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Standex Reports Fourth-Quarter and Fiscal 2014 Financial Results
August 27, 2014
Fourth Quarter Net Sales Grow 12.2% to $197.3M; Increase 6.4% to $716.2M for Full Year.
EPS from Continuing Operations Rise 10.3% to $1.07; Grow 12.8% to $3.89 for Full Year.
Non-GAAP EPS from Continuing Operations Increase 25.3% to $1.24; Rise 17.2% to $4.22 for Full Year
SALEM, NH – August 27, 2014 . . . . Standex International Corporation (NYSE:SXI) today reported financial results for the fourth quarter of fiscal year 2014 ended June 30, 2014.
Fourth Quarter Fiscal 2014 Results from Continuing Operations
- Net sales increased 12.2% to $197.3 million from $175.8 million in the fourth quarter of fiscal 2013.
- Income from operations was $19.2 million, compared with $17.7 million in the fourth quarter of fiscal 2013. Operating income for the fourth quarter of fiscal 2014 included, pre-tax, $4.2 million of restructuring charges, a $1.5 million gain associated with insurance proceeds received during the quarter, and a total of $0.4 million of non-recurring management transition expenses and acquisition-related costs. The fourth quarter of fiscal 2013 included, pre-tax, $0.4 million of restructuring charges. Excluding these items from both periods, the Company reported non-GAAP fourth-quarter fiscal 2014 operating income of $22.4 million, compared with $18.1 million in the year-earlier quarter.
- Net income from continuing operations was $13.6 million, or $1.07 per diluted share, including, after tax, $3.0 million of restructuring charges, $0.3 million of non-recurring management transition and acquisition related expenses, a $1.1 million gain associated with insurance proceeds received during the quarter, and a discrete tax benefit of $0.1 million . This compares with fourth quarter fiscal 2013 net income from continuing operations of $12.4 million, or $0.97 per diluted share, including $0.3 million of tax-effected restructuring charges. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations was $15.7 million, or $1.24 per diluted share, compared with $12.6 million, or $0.99 per diluted share, in the fourth quarter of fiscal 2013.
- EBITDA (earnings before interest, income taxes, depreciation and amortization) was $23.0 million, compared with $21.5 million in the fourth quarter of fiscal 2013. Excluding the previously mentioned items from both periods, EBITDA for the fourth quarter of fiscal 2014 was $26.1 million, compared with $21.9 million in the year-earlier quarter.
- Net working capital (defined as accounts receivable plus inventories less accounts payable) was $119.5 million at the end of the fourth quarter of fiscal 2014, compared with $112.3 million a year earlier. Working capital turns were 6.6 for the fourth quarter of fiscal 2014, compared with 6.3 turns for the year-earlier quarter.
- The Company closed the quarter with net cash of $29.2 million, compared with net cash of $1.0 million at June 30, 2013.
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.
“Standex closed fiscal 2014 with a strong fourth quarter, resulting in double-digit growth in both sales and non-GAAP operating income,” said David Dunbar, Standex President and CEO. “While achieving our goal of delivering organic growth in excess of underlying market growth, the business also performed well from a bottom-line perspective. We generated $37.1 million in cash from operating activities and $34.0 million in free operating cash flow, ending the quarter with a net cash position of $29.2 million on the balance sheet after divesting our AFS business and acquiring UltraFryer Systems. For the fiscal year, net sales were up 6.4%, non-GAAP operating income grew 14.7%, and adjusted EBITDA increased 12.4%.”
Food Service Equipment Group sales increased 11.1% year-over-year, and operating income was up 9%.
“On the refrigeration side of the business, our growth was largely driven by continued strength in our new line of value engineered endless merchandising cabinets sold into the dollar store segment,” Dunbar said. “In the quick service restaurant segment, our order flow benefited from pent-up demand due to adverse weather earlier in the year. In cooking solutions, sales were down slightly from the fourth quarter of fiscal 2013, reflecting slower store rollouts compared with a year ago. We completed the consolidation of our Cheyenne, Wyoming cooking solutions facility into Nogales, Mexico on schedule during the quarter. Although delayed shipments negatively affected our fourth-quarter margins, we continue to expect the consolidation to generate targeted cost savings in fiscal 2015.1”
Engraving Group sales increased 26.8% year-over-year, and operating income grew 74.7%.
“This was another record quarter for our Mold-Tech business,” said Dunbar. “Mold-Tech is continuing to ride the wave of record automotive model launch activity in all three of our regions -- North America, Europe and Asia. Our Asia business continues to grow and sales were up more than 25% during the fourth quarter of fiscal 2014. We also approved two new sites to begin operations in fiscal 2015, one in Eastern Europe and one in Southeast Asia. Although we expect Mold-Tech to continue delivering strong results in fiscal 2015, automotive model launches are likely to begin tapering down from this year’s record pace as we move through the year.1Nonetheless, we are planning major growth-focused investments in this business in fiscal 2015, and we expect it to continue to have a positive impact on our future growth.1”
Engineering Technologies Group sales increased 5.6% year-over-year, and operating income declined 14.5%.
“The Engineering Technologies Group’s fourth-quarter performance was primarily driven by increased orders in the space market,” Dunbar said. “Our Spincraft business is now shipping under a multiyear contract with Boeing and Lockheed Martin’s United Launch Alliance joint venture related to the Atlas V and Delta IV launch vehicle programs. In addition, we recently began shipping to Virgin Galactic for their next-generation spaceship program. The lower operating income we reported for the quarter reflected a difficult comparison due to the large volume of oil and gas business in the fourth quarter of fiscal 2013, as well as higher levels of development work currently in our product sales mix.
Electronics Products Group sales were up 7.4% year-over-year, with operating income increasing 17.7%.
“Our Electronics Products Group continues to be very effective in managing the evolution of its end markets, addressing new applications and winning new customers,” said Dunbar. “New sensor program launches in the white goods, HVAC and recreational markets, together with reed-switch wins, improved our product sales mix and operating income leverage in the quarter. We’re continuing to see strong demand across the combined Standex-Meder product line, particularly in North America and Europe. As a result, the Electronic Products Group reported its second consecutive quarter of record sales and profitability.”
The Hydraulics Products Group reported an 18.4% year-over-year sales increase, while operating income rose 29.6%.
“As our results demonstrate, everything came together for the Hydraulics Products Group this quarter,” Dunbar said. “Hydraulics responded to the falloff in the North American construction market and the resulting decline in dump truck and dump trailer demand during the 2008-2009 recession by penetrating the solid waste and refuse market with a range of well-received new products. Now, driven by steady improvement in North American construction activity, our traditional dump truck and dump trailer markets are recovering.1 As a result, we’re experiencing stronger customer demand in both the refuse and dump truck and trailer sectors.”
“Standex concluded a record year in the fourth quarter with solid growth and continued improvement in our operating leverage,” said Dunbar. “Our opening backlog is higher on a year-over-year basis in all of our businesses, and we are optimistic about fiscal 2015 as end market conditions are healthy1. Customer activity remains strong, and incoming orders are at a robust rate. At the same time, we are actively pursuing multiple avenues to capitalize on the strength of our markets and our balance sheet to deliver greater shareholder value.1”
Conference Call Details
Standex will host a conference call for investors today, August 27, 2014 at 10:00 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 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 (800) 585-8367 in the U.S. or (404) 537-3406 internationally; the passcode is 78777961. 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.
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, India and China. For additional information, visit the Company's website at https://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, 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, 2013, 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.