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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2002 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 office) (Zip Code)
(603) 893-9701
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
SECURITIES EXCHANGE ACT OF 1934:
Title of Each Class Name of Each Exchange
Common Stock, Par Value on Which Registered
$1.50 Per Share New York Stock Exchange
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 [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein
and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting and non-voting
common equity held by non-affiliates of the Registrant at the
close of business on July 31, 2002 was approximately
$241,909,000. Registrant's closing price as reported on the New
York Stock Exchange for July 31, 2002 was $20.96 per share.
The number of shares of Registrant's Common Stock
outstanding on August 12, 2002 was 12,187,443.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Registrant's 2002
Annual Meeting of Stockholders (Part III) of this report are
incorporated by reference.
PART I
ITEM 1. BUSINESS
Standex(1) is a diversified manufacturing and marketing
company with operations in three product segments: Food
Service, Industrial and Consumer. Standex was incorporated in
1975 and is the successor of a corporation organized in 1955.
The business of the Company is carried on within the three
segments by a number of operating units, each with its own
organization. The management of each operating unit has
responsibility for product development, manufacturing, marketing
and for achieving a return on investment in accordance with the
standards established by Standex. Overall supervision,
coordination and financial control are maintained by the
executive staff from its corporate headquarters located at
6 Manor Parkway, Salem, New Hampshire. As of June 30, 2002, the
Company had approximately 4,900 employees.
The principal products and the major markets for the
Company's products and services are set forth below. Sales are
made both directly to customers and by or through manufacturers'
representatives, dealers and distributors.
Food Service Products
Master-Bilt(r) refrigerated cabinets, cases, display units,
modular structures, coolers and freezers; Barbecue King(r) and
BKI(r) commercial cook and hold units, rotisseries, pressure
fryers, ovens and baking equipment; and Federal Industries bakery
and deli heated and refrigerated display cases for hospitals,
schools, fast food industry, restaurants, hotels, clubs,
supermarkets, bakeries, convenience stores and delicatessens.
USECO food service equipment and patient feeding systems for
hospitals, schools, nursing homes, correctional facilities and
restaurants; H. F. Coors hotel restaurant china and cookware; and
Mason candlelamps and candles for restaurants, hotels and
commercial industries.
Procon(r) rotary vane pumps for the carbonated beverage industry,
espresso coffee machine markets, water purification industry and
coolant recirculation systems.
Industrial Products
Snappy(r), ACME and ALCO metal ducting and fittings for heating,
ventilating and air conditioning distributors throughout the
continental United States.
Spincraft(r) power metal spinning, custom formed components for
aircraft engines, space launch vehicles, gas turbines, nuclear
reactors, military ordnance, commercial satellites and similar
products for OEMs, U.S. Government, energy, aircraft, aerospace
and commercial satellite industry and other commercial
industries.
JarvisTM, Can-Am Casters and WheelsTM and PEMCO(r) casters and
wheels and industrial hardware for general industry, hospitals,
supermarkets, hotels and restaurants. National Metal fabricated
metal products, including specialty hardware and metal furniture
for the food service industry, retail stores, office furniture
markets, stationery supply houses and other industries.
(1) References in this Annual Report on Form 10-K to "Standex"
or the "Company" shall mean Standex International Corporation and
its subsidiaries.
Roehlen(r) embossing rolls, texturizing and laser engraving
systems, machines and plates; Mold-Tech(r) mold engraving;
Mullen(r) Burst Testers; Perkins converting and finishing
machinery and systems for general industry (e.g., automotive,
plastics, textiles, paper, building products, synthetic
materials, OEMs, converting, textile and paper industry,
computer, housewares and construction industries).
Custom Hoists single and double acting telescopic and piston rod
hydraulic cylinders for dump trucks and trailers used in the
construction and waste hauling industries.
Standex Electronics reed switches, electrical connectors,
sensors, toroids and relays, fixed and variable inductors and
electronic assemblies, fluid sensors and tunable inductors and
ATC-Frost transformers and magnetic components for
telecommunications, consumer electronics, automotive, security
systems, communications equipment, computers, air conditioning
and refrigeration industries.
James Burn Wire-O(r) double-looped wire and machinery and
complete binding system for printers, publishers and binders of
checkbooks, calendars, diaries, appointment books, cookbooks,
catalogs and manuals.
Consumer Products
Standard(r) Publishing religious periodicals, curricula, Sunday
school literature, children's books and supplies published and
marketed to Sunday schools, churches, vacation Bible schools and
Christian bookstores and printing for general commerce and
industry.
Berean(r) Christian Stores, a chain of 19 Berean(r) Christian
bookstores, serving as distribution centers and retail outlets
for religious books and merchandise.
Frank Lewis(r) Grapefruit Club gift packages, Red Cooper(r) fresh
grapefruit, Harry's Crestview Groves(r) grapefruit packages,
grapefruit juice, grapefruit sections, onions, melons and roses;
Salsa Express(r) salsas and other related food products; Red
Cooper's Onion Store onions for mail order consumer direct sales.
Financial information about these segments is included under the
caption Industry Segment Information in the Notes to Consolidated
Financial Statements.
Raw Materials
Raw materials and components necessary for the fabrication
of products and the rendering of services for the Company are
generally available from numerous sources. The Company does not
foresee any unavailability of materials or components which
would have any material adverse effect on its overall business,
or any of its business segments, in the near term.
Patents and Trademarks
The Company owns or is licensed under a number of patents
and trademarks in each of its product groups. However, the loss
of any single patent or trademark would not, in the opinion of
the Company, materially affect any segment or the overall
business.
Backlog
Backlog orders believed to be firm at June 30, 2002 and
2001 are as follows (in thousands):
2002 2001
Food Service $ 19,877 $ 17,996
Industrial 100,109 110,492
Consumer 5,150 4,566
Total $125,136 $133,054
All but approximately $43,415,000 of the 2002 backlog, and
$52,939,000 of the 2001 backlog, was expected to be realized as
sales in the following fiscal year.
Competition
Standex manufactures and markets products many of which have
achieved a unique or leadership position in their market.
However, the Company encounters competition in varying degrees
in all product groups and for each product line. Competitors
include domestic and foreign producers of the same and similar
products. The principal methods of competition are price,
delivery schedule, quality of services, product performance and
other terms and conditions of sale. During fiscal 2002, the
Company invested $10,021,000 in new plant and equipment in order
to upgrade facilities to become more competitive in all
segments.
International Operations
Substantially all international operations of the Company
are related to domestic operations and are included in the Food
Service and Industrial business segments. International
operations are conducted at 31 plants, principally in Western
Europe. See the notes to the Consolidated Financial Statements
for international operations financial data.
Research and Development
Due to the nature of the manufacturing operations of
Standex and the types of products manufactured, expenditures for
research and development are not material to any segment.
Environmental and Other Matters
To the best of its knowledge, the Company believes that it
is presently in substantial compliance with all existing
applicable environmental laws and does not anticipate that such
compliance will have a material effect on its future capital
expenditures, earnings or competitive position.
ITEM 2. PROPERTIES
At June 30, 2002, Standex operated a total of 91 principal
plants, stores and warehouses located through the United States,
Western Europe, Canada, Australia, Singapore and Mexico. The
Company owned 46 of the facilities and the balance were leased.
The Company operated 19 retail stores in various sections of the
United States, of which all were leased. The approximate
building space utilized by each product group of Standex at June
30, 2002 is as follows (in thousands):
Area in Square Feet
Owned Leased
Food Service 702 230
Industrial 2,162 515
Consumer 342 268
General Corporate 29 -
Total 3,235 1,013
In general, the buildings are in good condition, are
considered to be adequate for the uses to which they are being
put and are in regular use.
The Company utilizes machinery and equipment which is
necessary to conduct its operations. Substantially all of such
machinery and equipment is owned by Standex.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth
quarter of the fiscal year.
EXECUTIVE OFFICERS OF STANDEX
Name Age Principal Occupation During
the Past Five Years
Thomas L. King 72 Vice Chairman of the Board
of the Company since December
2001; Chairman of the Board of
the Company from January 1992 to
December 2001; President of the
Company from August 1984 to July
1994; and Chief Executive
Officer of the Company from July
1985 to June 1995.
Edward J. Trainor 62 Chairman of the Board of
the Company since December 2001;
Chief Executive Officer of the
Company since July 1995;
President of the Company from
July 1994 to December 2001;
Chief Operating Officer of the
Company from July 1994 to June
1995; and Vice President of the
Company from July 1992 to July
1994.
Roger L. Fix 49 President and Chief
Operating Officer of the Company
since December 2001; Chief
Executive Officer, Chief
Operating Officer and President
of Outboard Marine Corporation
from August 2000 to February
2001; Chief Operating Officer of
Outboard Marine Corporation from
June 2000 to August 2000; Chief
Executive of John Crane from
1998 through June 2000;
President - North America of
John Crane from May 1996 to May
1998; prior thereto President of
Xomox, a division of Emerson
Electric.
As COO of Outboard Marine
Corporation ("OMC") (June-August
2000), Mr. Fix completed a
strategic review and commenced
implementation of programs to
address the financial crisis the
company was and had been
experiencing since about 1997.
Mr. Fix became President and CEO
of OMC in August 2000. In
December 2000, at the direction
of the investors, a voluntary
petition in Bankruptcy pursuant
to Chapter 11 of the U.S.
Bankruptcy Code was filed for
OMC.
David R. Crichton 64 Executive Vice
President/Operations of the
Company since June 1989.
Deborah A. Rosen 47 Chief Legal Officer of the
Company since October 2001; Vice
President of the Company since
July 1999; General Counsel of
the Company since January 1998;
Secretary of the Company since
October 1997; Assistant General
Counsel and Assistant Secretary
of the Company from January 1997
to December 1997 and prior
thereto Senior Corporate
Attorney and Assistant Secretary
of the Company.
Christian Storch 42 Vice President and Chief
Financial Officer of the Company
since September 2001; Manager of
Corporate Audit and Assurance
Services of the Company from
July 1999 to August 2001; prior
thereto Divisional Financial
Director and Corporate
Controller of Vossloh AG, a
publicly held German
corporation.
Daniel C. Potter 46 Treasurer of the Company
since August 1998; Assistant
Treasurer from July 1997 to July
1998; Corporate Tax Manager of
the Company since February 1997;
Tax Manager of the Company from
August 1996 to January 1997 and
prior thereto Tax
Manager/International.
Robert R. Kettinger 60 Corporate Controller of the
Company since July 1991.
The executive officers are elected each year by the Board
of Directors to serve for one-year terms of office. There are
no family relationships among any of the directors or executive
officers of the Company.
PART II
ITEM 5. MARKET FOR STANDEX COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The principal market in which the Common Stock of Standex
is traded is the New York Stock Exchange. The high and low
sales prices for the Common Stock on the New York Stock Exchange
and the dividends paid per Common Share for each quarter in the
last two fiscal years are as follows:
Common Stock Prices and Dividends Paid
Common Stock Price Range
Dividends
2002 2001 per Share
Year Ended June 30 High Low High Low 2002 2001
First quarter $23.95 $18.32 $19.44 $16.50 $0.21 $0.20
Second quarter 23.90 18.75 20.63 16.63 0.21 0.21
Third quarter 24.90 20.60 25.76 19.75 0.21 0.21
Fourth quarter 28.00 23.95 24.30 20.75 0.21 0.21
The approximate number of stockholders of record on August 12, 2002 was
2,950.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended June 30, 2002 is as
follows:
(In thousands,
except per share data) 2002 2001 2000 1999 1998
Net sales $573,992 $600,152 $637,049 $641,400 $616,180
Gross profit margin 187,217 198,149 209,338 210,126 200,548
Interest expense 8,546 10,998 10,571 10,492 10,117
Income before income taxes 29,885 42,465 46,853 51,491 33,064
Provision for income taxes 9,488 17,568 19,150 20,130 12,915
Income before cumulative
Effect of a change in
accounting principle (a) 20,397 24,897 27,703 31,361 20,149
PER SHARE DATA
Net sales (diluted) 46.61 48.64 49.91 49.20 46.61
Earnings (a):
Basic 1.68 2.05 2.19 2.42 1.54
Diluted 1.66 2.02 2.17 2.41 1.52
Dividends paid .84 0.83 0.79 0.76 0.76
Book value (diluted) 14.76 14.16 13.37 12.59 11.19
Average shares outstanding
Basic 12,113 12,172 12,672 12,972 13,072
Diluted 12,316 12,338 12,763 13,037 13,219
JUNE 30 FINANCIAL CONDITION
Working capital 44,033 139,807 145,009 146,514 148,943
Current ratio 1.28 2.86 2.68 2.79 2.73
Property, plant and
equipment - net 112,892 113,844 112,137 104,783 102,973
Total assets 406,039 424,264 424,200 410,042 411,242
Long-term debt 50,087 153,019 153,436 148,111 163,448
Stockholders' equity 178,432 172,174 164,814 162,301 146,197
See notes to consolidated financial statements.
(a) Excludes cumulative effect of a change in accounting principle of
$3,779,000 (31 cents per share) in 2002.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements contained in the following "Management's
Discussion and Analysis" that are not based on historical facts
are "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-
looking statements may be identified by the use of forward-
looking terminology such as "may," "will," "expect," "believe,"
"estimate," "anticipate," "continue," or similar terms or
variations of those terms or the negative of those terms. There
are many factors that affect the Company's business and the
results of its operations and may cause the actual results of
operations in future periods to differ materially from those
currently expected or desired. These factors include
uncertainties in competitive pricing pressures, unforeseen
volatility in financial markets, general domestic and
international business and economic conditions and market demand.
Liquidity and Capital Resources
Cash Flow
Operating activities in 2002 generated $44.4 million in cash
flow. The Company redeployed those resources by investing $10.0
million in plant and capital equipment while returning
$10.1 million to shareholders through cash dividends and reducing
net debt by $22.4 million. This represents the third consecutive
year in which Standex has generated cash from operations in
excess of $40.0 million, and the highest amount in at least 15
years.
In addition to measuring the cash flow generation or usage
based upon operating, investing, and financing classifications
included in the Consolidated Statement of Cash Flows, the Company
also measures free cash flow. Free cash flow is defined as cash
flow from operating activities less capital expenditures. The
Company generated free cash flow of $34.3 million in 2002,
compared with $28.3 million in 2001, and $21.4 million in 2000.
Capital Structure
The following table sets forth the Company's capitalization
at June 30:
Year Ended June 30 2002 2001
Short-term debt $82,221 $ 2,532
Long-term debt 50,087 153,019
Total Debt 132,308 155,551
Less cash 8,092 8,955
Total net debt 124,216 146,596
Stockholders' equity 178,432 172,174
Total capitalization $302,648 $318,770
The Company's net debt decreased by $22.4 million to $124.2
million at June 30, 2002. The Company's net debt to capital
percentage is 41.0% down from 46.0% in 2001.
On June 30, 2002, the Company had a $175.0 million revolving
credit agreement with eight banks which is scheduled to expire in
May 2003. In addition, the Company has the option to borrow up
to $175.0 million on an unsecured short-term basis. Available
borrowings under the revolving credit agreement are reduced by
unsecured short-term borrowings. At June 30, 2002, the Company
had the ability to borrow an additional $100.3 million under
these bank credit agreements. The Company intends to enter into
a new revolving credit agreement prior to December 31, 2002 and
believes it has adequate access to the private credit market.
The Company believes that these resources, along with the
Company's internally generated funds, will be sufficient to meet
anticipated cash funding needs for the foreseeable future.
The Company authorized the issue and sale of $25 million
aggregate principal amount of its 5.94% Senior Note due in 2012.
Two institutional holders committed to the note on August 9,
2002. On June 30, 2002, the Company's credit quality designation
was NAIC-2.
The Company has an insurance program for certain key
executives. The underlying policies have a cash surrender value
of $17.3 million and are reported net of loans of $13.3 million
for which the Company has the legal right of offset. These
policies have been purchased to fund Supplemental Retirement
Income Benefits for certain executives. The aggregate present
value of future obligations was $1,532,000 at June 30, 2002.
Fiscal 2002 as Compared to Fiscal 2001
A difficult economic environment affected sales in all
segments. Net sales for the year ended June 30, 2002 decreased
by $26.2 or 4.4% to $574.0 million as volume declined in each of
our business segments. The effect, on net sales, of changes in
the average foreign exchange rates was not significant.
The 5.5% decline in Food Service Segment sales was primarily
due to lower sales volumes caused by a weak economy. Demand was
weak as customers delayed or scaled back their rollout programs.
Net sales in the Consumer Segment decreased by 4.8%. Reduced
consumer confidence levels and the events of September 11th
negatively affected segment performance. The Industrial Segment
was particularly hard hit by the recession. Segment sales
decreased 3.7%. ATC-Frost was acquired in late fiscal 2001.
Excluding this acquisition's impact on fiscal 2002, segment sales
decreased by 6.3%. Lower sales volume and negative price
pressure from discounting activities was somewhat offset by the
effect of a strong housing market.
The Company's gross profit margin percentage ("GPMP")
decreased 0.4 percentage points to 32.6%. Because of the
economic environment, in the fourth quarter of 2002 the Company
recorded higher than normal inventory reserves of $3.4 million
affecting all three segments.
Selling, general and administrative expenses ("SG&A") were
25.9% of net sales, up from 24.1% in the prior year. SG&A
performance of the Company's business segments corresponds with
the decreased sales levels.
Interest expense decreased by $2.5 million. The decline
reflects lower average borrowings driven by the Company's strong
cash flow performance in 2002, and lower interest rates on the
Company's variable rate debt.
The effective tax rate was 36.3% which included the effect of
a change in accounting principle described below. The decline in
the 2002 effective tax rate from 2001 was affected by the
implementation of additional tax-planning strategies,
transactional based benefits from distributions from foreign
subsidiaries and decreased levels of various tax contingencies.
Income before the cumulative effect of a change in accounting
principle was $20.4 million as compared to $24.9 million last
year.
The Company recorded a charge of $3.8 million representing
the cumulative effect of a change in accounting principle to
write-off previously recorded goodwill. The charge related to the
Company's adoption of SFAS No. 142 effective July 2001, is
described in detail in the Notes to Consolidated Financial
Statements.
Fiscal 2001 as Compared to Fiscal 2000
Net sales for the year ended June 30, 2001 of $600.2 million
represents a decrease of $36.9 million or 5.8% from sales of
$637.0 million for the year ended June 30, 2000. The effect, on
net sales, of changes in the average foreign exchange rates was
not significant.
For the year ended June 30, 2001 net sales in the Food
Service Segment increased by $2.7 million or 1.9% from the prior
year. Net sales in the Consumer Segment increased slightly to
$115.6 million versus $115.3 in the prior year. Net sales in the
Industrial Segment were $337.7 million for the year ended June
30, 2001 compared to $377.7 million for 2000. The Industrial
Group continues to be adversely affected by the slowdown in the
automotive, trucking, aerospace and telecommunications markets as
several relatively larger customer program commitments and orders
have been delayed. Lower housing starts have had a negative
impact on our Standex Air Distribution Products division
The overall gross profit margin percentage ("GPMP") remained
essentially the same (33.0% vs. 32.9%) for the current and prior
year. All segments recorded similar GPMPs in 2001 as compared to
2000.
Consolidated selling, general and administrative ("SG&A")
expenses were 24.1% of net sales, up slightly from 23.5% in the
prior year. However, SG&A declined $4.9 million. None of the
fluctuations in SG&A reported by the Company's three segments
were individually significant and corresponded with the changes
in net sales discussed above.
A restructuring charge of $5.4 million was recorded in the
previous year. Also, during fiscal 2000, other income of $2.7
million was recorded resulting from the receipt of marketable
stock of an insurance company, in which Standex owned life
policies, that "demutualized" by converting from a mutual company
to a stock company.
An increase of $427,000 in interest expense for the year was
due primarily to a small increase in average net borrowings.
As a result of the above factors, income before income taxes
was $42.5 million compared to $46.9 million in the prior year.
The effective tax rate increased to 41.4% as compared to 40.9% in
the prior year since a greater portion of the Company's income
was generated in higher taxed countries. Net income decreased
$2.8 million or 10.1% from the prior year.
Other Matters
Inflation - Certain of the Company's expenses, such as wages
and benefits, occupancy costs and equipment repair and
replacement, are subject to normal inflationary pressures.
However, the Company expects significant price increases in the
steel products it uses in its manufacturing processes due to the
steel tariffs which were implemented in the US this past Spring.
Although management believes it can pass these price increases on
to its customers, there is no assurance that the Company will be
able to fully recover them from its customers.
Environmental Matters - The Company is party to various
claims and legal proceedings, generally incidental to its
business and has recorded an appropriate provision for the
resolution of such matters. As explained more fully in the Notes
to the Consolidated Financial Statements, the Company does not
expect the ultimate disposition of these matters to have a
material adverse effect on its financial statements.
Segments - During fiscal 2002 the Company realigned its
internal organization in a manner that caused the composition of
its reportable segments to change. The segment information for
prior years has been recast to reflect the realignment.
Critical Accounting Policies
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
the Company to make estimates, judgments and assumptions that
affect the reported amounts of assets, liabilities, revenues and
expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, management evaluates its
estimates and assumptions, and the effects of revisions are
reflected in the consolidated financial statements in the period
in which they are determined to be necessary. These policies and
estimates are more fully described in the Notes to Consolidated
Financial Statements.
Adoption of SFAS No. 141 and No. 142
Effective July 1, 2001, the Company adopted the provisions
of SFAS No. 141, "Business Combinations," and SFAS No. 142,
"Goodwill and Other Intangibles." SFAS No. 141 requires all
business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS No. 142,
goodwill and intangible assets with indefinite lives are no
longer amortized but are reviewed annually for impairment or more
frequently if impairment indicators arise. Separable intangible
assets that are not deemed to have indefinite lives will continue
to be amortized over their useful lives. In connection with the
adoption of SFAS No. 142 there were no identified intangible
assets.
The result of the Company's initial assessment of goodwill
for impairment in accordance with SFAS No. 142 resulted in a non-
cash charge of $3.8 million, which is reported as a cumulative
effect of a change in accounting principle in the accompanying
Statements of Consolidated Income. There was no tax benefit for
this change in accounting principle as it was not deductible for
tax purposes.
New Accounting Pronouncements
In October 2001, the Financial Accounting Standards Board
("FASB") issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which supercedes SFAS No. 121,
and the provisions of Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations-Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions," for the
disposal of segments of a business. The statement creates one
accounting model, based on the framework established in SFAS No.
121, to be applied to all long-lived assets including
discontinued operations. SFAS No. 144 will be effective for July
1, 2002. The impact of the adoption of SFAS No. 144 is not
expected to be significant.
In April 2002, the FASB issued SFAS No. 145, "Rescission of
FASB Statements No. 4, 44 and 64, amendment of FASB Statement No.
13, and Technical Corrections," which, among other things,
restricts the classification of gains and losses from
extinguishment of debt as extraordinary to only those
transactions that are unusual and infrequent in nature as defined
by APB Opinion No. 30 as extraordinary. SFAS No. 145 is
effective for fiscal 2004. Upon adoption, gains and losses on
certain future debt extinguishment, if any, will be recorded in
pre-tax income.
In June 2002, the FASB issued SFAS No. 146, "Accounting for
Cost Associated with Exit or Disposal Activities." SFAS No. 146
addresses financial accounting and reporting for costs associated
with exit or disposal activities and nullifies Emerging Issues
Task Force Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." SFAS No.
146 requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is
incurred. The provisions of SFAS No. 146 are effective for exit
or disposal activities that are initiated after December 31,
2002. The Company believes that the adoption of SFAS No. 146
will not have a material impact on its financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Company is subject to market risk associated with
changes in foreign currency exchange rates and interest rates.
The Company mitigates certain of its foreign currency exchange
rate risk by entering into forward foreign currency contracts.
These contracts are primarily used as a hedge against anticipated
foreign cash flows, such as dividend and loan payments, and are
not used for trading or speculative purposes. The fair value of
the forward foreign currency exchange contracts is sensitive to
changes in foreign currency exchange rates, as an adverse change
in foreign currency exchange rates from market rates would
decrease the fair value of the contracts. However, any such
losses or gains would generally be offset by corresponding gains
and losses, respectively, on the related hedged asset or
liability. Due to the absence of forward foreign currency
contracts at June 30, 2002, the Company did not have any fair
value exposure.
The Company's interest rate exposure is limited primarily to
interest rate changes on its variable rate borrowings. As of
June 30, 2002, a hypothetical 10% immediate increase in interest
rates would increase the Company's annual interest expense by
$158,000. The Company has an interest rate swap agreement to fix
the interest rate on $10 million of its variable rate borrowings.
At June 30, 2002, the fair value of the Company's interest rate
swap agreement would not be materially affected by a 10% change
in interest rates.
In addition to the $10 million of variable rate borrowings
covered by the interest rate swap agreement, the Company also has
$54 million of long-term debt at fixed interest rates as of
June 30, 2002. There would be no immediate impact on the
Company's interest expense associated with its long-term debt due
to fluctuations in market interest rates. However, based on a
hypothetical 10% immediate decrease in market interest rates, the
fair value of the Company's long-term debt would be increased by
approximately $1.7 million as of June 30, 2002. Such fair value
changes may affect the Company's determination as to whether to
retain, replace or retire its long-term debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Statements of Consolidated Income
Standex International Corporation and Subsidiaries
Year Ended June 30
(In thousands, except per share data) 2002 2001 2000
Net Sales $573,992 $600,152 $637,049
Cost of Products Sold 386,775 402,003 427,711
Gross profit 187,217 198,149 209,338
Selling, General and Administrative 148,654 144,886 149,825
Restructuring charge - - 5,408
Income from Operations 38,563 53,263 54,105
Other income (expense):
Interest expense (8,546) (10,998) (10,571)
Other, net (132) 200 608
Gain on stock received - - 2,711
Total (8,678) (10,798) (7,252)
Income Before Income Taxes 29,885 42,465 46,853
Provision for Income Taxes 9,488 17,568 19,150
Income before cumulative effect
of a change in accounting principle $20,397 $24,897 $27,703
Cumulative effect of a change
in accounting principle (3,779) - -
Net Income $16,618 $24,897 $27,703
Earnings Per Share (before
cumulative effect of a
change in accounting principle):
Basic $1.68 $2.05 $2.19
Diluted $1.66 $2.02 $2.17
Earnings Per Share (due
to cumulative effect of a
change in accounting principle):
Basic $(0.31)
Diluted $(0.31)
Earnings Per Share (after
cumulative effect of a
change in accounting principle):
Basic $1.37 $2.05 $2.19
Diluted $1.35 $2.02 $2.17
See notes to consolidated financial statements.
Statements of Consolidated Stockholders' Equity
Unamortized Accumulated
Additional Value of Other Treasury Stock Total
Paid-in Restricted Retained Comprehensive ------------------ Stockholders'
Year End (In thousands) Common Stock Capital Stock Awards Earnings Income Shares Amount Equity
- -----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 1999 $41,976 $9,157 $345,613 $(3,478) 15,089 $(230,969) $162,299
Stock issued for employee
stock options and stock
purchase plan, net of
related income tax benefit 117 (127) 1,952 2,069
Treasury stock acquired 698 (12,757) (12,757)
Comprehensive income
Net income 27,703 27,703
Foreign currency
translation adjustment (4,487) (4,487)
--------
Total comprehensive income 23,216
Dividends paid ($.79 per share) (10,013) (10,013)
-----------------------------------------------------------------------------------------------
Balance, June 30, 2000 41,976 9,274 363,303 (7,965) 15,660 (241,774) 164,814
Stock issued for employee stock
options and stock purchase
plan, net of related income
tax benefit 1,372 (311) 4,828 6,200
Restricted stock awards 111 $(1,450) (86) 1,339 -
Amortization of restricted
stock awards 401 401
Stock issued in conjunction
with acquisition 193 (29) 446 639
Treasury stock acquired 587 (12,483) (12,483)
Comprehensive income
Net income 24,897 24,897
Foreign currency
translation adjustment (1,109) (1,109)
Interest rate swap liability (1,060) (1,060)
Total comprehensive income 22,728
--------
Dividends paid ($.83 per share) (10,125) (10,125)
--------
Balance, June 30, 2001 41,976 10,950 (1,049) 378,075 (10,134) 15,821 (247,644) 172,174
-----------------------------------------------------------------------------------------------
Stock issued for employee
stock options and stock
purchase plan, net of
related income tax benefit 1,125 (221) 3,548 4,673
Amortization of restricted
stock awards 394 394
Treasury stock acquired 297 (6,984) (6,984)
Comprehensive income
Net income 16,618 16,618
Foreign currency
translation adjustment 1,091 1,091
Interest rate swap liability 570 570
Total comprehensive income 18,279
--------
Dividends paid ($.84 per share) (10,104) (10,104)
--------
Balance, June 30, 2002 $41,976 $12,075 $ (655) $384,589 $ (8,473) 15,897 $(251,080) $178,432
-----------------------------------------------------------------------------------------------
See notes to consolidated financial statements.
Notes to consolidated financial statements.
Consolidated Balance Sheets
Standex International Corporation
and Subsidiaries
(In thousands, except share data) 2002 2001
June 30
ASSETS
Current Assets
Cash and cash equivalents $ 8,092 $ 8,955
Receivables - less allowance
of $4,609 in 2002 and $3,433 in 2001 93,219 98,470
Inventories 92,931 102,674
Prepaid expenses 4,570 4,845
Total current assets 198,812 214,944
Property, Plant and Equipment
Land and buildings 89,449 86,246
Machinery and equipment 184,181 177,367
Total 273,630 263,613
Less accumulated depreciation 160,738 149,769
Property, plant and equipment - net 112,892 113,844
Other Assets
Prepaid pension cost 47,405 43,625
Goodwill - net 36,250 41,069
Other 10,680 10,782
Total other assets 94,335 95,476
Total $406,039 $424,264
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of debt $ 82,221 $ 2,532
Accounts payable 35,209 33,554
Accrued payroll and employee benefits 14,944 16,118
Income taxes 1,221 4,296
Other 21,184 18,637
Total current liabilities 154,779 75,137
Long-Term Debt - less current portion 50,087 153,019
Deferred Income Taxes 18,909 19,831
Other Non-current Liabilities 3,832 4,103
Commitments and Contingencies
Stockholders' Equity
Common stock-authorized,
60,000,000 shares in 2002 and 2001;
par value, $1.50 per share; issued
27,984,278 shares in 2002 and 2001 41,976 41,976
Additional paid-in capital 12,075 10,950
Retained earnings 384,589 378,075
Unamortized Value of Restricted Stock (655) (1,049)
Accumulated other comprehensive income (8,473) (10,134)
Less cost of treasury shares:
15,897,213 shares in 2002
and 15,821,421 shares in 2001 (251,080) (247,644)
Total stockholders' equity 178,432 172,174
Total $406,039 $424,264
See notes to consolidated financial statements.
Statement of Consolidated Cash Flows
Standex International Corporation and Subsidiaries
Year Ended June 30 (In thousands) 2002 2001 2000
Cash Flows from Operating Activities
Net Income $ 16,618 $ 24,897 $ 27,703
Adjustments to reconcile net income
to net cash provided by operating activities:
Cumulative effect of change in accounting principle 3,779 - -
Depreciation and amortization 12,887 13,680 13,622
Amortization of restricted stock awards 394 401 -
Profit improvement incentive plan - - (40)
Deferred income taxes (432) 3,118 1,874
Net pension credit (2,025) (3,608) (1,998)
(Gain) Loss on sale of investments, real estate
and equipment 34 182 203
Increase (Decrease) in cash from changes in assets
and liabilities, net of effects from acquisitions
& dispositions:
Receivables - net 5,270 8,160 (7,303)
Inventories 9,760 10,867 7,924
Prepaid expenses and other (2,212) (2,743) (3,209)
Accounts payable 1,662 (3,342) 334
Accrued payroll, employee
benefits and other liabilities 1,695 (8,455) 5,647
Income taxes (3,069) (1,059) (549)
Net cash provided by operating activities 44,361 42,098 44,208
Cash Flows from Investing Activities
Expenditures for property and equipment (10,021) (13,832) (22,787)
Expenditures for acquisitions, net of cash acquired - (15,048) -
Proceeds from sale of investments, real estate
and equipment 268 1,906 858
Proceeds from disposition of businesses - 532 -
Net cash used for investing activities (9,753) (26,442) (21,929)
Cash Flows from Financing Activities
Proceeds from additional borrowings 7,825 7,051 12,828
Payments of debt (31,068) (7,292) (9,110)
Stock issued under employee stock option
and purchase plans 4,673 6,199 2,068
Cash dividends paid (10,104) (10,125) (10,013)
Purchase of treasury stock (6,984) (12,483) (12,757)
Net cash used for financing activities (35,658) (16,650) (16,984)
Effect of Exchange Rate Changes on Cash
and Cash Equivalents 187 (489) (766)
Net Changes in Cash and Cash Equivalents (863) (1,483) 4,529
Cash and Cash Equivalents at Beginning of Year 8,955 10,438 5,909
Cash and Cash Equivalents at End of Year $8,092 $8,955 $10,438
Supplemental Disclosure of Cash Flow Information
Stock issued for acquisition $- $639 $-
Cash paid during the year for:
Interest 8,921 11,195 10,800
Income taxes 13,484 15,408 17,766
See notes to consolidated financial statements.
Standex International Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Accounting Policies
Basis of Presentation and Consolidation
Standex International Corporation (the "Company") is a
diversified manufacturing and distribution company with
operations primarily in the United States and Europe. The
accompanying consolidated financial statements include the
accounts of Standex International Corporation and its
subsidiaries and is prepared in accordance with generally
accepted accounting principles in the United States of
America. All significant intercompany transactions are
eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid
investments purchased with a maturity of three months or
less. Such investments are carried at cost, which
approximates fair value, due to the short period of time
until maturity.
Inventories and Revenue Recognition
Inventories are stated at the lower of first-in, first-
out cost or market. The Company generally recognizes
product and related services revenue when the price to the
customer is fixed or determinable, the collectibility of the
invoice is evaluated and delivery has occurred. Revenues
under certain fixed price contracts are generally recorded
at the time deliveries are made or, in a limited number of
cases, on a percentage of completion basis.
Property, Plant and Equipment
Property, plant and equipment are depreciated over
their estimated useful lives using primarily the straight-
line method. Lives for fixed assets are as follows:
Buildings 40 to 50 years
Leasehold Improvements 10 to 15 years
Machinery and Equipment 8 to 15 years
Furniture and Fixtures 3 to 10 years
Computer hardware and software 3 to 7 years
Minor maintenance costs are expensed as incurred.
Major improvements which extend the life, increase the
capacity or improve the safety or the efficiency of property
owned are capitalized. Major improvements to leased
buildings are capitalized as leasehold improvements and
depreciated.
Long-Lived Assets
In accordance with SFAS No. 121, the Company reviews
long-lived assets, excluding goodwill, for impairment
whenever events or changes in circumstances indicate the
carrying amount of such assets may not be recoverable.
Recoverability of these assets is determined by comparing
the forecasted undiscounted net cash flows of the operation
to which the assets relate, to the carrying amount. The
operations are generally distinguished by the business
segment, division or geographic region in which they
operate. If the operation is determined to be unable to
recover the carrying amount of its assets, then intangible
assets are written down first, followed by the other long-
lived assets of the operation, to fair value. Fair value is
determined based on discounted cash flows or appraised
values, depending upon the nature of the assets.
In October 2001, the FASB issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived
Assets," which supersedes SFAS No. 121, and provisions of
APB Opinion No. 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," for the disposal of
segments of a business. The statement creates one
accounting model, based on the framework established in SFAS
No. 121, to be applied to all long-lived assets including
discontinued operations. SFAS No. 144 will be effective on
July 1, 2002. The impact of the adoption of SFAS No. 144 is
not expected to be significant.
Goodwill and Identifiable Intangible Assets
Prior to July 1, 2001, the excess of purchase price of
acquired businesses over the fair value of net identifiable
assets at date of acquisition has been recorded as goodwill
and has been amortized on a straight-line basis over a forty-
year period. Accumulated amortization aggregated
$12,184,000 at June 30, 2001. The Company's amortization of
goodwill was $1,113,000 and $1,149,000 for fiscal 2001 and
2000, respectively. Prior to July 1, 2002, the Company
evaluated the net balance of goodwill based on the projected
operating income of the respective businesses on an
undiscounted cash flow basis.
Effective July 1, 2001, the Company adopted the
provisions of Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 141
requires all business combinations initiated after June 30,
2001 to be accounted for using the purchase method. Under
SFAS No. 142, goodwill and intangible assets with indefinite
lives are no longer amortized but are reviewed annually for
impairment or more frequently if impairment indicators
arise. Separable intangible assets that are not deemed to
have indefinite lives will continue to be amortized over
their useful lives. In connection with the adoption of SFAS
No. 142 there were no newly identified intangible assets.
The result of the Company's initial assessment of
goodwill for impairment in accordance with SFAS No. 142
resulted in a non-cash charge of $3,779,000, which is
reported as cumulative effect of a change in accounting
principle in the accompanying Statements of Consolidated
Income. There was no tax benefit for this change in
accounting principle as goodwill was not deductible for tax
purposes. Future adjustments for impairment of goodwill, if
any, will be recognized as an operating expense. Net
goodwill was $36,250,000 and $41,069,000 at June 30, 2002
and 2001, respectively.
A reconciliation of previously reported net income and
earnings per share to the amounts adjusted for the exclusion
of goodwill amortization follows:
(In thousands) 2002 2001
Reported net income $20,397 $24,897
Add back: Goodwill amortization 1,113
Adjusted net income $20,397 $26,010
Basic earnings per share:
Reported net income $1.68 $2.05
Goodwill amortization
..09
Adjusted net income $1.68 $2.14
Diluted Earnings per share:
Reported net income $1.66 $2.02
Goodwill amortization .09
Adjusted net income $1.66 $2.11
Fiscal 2002 excludes a cumulative effect of a change in
accounting principle of $3,779,000 or 31 cents per share.
Income Taxes
Deferred assets and liabilities are recorded for the
expected future tax consequences of events that have been
included in the financial statements or tax returns.
Deferred tax assets and liabilities are determined based on
the differences between the financial statements and the tax
bases of assets and liabilities using enacted tax rates.
Valuation allowances are provided when the Company does not
believe it more likely than not the benefit of identified
tax assets will be realized.
Research and Development
Research and development expenditures are expensed as
incurred.
Stock-Based Compensation
The Company has elected to continue to account for
stock options at their intrinsic value with disclosure of
the effects of fair value accounting on net income and
earnings per share on a proforma basis.
Foreign Currency Translation
Assets and liabilities of non-U.S. operations are
translated into U.S. dollars at year-end exchange rates.
Revenues and expenses are translated using average exchange
rates. The resulting translation adjustment is reported as
a component of comprehensive income in the Statements of
Consolidated Stockholders' Equity. Gains and losses from
currency transactions are included in results of operations.
Derivative Instruments and Hedging Activities
Effective July 1, 2000, the Company adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging
Activities." Standex manages its debt portfolio by
periodically using interest rate swaps to achieve an overall
desired position of fixed and floating rate debt to reduce
certain exposures to interest rate fluctuations. Standex
designates its interest rate swaps as cash flow hedge
instruments, whose recorded value in the consolidated
balance sheet approximates fair market value. The Company
assesses the effectiveness of its hedge instruments on a
quarterly basis. For the year ended June 30, 2002, the
Company completed an assessment of the cash flow hedge
instruments and determined these hedges to be highly
effective. For all qualifying and highly effective cash
flow hedges, the changes in the fair value of the
derivatives are recorded in other comprehensive income.
Forward foreign currency exchange contracts are used by the
Company to protect certain anticipated foreign cash flows,
such as dividends and loan payments from subsidiaries,
against movements in the related exchange rates. The
Company enters into such contracts for hedging purposes
only. The Company does not hold or issue derivative
instruments for trading purposes. The cumulative effect of
a change in accounting principles due to adoption of SFAS
No. 133 as of July 1, 2000 did not have a significant impact
on earnings for the year ended June 30, 2001.
Concentration of Credit Risk
The Company is subject to credit risk through trade
receivables and short-term cash investments. Credit risk
with respect to trade receivables is minimized because of
the diversification of the Company's operations, as well as
its large customer base and its geographical dispersion. No
individual customer generally accounts for more than 3% of
revenues or accounts receivable.
Short-term cash investments are placed with high credit-
quality financial institutions or in short-duration, high
quality debt securities. The Company limits the amount of
credit exposure in any one institution or type of investment
instrument. The Company is also subject to credit risk
exposure relating to its interest rate swap agreements as
described in the debt footnote below.
Accounting Estimates
The preparation of consolidated financial statements in
conformity with generally accepted accounting principles
requires the Company to make estimates, judgments and
assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure
of contingent assets and liabilities at the date of the
financial statements and for the period then ended. On an
on-going basis, the Company evaluates the estimates used,
including those related to the allowance for doubtful
accounts, potentially obsolete inventory, impairments of
tangible and intangible assets, income taxes, self-insurance
liabilities, incentive compensation liabilities, and
contingencies. The Company bases its estimates on
historical experience, actuarial estimates, current
conditions and various other assumptions that are believed
to be reasonable under the circumstances. These estimates
form the basis for making judgments about the carrying
values of assets and liabilities when they are not readily
apparent from other sources. The Company uses these
estimates to assist in the identification and assessment of
the accounting treatment necessary with respect to
commitments and contingencies. Actual results may differ
from these estimates under different assumptions or
conditions.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents,
accounts receivable, accounts payable and accrued expenses
approximate fair value because of their short-term nature.
The carrying amount of the Company's debt instruments
approximates fair value.
Earnings Per Share
The following table sets forth the number of shares (in
thousands) used in the computation of basic and diluted
earnings per share:
2002 2001 2000
Basic - Average Shares Outstanding 12,113 12,172 12,672
Effect of Dilutive Securities -
Stock Options 203 166 91
Diluted - Average Shares Outstanding 12,316 12,338 12,763
Both basic and dilutive income are the same for
computing earnings per share. Options, which were not
included in the computation of diluted earnings per share
because to do so would have had an anti-dilutive effect,
totaled 294,090; 565,091; and 731,103 for the years ended
June 30, 2002, 2001 and 2000, respectively.
Reclassifications
Certain prior years' amounts have been reclassified to
conform to the 2002 financial statement presentation.
New Accounting Pronouncements
In October 2001, the Financial Accounting Standards
Board ("FASB") issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which
supercedes SFAS No. 121, and the provisions of Accounting
Principles Board ("APB") Opinion No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," for the
disposal of segments of a business. The statement creates
one accounting model, based on the framework established in
SFAS No. 121, to be applied to all long-lived assets
including discontinued operations. SFAS No. 144 will be
effective for July 1, 2002. The impact of the adoption of
SFAS No. 144 is not expected to be significant.
In April 2002, the Financial Accounting Standards Board
issued SFAS No. 145, "Rescission of FASB Statements No. 4,
44 and 64, amendment of FASB Statement No. 13, and Technical
Corrections," which among other things, restricts the
classification of gains and losses from extinguishment of
debt as extraordinary to only those transactions that are
unusual and infrequent in nature as defined by Accounting
Principles Board Opinion No. 30 as extraordinary, SFAS No.
145 for fiscal 2004. Upon adoption, gains and losses on
certain future debt extinguishment, if any, will be recorded
in pre-tax income.
In June 2002, the FASB issued SFAS No. 146, "Accounting
for Cost Associated with Exit or Disposal Activities." SFAS
No. 146 addresses financial accounting and reporting for
costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." SFAS No. 146
requires that a liability for a cost associated with an exit
or disposal activity be recognized when the liability is
incurred. The provisions of SFAS No. 146 are effective for
exit or disposal activities that are initiated after
December 31, 2002. The Company believes that the adoption
of SFAS No. 146 will not have a material impact on its
financial statements.
Inventories
Inventories are comprised of (in thousands):
June 30 2002 2001
Raw materials $33,257 $35,724
Work in process 21,779 20,678
Finished goods 37,895 46,272
Total $92,931 $102,674
Debt
Debt is comprised of (in thousands):
June 30 2002 2001
Bank credit agreements $74,732 $90,297
Institutional investors
6.8% to 7.13% (due 2003-2008) 53,571 60,714
Other 3.0% to 4.85%
(due 2003-2018) 4,005 4,540
Total 132,308 155,551
Less current portion 82,221 2,532
Total long-term debt $50,087 $153,019
Bank Credit Agreements
The Company has a revolving credit agreement with eight
banks. The agreement provides for a maximum credit line of
$175,000,000 until May 2003, at which time outstanding loans
will be due and payable. As of June 30, 2002, the effective
rate of interest under the agreement was 2.43%. The Company
is required to pay a commitment fee of 0.2% on the average
daily-unused amount. As of June 30, 2002 and 2001, the
Company had borrowings of $50 million and $65 million,
respectively, under the agreement. The Company is currently
in negotiation to renew this facility and has classified
this debt as current in its balance sheet based on the May
2003 maturity.
In addition, the Company has the option to borrow up to
$175,000,000 on an unsecured short-term basis at rates which
are based on LIBOR and varied from 2.26% to 5.02% during
2002. Available borrowings under the revolving credit
agreement described above are reduced by unsecured short-
term borrowings. At June 30, 2002, the Company had the
ability to borrow an additional $100,268,000 under the
aforementioned bank credit agreements.
Institutional Investor Agreements
At June 30, 2002 and 2001, the Company had a
$25,000,000 note purchase agreement with two institutional
investors. The notes bear interest at 6.8% annually and are
due and payable in October 2008. Additionally, the Company
has a note purchase agreement with two institutional
investors with a balance of $28,571,000 which bears interest
at 7.13% annually and is payable in annual installments of
$7,143,000 which is due in September.
Interest Rate Swap Agreements
The Company manages its debt portfolio by using
interest rate swaps to achieve an overall desired position
of fixed and floating rate debt to reduce certain exposures
to interest rate fluctuations.
At June 30, 2002, the Company had one interest rate
swap contract with a notional amount of $10.0 million. The
agreement converts variable rate to a fixed rate of 7.5% and
matures in 2003.
Neither the Company nor the counterparty to the
agreement, which is a prominent financial institution, is
required to collateralize their respective obligations under
the swap. The Company is exposed to loss if the
counterparty defaults. At June 30, 2002, Standex had no
exposure to credit loss on the interest rate swap. The
Company does not believe that any likely change in interest
rates would have a material adverse effect on its financial
position, results of operations or cash flows.
Open interest rate contracts are reviewed regularly
by the Company to ensure that they remain effective as
hedges of interest rate exposure. This review revealed
that the interest rates swaps were highly effective for
fiscal 2002. Gains or losses associated with interest
rates swaps determined to be ineffective will result in
the reclassification into earnings of the gains/losses
previously reported in Other Comprehensive Income.
Management believes that the fair value of the rate swap
agreement approximates the recorded amount.
Loan Covenants and Repayment Schedule
The Company's loan agreements contain a limited number
of provisions relating to the maintenance of certain
financial ratios and restrictions on additional borrowings
and investments. The most restrictive of these provisions
requires that the Company maintain a minimum ratio of
earnings to fixed charges, as defined, on a trailing four
quarters basis.
Debt is due as follows: 2003, $82,221,000; 2004,
$7,502,000; 2005, $7,143,000; 2006, $7,142,000; and
thereafter, $28,300,000.
Accrued Payroll and Employee Benefits
This current liability caption consists of (in
thousands):
June 30 2002 2001
Payroll $13,091 $13,484
Benefits 1,654 2,227
Taxes 199 407
Total $14,944 $16,118
Commitments
The Company leases certain property and equipment under
agreements with initial terms ranging from one to twenty
years. Rental expense for the years ended June 30, 2002,
2001 and 2000 was approximately $8,200,000; $7,500,000; and
$8,000,000, respectively. At June 30, 2002, the minimum
annual rental commitments under non-cancelable operating
leases, principally real estate, were approximately: 2003,
$4,800,000; 2004, $4,100,000; 2005, $3,200,000; 2006,
$2,200,000; 2007, $1,900,000; and thereafter, $5,300,000.
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 SFAS No. 5, "Accounting
for Contingencies." Management believes that such provision
is sufficient to cover any future payments, including legal
costs, under such proceedings.
Income Taxes
The provision for income before taxes and the
cumulative effect of the change in accounting principle
consists of (in thousands):
2002 2001 2000
Current:
Federal $7,165 $11,244 $13,088
State 1,166 1,023 1,304
Non-U.S. 2,079 2,080 2,884
Total 10,410 14,347 17,276
Deferred (922) 3,221 1,874
Total $9,488 $17,568 $19,150
The components of income before income taxes and
cumulative effect of the change in accounting principle are
as follows (in thousands):
2002 2001 2000
U.S. Operations $24,539 $36,357 $42,694
Non-U.S. Operations 5,346 6,108 4,159
Total $29,885 $42,465 $46,853
A reconciliation of the U.S. Federal income tax rate to
the effective income rate is as follows:
2002 2001 2000
Statutory tax rate 35.0% 35.0% 35.0%
Non-U.S. 0.4 2.9 2.6
State taxes 2.8 3.0 3.8
Non-deductible goodwill 1.0 .8
Other, including change
in contingency levels (6.5) (0.5) (1.3)
Effective income tax rate 31.7% 41.4% 40.9%
The Company changed its tax contingency reserve by $1.3
million to income taxes in 2002. This was a result of a
change of tax rates at local domestic taxing jurisdictions,
thus reducing previously recorded deferred income taxes and
management's evaluation of the need for certain liabilities
that had been established for various tax contingencies.
The Company considered the level of currently recorded
amounts, the status of tax filings currently under
examination by the Internal Revenue Service and the ability
to benefit from distributions from foreign subsidiaries.
Significant components of the Company's net deferred
tax liabilities are as follows (in thousands):
2002 2001
Deferred tax liabilities:
Accelerated depreciation $ 9,291 $ 9,040
Net pension credit 15,774 15,098
Other items 327 352
Deferred tax assets:
Expense accruals (5,930) (4,051)
Compensation costs (553) (608)
Net deferred tax liability $18,909 $19,831
2002 2001 2000
Deferred taxes:
Accelerated deprecation $ 1,118 $ 1,163 $ 983
Net pension credit 1,352 2,011 1,517
Compensation costs 28 (79) (220)
Restructuring charge - 456 (456)
Expense accruals (1,520) (82) (13)
Other items (1,900) (248) 63
Total $ (922) $ 3,221 $ 1,874
At June 30, 2002, accumulated retained earnings of non-
U.S. subsidiaries totaled $34,213,000. No provision for
U.S. income and foreign withholding taxes has been made
because it is expected that such earnings will be
reinvested indefinitely or the distribution of any
remaining amount would be principally offset by foreign tax
credits. The determination of the withholding taxes that
would be payable upon remittance of these earnings and the
amount of unrecognized deferred tax liability on these un-
remitted earnings is not practicable.
Industry Segment Information
The Company is composed of three product groups. These
groups are described on pages 2 and 3.
The Company has determined that it has three distinct
reportable segments: Food Service, Consumer and Industrial.
These three segments are managed separately, and the
operating results of each segment are regularly reviewed and
evaluated separately by the Company's senior management.
During fiscal 2002, the Company realigned how certain
operations are managed and reported to the chief decision
maker. The segment information for prior years has been
recast to reflect the realignment of management practices of
the Company.
Net sales include only transactions with unaffiliated
customers and include no significant intersegment or export
sales. Operating income by segment and geographic area
excludes general corporate and interest expenses. Assets of
the Corporate segment consist primarily of cash,
administrative buildings, equipment, prepaid pension cost,
goodwill and other non-current assets.
DEPRECIATION AND
NET SALES AMORTIZATION
Year Ended June 30
(In thousands) 2002 2001 2000 2002 2001 2000
Food Service $138,704 $146,793 $144,089 $1,911 $2,105 $2,120
Consumer 110,150 115,615 115,276 1,217 1,404 1,575
Industrial 325,138 337,744 377,684 9,576 9,950 9,694
Corporate and Other - - - 183 221 233
Total $573,992 $600,152 $637,049 $12,887 $13,680 $13,622
ASSETS EMPLOYED CAPITAL EXPENDITURES
As of and Year
Ended June 30
(In thousands) 2002 2001 2000 2002 2001 2000
Food Service $64,559 $73,927 $75,018 $540 $1,644 $2,018
Consumer 42,971 45,078 48,576 1,626 527 1,180
Industrial 255,330 264,011 258,168 7,783 11,484 19,412
Corporate and Other 43,179 41,248 42,438 72 177 177
Total $406,039 $424,264 $424,200 $10,021 $13,832 $22,787
INCOME FROM
OPERATIONS
GOODWILL YEAR ENDED JUNE 30
(In thousands) June 30, 2002 2002 2001 2000
Food Service $672 $9,624 $13,870 $12,165
Consumer 1,571 7,114 9,680 9,594
Industrial 33,734 33,167 37,770 47,911
Corporate and Other 273 (11,342) (8,057) (10,157)
Restructuring charge - - - (5,408)
Total $36,250 $38,563 $53,263 $54,105
Product Net Sales Information:
Year Ended June 30 (In thousands) 2002 2001 2000
Food preparation, storage and presentation products $201,443 $217,749 $225,768
Printing and publishing products 113,685 126,115 134,198
Home and road construction products 123,084 118,483 130,985
Aerospace, automotive and electronic products 116,090 117,612 126,639
Miscellaneous 19,690 20,193 19,459
Total $573,992 $600,152 $637,049
Financial Data related to non-U.S. operations:
As of and Year Ended June 30 Non-US
(In thousands) 2002 2001 2000
Net Sales $68,345 $72,911 $89,496
Income from Operations 5,628 6,330 8,032
Long-Lived Assets 30,488 32,511 23,072
The restructuring charge in 2000 is excluded from the above table.
Employee Benefit Plans
Retirement Plans
The Company has defined benefit pension plans covering
the majority of its employees, including certain employees
in foreign countries. Plan assets are invested primarily in
common stocks and fixed income securities. The Company
makes contributions generally equal to the minimum amounts
required by federal laws and regulations. Foreign plans are
funded in accordance with the requirements of regulatory
bodies governing each plan.
The components of net pension credit are as follows (in
thousands):
Year Ended June 30 2002 2001 2000
Service cost $5,165 $4,687 $5,329
Interest cost 11,732 10,949 10,357
Expected return on plan assets (18,620) (17,874) (16,526)
Amortization of prior service cost 252 214 248
Recognized actuarial loss 521 153 340
Amortization of transition asset (1,075) (1,738) (1,746)
Total (2,025) (3,609) (1,998)
Curtailment/settlement - - 5
Net pension credit $(2,025) $(3,609) $(1,993)
The following table sets forth the funded status and
amounts recognized as of June 30, 2002 and 2001 for the
Company's U.S. and non-U.S. defined benefit pension plans
(in thousands):
Year Ended June 30 2002 2001
Change in benefit obligation:
Benefit obligation, beginning of year $157,083 $143,197
Service cost 5,165 4,687
Interest cost 11,732 10,949
Employee contributions 212 239
Amendments/settlements/curtailments 308 (85)
Actuarial (gain)/loss 8,656 7,993
Foreign currency exchange rate changes 254 (1,007)
Benefits paid (11,666) (8,890)
Benefit obligation, end of year $171,744 $157,083
Year Ended June 30 2002 2001
Change in plan assets:
Fair value of plan assets,
beginning of year $170,703 $183,822
Return on plan assets 8,319 (5,411)
Employer contribution 596 933
Employee contributions 212 239
Foreign currency exchange rate changes 278 (683)
Benefits paid (10,861) (8,197)
Fair value of plan assets, end of year $169,247 $170,703
Funded status $(2,447) $13,622
Unrecognized transition asset (290) (1,370)
Unrecognized net actuarial loss/(gain) 44,747 26,115
Unrecognized prior service cost 2,053 2,215
Net amount recognized 44,063 40,582
Amounts recognized in the balance
sheet consist of:
Prepaid benefit cost 47,405 43,625
Accrued benefit liability (3,342) (3,043)
Net amount recognized $44,063 $40,582
Year Ended June 30 2002 2001
Weighted average assumptions
as of June 30
Discount rate 4.00-7.30% 6.00-7.75%
Expected return on assets 8.50-9.60% 8.50-10.00%
Rate of compensation increase 3.50-4.00% 3.50-4.50%
Included in the above are the following assumptions
relating to the defined benefit pension plans in the United
States: discount rate 7.3%, expected return on assets 9.6%
and rate of compensation increase 4.0%. The US defined
benefit pension plans represent the majority of the
Company's pension obligations.
The projected benefit obligation, accumulated benefit
obligation, and fair value of plan assets for pension plans
with accumulated benefit obligations in excess of plan
assets were $6,204,000, $5,323,000 and $0, respectively, as
of June 30, 2002 and $6,606,000, $5,867,000 and $0,
respectively as of June 30, 2001.
Certain U.S. employees are covered by union-sponsored,
collectively bargained, multi-employer pension plans.
Contributions and costs are determined in accordance with
the provisions of negotiated labor contracts or terms of the
plans. Pension expense for these plans was $1,973,000;
$1,953,000; and $1,863,000 in 2002, 2001 and 2000,
respectively.
Deferred Contribution Plans
The Company had an Employee Stock Ownership Plan (ESOP)
covering certain salaried employees. The ESOP was merged
into the 401(k) savings plan discussed below in fiscal 2000.
Employee Savings Plan
The Company has established 401(k) savings plans
covering substantially all of the Company's full-time
domestic employees. Under the provisions of the plans,
employees may contribute a portion of their compensation
within certain limitations. The Company, at the discretion
of the Board of Directors, may make contributions on behalf
of its employees under these plans. Such contributions, if
any, become fully vested immediately. The Company
contributions, including contributions previously made to
the ESOP, were approximately $1,775,000, $1,975,000 and
$2,119,000 for the years ended June 30, 2002, 2001 and 2000,
respectively. These benefits are funded by insurance
policies owned by the Company. At June 30, 2002, the 401(k)
holds approximately 1.1 million shares of Company stock,
representing approximately 57% of the holdings of the plan.
Profit Improvement Participation Share Plan
The Company has maintained a profit improvement
incentive plan in which certain officers and employees
participate. The plan has been phased-out and,
consequently, no new units have been awarded since 1995.
Units under this plan were issued at the discretion of the
Compensation Committee of the Board of Directors and were
assigned a value equal to a multiple of earnings per share
payable in five years based upon the net increase in
earnings per share over the five-year period. Each fiscal
year, amounts were charged or credited to operations to
reflect this liability. The amounts credited to operations
for the year ended June 30, 2000 was $40,000.
Other Plans
The Company also sponsors a Supplemental Retirement
Income Plan for certain executives. The aggregate present
value of current outstanding benefits was $1,532,000 at June
30, 2002.
Postretirement Benefits Other Than Pensions
The Company sponsors unfunded postretirement medical
and life plans covering certain full-time employees who
retire and have attained the requisite age and years of
service. Retired employees are required to contribute
toward the cost of coverage according to various rules
established by the Company.
The Company records postretirement benefits (such as
health care and life insurance benefits) during the years an
employee provides services.
The following table sets forth the funded status of the
Company's postretirement benefit plans and accrued
postretirement benefit cost reflected in the Company's
balance sheet at year end (in thousands):
Year Ended June 30 2002 2001
Change in benefit obligation:
Benefit obligation, beginning of year $8,692 $7,743
Service cost 131 86
Interest cost 653 476
Participant contributions 361 221
Actuarial loss (gain) (3,190) 908
Benefits paid (903) (742)
Benefit obligation, end of year 5,744 8,692
Fair value of plan assets - -
Funded status (5,744) (8,692)
Unrecognized net actuarial gain (3,895) (743)
Unrecognized transition obligation 4,886 5,331
Net amount recognized $(4,753) $(4,104)
The assumed weighted average discount rate as of June
30, 2002 and 2001 was 7.30% and 7.75% respectively. The
annual assumed rate of increase in the per capita cost of
covered health care benefits is 9.0% for retirees under age
65 in 2002 and 10.0% in 2001, trending down to 5.0% in 2006
and is assumed to remain at that level thereafter. A 1%
increase in the assumed health care cost trend rate would
have increased the accumulated benefit obligation by
$563,000 and the net postretirement cost by $101,000 in
2002.
Net postretirement benefit costs are as follows (in
thousands):
Year Ended June 30 2002 2001 2000
Service cost $131 $86 $137
Interest cost 653 476 638
Amortization of transition obligation 445 445 444
Net amortization and deferral (37) (184) -
Net postretirement benefit cost $1,192 $823 $1,219
STOCK BASED COMPENSATION AND PURCHASE PLANS
Stock Based Compensation Plans
Under incentive compensation plans, the Company is
authorized to, and has made grants of, stock options,
restricted stock and performance share units to provide
equity incentive compensation to key employees. At June 30,
2002, 1,747,129 shares of common stock were reserved for
issuance under these plans. Of this amount, and as noted in
the table below, 789,318 shares are for options granted but
unexercised and 178,075 shares are for restricted stock
grants outstanding.
Stock Option Plans
Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation," encourages, but
does not require companies to record compensation cost for
stock based employee compensation plans at fair value. The
Company has chosen to continue to account for stock based
compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations.
Accordingly, the compensation cost of stock options is
measured as the excess, if any, of the quoted market price
of the Company's stock at the date of the grant over the
option exercise price and is charged to operations over the
vesting period.
At June 30, 2002, the Company has made grants of
options under various Stock Option Plans. Generally, these
options may be granted at or below fair market value as of
the date of grant and must be exercised within the period
prescribed by the Compensation Committee of the Board of
Directors at the time of grant but no later than ten years
from the date of grant. Certain options granted at fair
value can be exercised anytime after six months from the
date of grant, and other options can only be exercised in
accordance with the vesting schedules prescribed by the
Committee.
Restricted Stock Awards
The Company may award shares of restricted stock to
eligible employees at no cost, giving them in most instances
all of the rights of stockholders, except that they may not
sell, assign, pledge or otherwise encumber such shares and
rights. Such shares and rights are subject to forfeiture if
certain employment conditions are not met. During the
restriction period, recipients of the shares are entitled to
dividends on such shares, providing that such shares are not
forfeited. Dividends are accumulated and paid out at the
end of the restriction period. During 2002 and 2001, the
Company granted 45,000, and 19,051 shares, respectively, of
restricted stock to eligible employees. At June 30, 2002,
restrictions on the stock lapse between 2002 through 2010.
Through June 30, 2002, restrictions on 3,285 shares have
lapsed. Upon issuance of the shares, an unamortized
compensation expense on the dates of the grant was charged
to stockholders' equity and will be amortized over the
restriction period. For the years ended June 30, 2002 and
2001, $601,791 and $771,695, respectively, was recognized as
compensation expense.
Executive Compensation Program
The Company operates a compensation program for key
employees. The plan contains both an annual component as
well as long-term component. Under the annual component,
participants are required to receive 20% (and may elect to
receive up to 50%) of their annual incentive compensation in
restricted stock which is purchased at a discount to the
market based on the lower closing price on the date of the
grant or the date the award is paid out. During the
restriction period, recipients of the shares are entitled to
dividends on such shares, providing that such shares are not
forfeited. Dividends are accumulated and paid out at the
end of the restriction period. The restrictions on the
stock expire after three years. At June 30, 2002 and 2001,
respectively, 53,115 and 44,452 shares of restricted stock
are outstanding and subject to restrictions that lapse
between 2003 and 2004. The compensation expense associated
with this short-term incentive program is charged to income
ratably over the restriction period. The Company recorded
compensation expense related to this program of $166,000 and
$70,000 for the years ended June 30, 2002 and 2001,
respectively.
Under the long-term component, grants of incentive
performance share units ("PSU's") are made annually to key
employees and are earned based on the achievement of certain
overall corporate financial performance targets over a three-
year period. In addition, stock options are awarded under
this program at the fair market value as of the date of
grant. These options vest ratably over five years and must
be exercised within seven years. In certain circumstances,
such as retirement or a change in control, vesting of the
options granted are accelerated and PSU's are paid off on a
pro-rata basis. At June 30, 2002, under this program 50,300
shares were subject to the restrictions related to the
PSU's. Compensation expense, if any, associated with the
PSU's is recorded to expense as the achievement of future
performance objectives appears likely. Recipients of the
PSU's do not receive dividend rights until such time as the
shares have been issued.
A summary of stock options issued under the above plans is as follows:
Number Weighted Average
Year Ended June 30 of Options Exercise Price
Outstanding, June 30, 1999
($0.00 to $32.1875 per share) 638,555 $24.50
Granted ($0.00 to $23.375 per share) 352,514 14.81
Exercised ($0.00 to $15.8125 per share) (35,525) 10.74
Canceled ($0.00 to $31.5625 per share) (41,072) 27.35
Outstanding, June 30, 2000
($0.00 to $32.1875 per share) 914,472 21.17
Granted ($0.00 to $18.6875 per share) 205,551 16.95
Exercised ($0.00 to $23.375 per share) (165,642) 18.62
Canceled ($0.00 to $31.5625 per share) (41,649) 26.18
Outstanding, June 30, 2001
($0.00 to $32.1875 per share) 912,732 20.45
Granted ($0.00 to $21.45 per share) 228,000 15.43
Exercised ($0.00 to $25.875 per share) (66,450) 18.99
Canceled ($0.00 to $32.1875 per share) (106,889) 23.51
Outstanding, June 30, 2002
($0.00 to $32.1875 per share) 967,393 19.03
Exercisable, June 30, 2002
($0.00 to $31.5625 per share) 446,442 $25.94
The following table sets forth information regarding options outstanding at
June 30, 2002:
Weighted
Weighted Average
Weighted Average Number Exercise Prices
Number Range of Average Remaining Currently for Currently
of Options Exercise Prices Exercise Price Life (Years) Exercisable Exercisable
178,075 $0.00 $0.00 2 2,700 $0.00
152,873 $16.4375 - $18.6875 $18.56 5 33,508 $18.38
241,754 $18.85 - $ 23.00 $20.50 5 43,434 $23.00
171,351 $23.375 - $25.875 $24.53 4 143,460 $24.75
146,900 $27.00 - $28.375 $28.14 6 146,900 $28.14
76,440 $28.50 - $31.5625 $29.84 4 76,440 $29.84
967,393 $0.00 - $31.5625 $23.33 4 446,442 $25.94
As discussed above, the Company has chosen to continue to account for stock
based compensation using the intrinsic value method to measure compensation
expense. Had the Company used the fair value method to measure compensation for
grants after fiscal 1995, net income and earnings per share would have been as
follows:
Year Ended June 30 (In thousands) 2002 2001 2000
Income Before Income Tax Provision $28,636 $40,839 $45,361
Income Tax Provision (9,354) (17,389) (19,008)
Net Income $19,282 $23,450 $26,353
Earnings Per Share
Basic $1.59 $1.93 $2.08
Diluted $1.57 $1.90 $2.07
Fiscal 2002 excludes a cumulative effect of a change in accounting
principle of $3,779,000 or 31 cents per share.
Options granted during 2002, 2001 and 2000 had a weighted average grant
date fair value of $3.93, $5.13, and $6.59, respectively. The fair value of
options on the grant date, including the valuation of the option feature
implicit in the Company's stock purchase plan, was measured using the Binomial
option pricing model. Key assumptions used to apply this pricing model are as
follows:
Year Ended June 30 2002 2001 2000
Range of risk-free interest rates 4.41% to 4.50% 4.29% to 6.18% 5.72% to 6.83%
Range of expected life of option
grants (in years) 5 to 7 3 to 7 3 to 7
Expected volatility of underlying
stock 30.0% to 30.6% 34.4% to 35.8% 30.6% to 33.6%
Range of expected quarterly
dividends (per share) $0.21 $0.20 to $0.21 $0.19 to $0.20
It should be noted that the option pricing model used
was designed to value readily tradable stock options with
relatively short lives. The options granted to employees
are not tradable and have contractual lives of up to ten
years. However, management believes that the assumptions
used and the model to value the awards yields a reasonable
estimate of the fair value of the grants made under the
circumstances.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan that
allows employees to purchase shares of common stock of the
Company at a 15% discount from market value. Shares of
stock reserved for the plan were 230,285 at June 30, 2002.
Shares purchased under this plan aggregated 67,540, 76,081;
and 92,568; in 2002, 2001 and 2000, respectively.
Rights Plan
The Company has a Sharholder Rights Plan for which
purchase rights have been distributed as a dividend at the
rate of one right for each share of common stock held. The
rights may be exercised only if an entity has acquired
beneficial ownership of 15% or more of the Company's common
stock, or announces an offer to acquire 15% or more of the
Company.
Acquisitions and Dispositions
ATC-Frost Magnetics, Inc. was purchased for a total of
$15,700,000 in cash and stock in April 2001. ATC-Frost is a
leading manufacturer of custom magnetic components in
Canada. This transaction was accounted for as a purchase
and, accordingly, the consolidated financial statements
include the results of the acquired company from its
acquisition date. The purchase price of the acquisition was
allocated to the assets acquired based on their fair market
values and resulted in the recognition of goodwill of
approximately $10,000,000. If the acquisition had occurred
as of July 1, 1999, consolidated results would not have been
materially affected.
Restructuring
In June 2000, the Company recorded a restructuring
charge of $5,408,000 before taxes. The restructuring plan
involved the: (1) disposal, closing or elimination of
certain under-performing and unprofitable operating plants,
product lines, manufacturing processes and businesses; (2)
realignment and consolidation of certain marketing and
distribution activities; and (3) other cost containment
actions, including selective personnel reductions. The
charge was recorded in the line item "Restructuring charge"
on the Statements of Consolidated Income. As part of this
restructuring the Company sold for cash and a note the
assets and operations of its Keller-Dorian and Goyot
subsidiaries in September.
The following schedule reflects the Company's restructuring activities (in
thousands) since the charge was recorded:
Involuntary
Employee
Severance and Asset Shutdown
Benefits Costs Impairment Costs Total
Reserve beginning balance $1,036 $3,775 $597 $5,408
Expended:
Cash 1,013 - 775 1,788
Non-cash (disposals and write-offs) - 3,620 - 3,620
Total expenditures 1,013 3,620 775 5,408
Expenditures under (over) reserve $23 $155 $(178) $-
Quarterly Results of Operations (Unaudited)
The unaudited quarterly results of operations for the years ended June 30,
2002 and 2001 are as follows:
Sales and Earnings by Quarter (Unaudited)
Year Ended June 30 2002
(In thousands, except per share data) First Second Third Fourth
Net sales $143,710 $149,927 $136,865 $143,490
Gross profit margin 45,913 52,511 43,397 45,396
Net income 1,719 6,378 3,589 4,932
EARNINGS PER SHARE
Basic 0.45 0.53 0.29 0.41
Diluted 0.45 0.52 0.29 0.40
Year Ended June 30 2001
(In thousands, except per share data) First Second Third Fourth
Net sales $151,279 $158,652 $140,233 $149,988
Gross profit margin 48,065 54,483 44,841 50,760
Net income 7,038 7,553 4,037 6,269
EARNINGS PER SHARE
Basic 0.57 0.62 0.34 0.52
Diluted 0.57 0.61 0.33 0.51
The first quarter of fiscal 2002 excludes a cumulative
effect of a change in accounting principle of $3,779,000 or
31 cents per share. During the fourth quarter of fiscal
2002, the Company recorded certain tax adjustments
discussed in the Income Tax Note to the Consolidated
Financial Statements. In addition, during the fourth
quarter of fiscal 2002, the Company provided $3.4 million
of additional reserves for potentially obsolete and slow
moving inventory.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF STANDEX
The Company will file with the Securities and Exchange
Commission ("SEC") a definitive Proxy Statement no later
than 120 days after the close of the fiscal year ended June
30, 2002 (the "Proxy Statement"). The information required
by this item and not provided in Item 4 "Executive Officers
of Standex" is incorporated by reference from the Proxy
Statement under the captions "Election of Directors,"
"Stock Ownership in the Company," "Other Information
Concerning the Company" and "Section 16(a) Beneficial
Ownership Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is
incorporated by reference from the Proxy Statement under
the captions "Report of the Compensation Committee,"
"Executive Compensation," and "Directors' Fees."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The stock ownership of each person known to Standex to
be the beneficial owner of more than 5% of its Common Stock
and the stock ownership of all directors and executive
officers of Standex as a group are incorporated by
reference in the Proxy Statement under the caption "Stock
Ownership in the Company." The beneficial ownership of
Standex Common Stock of all directors and executive
officers of the Company is incorporated by reference in the
Proxy Statement under the caption "Stock Ownership in the
Company."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and
related transactions is incorporated by reference in the
Proxy Statement under the caption "Indebtedness of
Management."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedule
(i) The financial statements required in
response to this item are listed in
response to Part II, Item 8 of this Annual
Report on Form 10-K.
(ii) The financial statement schedule
listed in the accompanying index to the
Consolidated Financial Statements and
Schedules is filed as part of this Annual
Report on Form 10-K.
(b) Reports on Form 8-K
Standex filed no reports on Form 8-K with the
Securities and Exchange Commission during the last quarter
of the fiscal year ended June 30, 2002.
(c) Exhibits
3. (i) Restated Certificate of
Incorporation of Standex, dated
October 27, 1998, is incorporated by
reference to the exhibits to the
Quarterly Report of Standex on Form 10-
Q for the fiscal quarter ended December
31, 1998.
(ii) By-Laws of Standex, as
amended, and restated on July 27, 1994
are incorporated by reference to the
exhibits to the Annual Report of
Standex on Form 10-K for the fiscal
year ended June 30, 1994 (the "1994 10-
K").
4. (a) Agreement of the
Company, dated September 15, 1981, to
furnish a copy of any instrument with
respect to certain other long-term debt
to the Securities and Exchange
Commission upon its request is
incorporated by reference to the
exhibits to the Annual Report of
Standex on Form 10-K for the fiscal
year ended June 30, 1981.
(b) Rights Agreement of the
Company is incorporated by reference to
Form 8A filed with the Securities and
Exchange Commission on December 18,
1998 and to the Form 8-K filed with the
Securities and Exchange Commission on
December 18, 1998.
10. (a) Employment Agreement
dated May 1, 2000, between the Company
and David R. Crichton is incorporated
by this reference to the exhibits to
the Annual Report on Form 10-K for the
fiscal year ended June 30, 2000 (the
"2000 10-K") and an Amendment to the
Employment Agreement dated January 30,
2002 is incorporated by this reference
to the exhibits to the Quarterly Report
of Standex on Form 10-Q for the fiscal
quarter ended March 31, 2002 (the
"March 2002 10-Q").*
(b) Employment Agreement
dated May 1, 2000, between the Company
and Edward J. Trainor is incorporated
by this reference to the exhibits to
the 2000 10-K and an Amendment to the
Employment Agreement dated January 30,
2002 is incorporated by this reference
to the exhibits to the March 2002 10-
Q.*
(c) Employment Agreement
dated May 1, 2000, between the Company
and Edward F. Paquette is incorporated
by this reference to the exhibits to
the 2000 10-K.*
(d) Employment Agreement
dated May 1, 2000, between the Company
and Deborah A. Rosen is incorporated by
this reference to the exhibits to the
2000 10-K and an Amendment to the
Employment Agreement dated January 30,
2002 is incorporated by this reference
to the exhibits to the March 2002 10-
Q.*
(e) Employment Agreement
dated April 1, 2001 between the Company
and Daniel C. Potter is incorporated by
this reference to the exhibits to the
Annual Report on Form 10-K for the
fiscal year ended June 30, 2001 (the
"2001 10-K").*
(f) Employment Agreement
dated September 1, 2001 between the
Company and Christian Storch is
incorporated by this reference to the
exhibits to the Quarterly Report of
Standex on Form 10-Q for the fiscal
quarter ended September 30, 2001.*
(g) Employment Agreement
dated December 3, 2001 between the
Company and Roger L. Fix is
incorporated by this reference to the
exhibits to the Quarterly Report of
Standex on Form 10-Q for the fiscal
quarter ended December 31, 2001.*
(h) Standex International
Corporation 1998 Long-Term Incentive
Plan, effective October 27, 1998 is
incorporated by reference to the
exhibits to the Quarterly Report of
Standex on Form 10-Q of the fiscal
quarter ended December 31, 1998.*
(i) Standex International
Corporation Profit Improvement
Participation Shares Plan as amended
and restated on April 26, 1995 is
incorporated by reference to the
exhibits to the Annual Report of
Standex on Form 10-K for the fiscal
year ended June 30, 1995 (the "1995 10-
K").*
(j) Standex International
Corporation Stock Option Loan Plan,
effective January 1, 1985, as amended
and restated on January 26, 1994, is
incorporated by reference to the
exhibits to the 1994 10-K.*
(k) Standex International
Corporation Executive Security Program,
as amended and restated on January 31,
2001 is incorporated by reference to
the exhibits to the Quarterly Report of
Standex on Form 10-Q for the fiscal
quarter ended March 31, 2001 (the
"March 2001 10-Q").*
(l) Standex International
Corporation 1985 Stock Option Plan
effective July 31, 1985, as amended on
October 30, 1990, is incorporated by
reference to the exhibits to the Annual
Report of Standex on Form 10-K for the
fiscal year ended June 30, 1991.*
(m) Standex International
Corporation Executive Life Insurance
Plan effective April 27, 1994 and as
amended and restated on April 25, 2001
is incorporated by reference to the
exhibits to the 2001 10-K.*
(n) Standex International
Corporation 1994 Stock Option Plan
effective July 27, 1994 is incorporated
by reference to the exhibits to the
1994 10-K.*
(o) Standex International
Corporation Supplemental Retirement
Plan adopted April 26, 1995 and amended
on July 26, 1995 is incorporated by
reference to the exhibits to the 1995
10-K.*
(p) Standex International
Corporation Key Employee Share Option
Plan dated June 27, 2002 is
incorporated by reference to this
Annual Report on Form 10-K for the
fiscal year ended June 30, 2002.*
21. Subsidiaries of Standex.
23. Independent Auditors' Consent.
24. Powers of Attorney of David R.
Crichton, William R. Fenoglio, Roger L. Fix,
Walter F. Greeley, Daniel B. Hogan, Thomas
L. King, C. Kevin Landry,
H. Nicholas Muller, III, Ph.D. and Deborah
A. Rosen.
99. Sarbanes-Oxley Act, Section 906
Certification.
(d) Schedule
The schedule listed in the accompanying Index to the
Consolidated Financial Statements and Schedules is filed as
part of this Annual Report on Form 10-K.
* Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Standex International
Corporation has duly caused this Annual Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto
duly authorized, on August 19, 2002.
STANDEX INTERNATIONAL CORPORATION
(Registrant)
By: /s/EDWARD J. TRAINOR
Edward J. Trainor
Chairman/Chief Executive Officer
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by
the following persons on behalf of Standex International
Corporation and in the capacities indicated on August 19,
2002:
Signature Title
/s/ EDWARD J. TRAINOR Chairman/Chief Executive Officer
Edward J. Trainor
/s/ CHRISTIAN STORCH Vice President/Chief Financial
Officer
Christian Storch
/s/ ROBERT R. KETTINGER Corporate Controller
Robert R. Kettinger (Chief Accounting Officer)
Edward J. Trainor, pursuant to powers of attorney
which are being filed with this Annual Report on Form 10-K,
has signed below on August 19, 2002 as attorney-in-fact for
the following directors of the Registrant:
David R. Crichton Thomas L. King
William R. Fenoglio C. Kevin Landry
Roger L. Fix H. Nicholas Muller, III, Ph.D.
Walter F. Greeley Deborah A. Rosen
Daniel B. Hogan
/s/ EDWARD J. TRAINOR
Edward J. Trainor
Supplemental Information to be furnished with reports
filed pursuant to Section 15(d) of the Act by Registrants
which have not registered securities pursuant to Section 12
of the Act.
The Company will furnish its 2002 Annual Report, its
Proxy Statement and proxy materials to security holders
subsequent to the filing of the annual report of this Form.
Copies of such material shall be furnished to the
Commission when it is sent to security holders.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Schedule
Schedule VIII Valuation and Qualifying Accounts
Independent Auditors' Report relating to Schedule VIII
Schedules (consolidated) not listed above are omitted
because of the absence of conditions under which they are
required or because the required information is included in
the financial statements submitted.
INDEX TO ITEMS INCORPORATED BY REFERENCE
Page No.
Proxy
Statement ("P")
PART III
Item 10 Directors and Executive Officers of Standex
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Related
Transactions
Schedule VIII
STANDEX INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended June 30, 2002, 2001 and 2000
Column A Column B Column C Column D Column E
Balance at Additions
Beginning Charged to Costs Charged to Balance at
Description of Year and Expenses other Accounts Deductions End of Year
Allowances deducted
from assets to
which they apply -
for doubtful
accounts receivable:
June 30, 2002 $3,433,443 $2,724,937 $(1,549,051)(1) $4,609,329
June 30, 2001 $3,397,174 $1,825,947 $(1,789,678)(1) $3,433,443
June 30, 2000 $3,590,395 $1,412,681 $(1,605,902)(1) $3,397,174
(1) Accounts written off - net of recoveries
INDEX TO EXHIBITS
PAGE
10. (p) Standex International
Corporation Key Employee Share
Option Plan dated July 27,
2002 is incorporated by
reference to this Annual
Report on From 10-K for the
fiscal year ended June 30,
2002.
21. Subsidiaries of Standex.
23. Independent Auditors' Consent.
24. Powers of Attorney of
David R. Crichton,
William R. Fenoglio, Roger L.
Fix, Walter F. Greeley,
Daniel B. Hogan,
Thomas L. King, C Kevin Landry,
H. Nicholas Muller, III, Ph.D.,
Deborah A. Rosen.
99. Sarbanes-Oxley Act, Section
906 Certification.