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Standex Reports Second Quarter 2017 Financial Results

SALEM, N.H.--(BUSINESS WIRE)--Standex International Corporation (NYSE:SXI) today reported financial results for the second quarter of fiscal year 2017. The Company also announced in a separate release yesterday an agreement to acquire OKI Sensor Device Corporation, a Japan-based developer and manufacturer of reed switches.

Second-Quarter Fiscal 2017 Results

  • Net sales decreased 4.4% to $173.9 million from $181.9 million in the second quarter of fiscal 2016. Organic sales decreased 4.9%, foreign exchange had a negative effect of 0.9%, acquisitions contributed positive 4.1%, and the U.S. Roll, Plate and Machinery (RPM) divestiture had a negative effect of 2.7%, year over year.
  • Income from operations was $13.2 million, compared with $16.1 million in the second quarter of fiscal 2016. Net income from continuing operations was $10.3 million, or $0.80 per diluted share, including tax-effected $1.2 million of restructuring charges, $0.8 million of purchase accounting expenses, $1.1 million of acquisition-related costs, and $0.5 million of discrete and other tax benefits. This compares with second-quarter fiscal 2016 net income from continuing operations of $12.4 million, or $0.97 per diluted share, including tax-effected $1.1 million of restructuring charges, $0.3 million of purchase accounting expenses, $0.1 million of activity for the divested RPM business, and discrete and other tax benefits of $0.7 million. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations was $12.9 million, or $1.01 per diluted share, compared with $12.9 million, or $1.01 per diluted share, in the prior year.
  • Net working capital (defined as accounts receivable plus inventories less accounts payable) was $150.0 million at the end of the second quarter of fiscal 2017, compared with $144.2 million a year earlier. Working capital turns were 4.6 in the second quarter of fiscal 2017 and 5.0 in the year-earlier quarter.
  • The Company closed the quarter with a net debt (defined as debt less cash) position of $3.0 million, compared with a net debt position of $4.7 million a year ago.

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

“Second-quarter organic sales were primarily affected by soft refrigeration end market conditions as expected, as well as customer project push-outs in Engineering Technologies and Engraving,” said President and Chief Executive Officer David Dunbar. “At the same time, our continued focus on operational excellence mitigated the effect on our bottom line performance. GAAP operating profit declined by 120 basis points on the sales decline, and non-GAAP operating profit was essentially flat. In our Electronics business, we announced yesterday our intention to acquire OKI Sensor Device Corporation, a world-renowned Japanese manufacturer of reed switches. The acquisition expands our global reach in our Electronics business, and increases our ability to capitalize on new sensor opportunities in Asia.”

Segment Review

Food Service Equipment sales increased 1.4% year-over-year. Organic growth declined 6.7%, while the Horizon Scientific acquisition contributed 8.1%. Operating income increased 7.5%.

“In Refrigeration, sales were lower by 8.2% in the quarter, excluding the $7.4 million in sales from the Horizon Scientific business,” said Dunbar. “Weakness in the dollar store market and in national chains continued as anticipated. We believe we are at the trough in the small-footprint retail market and the large, national chain market. Beginning in the third quarter, we will have lapped sales declines in the dollar stores, and we expect a minimal impact on sales going forward. We anticipate that national chain sales activity will increase during the second half of the fiscal year due to investments by our customers in key programs. Horizon Scientific performed well during its first quarter with Standex, and the integration plan is on track. After the close of the quarter we announced Kevin Fink as our new Refrigeration group president. Kevin is an experienced industry executive and we look forward to his contributions.”

“Sales were down approximately 9.7% in Cooking Solutions, due to non-recurring roll-outs in the supermarket channel that were fulfilled in the prior year. Despite the sales decline, profitability increased in cooking due to continued focus on operational improvements, coupled with our proactive rationalization of lower margin products” said Dunbar. “Specialty Solutions Group sales increased by 5.2%, with strong volume in beverage and merchandising.”

Engraving sales decreased 19.0% year-over-year, with a 1.3% organic sales decline, a 15.2% negative effect from the RPM divestiture, and a negative foreign exchange impact of 2.5%. Operating income was down 12.5% compared with last year and down 10.1% adjusted without RPM.

“Mold texturizing sales decreased year-over-year due to the push out of automotive program launches in North America into our third and fourth fiscal quarters,” said Dunbar. “We are optimistic going forward as we expect the North American launches, coupled with expected growth in Asia and Europe will contribute to good growth in the second half of the fiscal year. In addition, we should capitalize on our Architexture design centers, nickel shell and laser technologies and increasing participation in the growing electric vehicle market.”

Engineering Technologies sales decreased 10.4% year-over-year, and operating income decreased 10.3%.

“Sales decreased year over year due to lower aviation sales as a result of customer push outs on select programs, lower space sales as a result of reduced sales to the unmanned segment and timing of the development programs in the manned space sector, and continued softness in the medical market. This was partially offset by higher energy market sales due to strong power-generation demand. Our focus for the second half of the fiscal year is to deliver on developmental programs in both space and aviation, and to meet delivery schedules on long-term aviation contracts.”

Electronics sales were up 0.5% year-over-year. Organic growth contributed 2.2%, partially offset by a negative currency effect of 1.7%. Operating income was up 34.6%.

“Revenue growth was driven by demand in Europe and Asia, offset by slower sales in North America as a result of inventory reductions by a large power grid customer,” said Dunbar. “Our bottom line showed improvements from a favorable sales mix as sensor sales increased. Operational cost improvements, and manufacturing footprint consolidation also contributed to improved profitability. After the close of the quarter we announced an agreement to acquire OKI Sensor Device Corporation. We expect this acquisition to expand our exposure to the Asian electronic sensors market and provide us with visibility through the OKI sales channel into new sensor business prospects. Looking ahead, we are focused on meeting customer demand for reed switches and capitalizing on new opportunities in the electric vehicle market.”

Hydraulics reported a 12.7% year-over-year sales decline, and operating income declined 35.5%.

“The decrease in sales in Hydraulics is primarily the result of softening in the North American dump truck and dump trailer markets,” said Dunbar. “Both aftermarket and export sales were strong and the refuse market was flat. We anticipate a pickup in the dump truck and dump trailer markets as we enter the spring construction season and plans for infrastructure investments become clear. We are making progress on several growth opportunities, including completing field tests and prototyping activities with key refuse customers and launching new hydraulic systems solutions.”

Business Outlook

“We believe that we are now at the trough in Refrigeration and expect sales in the second half of the fiscal year to increase,” said Dunbar. “We also anticipate renewed growth at Engraving in the third and fourth quarters as a result of North American automotive program launches and growth in Europe and Asia. We will continue to capitalize on aviation opportunities in Engineering Technologies and focus on growth laneways in Hydraulics. In Electronics, we are focused on completing the new OKI Sensor Device acquisition. As we look to the future, our balance sheet is well positioned to fund growth, CAPEX and acquisitions as we continue to deploy the Standex Value Creation System.”

Conference Call Details

Standex will host a conference call for investors today, February 3, 2017 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 and viewing the slide presentation should log on to the “Investors” section of Standex’s website under the subheading, “Webcasts and Presentations”, located at A replay of the webcast will also be available on the Company’s web site shortly after the conclusion of the presentation. To listen to the playback, please dial (800) 585-8367 in the U.S. or (404) 537-3406 internationally; the passcode is 60218259. The webcast replay also can be accessed in the “Investor Relations” section of the Company’s website, located at

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 income from operations, non-GAAP net income from continuing operations, free operating cash flow, EBITDA (earnings before interest, taxes, depreciation and amortization) 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, results of assets held for sale, and acquisition costs help investors to obtain a better understanding of our operating results and future 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: Food Service Equipment, Engineering Technologies, Engraving, Electronics, and Hydraulics 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

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 economic conditions in the oil and gas market, the impact of foreign exchange, increases in raw material costs, the ability to substitute less expensive alternative raw materials, changes in the heavy construction vehicle market, the ability to continue to successfully implement productivity improvements, market acceptance of our products, our ability to design, introduce and sell new products and related product components, the impact of delays initiated by our customers, our ability to increase manufacturing production to meet demand, 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, 2016, 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
Thomas DeByle, 603-893-9701