FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 1997 Commission File Number 1-7233 STANDEX INTERNATIONAL CORPORATION (Exact name of Registrant as specified in its Charter) DELAWARE 31-0596149 (State of incorporation) (I.R.S. Employer Identification No.) 6 MANOR PARKWAY, SALEM, NEW HAMPSHIRE 03079 (Address of principal executive offices) (Zip Code) (603) 893-9701 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO __ The number of shares of Registrant's Common Stock outstanding on September 30, 1997 was 13,107,285. STANDEX INTERNATIONAL CORPORATION I N D E X PART I. FINANCIAL INFORMATION: Page No. Statements of Consolidated Income for the Three Months Ended September 30, 1997 and 1996 2 Consolidated Balance Sheets, September 30, 1997 and June 30, 1997 3 Statements of Consolidated Cash Flows for the Three Months Ended September 30, 1997 and 1996 4 Notes to Financial Information 5 Management's Discussion and Analysis 6-7 PART II. OTHER INFORMATION: 8 <TABLE> Form 10-Q PART I. FINANCIAL INFORMATION STANDEX INTERNATIONAL CORPORATION Statements of Consolidated Income (000 Omitted) <CAPTION> Three Months Ended September 30 1997 1996 <S> <C> <C> Net Sales $141,061 $140,199 Cost of Products Sold 95,196 95,579 Gross Profit Margin 45,865 44,620 Selling, General & Administrative Expenses 31,473 30,242 Income from Operations 14,392 14,378 Other Income/(Expense): Interest Expense (2,092) (2,123) Interest Income 119 72 Other Income/(Expense) - net (1,973) (2,051) Income Before Income Taxes 12,419 12,327 Provision for Income Taxes 4,760 4,785 Net Income $7,659 $ 7,542 Earnings Per Share $ .58 $ .56 Cash Dividends Per Share $ .19 $ .18 </TABLE> <TABLE> STANDEX INTERNATIONAL CORPORATION Consolidated Balance Sheets (000 Omitted) <CAPTION> September 30 June 30 1997 1997 ASSETS CURRENT ASSETS: <S> <C> <C> Cash $8,917 $6,149 Receivables net of allowances for doubtful accounts 90,758 86,852 Inventories (approximately 45% finished goods, 25% work in process, and 30% raw material and supplies) 111,434 109,454 Prepaid expenses 10,198 4,631 Total current assets 221,307 207,086 PROPERTY, PLANT AND EQUIPMENT 223,700 223,519 Less accumulated depreciation 139,416 137,921 Property, plant and equipment, net 84,284 85,598 OTHER ASSETS: Prepaid pension cost 24,823 24,320 Goodwill, net 14,896 15,195 Other 10,698 8,839 Total other assets 50,417 48,354 TOTAL $356,008 $341,038 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable and current portion of long-term debt $ 2,704 $2,030 Accounts payable 35,259 31,380 Income taxes 8,489 4,481 Accrued expenses and other 28,377 32,249 Total current liabilities 74,829 70,140 LONG-TERM DEBT (less current portion included above) 120,975 112,347 DEFERRED INCOME TAXES AND OTHER LIABILITIES 16,662 17,366 STOCKHOLDERS' EQUITY: Common stock 41,976 41,976 Paid-in capital 5,822 5,663 Retained earnings 319,075 313,908 Cumulative translation adjustment (2,996) (1,082) Less cost of treasury shares (220,335) (219,280) Total stockholders' equity 143,542 141,185 TOTAL $356,008 $341,038 </TABLE> <TABLE> STANDEX INTERNATIONAL CORPORATION STATEMENTS OF CONSOLIDATED CASH FLOWS (000 OMITTED) <CAPTION> Three Months Ended September 30 1997 1996 Cash Flows from Operating Activities: <S> <C> <C> Net income $ 7,659 $7,542 Depreciation and amortization 3,262 3,181 Net changes in assets and liabilities (11,386) (9,376) Net Cash (Used for) Provided by Operating Activities (465) 1,347 Cash Flows from Investing Activities: Expenditures for property and equipment (2,319) (2,586) Other (10) 18 Net Cash Used for Investing Activities (2,329) (2,568) Cash Flows from Financing Activities: Proceeds from additional borrowings 9,437 9,036 Net payments of debt (135) (2,592) Cash dividends paid (2,492) (2,418) Purchase of treasury stock (1,417) (2,982) Other, net 521 627 Net Cash Provided by Financing Activities 5,914 1,671 Effect of Exchange Rate Changes on Cash (352) 112 Net Change in Cash and Cash Equivalents 2,768 562 Cash and Cash Equivalents at Beginning of Year 6,149 5,147 Cash and Cash Equivalents at September 30 $8,917 $5,709 Supplemental Disclosure of Cash Flow Information: Cash paid during the three months for: Interest $3,011 $3,025 Income taxes $ 752 $1,353 </TABLE> NOTES TO FINANCIAL INFORMATION 1. Management Statement The financial statements as reported in Form 10-Q reflect all adjustments (including those of a normal recurring nature) which are, in the opinion of management, necessary to a fair statement of results for the three months ended September 30, 1997 and 1996. 2. Per Share Calculation Shares (in thousands) used in per share data are as follows: September 30 1997 1996 Earnings 13,278 13,574 Cash Dividends 13,115 13,436 Earnings per share have been computed according to generally accepted accounting principles. Cash dividends per share have been computed based on the shares outstanding at the time the dividends were paid. 3. Contingencies The Company is a party to various claims and legal proceedings related to environmental and other matters generally incidental to its business. Management has evaluated each matter based, in part, upon the advice of its independent environmental consultants and in-house counsel and has recorded an appropriate provision for the resolution of such matters in accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." Management believes that such provision is sufficient to cover any future payments, including legal costs, under such proceedings. 4. Acquisition On October 6, 1997, the Company completed the acquisition of the net assets of ACME Manufacturing Company for an undisclosed amount of cash. ACME Manufacturing is a manufacturer of heating, ventilation, and air conditioning pipe, duct, and fittings for the home building industry in the Northeast, Mid-West, and Southern United States. ACME, with annual sales of approximately $60 million, has seven manufacturing facilities. The acquisition will be accounted for as a purchase and was not significant with respect to the Company's consolidated financial statements. STANDEX INTERNATIONAL CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations MATERIAL CHANGES IN FINANCIAL CONDITION During the quarter ended September 30, 1997, net proceeds from additional borrowings of $9.4 million were used to purchase $1.4 million of the Company's Common Stock, invest $2.3 million in plant and equipment and pay out $2.5 million of cash dividends to the Company's shareholders. On October 6, 1997, the Company acquired the net assets of ACME Manufacturing Company for an undisclosed amount of cash (see Footnote 4). The acquisition of this operation was financed from existing bank credit agreements. The Company intends to continue its policy of using its funds to make acquisitions when conditions are favorable, invest in property, plant and equipment, pay dividends and purchase its Common Stock. In February 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 128 "Earnings per Share." This standard changes the method of calculating earnings per share and is effective December 15, 1997. The Company has evaluated this standard and does not expect its adoption to have a significant effect on the Company's earnings per share. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company has reviewed both of these standards and does not expect their adoption to have a significant effect on the Company's operating results or disclosure requirements. OPERATIONS Quarter Ended September 30, 1997 as compared to the Quarter Ended September 30, 1996 For the first quarter ended September 30, 1997, Net Sales increased by $862,000 as compared to the first quarter of the prior year. Management believes the majority of fluctuations in Net Sales reported by each segment are primarily due to changes in unit volumes. In addition, although changes in the average foreign exchange rates from September 30, 1996 to September 30, 1997 have had a positive impact on Net Sales for the quarter, the total effect was not significant. Net Sales in the Food Service segment remained flat as compared to the prior year. However, there was significant growth in sales at one division due to increased demand which was offset by the absence of sales from a division which was disposed of in the second half of fiscal 1997. The Consumer segment reported an increase of $1.4 million in Net Sales due to improved demand and acquisitions made during fiscal 1997. The Industrial segment reported a reduction of $1 million in Net Sales due primarily to the disposition of two product lines in the second half of fiscal 1997 and continued sluggishness in some of the Company's European operations. The Gross Profit Margin Percentage increased to 32.5%, as compared to the prior year's percentage of 31.8%. The Consumer and Industrial segments reported minor changes in their Gross Profit Margin Percentages none of which was individually significant. However, the Food Service segment reported a Gross Profit Margin of 28.7% versus the prior year's 27.2% primarily due to reduced costs. For the three months ended September 30, 1997, Selling, General and Administrative Expenses increased by $1.2 million, or 4.1%. None of the fluctuations reported by the Company's three segments were individually significant and corresponded respectively to the changes in Net Sales discussed above. Interest income and interest expense for the first quarter of fiscal 1998, remained approximately the same as reported in the prior year. The above factors resulted in a $92,000 increase in Income Before Income Taxes as compared to the same period of the prior year. The effective tax rate in the first quarter decreased from 38.8% in fiscal 1997 to 38.3% in fiscal 1998 due to several factors, none of which was individually significant. As a result of the above, Net Income for the first quarter of fiscal 1998 increased $117,000, or 1.6%, over the same period in the prior year. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10(n) Employment Agreement, effective September 1, 1997, between the Company and Edward F. Paquette 27 Financial Data Schedule (b) Standex filed no reports on Form 8-K with the Securities and Exchange Commission during the first quarter of the fiscal year ended September 30, 1997. ALL OTHER ITEMS ARE INAPPLICABLE. Form 10-Q STANDEX INTERNATIONAL CORPORATION S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STANDEX INTERNATIONAL CORPORATION Date: November 12, 1997 /s/ Robert R. Kettinger Robert R. Kettinger Corporate Controller Date: November 12, 1997 /s/ Lindsay M. Sedwick Lindsay M. Sedwick Sr. Vice President of Finance/CFO