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Standex Reports Strong Fourth-Quarter and Fiscal 2015 Financial Results on Food Service Margin Expansion
August 25, 2015
SALEM, N.H.--(BUSINESS WIRE)--Standex International Corporation (NYSE:SXI) today reported financial results for the fourth quarter of fiscal year 2015.
Fourth Quarter Fiscal 2015 Results from Continuing Operations
- Net sales increased 1.2% to $199.8 million from $197.3 million in the fourth quarter of fiscal 2014. Organic sales decreased 0.5%, acquisition growth accounted for 5.4% of the increase and foreign exchange had a negative effect of 3.7% year over year.
- Income from operations was $23.7 million, compared with $19.2 million in the fourth quarter of fiscal 2014. Net income from continuing operations was $16.3 million, or $1.27 per diluted share, including tax-effected $0.8 million of restructuring charges offset by $0.4 million of insurance proceeds. This compares with fourth quarter fiscal 2014 net income from continuing operations of $13.6 million, or $1.07 per diluted share, including tax-effected $3.0 million of restructuring charges, and $0.2 million in non-recurring management transition expenses, offset by gains of $1.1 million and $0.1 million related to insurance proceeds and discrete tax items, respectively. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations was $16.7 million, or $1.31 per diluted share, compared with $15.7 million, or $1.24 per diluted share, in the fourth quarter of fiscal 2014.
- EBITDA (earnings before interest, income taxes, depreciation and amortization) was $27.9 million, compared with $23.0 million in the fourth quarter of fiscal 2014. Excluding the previously mentioned items from both periods, adjusted EBITDA for the fourth quarter of fiscal 2015 was $28.5 million, compared with $26.1 million in the year-earlier quarter.
- Net working capital (defined as accounts receivable plus inventories less accounts payable) was $138.0 million at the end of the fourth quarter of fiscal 2015, compared with $119.5 million a year earlier. Working capital turns were 5.8 in fiscal 2015, slightly short of our goal of 6.0. In the prior fiscal year, working capital turns were 6.6 primarily due to increased payables for capital projects.
- The Company closed the quarter with net debt of $6.9 million, compared with net cash of $29.2 million at June 30, 2014.
- 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 2015 on a high note, especially given the continued headwinds from foreign exchange and the downturn in the oil and gas markets,” said David Dunbar, President and CEO. “For Q4, overall revenues grew 1.2% to $199.8 million, with foreign exchange having a negative effect of 3.7%, and adjusted operating income was up 8.8%. Food Service was slightly down on the top line in the fourth quarter, but we are seeing positive results from an operational standpoint, as it generated an 11.8% EBIT margin. We are seeing a leaner, more profitable Food Service business. The Engraving, Electronics and Hydraulics Groups reported strong demand during the quarter, while Engineering Technologies continued to be affected by the decline in oil and gas.”
Food Service Equipment Group sales decreased 1.0% year-over-year, and operating income was up 7.7%.
“In Refrigeration, sales to large, national chains declined during the quarter, as well as sales through dealers,” said Dunbar. “Strength in drug retail and dollar stores slowed a bit, while C-stores and other small retail continued to perform well. Cooking Solutions sales increased by approximately 19% year-over-year, including the Ultrafryer acquisition. Excluding the acquisition, Cooking Solutions sales increased 3.1% and it generated an improved EBIT margin. Pricing continues to strengthen, freight costs are coming down, and plant productivity was solid. Efforts at Cooking Solutions are now focusing on warranty costs and distribution center performance.”
Engraving Group sales increased 2.1% year-over-year. Sales increases of 13.1% were offset by an 11.0% negative effect from foreign exchange, while operating income was flat with last year.
“Our Mold-Tech performed well in China as we saw demand from both automotive and non-automotive customers,” said Dunbar. “Sales volume also increased in Europe, which was masked by the negative currency effect. We expect sales in North America to improve during the first half of fiscal 2016 as some automotive projects were pushed out from the fourth quarter.1 We continue to expand our Mold-Tech presence worldwide and during Q4 we set up new operations in both Sweden and Malaysia. In our roll, plate and machinery business, sales increased year-over-year due to a large project win from a major tissue and towel maker.”
Engineering Technologies Group sales grew 13.2% year-over-year, and operating income increased 4.2%. Acquisitions contributed 29.8% to growth, partially offset by organic and foreign exchange sales declines.
“Profitability in Engineering Technologies was up 4.2% year over year.” said Dunbar. “We continue to be excited by our Enginetics acquisition, which remains on track in terms of integration and performance expectations.1 Our legacy business increased margins through cost-reduction and operational excellence initiatives. The organic sales decline was due to the continued weak demand from the oil and gas market, which also carries high margins. We have reduced our cost structure in this business in response to market conditions. Our aviation sales continue to ramp up, though they were not enough to overcome the headwinds in the other end markets. To meet the demands of our current aviation contracts and future opportunities, we are expanding capacity with a new greenfield site in Wisconsin. We are breaking ground in the current first fiscal quarter, and will begin production later in 2016.”
Electronics Products Group sales were down 2.4% year-over-year. Organic sales increases of 5.8% were offset by an 8.7% negative currency effect, while operating income was up 7.8%.
“Sales in Q4 were driven by automotive demand in North America as well as strength in Europe.” said Dunbar. “Operating income was up 7.8% as a result of successful operational improvement and cost reduction programs. We have a mature operational excellence program within Electronics that we will continue to leverage. We remain optimistic about Electronics long term and have a strong backlog going into Q1.1”
The Hydraulics Products Group reported a 6.1% year-over-year sales increase, while operating income rose 2.2%.
“We experienced strong demand across our dump truck/dump trailer and refuse markets.” said Dunbar. “Our facility in China is helping to strengthen Standex’s global competitive advantage by enabling us to bundle telescopic cylinders from North America with rod cylinders from China. Looking ahead, we are focused on capitalizing on strong customer demand in our end markets and leveraging operational excellence to increase throughput.1 We also are turning custom product designs around rapidly in our core markets and exploring opportunities for expansion in new markets.1”
“Looking ahead, we will continue to use the elements of our Standex value creation system, which is now in place across all segments, to grow sales and improve operating efficiencies. Food Service Equipment will continue its focus on improved operating performance to enhance margins, and Engineering Technologies is undergoing a significant change in its end-market mix as aviation awards ramp up and oil and gas related projects remain soft. Our balance sheet remains strong and we are executing on our planned investments to support the increased demand across a number of businesses and markets. The financial performance of our recent acquisitions – Planar, Ultrafryer and Enginetics -- reflects the success of our acquisition strategy and we have a healthy, active pipeline of additional prospects. We are beginning to reap the rewards from these initiatives and we are excited to continue to execute against our strategy this coming year,1” concluded Dunbar.
Conference Call Details
Standex will host a conference call for investors today, August 25, 2015 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. Interested parties may access the call by dialing (877) 847-6070 in the U.S. and (631) 813-4923 internationally; the passcode is 94619625. The live audio feed of the call, which will be supplemented by a slide presentation, can be accessed in the “Webcasts and Presentations” tab in the “Investors” section of the company’s website, located at: www.standex.com. For those unable to participate in the live conference call, a playback will be available through September 1, 2015. To listen to the playback, please dial (800) 585-8367 in the U.S. or (404) 537-3406 internationally; the passcode is 94619625. 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
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 athttps://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 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, 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, 2014, 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.