Standex Reports Fourth-Quarter 2018 Financial Results
Aug. 28, 2018
SALEM, N.H.--(BUSINESS WIRE)--Aug 28, 2018--Standex International Corporation(NYSE:SXI) today reported financial results for its fourth quarter and full fiscal year 2018 ended June 30, 2018.
Fourth-Quarter Fiscal 2018 ResultsNet sales increased 4.8% year-over-year to $227.5 million with total organic sales up 1.2%. Acquisitions contributed 1.8% to growth and foreign exchange had a positive effect of 1.8%. Net income from continuing operations was $12.6 million, or $0.99 per share, which includes tax-effected $0.6 million of acquisition-related costs, $1.0 million of restructuring charges, and $6.3 million of discrete tax items related to the impact of tax reform. This compares with fourth-quarter fiscal 2017 net income from continuing operations of $14.1 million, or $1.11 per diluted share, including tax-effected $0.7 million of acquisition-related costs, $2.0 million of restructuring charges, $1.5 million of purchase accounting costs and a $0.5 million gain on sale of real estate. Excluding the aforementioned items from both periods, non-GAAP net income from continuing operations was $20.4 million, or $1.60 per diluted share, up from $17.9 million, or $1.40 per diluted share, in the prior-year period. Net working capital (defined as accounts receivable plus inventories less accounts payable) was $171.7 million at the end of the fourth quarter of fiscal 2018, compared with $150.0 million a year earlier. Working capital turns decreased to 5.3 in the fourth quarter of fiscal 2018 from 5.8 a year earlier, primarily due to sales growth and business mix. The Company closed the quarter with net debt (defined as debt less cash) of $84.2 million, compared with a net debt position of $108.4 million in the prior quarter.
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.
“We ended the fiscal year with a strong fourth quarter as we delivered topline organic growth across our Electronics, Engraving and Hydraulics business segments, and began to realize bottom line benefits from our restructuring initiatives in the Food Service business,” said President and Chief Executive Officer David Dunbar. “Engineering Technologies sales and margins were challenged as expected due to delays in aviation platform ramps, and we remain optimistic that investments we have made in the business will support long-term sustainable growth.”
“On a full-year basis, sales were up 15%, reflecting double-digit organic growth in Engraving, Electronics and Hydraulics, as well as strong contributions from the recent acquisitions of Standex Electronics Japan and Piazza Rosa,” continued Dunbar, “We exited the year with a solid balance sheet, growing backlog, and continued strength in our end markets.”
Food Service Equipment sales decreased 2.2% year-over-year. Q4 operating income increased 5.1%.
“Operating income grew 70 basis points as we began to realize the benefits from the restructuring efforts in Cooking and Refrigeration,” said Dunbar. “Our Scientific and Specialty Solutions businesses delivered double-digit growth as we capitalized on new product roll outs and business opportunities. Despite this, overall segment sales declined due to lighter order volumes from customers in our refrigeration and cooking businesses..”
“Looking ahead, we remain focused on continuing to grow differentiated products and realizing improved margins in our Refrigeration and Cooking plants.”
Engraving sales increased 28.6% year-over-year. Operating income was up 36.1%.
“We achieved strong top and bottom line performance in Engraving as we capitalized on new technologies including laser, tool finishing and nickel shell, as well as the success of the Piazza Rosa acquisition,” said Dunbar. “As recently announced, we completed the acquisition of Tenibac-Graphion, which complements our Engraving offering and will deliver additional value to both our automotive and non-automotive customers.”
“Looking ahead, we remain focused on capitalizing on growth from new technologies and recent acquisitions, as well as robust automotive roll outs.”
Engineering Technologies sales decreased 14.9% year-over-year, and operating income declined 32.1%.
“Sales and margins declined in line with our expectations as we experienced lower shipments in aviation and space markets” said Dunbar. “As we exited the quarter, we saw early signs of improved profitability, and our backlog was up 21% from the prior year, demonstrating that demand is building in the business.”
“Going forward, we are focused on leveraging the investments we have made to support the upcoming aviation ramp, delivering on the growing backlog for critical engine parts and lip-skins, and executing on our operational excellence initiatives to improve operating efficiencies.”
Electronics sales were up 15.4% year-over-year. Operating income was up 59.1% year over year. Excluding $2.0M of purchase accounting in Q4 of FY 17, operating income was up 29.1%.
“The year-over-year sales increase in Electronics was once again driven by double-digit organic growth in all regions and all end-markets with continued solid contributions from Standex Electronics Japan, said Dunbar.
“Looking ahead, we are focused on capitalizing on increased market demand and fueling the growth potential of the Electronics business with investments in market tests, growth laneways and M&A opportunities.”
Hydraulics reported a 19.5% year-over-year sales increase while operating income increased 16.0%.
“Hydraulics sales growth was driven by strength in all sectors,” said Dunbar. “Orders increased over 30% and backlog more than doubled as compared to the prior-year. In addition, EBIT margins were back to normal levels as we began to realize the benefits from pricing increases implemented earlier. We remain optimistic about the future of this segment as we continue to leverage the strong market environment and pursue market tests to grow the business.”
“We are entering 2019 with solid momentum and strong end markets” said Dunbar. “We are well-positioned to grow in Engraving, Electronics and Hydraulics over the next year. We expect to see margin improvements in our Engineering Technologies business and Food Service Equipment as the results of restructuring programs flow through to our bottom line. Our plans are to ramp our capex spending to $35 to $36 million to support investments in growth opportunities in Electronics and Engraving, as well as new aviation platforms like the A350 in Engineering Technologies. By executing against our Value Creation System, we are positioning Standex to deliver on our long-term financial targets and fulfill our mission to become a best-in-class operating company.”
Conference Call Details
Standex will host a conference call for investors today, August 28, 2018 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 www.standex.com. A replay of the webcast will also be available on the Company’s website shortly after the conclusion of the presentation through September 11, 2018. To listen to the playback, please dial (800) 585-8367 in the U.S. or (404) 537-3406 internationally; the passcode is 3896908. 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 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, purchase accounting, 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.
Standex International Corporation is a multi-industry manufacturer in five broad business segments: Food Service Equipment, Engraving, Engineering Technologies, Electronics, and Hydraulics with operations in the United States, Europe, Canada, Japan, Australia, Singapore, Mexico, Brazil, Argentina, Turkey, South Africa, India and China. For additional information, visit the Company's website at http://standex.com/.
During the fourth quarter of fiscal 2017, we adopted Accounting Standards Update (ASU) 2016-09 requiring the recognition of excess tax benefits as a component of income tax expense which were historically recognized in equity. As the ASU requires a prospective adoption, our Q1-Q3 2017 results have been recast to allocate $0.6M of the overall benefit to the applicable periods. The Q4 2017 impact was immaterial to that quarter's results.
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