Standex Announces Sale of Minority Interest in Combi Oven Cooking Business; Provides Update on Cooking Solutions Divestiture; Issues Updated Proforma Historical Financial Results to Show Impact on Sales, Margins, and GAAP and Non-GAAP EPS Measures

Standex International Corporation (NYSE:SXI) announced today that it has sold its minority interest investment in Giorik, SpA (Giorik) to that businesss majority owner. It was necessary to have the Companys partner repurchase the minority interest in Giorik to allow the eventual buyer of Cooking Solutions maximum flexibility and to have a supply contract with the partner in place.

Standex continues to make progress on the Cooking Solutions divestiture from the Food Service Equipment Group segment in line with its plan. Standex has provided an updated table, attached to this release, to show the pro-forma historical impact of the divestitures of both Cooking Solutions and the Giorik minority interest on sales, margins and earnings per share both on a GAAP and non-GAAP basis.

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, Japan, Canada, Australia, Singapore, Mexico, Brazil, Argentina, Turkey, South Africa, India and China. For additional information, visit the Company’s website at http://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.

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, 2018, 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.

 

Reconciliation of Q2 and Fiscal Year to Date 2018 Financial Results to Reflect Planned Divestiture of Cooking Solutions Group

                       

Second Quarter FY 2018

Q2 FY18 Reported

   

Cooking Divestiture

   

Pension Exp. Reclassification

   

Q2 GAAP Adjusted

   

Pro Forma Non-GAAP Adjs.

   

Q2 FY18 Pro Forma

Net Sales 209,751 24,057 185,694 185,694
Cost of Goods Sold 138,225     15,710     (139)     122,376         122,376
Gross Profit 71,526 8,347 139 63,318 63,318
% 34.1% 34.7% 34.1% 34.1%
 
SG&A 50,679 6,464 (421) 43,794 43,794
Acquisition Related Costs 703 703 (703)
Restructuring 1,966     192         1,774     (1,774)    
Operating Income 18,178 1,691 560 17,047 2,477 19,524
% 8.7% 7.0% 9.2% 10.5%
 
Interest Expense 1,793 1,793 1,793
Non-Operating Exp./ (Income) (453)     (135)     560     242         242
Profit Before Tax 16,838 1,826 15,012 2,477 17,489
Income Tax 19,642     283         19,359     (14,338)     5,021
Net Income Continuing Ops (2,804) 1,543 (4,347) 16,815 12,468
 

Second Quarter YTD FY 2018

Q2 YTD FY18 Reported

   

Cooking Divestiture

   

Pension Exp. Reclassification

   

Q2 GAAP Adjusted

   

Pro Forma Non-GAAP Adjs.

   

Q2 YTD FY18 Pro Forma

Net Sales 424,130 49,295 374,835 374,835
Cost of Goods Sold 278,423     32,345     (231)     245,847     (205)     245,642
Gross Profit 145,707 16,950 231 128,988 205 129,193
% 34.4% 34.4% 34.4% 34.5%
 
SG&A 100,705 12,968 (886) 86,851 86,851
Acquisition Related Costs 1,708 1,708 (1,708)
Restructuring 4,970     238         4,732     (4,732)    
Operating Income 38,324 3,744 1,117 35,697 6,645 42,342
% 9.0% 7.6% 9.5% 11.3%
 
Interest Expense 3,514 3,514 3,514
Non-Operating Exp./(Income) (1,057)     (276)     1,117     336         336
Profit Before Tax 35,867 4,020 31,847 6,645 38,492
Income Tax 24,672     1,050         23,622     (13,268)     10,354
Net Income Continuing Ops 11,195 2,970 8,225 19,913 28,138
 
   

Reconciliation of Fiscal Q3 and Q4 2018 Financial Results to Reflect Planned Divestiture of Cooking Solutions Group

                   
Third Quarter FY 2018

Q3 FY18 Reported

Cooking Divestiture

Pension Exp. Reclassification

Q3 GAAP Adjusted

Pro Forma Non-GAAP Adjs.

Q3 FY18 Pro Forma

Net Sales 216,743 24,596 192,147 192,147
Cost of Goods Sold 142,971 16,796 (139) 126,036 126,036
Gross Profit 73,772 7,800 139 66,111 66,111
% 34.0% 31.7% 34.4% 34.4%
 
SG&A 51,854 6,552 (430) 44,872 44,872
Acquisition Related Costs 1,254 1,254 (1,254)
Restructuring 1,337 276 1,061 (1,061)
Operating Income 19,327 972 569 18,924 2,315 21,239
% 8.9% 4.0% 9.8% 11.1%
 
Interest Expense 2,286 2,286 2,286
Non-Operating Exp./(Income)

 

293

(139) 569 1,001 1,001
Profit Before Tax 16,748 1,111 15,637 2,315 17,952
Income Tax 3,928 231 3,697 (1,132) 2,565
Net Income Continuing Ops

 

12,820

880 11,940 3,447 15,387
 

Fourth Quarter FY 2018

 

 

Q4 FY18 Reported

 

Cooking Divestiture

Pension Exp. Reclassification

Q4 GAAP Adjusted

Pro Forma Non-GAAP Adjs.

Q4 FY18 Pro Forma

Net Sales 227,508 24,039 203,469 203,469
Cost of Goods Sold 145,188 16,082 (139) 128,967 128,967
Gross Profit 82,320 7,957 139 74,502 74,502
% 36.2% 33.1% 36.6% 36.6%
 
SG&A 53,898 6,456 (356) 47,086 47,086
Acquisition Related Costs 749 749 (749)
Restructuring 1,287 115 1,172 (1,172)
Operating Income 26,386 1,386 495 25,495 1,921 27,416
% 11.6% 5.8% 12.5% 13.5%
 
Interest Expense 2,230 2,230 2,230
Non-Operating Exp./(Income)

 

(481)

(211) 495 225 225
Profit Before Tax 24,637 1,597 23,040 1,921 24,961
Income Tax 12,020 420 11,600 (5,782) 5,818
Net Income Continuing Ops

 

12,617

1,177 11,440 7,703 19,143
 
 

Impact of Food Service Equipment Group Sales and Operating Income on Cooking Solutions Group Divestiture

                               
Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18
FSEG Reported Operating Income 9,488 7,206 7,418 9,324 10,424 7,841 6,785 9,803
Reclassify Cooking as Disc Ops (3,199)     (2,149)     (2,593)     (2,495)     (2,070)     (1,691)     (972)     (1,386)
FSEG GAAP Operating Income 6,289 5,057 4,825 6,829 8,354 6,150 5,813 8,417
Add: Horizon Purchase Accounting 1,086
Cooking Restructuring Expense (53) (3) (7) (47) (192) (276) (115)
Cooking Gain on Sale of Real Estate Above             652                
Restated FSEG Operating Income 6,236 6,140 4,818 7,481 8,307 5,958 5,537 8,302
 
Sales as Reported 92,651 92,200 92,730 103,388 103,064 97,222 95,482 101,121
Reclassify Cooking as Disc Ops (27,653)     (24,370)     (26,591)     (28,759)     (25,237)     (24,058)     (24,596)     (24,039)
Restated FSEG Sales 64,998 67,830 66,139 74,629 77,827 73,164 70,886 77,082
                                           
Adjusted Op Income % of Adjusted Sales 9.6%     9.1%     7.3%     10.0%     10.7%     8.1%     7.8%     10.8%
Reported Op Income % of Reported Sales 10.2%     7.8%     8.0%     9.0%     10.1%     8.1%     7.1%     9.7%
 
 

Reconciliation of GAAP to non-GAAP measures Adjusted Earnings per Share

                               
Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18
Reported EPS 1.12 0.82 0.60 1.11 1.10 (0.22) 1.00 0.99
Reclassify Cooking as Disc Ops (0.18)     (0.13)     (0.13)     (0.14)     (0.12)     (0.13)     (0.08)     (0.11)
Restated EPS from Continuing Ops 0.94 0.69 0.47 0.97 0.98 (0.35) 0.92 0.88
 
Adjustments:
Restructuring as Reported 0.02 0.10 0.06 0.16 0.18 0.12 0.08 0.08
Cooking Restructuring in Above (0.01) (0.02) (0.01)
Acquisition Related Costs 0.09 0.32 0.05 0.06 0.04 0.07 0.04
Purchase Accounting 0.06 0.12 0.01
Stock Comp Tax Accounting Change 0.03 0.02 (0.05)
Discrete Tax Items (0.04) 1.18 (0.04) 0.49
Loss / (Gain) on Real Estate Sale (0.04)
Cooking Gain on Real Estate Above             0.04                
Adjusted EPS ex Cooking 0.99     0.92     0.85     1.25     1.23     0.98     1.01     1.48
As Reported Adjusted EPS Incl. CSG 1.17     1.05     0.98     1.35     1.35     1.12     1.11     1.60
 
 

Adjusted EBIT by Quarter

                               
Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18
Net Income / (Loss) from Continuing Operations as Reported 13,951 10,258 7,644 14,799 14,000 (2,804) 12,822 12,617
Provision for Income Taxes 5,556 2,458 2,890 4,376 5,030 19,642 3,927 12,020
Interest Expense 697     850     953     1,543     1,721     1,793     2,286     2,230
EBIT as Reported 20,204 13,566 11,487 20,718 20,751 18,631 19,035 26,867
Reclassify Cooking as Disc Ops (3,357)     (2,326)     (2,676)     (2,678)     (2,239)     (2,018)     (1,388)     (1,728)
Restated EBIT from Continuing Ops 16,847 11,240 8,811 18,040 18,512 16,613 17,647 25,139
 
Adjustments:
Restructuring 394 1,664 1,019 2,748 3,004 1,966 1,337 1,287
Cooking Restructuring in Above (53) (3) (7) (47) (192) (276) (115)
Acquisition Related Costs 1,503 5,422 918 1,005 703 1,254 749
Purchase Accounting 1,086 1,998 205
Loss / (Gain) on Real Estate Sale (652)
Cooking Gain on Real Estate in Above             652                
Adjusted EBIT from Continuing Ops 17,188     15,490     15,245     23,704     22,679     19,090     19,962     27,060
 
Sales as Reported 179,600 173,854 184,715 217,089 214,379 209,751 216,743 227,508
Reclassify Cooking as Disc Ops (27,653)     (24,370)     (26,591)     (28,759)     (25,237)     (24,058)     (24,596)     (24,039)
Adjusted Sales from Continuing Ops 151,947     149,484     158,124     188,330     189,142     185,693     192,147     203,469
                                           
Adjusted EBIT % of Adjusted Sales 11.3%     10.4%     9.6%     12.6%     12.0%     10.3%     10.4%     13.3%
 
 

Reconciliation of GAAP to non-GAAP measures

Adjusted EBITDA

FULL YEAR

                       
FY13 FY14 FY15 FY16 FY17 FY18
Net Income, as Reported 44,054 49,749 55,243 52,230 46,577 36,632
Provision for Income Taxes 15,244 18,054 20,874 16,295 15,355 40,620
Interest Expense 2,469 2,249 3,161 2,871 4,043 8,030
Depreciation & Amortization 15,236     14,591     16,683     17,954     20,315     29,163
EBITDA 77,003 84,643 95,961 89,350 86,290 114,445
 
Adjustments:
Restructuring 2,666 10,077 3,443 4,232 5,825 7,594
CSG Restructuring in Above (157) (9,155) (2,574) (2,168) (63) (630)
Acquisition Related Costs 7,843 3,749
Purchase Accounting 1,549 60 1,696 423 3,084 205
CSG Purchase Accounting in Above (60) (587)
Legal Settlement 2,809
Management Transition Costs 3,918
Loss on Disposed Business 7,267
DA of Disposed Business (RPM) (1,090) (668) (506) (508)
DA of Disposed Business (CSG) (2,328) (2,108) (2,977) (2,954) (2,502) (2,457)
Profit by Disposed Business (RPM) (1,436) (174) (90) (860)
Profit by Disposed Business (CSG) (7,185) (5,436) (2,878) (12,483) (11,036) (7,373)
Life Insurance Benefit (2,278) (3,353)
Net Gain on Insurance Proceeds (3,462) (497)
Loss / (Gain) on Real Estate Sale 191 (652)
CSG Real Estate Gain in Above                 652    
Adjusted EBITDA 69,553     74,282     90,991     82,490     89,441     115,533
 
Sales as Reported 673,390 716,180 772,142 751,586 755,258 868,382
Sales of Disposed Business (RPM) (16,468) (14,645) (14,654) (17,445)
Sales of Disposed Business (CSG) (100,092)     (97,050)     (118,621)     (119,161)     (107,373)     (97,930)
Adjusted Sales 556,830     604,485     638,867     614,980     647,885     770,452
                               
Adjusted EBITDA % of Adjusted Sales 12.5%     12.3%     14.2%     13.4%     13.8%     15.0%
 
 

CSG Operating Statistics by Quarter

                               
Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18
CAPEX 37 339 375 240 528 432 223 81
Depreciation & Amortization 638 628 610 625 598 611 623 635
 
Accounts Receivable 13,035 10,923 10,913 12,820 13,303 11,723 12,180 14,445
Inventory 23,957 23,559 25,131 23,316 23,723 24,922 24,451 22,923
Accounts Payable (9,045)     (8,814)     (11,462)     (12,910)     (9,525)     (9,896)     (9,936)     (10,759)
Net Working Capital 27,947 25,668 24,582 23,226 27,501 26,749 26,695 26,609
 

Thomas DeByle, CFO
(603) 893-9701
[email protected]