Market Overview

Standex Reports Fourth Quarter 2019 Financial Results

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SALEM, N.H., Aug. 26, 2019 /PRNewswire/ -- Standex International Corporation (NYSE:SXI) today reported financial results for the fourth quarter of fiscal year 2019 ending June 30, 2019.





Summary Financial Results - Total Standex



($M except EPS and Dividends)

4Q19

4Q18

Change

Net Sales

$209.2

$203.5

2.8%

Operating Income

$20.2

$25.5

-20.7%

Net Income from Continuing Ops

$13.1

$11.3

16.3%





EBITDA

$28.3

$32.2

-12.2%

EBITDA margin

13.5%

15.8%

-230 bps

Adjusted EBITDA

$30.1

$34.1

-11.7%

Adjusted EBITDA margin

14.4%

16.8%

-240 bps





Diluted EPS

$1.05

$0.88

19.3%

Adjusted EPS

1.16

1.48

-21.6%

Dividends per share

0.20

0.18

11.1%





Free Cash Flow

$31.7

$34.0

-6.8%

Net Debt to Adjusted EBITDA

0.9x

0.7x

28.6%

*Fourth quarter of fiscal 2018 results have been adjusted to reflect the disposition of the Cooking Solutions Group on April 1, 2019.

Fourth Quarter Fiscal 2019 Results 

"Fourth quarter results were in line with our expectations as performance in Engineering Technologies, Hydraulics and Scientific remained strong.  While macro-economic headwinds continued to impact results in Engraving and Electronics, we are effectively managing costs, our restructuring efforts are on plan and we delivered solid free cash flow," commented President and Chief Executive Officer David Dunbar

"Despite challenges in some of our end markets, we continued to make significant progress in the quarter and fiscal year in regard to our strategic priorities and we are well-positioned to further execute on our transformation and long-term goals for growth and profitability.

"From a growth perspective, our targeted investments are paying off with growth laneways increasing 61% year-over-year in fiscal 2019 to $58 million and the positive repositioning of Engineering Technologies as evidenced by its results.  The recent GS Engineering acquisition and successful divestiture of the Cooking Solutions business furthered our portfolio reshaping toward building our higher margin growth businesses into significant platforms.  The restructuring plan we began to implement in the third quarter is on track to achieve $3.8 million in annual savings by 2Q20.  We have also identified a significant number of additional productivity projects that we plan to implement in fiscal 2020.

"In addition, our financial position is strong with net debt to Adjusted EBITDA of under 1x and $253 million in available liquidity.  While we will remain disciplined and balanced with respect to capital allocation, our financial flexibility positions us well to invest both in high return internal projects and our active acquisition pipeline," said Dunbar.

Outlook

"As we enter fiscal 2020, we expect a sequential decline in the first quarter due to continued challenges in some of our markets followed by improved year-over-year performance in our fiscal second quarter.  We expect to benefit from scheduled platform rollouts in the automotive OEM market, a very strong funnel of new business opportunities in Electronics and continued growth in Engineering Technologies and Hydraulics.  These improvements will be complemented by the completion of the cost restructuring we announced in 3Q19 as well as additional efficiency projects that we have identified," concluded Dunbar. 

Fourth Quarter Segment Operating Performance

Engraving (18% of sales; 18% of segment operating income)

Engraving ($M)

4Q19

4Q18

% Change

Net sales

$38.1

$35.8

6.3%

Operating Income

5.1

7.9

-35.1%

Adj. Operating Income*

5.3

7.9

-32.9%

Operating Margin

13.4%

22.0%


Adj. Operating Margin*

13.9%

22.0%


* FY19 excludes $0.2 million of purchase accounting expenses

Overall sales grew 6.3% with contributions from recent acquisitions overcoming an organic decline of 4% and negative impact of foreign currency of 5%.  End market weakness from a lower level of new automotive model introductions compressed margins in our core business as well as those in our recent acquisitions.  Adjusted operating income decreased by $2.6 million year-on-year primarily due to the lower level of new roll-outs in the automotive sector, acquisition integration related costs, and tariff-related impact on the segment's China production facilities.  

In fiscal 2020, Standex expects Engraving end markets to strengthen as new global automotive model roll-outs ramp combined with contribution from the recent GS Engineering acquisition. In addition, previously announced restructuring actions are on track to deliver annualized savings of $2.7 million by 2Q20.

Electronics (24% of sales; 30% of segment operating income)

Electronics ($M)

4Q19

4Q18

% Change

Net sales

$49.7

$52.2

-4.8%

Operating Income

8.6

13.7

-37.0%

Operating Margin

17.4%

26.3%


The 4.8% decline in sales was primarily due to lower demand in the automotive market, impact of China tariffs and distributor inventory destocking.  These trends were partially offset by contribution from the Agile acquisition.  Operating income for the period decreased by 37.0% from the fourth quarter of fiscal 2018 as a result of the lower sales volume, material inflation and the impact of tariffs. During the quarter, the Electronics business delivered first shipments from its new India facility.  This site provides the business with a cost competitive manufacturing alternative and the ability to accelerate new business growth.

The Company expects Electronics sales volume to decline sequentially in the first half of fiscal year 2020 due to the factors that affected the fourth quarter's results followed by a modest recovery in the second half of the fiscal year. The segment also has a record level of new business opportunities, some of which have already been awarded, which will ramp during fiscal 2020. In addition, cost saving initiatives regarding G&A reduction, increased productivity and reduced material spend will approximate $1.1 million on an annual basis by 2Q20.

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