Standex Reports 41% Operating Income Increase on 5% Revenue Growth in Third Quarter of Fiscal 2008
SALEM, N.H.--(Business Wire)--
Standex International Corporation (NYSE:SXI) today reported
financial results for the third quarter of fiscal 2008 ended March 31,
2008.
-- Net sales for the third quarter of fiscal 2008 increased 5.2%
to $169.0 million from $160.7 million in the third quarter of
fiscal 2007.
-- Income from operations for the third quarter of fiscal 2008
grew by 41.0% to $6.8 million compared with $4.8 million in
the third quarter last year.
-- Net income from continuing operations for the third quarter of
fiscal 2008 was $2.6 million, or $0.21 per diluted share,
compared with net income from continuing operations of $1.9
million, or $0.15 per diluted share, in the year-ago quarter.
-- Net income for the third quarter of fiscal 2008 was $1.6
million, or $0.13 per diluted share, compared with net income
of $1.3 million, or $0.10 per diluted share, in the third
quarter of fiscal 2007. Net loss from discontinued operations
was $1.0 million for the third quarter of 2008 versus a loss
of $.6 million in the prior year. The larger loss related to
an environmental expense recorded in the third quarter of
fiscal 2008.
-- Net working capital (defined as accounts receivable plus
inventories less accounts payable) was $133.7 million at the
end of the third quarter as compared to $129.0 million in the
prior year. Working capital turns increased to 5.1 turns from
5.0 turns for the third fiscal quarter of 2007.
-- Net debt (defined as short-term debt plus long-term debt less
cash) decreased by $1.5 million to $127.6 million at March 31,
2008 from $129.1 million at December 31, 2007. The company's
balance sheet leverage ratio of net debt to total capital was
36.0% at March 31, 2008, compared with 36.4% at December 31,
2007.
Comments on the Third Quarter
"Standex performed well in the third quarter, delivering good
top-line growth and substantial profitability improvement in a
difficult economic environment," said Roger Fix, Standex's president
and chief executive officer. "Our 41 percent year-over-year increase
in operating income demonstrates the success of our efforts to take
cost out of the business, enhance operational efficiencies and improve
margins. Our Food Service Equipment and Engraving groups led Standex's
strong third-quarter performance with double-digit increases in
operating income, and the Engineered Products group capitalized on
robust demand and reported a double-digit sales increase. ADP and
Hydraulics Products continued to be affected by weak market
conditions."
"During the quarter, the U.S. Environmental Protection Agency
requested Standex's participation in a clean-up activity at a site
located in Cleveland, Ohio, where the Company leased a building and
conducted operations from 1967 until 1979," added Fix. "The site is
the former location of the Club Products and Monarch Aluminum
divisions. We are currently evaluating the extent of Standex's
involvement at the site and, therefore, have established an accrual
reported in discontinued operations in the amount of $2.0 million."
The Food Service Equipment Group posted third-quarter,
year-over-year sales growth of 9.9%, all of which was organic, and
strong operating income growth of 72.5% year-over-year.
"Top-line growth at our Food Service Equipment Group was driven by
double-digit sales gains in the majority of our businesses," Fix said.
"We continued our efforts to grow market share by increasing our
penetration of nationwide quick-serve restaurant chains, leveraging
relationships with large dealers and dealer buying groups, and
expanding our network of foodservice consultants. During the quarter
we also made progress in broadening our sales channels and end user
customer relationships in Canada. Operating profitability outpaced the
revenue increase primarily due to purchasing cost reductions and
improved manufacturing efficiencies."
The Engraving Group generated sales growth of 16.3%
year-over-year, driven by demand from our North American automotive
OEM customers and strong growth at our international engraving
operations. Third-quarter income from operations increased by 38.3%
year-over-year due primarily to sales leverage and productivity gains.
"Standex's international operations turned in a very strong
performance and the domestic mold texturizing business continued to
report solid growth," said Fix. "We have made good progress in our
strategy to expand our engraving business into emerging geographic
markets. Our Turkish operation has been successful in attracting both
automotive and non-automotive business, our new plant in the Czech
Republic is ramping up sales in Eastern Europe, and our mold
texturizing facilities in China have continued to grow. Moreover, by
taking advantage of lower-cost manufacturing and implementing lean
enterprise techniques, we generated a substantial improvement in
operating income."
Engineered Products Group revenue for the third quarter increased
by 16.0% year-over-year. Operating income declined by 13.0%
year-over-year due to an increase to a legal reserve, temporary
manufacturing inefficiencies, and higher material costs.
"We continued to see robust demand in the energy, aerospace and
aviation markets for the Spincraft business," said Fix. "To capitalize
on the significant contracts we have been awarded during the past year
from major customers, we completed the installation of the necessary
capital equipment at our Spincraft facilities. Margins at Spincraft
were affected by inefficiencies on the shop floor as we began to train
the operators and perfect the manufacturing processes and tooling for
the new equipment. We believe these inefficiencies should be
substantially resolved by the end of the current fourth quarter.(1)"
"Sales at the electronics business remained relatively flat
year-over-year, as good growth in industrial markets was offset by
softness in end user segments related to the residential housing
market," added Fix. "During the third quarter the announced closing of
one of our facilities in Canada resulted in manufacturing
inefficiencies as we transferred the production of products from
Canada to Mexico and China. Higher material costs also affected
electronics margins in the third quarter, although material
substitutions should substantially offset this issue beginning with
the first quarter of FY09.(1) We continue to focus on margin
improvement in the electronics business through plant consolidations,
price increases, material cost reductions and the use of low cost
manufacturing in Mexico and China."
Hydraulics Products Group revenues for the quarter fell by 2.4%
year-over-year and operating income decreased by 4.5% as a result of
decreased operating leverage.
"Sales and operating income are off slightly from last year's
levels as a result of the weak demand environment for off-road heavy
construction vehicles in the U.S.," said Fix. "Although the timing and
extent of any recovery of the off-road heavy construction vehicle
market remains uncertain, we continue to believe that we have hit the
bottom of the downturn.(1) The international picture is better as we
continue to see export sales growth opportunities for our hydraulic
cylinders, especially into Middle East, South America, Mexico and
China."
Air Distribution Products Group ("ADP") sales for the quarter
declined by 25.2% as a result of the continued severe downturn in the
residential construction market. ADP reported a loss for the quarter
due to the sharp decline in sales volume and higher material costs.
"As expected, poor housing construction market conditions and
rising material costs affected ADP's financial performance for the
quarter," said Fix. "In an increasingly challenging environment, we
remain focused on implementing cost reductions and gaining market
share to secure profitability for this group."
Business Outlook
"Heading into the final quarter of fiscal 2008, we are encouraged
about Standex's long-term prospects for growth and profitability even
as we face near-term market challenges in multiple businesses. Across
our operating groups, Standex's businesses are taking every
opportunity to gain share in their respective markets and to drive
cost reductions. In Food Service Equipment, we are excited by the
opportunities to leverage sales synergies, drive growth and enhance
margins in each one of our businesses. While the global automotive
market remains volatile, we expect our Engraving Group will continue
to make strides to diversify our business in traditional markets and
to exploit growth opportunities in emerging markets.(1) We see
tremendous opportunities before us in the Engineered Products Group
across the aerospace, aviation and energy markets. While we have
seemingly found the bottom of the market for our Hydraulics business,
we cannot foretell when the market will rebound. Likewise, visibility
for ADP is difficult due to the poor housing market, but we do not
expect an upturn in the near term,(1)" concluded Fix.
Conference Call Details
Standex will host a conference call for investors today, Tuesday,
May 6, at 10:00 a.m. ET. On the call, Roger Fix, president and CEO,
and Thomas DeByle, CFO, will review the company's financial results,
and business and operating highlights. Investors interested in
listening to the webcast should log on to the "Investor Relations"
section of Standex's website, located at www.standex.com. To listen to
the playback, please dial (888) 286-8010 in the U.S. or (617) 801-6888
internationally; the passcode is 78866966. The replay also can be
accessed in the "Investor Relations" section of the company's website,
located at www.standex.com.
About Standex
Standex International Corporation is a multi-industry manufacturer
in five broad business segments: Food Service Equipment Group, Air
Distribution Products Group, Engineered Products Group, Engraving
Group and Hydraulics Products Group with operations in the United
States, Europe, Canada, Australia, Singapore, Mexico, Brazil and
China. For additional information, visit the company's website at
www.standex.com.
(1) Safe Harbor Language
Statements in this news release include, or may be based upon,
management's current expectations, estimates and/or projections about
Standex's markets and industries. These statements are forward-looking
statements within the meaning of The Private Securities Litigation
Reform Act of 1995. Actual results may materially differ from those
indicated by such forward-looking statements as a result of certain
risks, uncertainties and assumptions that are difficult to predict.
Among the factors that could cause actual results to differ are
uncertainty in conditions in the general domestic and international
economy including more specifically increases in raw material costs,
the ability to substitute less expensive alternative raw materials,
the heavy construction vehicle market, the new residential
construction market, reduced capital spending by customers, the impact
of diversification efforts in our Engraving Group, delays in fully
resolving some shop floor inefficiencies beyond the fourth quarter of
2008 and the other factors discussed in the Annual Report of Standex
on Form 10-K for the fiscal year ending June 30, 2007, which is on
file with the Securities and Exchange Commission, and any subsequent
periodic reports filed by the company with the Securities and Exchange
Commission. In addition, any forward-looking statements represent
management's estimates only as of the day made and should not be
relied upon as representing management's estimates as of any
subsequent date. While the company may elect to update forward-looking
statements at some point in the future, the company and management
specifically disclaim any obligation to do so, even if management's
estimates change.
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Standex International Corporation
Segment Reporting Data
Net Revenues:
Three Months Nine Months Ended
Ended March 31, March 31,
----------------- -----------------
(in thousands) 2008 2007 2008 2007
-------- -------- -------- --------
Food Service Equipment Group $ 90,604 $ 82,409 $282,483 $207,630
Air Distribution Products Group 19,468 26,013 69,982 83,825
Hydraulics Products Group 9,257 9,480 26,114 27,755
Engraving Group 24,278 20,868 68,312 64,016
Engineered Products Group 25,395 21,893 69,876 66,195
-------- -------- -------- --------
Total Net Revenues $169,002 $160,663 $516,767 $449,421
======== ======== ======== ========
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Income from Operations:
Three Months Nine Months Ended
Ended March 31, March 31,
----------------- -------------------
(in thousands) 2008 2007 2008 2007
-------- -------- --------- ---------
Food Service Equipment Group $ 6,143 $ 3,561 $ 23,997 $ 11,814
Air Distribution Products
Group (481) (310) (83) 3,539
Hydraulics Products Group 1,105 1,157 3,349 3,860
Engraving Group 2,712 1,961 6,611 6,645
Engineered Products Group 2,424 2,787 8,825 7,440
-------- -------- --------- ---------
Subtotal 11,903 9,156 42,699 33,298
Corporate (5,103) (4,298) (13,914) (11,126)
Restructuring (214) (45) (214) (335)
Other 188 (8) 326 1,063
-------- -------- --------- ---------
Total Income from Operations $ 6,774 $ 4,805 $ 28,897 $ 22,900
======== ======== ========= =========
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STANDEX INTERNATIONAL CORPORATION
Consolidated Condensed Statements of Income
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
(In thousands, except per
share data) 2008 2007 2008 2007
--------- --------- --------- ---------
Net sales $169,002 $160,663 $516,767 $449,421
Cost of sales 121,221 117,223 368,105 324,455
--------- --------- --------- ---------
Gross profit 47,781 43,440 148,662 124,966
Operating expenses:
Selling, general and
administrative expenses 40,793 38,590 119,551 101,731
Restructuring costs 214 45 214 335
--------- --------- --------- ---------
41,007 38,635 119,765 102,066
Income from operations 6,774 4,805 28,897 22,900
Other non-opearting income and
expense:
Interest expense 2,257 2,789 7,671 6,159
Other non-operating
expense/(income) 590 (79) 685 (871)
--------- --------- --------- ---------
2,847 2,710 8,356 5,288
Income from operations before
income taxes 3,927 2,095 20,541 17,612
Provision for income taxes 1,288 240 7,074 4,998
--------- --------- --------- ---------
Income from continuing
operations 2,639 1,855 13,467 12,614
Income/(loss) from
discontinued operations, net
of income taxes (993) (583) (388) 5,607
--------- --------- --------- ---------
Net income $ 1,646 $ 1,272 $ 13,079 $ 18,221
========= ========= ========= =========
Basic earnings per share:
Continuing operations $ 0.21 $ 0.15 $ 1.10 $ 1.03
Discontinued operations (0.08) (0.05) (0.03) 0.46
--------- --------- --------- ---------
Total $ 0.13 $ 0.10 $ 1.07 $ 1.49
========= ========= ========= =========
Diluted earnings per share:
Continuing operations $ 0.21 $ 0.15 $ 1.09 $ 1.02
Discontinued operations (0.08) (0.05) (0.03) 0.45
--------- --------- --------- ---------
Total $ 0.13 $ 0.10 $ 1.06 $ 1.47
========= ========= ========= =========
Weighted average shares, basic 12,297 12,240 12,280 12,227
Weighted average shares,
diluted 12,379 12,362 12,387 12,400
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STANDEX INTERNATIONAL CORPORATION
Consolidated Condensed Balance Sheets
(Unaudited)
March 31, June 30,
(In thousands) 2008 2007
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 20,263 $ 24,057
Accounts receivable, net 98,999 106,116
Inventories 100,309 91,301
Prepaid expenses and other current assets 4,123 3,762
Deferred tax asset 12,212 11,093
---------- ----------
Total current assets 235,906 236,329
Property, plant and equipment, net 116,487 122,315
Goodwill 120,473 118,911
Intangible assets 28,078 31,228
Prepaid pension cost 13,845 8,256
Other non-current assets 22,777 22,861
---------- ----------
Total assets $ 537,566 $ 539,900
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 65,588 $ 65,977
Accrued expenses 46,755 49,370
Current portion of long-term debt 28,754 4,162
Current liabilities - discontinued
operations 1,670 821
---------- ----------
Total current liabilities 142,767 120,330
Long-term debt - less current portion 119,086 164,158
Accrued pension and other non-current
liabilities 49,029 50,981
---------- ----------
Total liabilities 310,882 335,469
Shareholders' equity:
Common stock 41,976 41,976
Additional paid-in capital 25,691 25,268
Retained earnings 430,588 426,171
Accumulated other comprehensive loss (9,733) (26,533)
Treasury shares (261,838) (262,451)
---------- ----------
Total shareholders' equity 226,684 204,431
---------- ----------
Total liabilities and shareholders' equity $ 537,566 $ 539,900
========== ==========
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Summary Cash Flow Data
Nine Months Ended
March 31, March 31,
2008 2007
--------- ---------
Cash flows provided by operating activities $ 22,529 $ 17,343
Cash flows provided by investing activities 1,345 (70,958)
Cash flows used in financing activities (28,966) 39,049
Effect of exchange rate changes on cash 1,298 424
--------- ---------
Net change in cash and cash equivalents (3,794) (14,142)
Beginning cash and cash equivalents 24,057 32,590
--------- ---------
Ending cash and cash equivalents $ 20,263 $ 18,448
========= =========
Supplementary Financial Data
As of March 31,
2008 2007
--------- ---------
Net working capital $133,720 $128,974
Working capital turns 5.1 5.0
Inventory turns 4.9 5.1
A/R days sales outstanding 53 55
A/P days payable outstanding 42 40
Capital Expenditures, for the nine months ended $ 7,703 $ 6,863
Depreciation 9,138 8,329
Amortization of intangibles 3,387 2,866
Net debt 127,577 147,458
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Standex International Corporation
Thomas DeByle, 603-893-9701
CFO
InvestorRelations@Standex.com
Copyright Business Wire 2008
