Standex International Corp. Reports Operating Results (10-Q)

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May 12, 2009
Standex International Corp. (SXI, Financial) filed Quarterly Report for the period ended 2009-05-11.

Standex International Corp. is a diversified manufacturer producing and marketing a wide variety of useful quality products. The company enjoys a broad and well-balanced earnings base by virtue of its strong market position in selected areas of operation. (PRESS RELEASE) Standex International Corp. has a market cap of $135.8 million; its shares were traded at around $10.99 with a P/E ratio of 6.8 and P/S ratio of 0.2. The dividend yield of Standex International Corp. stocks is 7.6%.

Highlight of Business Operations:

Loss from operations for the third quarter of 2009 was ($19.9) million, compared income of $6.8 million reported for the same period a year ago. Operating income was negatively impacted by goodwill and intangible assets impairment of $21.3 million within the Food Service Equipment Group, $1.4 million of restructuring costs incurred during the period, primarily related to the consolidation of three manufacturing facilities during the quarter and additional salaried workforce reductions, as well as an inventory write-down of $3.5 million in the ADP Group. Operating income was favorably impacted by a $3.6 million reversal of bonus accruals. Absent these factors, operating income declined by $4.3 million from the same period last year.

Loss from operations for the first nine months of 2009 was ($3.2) million, $32.1 million lower than the $28.9 million reported for the same period a year ago. Operating income was negatively impacted by the $21.3 million of goodwill impairment, $6.8 million of restructuring costs incurred during the period related primarily to facility closures and headcount reductions during the year, and partially offset by the reversal of bonus and long term incentive accruals of $3.6 million in the third quarter. Excluding these costs, operating income decreased $4.3 million, or 14.7% from the first nine months of 2008.

The Companys income tax provision for the nine months ended March 31, 2009 was a $366,000, or an effective rate of (5.0%), compared to $7.1 million, or an effective rate of 34.4%, for the same period in the prior year. The provision for the nine months ended March 31, 2009 reflects an expected full year effective tax rate of 30.4% on continuing operations. However, the recorded provision is significantly impacted by the following discrete items (i) the $21.3 million impairment for which only $1.3 of tax benefit could be realized as the goodwill had no tax basis (ii) a benefit totaling $1.7 million from the reversal of the deferred tax liability that was no longer required due to a change in the U.S. tax classification of one of our foreign entities, (iii) a benefit of $553,000 related primarily to the retroactive extension of the R&D credit recorded during the second quarter and (iv) a benefit related to the receipt of $1.1 million of nontaxable life insurance proceeds during the first quarter and other minor adjustments.

Loss from operations for the third quarter of fiscal 2009 was ($15.6) million, a decrease of $21.8 million when compared to $6.1 million of income in the same period one year earlier. The loss was driven by the impairment of $21.3 million of goodwill and intangible assets related to our 2007 acquisition of the American Associated Industries (AAI) operating unit. Excluding these charges, income from operations was $5.7 million, a decrease of $0.4 million, or 7.2%, from the third quarter of 2008, as $16.5 million of volume decline was mostly offset by aggressive cost-cutting activities across the business, including staffing and supply chain cost reductions and labor productivity improvements and the reversal of the bonus accruals.

Corporate expenses of approximately $2.7 million in the third quarter of 2009 decreased $2.2 million or 44.7% compared to 2008. This was primarily due to a $4.7 million change in bonus expense caused by the reversal of accruals recorded for 2009 bonuses and performance-based stock compensation of $3.6 million versus a $1.1 million expense in 2008. For the nine months ended March 31, 2009, corporate expenses decreased $1.7 million, or 12.6%, to $11.9 million due to the bonus reversal, partially offset by an increase in the self-insured portion of the Companys healthcare costs.

Cash flows from continuing operations for the nine months ended March 31, 2009, were $29.3 million compared to $22.7 million for the same period in 2008. Improved working capital management during the period contributed $22.3 million to operating cash flows, a $24.5 million increase from the first nine months of 2008. The changes in working capital reflect increased collection of receivables totaling $21.9 million and better inventory turns generating $9.0 million in additional cash flow, offset by $6.4 million in additional payments to our vendors.

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