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Standex Reports Fourth Quarter 2019 Financial Results

- Continued Strength in Engineering Technologies, Hydraulics and Scientific

- Positive Cash Flow Trends Reflect Success of Working Capital Initiatives

- Growth Laneway Sales Increased 61% year-over-year in Fiscal 2019

- Restructuring Savings on Target for $3.8 million; Active Pipeline of Additional Efficiency Projects

SALEM, N.H., Aug. 26, 2019 /PRNewswire/ -- Standex International Corporation (SXI) today reported financial results for the fourth quarter of fiscal year 2019 ending June 30, 2019.





Summary Financial Results - Total Standex



($M except EPS and Dividends)

4Q19

4Q18

Change

Net Sales

$209.2

$203.5

2.8%

Operating Income

$20.2

$25.5

-20.7%

Net Income from Continuing Ops

$13.1

$11.3

16.3%





EBITDA

$28.3

$32.2

-12.2%

EBITDA margin

13.5%

15.8%

-230 bps

Adjusted EBITDA

$30.1

$34.1

-11.7%

Adjusted EBITDA margin

14.4%

16.8%

-240 bps





Diluted EPS

$1.05

$0.88

19.3%

Adjusted EPS

1.16

1.48

-21.6%

Dividends per share

0.20

0.18

11.1%





Free Cash Flow

$31.7

$34.0

-6.8%

Net Debt to Adjusted EBITDA

0.9x

0.7x

28.6%

*Fourth quarter of fiscal 2018 results have been adjusted to reflect the disposition of the Cooking Solutions Group on April 1, 2019.

Fourth Quarter Fiscal 2019 Results 

"Fourth quarter results were in line with our expectations as performance in Engineering Technologies, Hydraulics and Scientific remained strong.  While macro-economic headwinds continued to impact results in Engraving and Electronics, we are effectively managing costs, our restructuring efforts are on plan and we delivered solid free cash flow," commented President and Chief Executive Officer David Dunbar

"Despite challenges in some of our end markets, we continued to make significant progress in the quarter and fiscal year in regard to our strategic priorities and we are well-positioned to further execute on our transformation and long-term goals for growth and profitability.

"From a growth perspective, our targeted investments are paying off with growth laneways increasing 61% year-over-year in fiscal 2019 to $58 million and the positive repositioning of Engineering Technologies as evidenced by its results.  The recent GS Engineering acquisition and successful divestiture of the Cooking Solutions business furthered our portfolio reshaping toward building our higher margin growth businesses into significant platforms.  The restructuring plan we began to implement in the third quarter is on track to achieve $3.8 million in annual savings by 2Q20.  We have also identified a significant number of additional productivity projects that we plan to implement in fiscal 2020.

"In addition, our financial position is strong with net debt to Adjusted EBITDA of under 1x and $253 million in available liquidity.  While we will remain disciplined and balanced with respect to capital allocation, our financial flexibility positions us well to invest both in high return internal projects and our active acquisition pipeline," said Dunbar.

Outlook

"As we enter fiscal 2020, we expect a sequential decline in the first quarter due to continued challenges in some of our markets followed by improved year-over-year performance in our fiscal second quarter.  We expect to benefit from scheduled platform rollouts in the automotive OEM market, a very strong funnel of new business opportunities in Electronics and continued growth in Engineering Technologies and Hydraulics.  These improvements will be complemented by the completion of the cost restructuring we announced in 3Q19 as well as additional efficiency projects that we have identified," concluded Dunbar. 

Fourth Quarter Segment Operating Performance

Engraving (18% of sales; 18% of segment operating income)

Engraving ($M)

4Q19

4Q18

% Change

Net sales

$38.1

$35.8

6.3%

Operating Income

5.1

7.9

-35.1%

Adj. Operating Income*

5.3

7.9

-32.9%

Operating Margin

13.4%

22.0%


Adj. Operating Margin*

13.9%

22.0%


* FY19 excludes $0.2 million of purchase accounting expenses

Overall sales grew 6.3% with contributions from recent acquisitions overcoming an organic decline of 4% and negative impact of foreign currency of 5%.  End market weakness from a lower level of new automotive model introductions compressed margins in our core business as well as those in our recent acquisitions.  Adjusted operating income decreased by $2.6 million year-on-year primarily due to the lower level of new roll-outs in the automotive sector, acquisition integration related costs, and tariff-related impact on the segment's China production facilities.  

In fiscal 2020, Standex expects Engraving end markets to strengthen as new global automotive model roll-outs ramp combined with contribution from the recent GS Engineering acquisition. In addition, previously announced restructuring actions are on track to deliver annualized savings of $2.7 million by 2Q20.

Electronics (24% of sales; 30% of segment operating income)

Electronics ($M)

4Q19

4Q18

% Change

Net sales

$49.7

$52.2

-4.8%

Operating Income

8.6

13.7

-37.0%

Operating Margin

17.4%

26.3%


The 4.8% decline in sales was primarily due to lower demand in the automotive market, impact of China tariffs and distributor inventory destocking.  These trends were partially offset by contribution from the Agile acquisition.  Operating income for the period decreased by 37.0% from the fourth quarter of fiscal 2018 as a result of the lower sales volume, material inflation and the impact of tariffs. During the quarter, the Electronics business delivered first shipments from its new India facility.  This site provides the business with a cost competitive manufacturing alternative and the ability to accelerate new business growth.

The Company expects Electronics sales volume to decline sequentially in the first half of fiscal year 2020 due to the factors that affected the fourth quarter's results followed by a modest recovery in the second half of the fiscal year. The segment also has a record level of new business opportunities, some of which have already been awarded, which will ramp during fiscal 2020. In addition, cost saving initiatives regarding G&A reduction, increased productivity and reduced material spend will approximate $1.1 million on an annual basis by 2Q20.

Engineering Technologies (16% of sales; 16% of segment operating income)

Engineering ($M)

4Q19

4Q18

% Change

Net sales

$33.5

$25.2

33.0%

Operating Income

4.5

2.6

72.6%

Operating Margin

13.6%

10.4%


Engineering Technologies revenue grew 33.0% over 4Q18 with broad-based strength across end markets including Aviation, Space, Defense and Energy. The Company's long-term investments to support new aviation platforms are paying off as these platforms ramp to full production volume.  Operating income grew 72.6% year-over-year as the segment leveraged both the volume growth and continued productivity improvements in manufacturing processes. 

In fiscal 2020, Standex expects continued growth and improved margins as aviation-related programs continue to ramp to higher production rates as well as favorable trends in Space and Defense.

Hydraulics (7% of sales; 11% of segment operating income)

Hydraulics ($M)

4Q19

4Q18

% Change

Net sales

$14.2

$13.2

7.5%

Operating Income

3.1

2.3

38.8%

Operating Margin

22.1%

17.1%


Sales for the Hydraulics segment increased 7.5% year-over-year due to strong OEM demand, particularly in the North American refuse market, as well as new product application offerings for vacuum trucks, sweepers and hydro-excavators.  Income from operations gained 38.8% year-over-year due to higher sales and cost structure efficiencies. 

The Company expects Hydraulics' end market demand to remain positive due to project opportunities in the construction and infrastructure markets as well as the potential for market share gains in the refuse market.

Food Service Equipment (35% of sales; 25% of segment operating income)

Food Service ($M)

4Q19

4Q18

% Change

Net sales

$73.7

$77.1

-4.3%

Operating Income

7.4

8.3

-11.3%

Operating Margin

10.0%

10.8%


The 4.3% decline in sales reflected lower sales in Refrigeration, Pumps and Merchandising businesses partially offset by growth in Scientific sales led by demand in clinical and drug retail markets.    The 11.3% decrease in operating income reflected deleverage on lower volume in Refrigeration again partially offset by strength in Scientific.

As previously reported, a fire destroyed a Refrigeration Group warehouse in late June.  There was approximately $7 million of damage to the Company's finished goods and approximately $1 million related to ancillary handling equipment.  The Company has insurance coverage associated with the damage to the inventory and equipment. 

The Company anticipates that Refrigeration Group sales will be lower in the first half of fiscal year 2020 as finished goods inventory levels are rebuilt in order to meet customer demand.  In addition, Standex will continue to pursue productivity improvements to address the current market conditions and expects strength in Scientific and Merchandising sales in FY20.

Capital Allocation

  • Share Repurchase: During 4Q19, the Company repurchased approximately 202,000 shares for $14 million or an average price per share of $69.95.  In fiscal 2019, Standex repurchased approximately 437,900 shares for $33.4 million.  There is approximately $53 million remaining under the Board's current repurchase authorization.
  • Capital Expenditures: In fiscal 2019 Standex's capital expenditures were $34.4 million compared to the prior expectation of between $35 million to $36 million in fiscal 2019.  The Company expects fiscal 2020 capital spending to be between approximately $33 million - $34 million.
  • Dividends: On July 25, the Company declared a quarterly cash dividend of $0.20 per share, which was payable August 23, 2019 to shareholders of record August 9, 2019. 

Balance Sheet and Cash Flow Highlights

  • Net Debt: Standex had net debt of $104.5 million at June 30, 2019 compared to $84.2 million for the same period a year ago.  Net debt consisted primarily of long-term debt of $197.6 million and cash and equivalents of $93.1 million of which $86.2 million was held by foreign subsidiaries. In fiscal 2019, Standex repatriated $51.5 million from foreign subsidiaries.  The Company's net debt to Adjusted EBITDA leverage ratio was 0.92x at the end of fiscal 2019.
  • Cash Flow: Net cash provided by continuing operating activities for the three months ended June 30, 2019 was $48.2 million compared to net cash provided by continuing operating activities of $33.5 million in the prior year. Cash provided by operating activities reflected improved working capital management driven by decreases in accounts receivable due to focused collection efforts and improved inventory turns and accounts payable management.

Cash capital expenditures were approximately $16.5 million compared to $5.1 million in 4Q18. As a result, the Company generated free cash flow of $31.7 million compared to free cash flow of $34.0 million in 4Q18.  Free cash flow as a percentage of adjusted net income was 241.5% compared to 193.4% in 4Q18.

Conference Call Details

Standex will host a conference call for investors tomorrow, August 27, 2019 at 8:30 a.m. ET. On the call, David Dunbar, 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 and viewing the slide presentation should log on to the "Investors" section of Standex's website under the subheading, "Events and Presentations", located at www.standex.com

A replay of the webcast will also be available on the Company's website shortly after the conclusion of the presentation online through August 27, 2020. To listen to the teleconference playback, please dial (877) 344-7529 in the U.S. or (412) 317-0088 internationally; the passcode is 10134405.  The audio playback via phone will be available through September 3, 2019. The webcast replay also can be accessed in the "Investor Relations" section of the Company's website, located at www.standex.com.

Use of Non-GAAP Financial Measures

In addition to the financial measures prepared in accordance with generally accepted accounting principles ("GAAP"), the Company uses certain non-GAAP financial measures, including non-GAAP adjusted income from operations, non-GAAP adjusted net income from continuing operations, free operating cash flow, EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted EBITDA, adjusted EBITDA to net debt, and adjusted earnings per share. The attached financial tables reconcile non-GAAP measures used in this press release to the most directly comparable GAAP measures. The Company believes that the use of non-GAAP measures including the impact of restructuring charges, purchase accounting, property insurance deductibles, discrete tax events, and acquisition costs help investors to obtain a better understanding of our operating results and prospects, consistent with how management measures and forecasts the Company's performance, especially when comparing such results to previous periods.  An understanding of the impact in a particular quarter of specific restructuring costs, acquisition expenses, or other gains and losses, on net income (absolute as well as on a per-share basis), operating income or EBITDA can give management and investors additional insight into core financial performance, especially when compared to quarters in which such items had a greater or lesser effect, or no effect.  Non-GAAP measures should be considered in addition to, and not as a replacement for, the corresponding GAAP measures, and may not be comparable to similarly titled measures reported by other companies.

About Standex

Standex International Corporation is a multi-industry manufacturer in five broad business segments: Engraving, Electronics, Engineering Technologies, Hydraulics, and Food Service Equipment with operations in the United States, Europe, Canada, Japan, Singapore, Mexico, Brazil, Turkey, South Africa, India and China.  For additional information, visit the Company's website at http://standex.com/.

Standex International Corporation

Consolidated Statement of Operations

















Three Months Ended



Year Ended




June 30,



June 30,

(In thousands, except per share data)



2019



2018



2019



2018














Net sales


$

209,198


$

203,469


$

791,579


$

770,452

Cost of sales



139,117



128,967



523,519



500,850

Gross profit



70,081



74,502



268,060



269,602














Selling, general and administrative expenses



48,178



47,086



184,733



178,878

Restructuring costs



461



1,172



1,635



6,964

Property Insurance Deductible



500



-



500



-

Acquisition related costs



723



749



3,075



3,749














Income from operations



20,219



25,495



78,117



80,011














Interest expense



2,160



2,230



10,760



8,029

Other (income) expense, net



51



385



1,744



1,735

Total



2,211



2,615



12,504



9,764














Income from continuing operations before income taxes



18,008



22,880



65,613



70,247

Provision for income taxes



4,889



11,598



18,424



38,904

Net income from continuing operations



13,119



11,282



47,189



31,343














Income (loss) from discontinued operations, net of tax



(725)



1,322



20,725



5,261














Net income


$

12,394


$

12,604


$

67,914


$

36,604














Basic earnings per share:













Income from continuing operations


$

1.06


$

0.89


$

3.75


$

2.47

Income (loss) from discontinued operations



(0.06)



0.10



1.65



0.41

Total


$

1.00


$

0.99


$

5.40


$

2.88














Diluted earnings per share:













Income from continuing operations


$

1.05


$

0.88


$

3.74


$

2.45

Income (loss) from discontinued operations



(0.06)



0.10



1.64



0.41

Total


$

0.99


$

0.98


$

5.38



2.86














Average Shares Outstanding













   Basic



12,432



12,708



12,574



12,698

   Diluted



12,483



12,797



12,633



12,788

 

Standex International Corporation

Condensed Consolidated Balance Sheets











June 30,



June 30,

(In thousands)



2019



2018








ASSETS







Current assets:







  Cash and cash equivalents


$

93,145


$

109,602

  Accounts receivable, net



119,589



119,783

  Inventories



88,645



104,300

  Prepaid expenses and other current assets



30,872



10,255

  Income taxes receivable



1,622



2,348

  Current Assets - Discontinued Operations



-



37,671

    Total current assets



333,873



383,959








Property, plant, equipment, net



148,024



136,934

Intangible assets, net



118,660



84,938

Goodwill



281,503



211,751

Deferred tax asset



14,140



7,447

Other non-current assets



25,689



29,749

Other non-current assets - Discontinued Operations



-



62,159

    Total non-current assets



588,016



532,978








Total assets


$

921,889


$

916,937








LIABILITIES AND STOCKHOLDERS' EQUITY














Current liabilities:







  Accounts payable


$

72,603


$

78,947

  Accrued liabilities



62,648



57,679

  Income taxes payable



5,744



6,050

  Current Liabilities - Discontinued Operations



620



18,665

    Total current liabilities



141,615



161,341








Long-term debt



197,610



193,772

Accrued pension and other non-current liabilities



118,351



111,029

    Total non-current liabilities



315,961



304,801








Stockholders' equity:







  Common stock



41,976



41,976

  Additional paid-in capital



65,515



61,328

  Retained earnings



818,282



761,430

  Accumulated other comprehensive loss



(137,278)



(121,859)

  Treasury shares



(324,182)



(292,080)

     Total stockholders' equity



464,313



450,795








Total liabilities and stockholders' equity


$

921,889


$

916,937








 

Standex International Corporation and Subsidiaries

Statements of Consolidated Cash Flows




Year Ended




June 30,

(In thousands)



2019



2018








Cash Flows from Operating Activities







Net income


$

67,914


$

36,604

Income (loss) from discontinued operations



20,725



5,261

Income from continuing operations



47,189



31,343








Adjustments to reconcile net income to net cash provided by operating activities:





   Depreciation and amortization



30,881



26,696

   Stock-based compensation



4,350



4,961

    Non-cash portion of restructuring charge



(329)



(1,264)

   Disposal of real estate and equipment



-



(655)

Contributions to defined benefit plans



(1,359)



(6,966)

Net changes in operating assets and liabilities



(7,564)



6,317

Net cash provided by operating activities - continuing operations



73,168



60,432

Net cash provided by (used in) operating activities - discontinued operations



178



4,493

Net cash provided by (used in) operating activities



73,346



64,925

Cash Flows from Investing Activities







    Expenditures for property, plant and equipment



(34,367)



(25,275)

    Expenditures for acquisitions, net of cash acquired



(127,924)



(10,397)

    Proceeds from sale of real estate and equipment



3,208



2,852

    Other investing activities



(377)



1,820

Net cash (used in) investing activities from continuing operations



(159,460)



(31,000)

Net cash (used in )investing activities from discontinued operations



109,789



(1,265)

Net cash (used in) investing activities



(49,671)



(32,265)

Cash Flows from Financing Activities







    Proceeds from borrowings



4,800



(1,288)

    Contingent consideration payment



(910)



-

    Activity under share-based payment plans



1,129



915

    Purchase of treasury stock



(33,394)



(2,652)

    Cash dividends paid



(9,826)



(8,888)

Net cash provided by (used in) financing activities



(38,201)



(11,913)








Effect of exchange rate changes on cash



(1,931)



289








Net changes in cash and cash equivalents



(16,457)



21,036

Cash and cash equivalents at beginning of year



109,602



88,566

Cash and cash equivalents at end of period


$

93,145


$

109,602

 

Standex International Corporation

Selected Segment Data

















Three Months Ended



Year Ended




June 30,



June 30,

(In thousands)



2019



2018



2019



2018

Net Sales













Engraving


$

38,091


$

35,818


$

149,693


$

136,275

Electronics Products



49,726



52,208



204,073



196,291

Engineering Technologies



33,452



25,161



105,270



90,781

Hydraulics Products



14,185



13,200



53,943



48,169

Food Service Equipment



73,744



77,082



278,600



298,936

Total


$

209,198


$

203,469


$

791,579


$

770,452














Income from operations













Engraving


$

5,113


$

7,883


$

23,996


$

29,618

Electronics Products



8,645



13,727



41,227



45,501

Engineering Technologies



4,534



2,627



11,169



6,506

Hydraulics Products



3,138



2,260



8,891



7,398

Food Service Equipment



7,356



8,297



22,773



28,129

Restructuring



(461)



(1,172)



(1,635)



(6,964)

Property Insurance Deductible 



(500)



-



(500)



-

Acquisition related costs



(723)



(749)



(3,075)



(3,749)

Corporate



(6,883)



(7,378)



(24,729)



(26,428)

Total


$

20,219


$

25,495


$

78,117


$

80,011

 

Standex International Corporation



Reconciliation of GAAP to Non-GAAP Financial Measures

























Three Months Ended





Year Ended







June 30,





June 30,



(In thousands, except percentages)


2019


2018


% Change



2019



2018


% Change

Adjusted income from operations and adjusted net income from continuing operations:

















Income from operations, as reported


$

20,219


$

25,495


-20.7%


$

78,117


$

80,011


-2.4%

Adjustments:


















Restructuring charges



461



1,172





1,635



6,964




Property Insurance Deductible 



500



-





500



-




Purchase Accounting Expenses



180



-





691



204




Acquisition-related costs



723



749





3,075



3,749



Adjusted income from operations


$

22,083


$

27,416


-19.5%


$

84,018


$

90,928


-7.6%

Interest and other income (expense), net



(2,211)



(2,615)





(12,504)



(9,764)



Provision for income taxes



(4,889)



(11,598)





(18,424)



(38,904)




Discrete and other tax items



-



6,285





(779)



20,844




Tax impact of above adjustments



(459)



(474)





(1,452)



(2,696)



Net income from continuing operations, as adjusted


$

14,524


$

19,014


-23.6%


$

50,859


$

60,408


-15.8%



















EBITDA and Adjusted EBITDA:

















Net income from continuing operations, as reported


$

13,119


$

11,282




$

47,189


$

31,343



Add back:


















Provision for income taxes



4,889



11,598





18,424



38,904




Interest expense



2,160



2,230





10,760



8,029




Depreciation and amortization



8,087



7,065





30,881



26,696



EBITDA


$

28,255


$

32,175


-12.2%


$

107,254


$

104,972


2.2%

Adjustments:


















Restructuring charges



461



1,172





1,635



6,964




Property Insurance Deductible



500



-





500



-




Purchase Accounting Expenses



180



-





691



204




Acquisition-related costs



723



749





3,075



3,749



Adjusted EBITDA


$

30,119


$

34,096


-11.7%


$

113,155


$

115,889


-2.4%



















Free operating cash flow:

















Net cash provided by operating activities - continuing operations, as reported


$

48,211


$

33,536




$

73,168



60,432



Add back: Voluntary pension contribution



-



5,500





-



5,500



Less: Capital expenditures



(16,523)



(5,068)





(34,367)



(25,275)



Free operating cash flow


$

31,688


$

33,968




$

38,801


$

40,657





















Net income from continuing operations



13,119



11,282





47,189



31,343



Discrete tax item - tax on foreign cash



-



6,285





(778)



20,844



Adjusted net income


$

13,119



17,567





46,411



52,187



Conversion of free operating cash flow



241.5%



193.4%





83.6%



77.9%





















 

Standex International Corporation

Reconciliation of GAAP to Non-GAAP Financial Measures























Three Months Ended





Year Ended



Adjusted earnings per share from continuing operations



June 30,





June 30,





2019



2018


%
Change



2019



2018


%
Change



















Diluted earnings per share from continuing operations, as reported


$

1.05


$

0.88


19.3%


$

3.74


$

2.45


52.7%



















Adjustments:


















Restructuring charges



0.03



0.07





0.10



0.41




Property Insurance Deductible



0.03



-





0.03



-




Purchase Accounting Expenses



0.01



-





0.04



0.01




Acquisition-related costs



0.04



0.04





0.18



0.22




Discrete and other tax items



-



0.49





(0.06)



1.63



Diluted earnings per share from continuing operations, as adjusted


$

1.16


$

1.48


-21.6%


$

4.03


$

4.72


-14.6%




















 

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