Standex Reports 9% Sales Growth in Second Quarter Fiscal 2013

• Q2 GAAP Operating Income Up 13.2% and Non-GAAP Q2 Operating Income Increases 15.0%
• Q2 GAAP EPS from Continuing Ops increases 8.9% to $0.86 and Q2 Non-GAAP EPS from Continuing Ops Grows 10.8% to $0.92
• Net Debt Reduced by $6 Million in Quarter on Strong Cash Generation; Net Debt to Capital at 9.8%

SALEM, N.H.--(BUSINESS WIRE)--Standex International Corporation (NYSE:SXI) today reported financial results for the second quarter ended December 31, 2012.

Second Quarter Fiscal 2013 Results from Continuing Operations

• Net sales increased 8.9% to $168.6 million from $154.9 million in the second quarter of fiscal 2012. Sales growth consisted of 8.5% from the Company’s acquisition of Meder electronic and 0.5% organic growth offset by 0.1% of unfavorable foreign exchange.
• Income from operations was $16.3 million compared with $14.4 million in the second quarter of fiscal 2012. Operating income for the second quarter of 2013 included, pre-tax, $1.0 million of restructuring charges and acquisition-related costs of $0.1 million. The second quarter of 2012 included, pre-tax, $0.7 million of restructuring charges. Excluding these items from both periods, the Company reported non-GAAP second-quarter fiscal 2013 operating income of $17.3 million compared with $15.1 million in the year-earlier quarter, an increase of 15.0%.
• Net income from continuing operations was $11.0 million, or $0.86 per diluted share, including, after tax, $0.6 million of restructuring charges. This compares with second quarter 2012 net income from continuing operations of $10.1 million, or $0.79 per diluted share, which included, after tax, $0.5 million of restructuring charges. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations increased 11.3% to $11.7 million, or $0.92 per diluted share, from $10.5 million, or $0.83 per diluted share, in the second quarter of fiscal 2012.
• EBITDA (earnings before interest, income taxes, depreciation and amortization) was $20.4 million compared with $17.7 million in the second quarter of fiscal 2012. Excluding the previously mentioned items from both periods, EBITDA increased 16.5% to $21.4 million from $18.4 million in the second quarter of fiscal 2012.
• Net working capital (defined as accounts receivable plus inventories less accounts payable) was $129.9 million at the end of the second quarter of 2013, compared with $116.4 million a year earlier. Working capital turns were 5.2 for the second quarter of fiscal 2013, compared with 5.3 turns in the second quarter of fiscal 2012.
• The Company’s net debt (defined as short-term debt plus long-term debt less cash) of $28.9 million compares with net debt of $35.0 million at September 30, 2012.

A reconciliation of net income, earnings per share and net income from continuing operations from reported GAAP amounts to non-GAAP amounts is included later in this release.

Management Comments

“We continued to demonstrate the success of our organic and acquisition growth strategies in the second quarter,” said President and CEO Roger Fix. “We reported 9% year-over-year sales growth in the quarter due primarily to the performance of our Meder acquisition. Non-GAAP EPS from continuing operations grew 10.8% to $0.92, and we are now at an EBITDA run rate excluding special items of nearly $90 million. We also generated good cash flow, reduced our net debt by $6 million, and lowered our net debt-to-capital ratio. Given the macroeconomic challenges we experienced during the quarter in a number of our end user markets, we performed well in the second quarter.”

Segment Review

Food Service Equipment Group sales decreased 0.2% year-over-year, with operating income increasing 0.2%.

“Continuing strength in sales to quick serve restaurant chains were substantially offset by softness at drug retail stores and a seasonal pause in demand from the dollar store segment during the quarter,” said Fix. “We continue to expect full-year sales to dollar stores to be equal to or higher than in fiscal 2012, and we believe this segment will be a very good long-term opportunity for us.¹ To enhance our competitiveness in the retail drug, dollar store and convenience store segments, we are value engineering our refrigerated merchandising cabinet product line to reduce material expenses while adding features, as well as realigning our manufacturing processes utilizing lean manufacturing techniques to lower labor costs.”

“Demand further softened in the retail grocery segment in the UK as a result of the macro-economic conditions there, while we experienced lower sales to the US grocery store segment where customers are continuing to reduce capital spending,” said Fix. “We have implemented staff reductions in this area given the lower expectations for volume. At the same time, we made progress in our effort to penetrate a greater number of major chains and dealers, both domestically and internationally, much like we did successfully on the refrigeration side of the business.”

“While our beverage dispensing pump business continues to be affected by the weak economy in Europe, demand was strong at our custom merchandising businesses,” said Fix.

Engraving Group sales increased 2.3% year-over-year, with 1.5% growth in operating income.

“Strength in demand for automotive program mold texturizing work in Europe and China offset weakness in North America,” said Fix. “As we previously discussed, we believe that Engraving mold texturizing sales for fiscal 2013 will be flat compared to the excellent sales performance we reported in fiscal 2012 but that fiscal 2014 will be a record year for the segment.¹ During the quarter we continued to make progress on our emerging economy strategy, which includes growing our infrastructure in China, Asia Pacific and South America. We completed the move into a bigger and better equipped facility in Brazil, we opened our new plant in Korea, we broke ground on a fourth facility in India and we committed to a new, larger Mexican facility in a region northwest of Mexico City that has become a growing center for automotive production.”

“At our roll, plate and machinery businesses, we continue to see early signs of improvement driven by building product applications,” said Fix.

Engineering Technologies Group sales grew 0.1% year-over-year, while operating income declined by 1.0%.

“The year-over-year comparison in the Engineering Technologies Group was made difficult by the shipment in Q2 fiscal 2012 of a large, high-margin order to the oil and gas market,” said Fix. “This was offset by the impact of $0.7 million in operating income resulting from a retrospective payment from a customer in the space sector related to incremental costs recorded in cost of sales in prior periods which were attributable to customer-supplied materials. During the quarter we continued to see good quoting activity in the space sector for both developmental and production work for NASA as well as commercial space customers. We’re also seeing good long-term opportunities in the land-based turbines market where we have been successful in broadening our customer base. In the aviation market, we are generating significant interest from customers seeking our capabilities for jet engine lipskins and a number of other components internal to jet engines for commercial aviation.¹”

The Electronics Products Group reported 122.5% year-over-year sales growth, with operating income increasing 127.0%.

“The excellent top- and bottom-line performance by the Electronics Products Group was driven by both the legacy electronics business as well as the Meder acquisition,” said Fix. “At the legacy business, sales from new customer programs for magnetics and sensors continue to grow and more than offset soft reed switch sales in China and Asia Pacific. We have a robust pipeline for new products and customer programs that we expect will contribute to revenue in future quarters.¹”

“The Meder integration is proceeding on plan, and we have completed the first round of training of engineers and sales people from both organizations about the respective product offerings,” said Fix. “We’re now working with our customers on the engineering test and evaluation process, and reactions have been enthusiastic. In addition to sales synergies, we’re making progress in the realization of cost synergies in two specific areas. We have identified $0.5 million in material and procurement savings that will be implemented in the next 12 months, and we will begin to implement facility rationalizations in the second half of this fiscal year that will be completed early in fiscal 2014. These facility rationalizations should generate between $1.0 and $1.5 million of annualized cost savings.¹”

The Hydraulics Products Group reported a 5.2% year-over-year sales decline, while operating income increased 23.3%.

“The North American market for dump trailer systems remained weak in the second quarter, as did export sales to Mexico, Australia and South America,” said Fix. “Sales declines were tempered by continued growing demand from refuse handling applications as a result of our ongoing efforts to penetrate this market. Geographically, sales from our China operation, which has been instrumental in our ability to grow share in the refuse handling market, contributed to the second-quarter profit improvement. Operating income grew 23.3% due to cost reduction and productivity improvement initiatives as well as a greater mix of sales from China.”

Business Outlook

“We have performed well in the first two quarters of fiscal 2013 despite softening in demand from several of our end user market segments. We plan to continue to execute on our organic and acquisition growth strategies going forward.¹ Each of our business units have a number of organic growth initiatives that we have been executing for the past several years including the introduction of new products and technologies, penetration of new end user and geographic markets and development of specific customer solutions which will continue to allow us to grow our top line through market share gains in what we expect will be generally a slow growth end user market environment.¹ Following on the success of our Meder acquisition, we have a solid pipeline of acquisition candidates and dry powder on our balance sheet. While there may be short-term challenges in certain of our end markets, we are confident that we have the right strategy to continue to grow sales, increase profits and generate long-term shareholder value,¹” concluded Fix.

Conference Call Details

Standex will host a conference call for investors today, February 1, 2013 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. The Company's slide show accompanying the webcast audio also can be accessed via its website. To listen to the playback, please dial [phone] in the U.S. or [phone] internationally; the passcode is 94784038. The 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

EBITDA, which is "Earnings Before Interest, Taxes, Depreciation and Amortization," non-GAAP income from operations, non-GAAP net income from continuing operations and free cash flow are non-GAAP financial measures and are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the Company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in this news release.

About Standex

Standex International Corporation is a multi-industry manufacturer in five broad business segments: Food Service Equipment Group, Engineering Technologies Group, Engraving Group, Electronics Products Group, and Hydraulics Products Group with operations in the United States, Europe, Canada, Australia, Singapore, Mexico, Brazil, Argentina, Turkey, South Africa, Korea, India 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 the impact of implementation of government regulations and programs affecting our businesses, unforeseen legal judgments, fines or settlements, uncertainty in conditions in the financial and banking markets, 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 ability to continue to successfully implement productivity improvements, increase market share, access new markets, introduce new products, enhance our presence in strategic channels, the successful expansion and automation of manufacturing capabilities and diversification efforts in emerging markets, the ability to continue to achieve cost savings through lean manufacturing, cost reduction activities, and low cost sourcing, effective completion of plant consolidations, successful completion and integration of acquisitions and the other factors discussed in the Annual Report of Standex on Form 10-K for the fiscal year ending June 30, 2012, 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.

Standex International Corporation
Consolidated Statement of Operations
	Three Months Ended						Six Months Ended
	December 31,						December 31,
		2012			2011			2012			2011
Net sales	$	168,629		$	154,868		$	352,015		$	314,174
Cost of sales		112,339			104,598			236,480			211,158
Gross profit		56,290			50,270			115,535			103,016
Selling, general and administrative expenses		39,037			35,193			80,421			71,303
Restructuring costs		985			701			1,220			1,223
Income from operations		16,268			14,376			33,894			30,490
Interest expense		575			428			1,226			900
Other (income) expense, net		(166	)		(94	)		(130	)		(285	)
Total		409			334			1,096			615
Income from continuing operations before income taxes		15,859			14,042			32,798			29,875
Provision for income taxes		4,833			3,965			9,847			7,979
Net income from continuing operations		11,026			10,077			22,951			21,896
Income (loss) from discontinued operations, net of tax		(65	)		(14,193	)		(160	)		(14,054	)
Net income	$	10,961			($4,116	)	$	22,791		$	7,842
Basic earnings per share:
Income from continuing operations	$	0.88		$	0.80		$	1.82		$	1.75
Loss from discontinued operations		(0.01	)		(1.13	)		(0.01	)		(1.12	)
Total	$	0.87			($0.33	)	$	1.81		$	0.63
Diluted earnings per share:
Income from continuing operations	$	0.86		$	0.79		$	1.79		$	1.72
Loss from discontinued operations		0.00			(1.11	)		(0.01	)		(1.11	)
Total	$	0.86			($0.32	)	$	1.78		$	0.61

Standex International Corporation
Statements of Consolidated Cash Flows
	Six Months Ended December 31,
		2012			2011
Cash Flows from Operating Activities
Net income	$	22,791		$	7,842
Loss from discontinued operations		160			14,054
Income from continuing operations		22,951			21,896
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,765			6,788
Stock-based compensation		1,725			1,370
Contributions to defined benefit plans		(3,876	)		(642	)
Net changes in operating assets and liabilities		(3,909	)		(20,400	)
Net cash provided by operating activities - continuing operations		24,656			9,012
Net cash (used in) operating activities - discontinued operations		(1,418	)		(2,456	)
Net cash provided by operating activities		23,238			6,556
Cash Flows from Investing Activities
Expenditures for property, plant and equipment		(9,723	)		(5,064	)
Expenditures for acquisitions, net of cash acquired		(39,613	)		-
Other investing activities		108			2,900
Net cash (used in) investing activities from continuing operations		(49,228	)		(2,164	)
Net cash provided by investing activities from discontinued operations		-			1,619
Net cash (used in) investing activities		(49,228	)		(545	)
Cash Flows from Financing Activities
Proceeds from borrowings		74,000			78,500
Payments of debt		(62,723	)		(64,000	)
Borrowings on short-term facilities (net)		-			(1,800	)
Activity under share-based payment plans		135			168
Excess tax benefit from share-based payment activity		2,011			581
Cash dividends paid		(1,883	)		(1,627	)
Purchase of treasury stock		(8,004	)		(3,831	)
Net cash provided by financing activities from continuing operations		3,536			7,991
Net cash provided by financing activities from discontinued operations		-			-
Net cash provided by financing activities		3,536			7,991
Effect of exchange rate changes on cash		831			(1,664	)
Net changes in cash and cash equivalents		(21,623	)		12,338
Cash and cash equivalents at beginning of year		54,749			14,407
Cash and cash equivalents at end of period	$	33,126		$	26,745

Standex International Corporation
Condensed Consolidated Balance Sheets
	December 31,			June 30,
		2012			2012
ASSETS
Current assets:
Cash and cash equivalents	$	33,126		$	54,749
Accounts receivable, net		90,433			99,432
Inventories, net		96,624			73,076
Prepaid expenses and other current assets		9,059			6,255
Income taxes receivable		2,465			3,568
Deferred tax asset		12,661			12,190
Total current assets		244,368			249,270
Property, plant, and equipment, net		96,639			82,563
Goodwill		114,054			100,633
Intangible assets, net		27,257			19,818
Deferred tax asset		4,764			6,618
Other non-current assets		19,893			20,909
Total non-current assets		262,607			230,541
Total assets	$	506,975		$	479,811
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		57,139			62,113
Accrued liabilities		51,795			51,124
Income taxes payable		2,644			3,548
Total current liabilities		111,578			116,785
Long-term debt		62,073			50,000
Accrued pension and other non-current liabilities		67,497			70,119
Total non-current liabilities		129,570			120,119
Stockholders' equity:
Common stock		41,976			41,976
Additional paid-in capital		35,546			34,928
Retained earnings		526,027			505,163
Accumulated other comprehensive loss		(69,200	)		(75,125	)
Treasury shares		(268,522	)		(264,035	)
Total stockholders' equity		265,827			242,907
Total liabilities and stockholders' equity	$	506,975		$	479,811

Standex International Corporation
Selected Segment Data
	Three Months Ended						Six Months Ended
	December 31,						December 31,
		2012			2011			2012			2011
Net Sales
Food Service Equipment	$	95,816		$	95,962		$	205,139		$	200,169
Engraving		23,663			23,133			47,019			44,831
Engineering Technologies		18,027			18,012			33,757			32,650
Electronics Products		24,894			11,188			52,733			22,878
Hydraulics Products		6,229			6,573			13,367			13,646
Total	$	168,629		$	154,868		$	352,015		$	314,174
Income from operations
Food Service Equipment	$	9,694		$	9,678		$	23,042		$	22,084
Engraving		4,476			4,411			9,028			8,288
Engineering Technologies		3,644			3,679			5,337			6,258
Electronics Products		4,101			1,807			7,189			3,933
Hydraulics Products		963			781			1,934			1,457
Corporate		(5,625	)		(5,279	)		(11,416	)		(10,307	)
Total	$	17,253		$	15,077		$	35,114		$	31,713

Standex International Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
	Three Months Ended								Six Months Ended
	December 31,								December 31,
		2012			2011		% Change			2012			2011		% Change
Adjusted income from operations and adjusted net income from continuing operations:
Income from operations, as reported	$	16,268		$	14,376		13.2	%	$	33,894		$	30,490		11.2	%
Adjustments:
Restructuring charges		985			701					1,220			1,223
Acquisition-related costs		84			-					1,549			-
Adjusted income from operations	$	17,337		$	15,077		15.0	%	$	36,663		$	31,713		15.6	%
Interest and other expenses		(409	)		(334	)				(1,096	)		(615	)
Provision for income taxes		(4,833	)		(3,965	)				(9,847	)		(7,979	)
Discrete tax items		-			-					-			(530	)
Tax impact of above adjustments		(365	)		(242	)				(883	)		(422	)
Net income from continuing operations, as adjusted	$	11,730		$	10,536		11.3	%	$	24,837		$	22,167		12.0	%
EBITDA and Adjusted EBITDA:
Income from continuing operations before income taxes, as reported	$	15,859		$	14,042				$	32,798		$	29,875
Add back:
Interest expense		575			428					1,226			900
Depreciation and amortization		3,936			3,233					7,765			6,788
EBITDA	$	20,370		$	17,703		15.1	%	$	41,789		$	37,563		11.3	%
Adjustments:
Restructuring charges		985			701					1,220			1,223
Acquisition-related costs		84			-					1,549			-
Adjusted EBITDA	$	21,439		$	18,404		16.5	%	$	44,558		$	38,786		14.9	%
Free operating cash flow:
Net cash provided by operating activities - continuing operations, as reported	$	15,087		$	11,688				$	24,656		$	9,012
Add back: Voluntary pension contribution		-			-					3,250			-
Less: Capital expenditures		(4,818	)		(2,806	)				(9,723	)		(5,064	)
Free operating cash flow	$	10,269		$	8,882				$	18,183		$	3,948
Net income from continuing operations		11,026			10,077					22,951			21,896
Conversion of free operating cash flow		93.1	%		88.1	%				79.2	%		18.0	%

Standex International Corporation
Reconciliation of GAAP to Non-GAAP Financial Measures
	Three Months Ended						Six Months Ended
	December 31,						December 31,
		2012		2011	% Change			2012		2011		% Change
Adjusted earnings per share from continuing operations
Diluted earnings per share from continuing operations, as reported	$	0.86	$	0.79	8.9	%	$	1.79	$	1.72		4.1	%
Adjustments:
Restructuring charges		0.05		0.04				0.06		0.06
Acquisition-related costs		0.01		-				0.08		-
Discrete tax items		-		-				-		(0.04	)
Diluted earnings per share from continuing operations, as adjusted	$	0.92	$	0.83	10.8	%	$	1.93	$	1.74		10.9	%