 109 did not have a material
impact on the Company's consolidated financial statements.
The provision for income taxes consists of (in thousands):
1994 1993 1992
Current:
Federal $8,509 $8,201 $6,755
State 2,062 1,640 1,323
Non-U.S. 3,709 2,991 2,948
Total 14,280 12,832 11,026
Deferred 795 606 720
Total $15,075 $13,438 $11,746
Income before income taxes relating to U.S. operations was $30,254,000,
$27,862,000 and $23,872,000 in 1994, 1993 and 1992, respectively. Income before
income taxes for Non-U.S. operations was $11,968,000, $9,588,000 and $9,787,000
in 1994, 1993 and 1992, respectively.
A reconciliation of the U.S. Federal income tax rate to the effective income
tax rate is as follows:
1994 1993 1992
Statutory tax rate 35.0% 34.0% 34.0%
Non-U.S. (1.1) (1.0) (0.7)
State taxes 3.3 3.3 2.6
Insurance - net (0.5) (0.3) (1.5)
Other items - net (1.0) (0.1) 0.5
Effective income tax rate 35.7% 35.9% 34.9%
Significant components of the Company's net deferred tax liability as of June
30, 1994 were as follows (in thousands):
Deferred tax liabilities:
Accelerated depreciation $12,612
Net pension credit 5,678
Other items 589
Deferred tax assets:
Expense accruals (3,357)
Compensation costs (1,753)
Net deferred tax liability $13,769
Significant components of deferred income taxes and their related impact on
deferred income tax expense are as follows (in thousands):
1994 1993 1992
Accelerated depreciation $606 $612 $277
Net pension credit 759 621 676
Compensation costs (509) 28 -
Business disposition costs - - 489
Expense accruals (204) (538) (718)
Other items 143 (117) (4)
Total $795 $606 $720
At June 30, 1994, accumulated retained earnings of non-U.S. subsidiaries
totaled $35,185,000. No provision for U.S. income and foreign withholding taxes
has been made because it is expected that such earnings will be reinvested
indefinitely or the distribution of any remaining amount would be principally
offset by foreign tax credits. The determination of the withholding taxes that
would be payable upon remittance of these earnings and the amount of
unrecognized deferred tax liability on these unremitted earnings is not
practicable.
Industry Segment Information
The Company is composed of three product groups. These groups are described on
pages 4-11. Net sales include only transactions with unaffiliated customers and
include no significant intersegment or export sales. Operating income by
product group and geographic area excludes general corporate and interest
expenses. Assets of the Corporate segment consist primarily of cash,
administrative buildings and equipment and other non-current assets.
Net Sales Operating Income
(In thousands) 1994 1993 1992 1994 1993 1992
Graphics/Mail Order $138,738 $145,558 $147,117 $11,484 $13,342 $11,949
Institutional 241,054 211,682 187,896 28,379 25,125 20,405
Industrial 149,607 149,067 141,839 16,955 15,810 15,147
Corporate and other - 5 364 (14,596) (16,827) (13,842)
Total $529,399 $506,312 $477,216 $42,222 $37,450 $33,659
Assets Employed Capital Expenditures
(In thousands) 1994 1993 1992 1994 1993 1992
Graphics/Mail Order $76,250 $75,410 $83,226 $3,031 $1,368 $3,545
Institutional 136,117 117,314 109,858 6,521 4,472 4,390
Industrial 95,732 100,071 104,183 3,627 4,816 7,340
Corporate and other 15,622 15,774 19,299 59 71 378
Total $323,721 $308,569 $316,566 $13,238 $10,727 $15,653
Depreciation and Amortization
(In thousands) 1994 1993 1992
Graphics/Mail Order $2,659 $2,802 $2,623
Institutional 4,522 4,246 3,715
Industrial 5,036 5,391 5,234
Corporate and other 261 431 350
Total $12,478 $12,870 $11,922
Financial data related to U.S. and non-U.S. operations:
U.S. Non-U.S.
(In thousands) 1994 1993 1992 1994 1993 1992
Net sales $431,774 $402,274 $373,888 $97,625 $104,033 $102,964
Operating income 45,761 44,987 37,799 11,057 9,290 9,702
Assets employed 232,448 207,999 205,432 75,651 84,796 91,835
The Corporate segment is excluded from the above table.
Employee Benefit Plans
Retirement Plans
The Company and its subsidiaries have several company sponsored, funded
retirement plans covering substantially all U.S. and many non-U.S. employees.
Benefits are principally based on an employee's years of service and
compensation during employment. The Company's funding policy with respect to the
U.S. plans is to contribute annually the amount required by the Employee
Retirement Income Security Act of 1974. Non-U.S. plans are funded in accordance
with local requirements.
The periodic pension credit is comprised of the components listed below as
determined using the projected unit credit actuarial cost method (in thousands):
1994 1993 1992
Service costs for benefits
earned during the period $3,913 $3,852 $3,687
Interest cost on projected
benefit obligation 7,478 6,941 6,278
Actual return on plan assets 1,217 (9,192) (5,750)
Net amortization and deferral (13,445) (2,221) (5,174)
Net pension credit $(837) $(620) $(959)
The following table sets forth the funded status and obligations of the
Company's principal plans at year end, using a measurement date of April 1
(in thousands):
1994 1993
Accumulated vested benefit obligation $79,236 $68,797
Projected benefit obligation 99,068 90,120
Fair value of assets 113,350 117,750
Funded status 14,282 27,630
Unrecognized transition amount (13,534) (15,299)
Unrecognized prior service cost 1,455 1,565
Unrecognized loss (gain) 8,692 (4,682)
Prepaid pension cost $10,895 $9,214
The accumulated benefit obligation approximated the accumulated vested benefit
obligation in 1994 and 1993. The Company used an assumed weighted average
discount rate of 8.0% for 1994 and 8.5% for 1993 and 1992, and a rate of
increase in future compensation levels of 5% in 1994, and 6% for 1993 and 1992
in determining the actuarial present value of the U.S. projected benefit
obligation. The expected long-term rate of return on U.S. plan assets was 9% in
1994, 1993 and 1992. At June 30, 1994, U.S. plan assets consisted of equity
securities, U.S. treasury obligations, corporate bonds and cash equivalents. For
its non-U.S. plans, the Company used assumed weighted average discount rates
ranging from 7.5% to 10%, and rates of increase in future compensation levels
ranging from 5% to 7% in determining the actuarial present value of the
projected benefit obligation. The expected long-term rate of return on plan
assets was 11.0%. As of June 30, 1994, non-U.S. plan assets consist of units in
a pooled investment fund.
Certain U.S. employees are covered by union-sponsored, collectively bargained,
multi-employer pension plans. Contributions and cost are determined in
accordance with the provisions of negotiated labor contracts or terms of the
plans. Pension expense for these plans was $1,006,000, $881,000 and $939,000 in
1994, 1993 and 1992, respectively.
Employees' Stock Ownership Plan
The Company has an Employee Stock Ownership Plan covering certain salaried
employees. Amounts provided for this plan are approved by the Board of Directors
and for the years ended June 30, 1994, 1993 and 1992 aggregated $1,000,000 each
year.
Profit Improvement Incentive Plan
The Company has a profit improvement incentive plan in which certain officers
and employees participate. Shares under this plan are issued at the discretion
of the Salary and Employee Benefits Committee of the Board of Directors and are
assigned a value equal to a multiple of earnings per share payable in five years
based upon the net increase in earnings per share over the five-year period.
Each fiscal year, amounts are charged or credited to operations to reflect this
liability. Amounts charged to operations for the years ended June 30, 1994, 1993
and 1992 were $3,663,000, $3,065,000 and $2,420,000, respectively.
Postretirement Benefits Other Than Pensions
The Company sponsors unfunded postretirement medical and life plans covering
certain full time employees who retire and have attained the requisite age and
years of service. Retired employees are required to contribute toward the cost
of coverage according to various rules established by the Company.
Effective July 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," which requires accrual of
postretirement benefits (such as health care and life insurance benefits) during
the years an employee provides services. Prior to adopting this standard, the
Company recorded the cost of these benefits on a pay-as-you-go basis. The
adoption of SFAS No. 106 increased operating expenses by $639,000
in 1994. Postretirement benefits paid during 1994 totaled $667,000, while net
postretirement costs recorded in 1994 aggregated $1,306,000 which included
service and interest costs of $119,000 and $741,000, respectively, as well as
$446,000 relating to the amortization of the transition obligation which is
being amortized on a straight line basis over twenty years.
The following table sets forth the funded status of the Company's postretirement
benefit plans (in thousands):
Accumulated benefit obligation:
Retirees $4,770
Eligible active employees 1,921
Other active employees 2,384
Total 9,075
Unrecognized net loss 49
Unrecognized transition obligation (8,485)
Accrued postretirement cost $639
The Company used an assumed discount rate of 8% and an initial assumed health
care cost trend rate of 8.5%, declining gradually to an ultimate cost rate of
4.5% for years after 2008. A 1% increase in the assumed health care cost trend
rate would have increased the cost of postretirement health care benefits by 8%
and the accumulated benefit obligation at June 30, 1994 by $726,000.
Stock Option and Stock Purchase Plans
Stock Option Plans
At June 30, 1994, 546,616 shares of common stock were reserved for issuance
under the Stock Option Plans. Options may be granted at or below fair market
value as of the date of grant and must be exercised within the period prescribed
by the Salary and Employee Benefits Committee of the Board of Directors at the
time of grant but not later than ten years from the date of grant. Options
granted at fair market value can be exercised any time after six months from
date of grant, and options granted at below fair market value can only be
exercised in accordance with vesting schedules prescribed by the Committee.
A summary of options issued under the plans is as follows:
No. of Shares
Outstanding, June 30, 1991
($5.10 to $10.50 per share) 1,412,100
Granted ($9.00 to $12.50 per share) 24,500
Exercised ($5.10 to $10.32 per share) (487,816)
Cancelled ($5.08 to $8.25 per share) (138,134)
Outstanding, June 30, 1992
($5.10 to $12.50 per share) 810,650
Granted ($15.82 to $18.38 per share) 48,000
Exercised ($5.10 to $12.50 per share) (255,554)
Outstanding, June 30, 1993
($5.10 to $18.38 per share) 603,096
Granted ($16.00 to $26.00 per share) 37,000
Exercised ($5.10 to $15.81 per share) (177,884)
Cancelled ($7.50 to $12.50 per share) (4,800)
Outstanding, June 30, 1994
($6.75 to $26.00 per share) 457,412
Exercisable, June 30, 1994
($6.75 to $18.38 per share) 293,912
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan which allows employees to
purchase shares of common stock of the Company at a 15% discount from market
value. Shares of stock reserved for the Plan were 282,539 at June 30, 1994.
Shares purchased under this plan aggregated 85,391; 85,910 and 50,471 in 1994,
1993 and 1992, respectively.
Shareholders Rights Plan
The Company has a Shareholders Rights Plan for which purchase rights have been
distributed as a dividend at the rate of one right for each share of common
stock held. The rights may be exercised only if an entity has acquired
beneficial ownership of 20% or more of the Company's common stock, or announces
an offer to acquire 30% or more of the Company.
Stock split
All share and per share data have been adjusted, where appropriate, to reflect
the May 1993, two-for-one stock split.
Acquisitions
During 1992, the Company made five acquisitions for a total of $6,700,000 in
cash. These transactions were accounted for as purchases and, accordingly, the
consolidated financial statements include the results of operations of the
acquired businesses from their respective acquisition dates. The purchase price
of the acquisitions were allocated to the assets acquired based on their fair
value and resulted in the recognition of goodwill of $1,220,000. If the
acquisitions had occurred as of July 1, 1991 consolidated results would not have
been materially affected.
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for the years ended June 30, 1994
and 1993 are set forth on page 14.
Subsequent Event
On August 10, 1994, the Company entered into an agreement to sell a subsidiary,
Standex International Engraving GmbH, as of August 31, 1994 for total
consideration of $19.4 million. This transaction is expected to result in a
gain. Net sales of the subsidiary totaled $19.1 million during 1994.
{INDEPENDENT AUDITORS' REPORT}
To the Board of Directors and Stockholders
of Standex International Corporation:
We have audited the accompanying consolidated balance sheets of Standex
International Corporation and subsidiaries as of June 30, 1994 and 1993, and the
related statements of consolidated income, stockholders' equity, and cash flows
for each of the three years in the period ended June 30, 1994. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Standex International Corporation
and subsidiaries as of June 30, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1994 in conformity with generally accepted accounting principles.
Boston, Massachusetts
August 16, 1994
Corporate
Headquarters
Standex International Corporation
6 Manor Parkway
Salem, N.H. 03079
(603) 893-9701
Facsimile:(603) 893-7324
Common Stock
Listed on the New York Stock
Exchange (Ticker symbol:SXI)
Transfer Agent and Registrar:
The First National Bank
of Boston, Shareholder
Services Division,
Box 644, Mail Stop 45-02-09,
Boston, Mass. 02102-0644
(617) 575-2900
Counsel
Hale and Dorr
60 State Street
Boston, Mass. 02109
Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, Mass. 02110
Shareholder Services
Stockholders should contact Standex.s Transfer Agent (The First National Bank of
Boston, Shareholder Services Division, Box 644, Mail Stop 45-02-09, Boston,
Mass. 02102-0644) regarding changes in name, address or ownership of stock;
lost certificates or dividends; and consolidation of accounts.
Form 10-K
Shareholders may obtain a copy of Standex.s Form 10-K Annual Report, as filed
with the Securities and Exchange Commission by writing to: Standex Investor
Relations Department, 6 Manor Parkway, Salem, N.H. 03079
Stockholder Meeting
The Annual Meeting of Stockholders will be held at
11:00 AM on Tuesday, October 25, 1994 at The First National Bank of Boston,
Auditorium, Main Lobby, 100 Federal Street, Boston, Mass.
{BOARD OF {CORPORATE {DIVISION
DIRECTORS} OFFICERS} MANAGEMENT}
Thomas L. King* Thomas L. King Robert J. Dittrich
Chairman of the Board, Chairman of the Board, President
President, Chief President, Chief Standard Publishing
Executive Officer Executive Officer
Harry D. Goodwin
John Bolten, Jr.a David R. Crichton President
Consultant Executive Vice Crest Fruit Company
President/
William L. Brown* Operations Jerry G. Griffin
Former Chairman of the President
Board of Bank of Boston Thomas H. DeWitt Standex Commercial Products
Corporation and The First Executive Vice
National Bank of Boston President/ John Hill
Administration, Chairman & Consultant
David R. Crichton General Counsel Standex Electronics
Executive Vice
President/Operations Lindsay M. Sedwick Giorgio Mazza
Vice President, President
Samuel S. Dennis 3d*a Treasurer Roehlen Industries/Europe
Senior Partner, Hale
and Dorr, Attorneys Edward J. Trainor Martin D. Pallante
Vice President President
Thomas H. DeWitt Roehlen Industries/
Executive Vice President/ Robert R. Kettinger North America
Administration, Corporate Controller
General Counsel Thomas Tellin
Richard H. Booth President
Walter F. Greeley Corporate Counsel, James Burn International
Chairman, High Street Secretary
Associates, An Investment Edward J. Trainor
Partnership Deborah A. Rosen President
Senior Corporate Standex Institutional
Daniel B. Hogan, Ph.D. Attorney, Products
President, Assistant Secretary
The Apollo Group, L. Kenneth Womelsdorf
Management Consultants Norman B. Asher President
Assistant Secretary Standex Precision
C. Kevin Landry Engineering
Managing Partner,
T.A. Associates,
A Venture Capital Firm
H. Nicholas Muller, III,
Ph.D.
Director, State
Historical
Society of Wisconsin
Sol Sackel
Former Senior
Vice President of the
Company
Lindsay M. Sedwick
Vice President, Treasurer
* Member of Executive
Committee
a Founder of the Company
Printed in U.S.A. by Standard Publishing,
Cincinnati, Ohio, a division of Standex International.