EX-13 3 0003.txt roastme BKI Worldwide manufactures ovens/rotisseries for supermarkets, restaurants, delicatessens and convenience stores. [photo shows a BKI oven/rotisserie] driveme Standex Engraving provides the rolls and texturizing molds that enhance automotive interiors. [photo shows a Ford dashboard] comfortme Standex Air Distribution Products manufactures high quality heating and air conditioning ductwork for your home. [photo shows duct product] what's essential to you? developme Standard Publishing's Baby Blessings product line not only teaches Christian values to young children, but also provides parents with a powerful developmental tool that is based on pioneering university research findings on how children learn. [photo shows a selection of Baby Blessings books] chillme Master-Bilt Products manufactures a variety of cold cases for the beverage and frozen food industry. [photo shows a reach in freezer case] liftme Custom Hoists manufactures multi stage hydraulic cylinders for construction dump trucks and dump trailers. [photo shows a dump truck in the lift position] Standex 2000 Annual Report to Shareholders FINANCIAL HIGHLIGHTS 2000 Highlights Standex is a global, multi-industry company that manufactures and markets products through 16 business units and 91 facilities in 14 countries. Our strategy is to make synergistic acquisitions and invest in businesses that generate solid revenues and earnings streams, and then to reinvest for long-term growth - while providing attractive current returns to our shareholders. We operate in three broad business segments. Our Food Service and Consumer businesses are well positioned to capitalize on trends that reflect new ways of living, working and shopping. Our Industrial businesses typically serve niche OEM markets, so many of our products and services are invisible to consumers and end-users. Yet we typically add functionality, competitive advantage and market appeal that are critical to the quality and value of the finished product. Standex International. We make essential products that add value to your world. FINANCIAL PERFORMANCE Net Sales 1996 1997 1998 1999 2000 562,679 564,623 616,180 641,400 637,049 Diluted Earnings Per Share 1996 1997 1998 1999 2000 As reported * 2.21 2.00 2.13 2.36 2.39 As adjusted ** 2.21 2.00 1.52 2.41 2.17 EBITDA 1996 1997 1998 1999 2000 As reported * 68,790 62,849 68,809 74,698 73,759 As adjusted ** 68,790 62,849 56,051 75,714 71,062 Return on Equity 1996 1997 1998 1999 2000 As reported * 22.8% 19.1% 19.3% 19.0% 18.5% As adjusted ** 22.8% 19.1% 13.8% 19.3% 16.8% Note A EBITDA consist of earnings before interest expense, income taxes, depreciation and amortization, less interest and other income and loss on disposition of business. EBITDA is presented because we believe it is an indicator of our ability to incur and service debt, and a similar formula is used by our lenders in determining compliance with financial covenants. However, EBITDA should not be considered as an alternative to cash flow from operating activities, as a measure of liquidity or as an alternative to net income as a measure of operating results in accordance with generally accepted accounting principles. * As reported in the Financial Statements ** As adjusted: Fiscal Year 2000 amounts exclude a non-recurring net after tax gain of $1.7 million or 13 cents per share related to the demutualization of an insurance company and Fiscal Years 2000, 1999 and 1998 include a net after tax restructuring of $4.4 million or 35 cents per share charge, a $600,000 or 5 cents per share credit, and an $8.0 million or 61 cents per share charge, respectively.
WHAT'S ESSENTIAL TO YOU? Standex makes over 48,000 Industrial, Food Service and Consumer products that are essential to your everyday life. Standex International 2000 Annual Report 1 WHAT'S ESSENTIAL TO YOU? letter to our shareholders Standex International Corporation experienced a mixed year. Your Company celebrated 30 years on the New York Stock Exchange and increased the quarterly dividend for the 27th time in the past 30 years - an enviable record. A major shift, however, from "old economy" stocks to "new economy" stocks occurred in the financial markets. Prices paid for "old economy" stocks such as Standex declined markedly, while money flowed into high tech investments, many of which were actually reporting losses. This resulted in an extreme disparity in price/earnings relationships which we believe will eventually correct itself. In the meantime, we have been continually examining strategic alternatives in order to release some of the unrecognized value in Standex. For the fiscal year ended June 30, 2000, Standex's annual sales totaled $637.0 million, a slight decline from last year's record shipments of $641.4 million. After taking into account approximately $10.8 million of fiscal 1999 shipments from product lines which were subsequently disposed of, sales for fiscal year 2000 increased approximately 1%. Earnings, prior to accounting for an unusual gain and a restructuring charge, were $2.39 per share compared with $2.36 per share on a comparable basis for the previous fiscal year. The Company experienced solid earnings growth in both our Industrial Group and our Consumer Group, but realized a significant earnings shortfall in the Food Service Group. Overall, our margins remain strong at 33%. We submitted bids on four major acquisition opportunities during the year, none of which were consummated. The prices ultimately paid for these businesses would have been highly dilutive to our earnings and would have taken several years to be accretive with considerable risk. We are continuing to seek larger acquisitions with synergistic and growth possibilities toward our goal of larger, more focused, business units. Standex International 2000 Annual Report 2 industrial food Service consumer Officers and Directors ringing the opening bell commemorating 30 years on the New York Stock Exchange. corporate officers [photo shows Board of Directors, Corporate Officers and the President of the NYSE clapping after the bell ringing ceremony] [number next to name represents their location in the above described photo] 1 Edward J. Trainor President and Chief Executive Officer 2 Thomas L. King Chairman of the Board 3 Edward F. Paquette Vice President and Chief Financial Officer 4 David R. Crichton Executive Vice President/Operations 5 Deborah A. Rosen Vice President, General Counsel and Secretary The Balance Sheet remains strong with a current ratio of 2.7 to 1, and a debt to capital ratio of 48.6%. Book value per share reached a new record of $13.37 per share. A strong cash flow allowed the Corporation to invest $22.8 million in capital expenditures, pay $10.0 million in dividends, and repurchase $12.8 million of Standex common stock while maintaining the debt/capital ratio virtually unchanged. Excluding the restructuring charge of $4.4 million and the $1.7 million demutualization gain, return on sales was 4.8% and return on equity was 18.5%. The future continues to look promising and our backlogs remain strong. Our emphasis on operations improvement and technology development in our Industrial Group is really paying dividends. A modest rebound in the Food Service sector combined with continuing good performance for the Consumer and Industrial Groups, should position us well for the year ahead. The employees of Standex should be complimented for their efforts and dedication this past year during a very difficult market environment. /s/Edward J. Trainor Edward J. Trainor President and Chief Executive Officer /s/Thomas L. King Thomas L. King Chairman of the Board Standex International 2000 Annual Report 3 WHAT'S ESSENTIAL TO YOU? reliability and functionality What does it take to compete in today's OEM marketplace-where customers' expectations and sophistication are constantly increasing? How will you help them maximize manufacturing efficiency, reduce time to market, increase end-user satisfaction, satisfy global demand, and-last but never least-reduce costs? At the Standex Industrial Group, we help our customers address these challenges every day by making their products more useful, appealing and cost-effective to manufacture. From tiny electronic coils and switches, to precisely machined multi-ton rocket components, to hoists and casters, to elegant and distinctive product textures -Standex innovation, expertise and service can add essential quality and reliability your customers will value. We're proving it daily at businesses like the recently formed Standex Engraving Group, which consolidates the sophisticated capabilities of Roehlen Embossing and our Mold-Tech unit under a single global banner. With 25 plants in 14 countries and a progressive R&D team, the unit is the world's leader in texturizing and the only truly global texturizing resource. We're capitalizing on this position by focusing on comprehensive texturizing solutions, delivered through the industry's most extensive network-and the most advanced technology. A significant portion of the unit's business is the creation and delivery of systems that produce manufacturing rolls, plates and machines that apply textures and patterns to products like vinyl siding, wall coverings, fine writing papers, and even leather basketballs and footballs used by your favorite sports teams-and the kids in the neighborhood. Of increasing importance, however, is the unit's pioneering work in digitized texturizing: capturing or creating Standex International 2000 Annual Report 4 graspme Standex Engraving provides the texture for making mobile phones easier to hold. [photo shows a mobile phone] illuminateme Standex Electronics provides the starters for streetlights throughout the world. [photo shows a street light and street light starter] industrial food service consumer informme Standex Electronics makes a variety of sensors that convey information about fuel, water and oil levels in your automobile. [photo shows a variety of sensors] driveme Standex Engraving texturizes rolls and molds that enhance automotive interiors. [photo shows a family consisting of a father holding a baby with a son, mother and daughter in front of a Ford dashboard] WHAT'S ESSENTIAL TO YOU? digital images of textures using 3-D optical scanning, and using those images to drive lasers that engrave the textures on rolls and molds for companies in the global OEM marketplace. Plans call for the creation of a worldwide network of design centers, which will house the digitizing technology needed to partner with customers and generate highly customized texturizing solutions. Sophisticated CAD modeling technology will allow the customer to view each texture in advance, before a model is made. The software developed at these centers will be transmitted via high speed Internet links to manufacturing centers, where molds, rolls and patterns will be laser- engraved for the customer at a plant close to that customer's own facility. The benefits to the customer are many, but the most significant advantage is dramatically reduced time-to-market, a competitive advantage in the fast-moving consumer world. Patterns and textures that used to take weeks to create will eventually be available on a worldwide basis in a matter of days. One of Standex's most impressive technologies can be found in the Spincraft unit, where multi-ton sheets of metal are precisely formed and machined to create fuel tank domes and other key components for the global aerospace industry. Spincraft recently introduced a patented forming process that allows weld-free domes to be made with significantly smaller blank sizes, reducing raw material costs by up to 50%. It's a technological edge that will serve the unit well in the commercial launch market and Space Shuttle programs, where Spincraft is partnering with global industry leaders in the design and development process. connectme Spincraft provides a variety of launch vehicle components that are critical to placing telecommunication satellites into orbit. [photo shows a satellite] launchme Spincraft manufactures rocket engine combustion chambers and fuel tank components for commercial launch vehicles as well as the Space Shuttle program. [photo shows a combustion chamber and a rocket in launch] deliverme Jarvis Caster Group manufactures casters and wheels for luggage carts for all the major hotels in the world. Brass Birdcager Cart courtesy of Forbes Industries, Ontario, CA. [photo shows the Brass Birdcage Cart] [photo to left -bellman] liftme Custom Hoists manufactures multi stage hydraulic cylinders for construction dump trucks and dump trailers. [photo shows a dumb truck in the up position] reliabilityandfunctionality industrial food service consumer packageme Eastern Engraving, a division of Standex Engraving, provides textured rolls to package designers. [photo shows a variety of products who use the Eastern Engraving textured rolls] bindme James Burn International provides double-loop wire binding products to the printing industry. [photo shows materials with binds from Jams Burn International] gripme Standex Engraving makes the rolls that put the pebbled texture on footballs used by the NFL and the NCAA. [photo shows a football with the pebbled roll ] Another unit undergoing strategic refocusing is James Burn International, the maker of a wide range of binding products, including the Wire-Or double-loop wire binding systems. The emergence of the print-on-demand market has created significant new opportunities for the unit, which is focusing on becoming the low- cost supplier to the trade bindery and digital print markets. Standex Electronics' core competency is in designing and building electronic components that can withstand the rigors of our customers' automated manufacturing processes. The company is a leading supplier of reed switches, sensors, miniature coils, magnetic components and connectors for a wide range of applications. The unit is aggressively expanding into new markets where OEMs are seeking the enhanced productivity that these automated manufacturing techniques offer. At Jarvis Caster Group, we make over 6,000 products that help virtually everything that rolls, roll better-from the luggage carts at hotels to the shopping carts at your local supermarket, and with new lean manufacturing programs at our plants, we're making our products better, faster and more efficiently. A commitment to product and service enhancements is paying off at Custom Hoists, which makes hydraulic telescopic cylinders for dump trucks and trailers. Sales are growing significantly faster than the market as a whole, propelled by the exceptional reliability of new cylinder designs-and a warranty that is twice as long as the industry average. Because downtime can be especially costly to a small trucking or excavating company, the unit provides same-day delivery of replacement cylinders. These factors, coupled with on-time delivery rates for new cylinders of nearly 100%, are winning Custom Hoists a loyal following among distributors and manufacturers as well as operators. Standex International 2000 Annual Report 7 WHAT'S ESSENTIAL TO YOU? flavor and freshness When you pick out a pastry or order an espresso or you pick up a ready-to-eat dinner, it's likely that your enjoyment is being enhanced by a product from the Standex Food Service Group. You'll find Standex products in supermarkets, gourmet shops, convenience stores, bakeries and institutional kitchens across the U.S., and increasingly, worldwide. Our refrigerator cases, cooking equipment, even pumps used in soft drink and espresso machines are all designed to enhance freshness, flavor, texture or appetite appeal, essential factors that contribute to your satisfaction and convenience. chillme Master-Bilt manufactures a variety of cold cases for the beverage and frozen food industry. [photo of a reach in freezer] In fact, Standex products play an essential role in helping consumers adapt to today's busy lifestyles, which leave little time for shopping, cooking and traditional family meals. Among dual-earner families in the U.S. and Europe, home meal replacement (HMR) has provided an answer. You're part of the HMR trend if you've ever stopped by a supermarket or restaurant and brought home a complete meal to go, and given the quality, variety and sophistication of these meals, you've probably done it more than once. One reason for the appeal of these meals: the commercial food preparation equipment made by Standex's BKI Worldwide unit. This global business has manufacturing locations in the U.S. and England, as well as a global distribution Standex International 2000 Annual Report 8 displayme preserveme Federal Industries manufactures a full range of refrigerated display cases used by restaurants, bakeries, and candy stores. [photo shows an Bob Evans employee in front of a refrigerated display case by Federal Industries] warmme BKI Worldwide, in addition to manufacturing ovens/rotisseries, manufactures a full range of cook and hold serving display cases for delis, restaurants and supermarkets. [photo shows a cook and hold serving display case by BKI] industrial food service consumer WHAT'S ESSENTIAL TO YOU? network. BKI systems, which include ovens/rotisseries, pressure fryers, low-temperature cook-and-hold ovens and heated display cases-can be found in thousands of supermarkets, restaurants, institutional food kitchens, delicatessens and convenience stores around the world. But Standex adds enjoyment and convenience to your life in other ways. For example, our Procon Products unit probably made the pump that dispensed your espresso this morning or soft drink at lunch. With state-of-the-art operations in the U.S. and Europe, Procon is a global company that uses robotic systems and direct numerical control technologies to maximize efficiency and quality-and to ensure adequate capacity in a world where demand for gourmet coffee is on the rise. Standex's Master-Bilt Products or Federal Industries units may well have manufactured the refrigerated or heated display case from which you chose your meal. Federal Industries has enjoyed a strong market position for over sixty years, becoming an established leader in merchandising and display cases for restaurants, supermarkets, convenience stores, bakeries, delis and confectionery shops. Our growth and success have been driven by our commitment to customizing and manufacturing modular merchandising and presentation systems that match each retailer's design concept. Because our customers' products are presented more distinctively and attractively, sales increase and satisfied consumers keep coming back for more. roastme BKI Worldwide manufactures ovens/rotisseries for supermarkets, restaurants, delicatessens and convenience stores. [photo of a BKI oven/rotisserie and chef standing to its left] disposeofme USECO's Red Goat Disposers line is a mainstay product in heavy-duty applications. [photo shows a Red Goat Disposer] coolme Master-Bilt makes a large variety of walk-in and reach-in refrigerated display cases for supermarkets, convenience stores and drug stores. [photo shows walk-in refrigerated display cases] flavorandfreshness industrial food service consumer deliverme USECO's Unitron V provides a food delivery system that maintains flavor and freshness for hot and cold products in institutional settings such as hospitals, schools, prisons and nursing homes. [photo shows a USECO Unitron V delivery system] carbonateme Procon Products' pumps are used in carbonated beverage dispensing machines as well as espresso machines. [photo shows a soft drink cup with a Procon pump] prepareme General Slicing provides a variety of products utilized in the preparation and sale of cold cuts, vegetables, cheese, etc. [photo shows a General Slicing food slicer] Master-Bilt was one of the first companies to build refrigeration units with precise temperature control, an essential factor in healthful food storage. A leader in designing equipment that maximizes food safety by minimizing temperature fluctuations, Master- Bilt systems include refrigerated cabinets, cases, display units and modular walk-in refrigerator/freezers-as well as an expansion into refrigerated warehouse systems. You'll see the Master-Bilt name in supermarkets, convenience stores, restaurants and drug stores across the country-and when you do, you'll know that Standex is at work. Our USECO division is even helping to increase the appeal of the food served by hospitals, schools, colleges and correctional facilities. Its Unitron V Feeding System is specifically designed for institutions that prepare food in one location and serve it in another. The system was the first in the U.S. to use convection- reheating technology, which preserves more of the food's texture and flavor. This innovative approach uses circulating air to selectively reheat chilled entrees while preserving the cold items such as salads, juices and desserts. As a result, both hot and cold food temperatures can be maintained on the same tray. Standex International 2000 Annual Report 11 WHAT'S ESSENTIAL TO YOU? home and family The spiritual well being of your family, the comfort of your home, the quality of the products you buy-most people would list all these among their essential concerns. At the Standex Consumer Group, they are our essential concerns as well. Quality-of-life issues are complex and highly personal, and helping consumers successfully address them represents a significant business opportunity for a company that does so responsibly and sensitively. At Standex Consumer Group, we strive to deliver quality products that represent real value-and reflect the most important values-of the majority of American consumers. Nowhere is that commitment more evident-or more completely fulfilled-than in our Standard Publishing and Bereanr Christian Stores units. These businesses are among our oldest, and steadily growing units, melding traditional biblically based values with the most sophisticated of today's merchandising, multimedia and Internet techniques. Together, these businesses place Standex in the forefront of companies that are benefiting from the reemergence of religion in America. Berean's mission is to become "the dominant Christian retailer" in all of its 18 markets, which means providing both churches and the general public with a wide range of products, from best-selling Christian books, gift ideas and music to liturgical supplies. To keep pace with rapidly evolving retailing trends and consumer tastes, Berean has just introduced a new store format. Averaging over 15,000 square feet, Bereanr stores increasingly offer a shopping experience that provides a sense of community and comfort, with cafes, sitting comfortme Standex Air Distribution Products manufactures high quality heating and air conditioning ductwork for your home. [photo shows a construction worker with a blueprint of a house and duct products in the background] industrial food service consumer WHAT'S ESSENTIAL TO YOU? inspireme Berean Christian Stores offers a broad range of products including bibles, books, music gifts, art, clothing and church supplies. [photo is of the Berean Christian Store located in Fresno, CA] entertainme Berean Christian Stores offers its customers a center of knowledge and activity for the Christian community. [photo is the entertainment section of the Berean Christian Store located in Mesa, AZ] readme Standard Publishing is a leading source of bibles and books used by pastors, youth ministers, Sunday school teachers, families and individuals to develop and sustain Christian values. [photo is of the Standard Lesson Commentary books] nourishme Standex Direct offers consumers the convenience of buying farm-fresh fruit, selected produce and specialty packaged foods via direct mail, telephone or the Internet. [photo is of three grapefruit sections] areas and music listening stations-an experience similar in style and quality to that offered by other major national booksellers. The goal is to provide a center of knowledge and activity for the Christian community in an inviting atmosphere where customers will enjoy spending time as well as shopping. A similar strategy can be seen at the unit's Web site: www.bereanchristianstores.com. Filled with news, reviews, and links with a range of other Christian resources, the site is far more than a mere catalogue of products. It is a gateway to a congenial Internet experience-and fully comparable in quality and impact with the best Internet booksellers. Also serving the Christian marketplace is Standard Publishing, one of the country's leading publishers of biblically based books, CDs, videos and study curricula. Its Vacation Bible School programs are among the most widely used, and it publishes magazines with a weekly circulation exceeding 170,000. Among the first Christian publishers to explore the power of new media, the unit has developed a range of CD-ROM/book combinations that have become industry bestsellers. Building on this experience, and its long-standing strength in the children's market, Standard Publishing has adopted a new strategy that emphasizes careful market segmentation, with a special focus on the dynamic childhood and young-adult markets. Standex International 2000 Annual Report 14 homeandfamily industrial food service consumer teachme Standard Publishing creates teaching materials for Vacation Bible Schools (VBS). "Road Rally 2000" was this year's theme. [photo is of the Road Rally 2000 VBS package] developme Standard Publishing's Baby Blessings product line not only teaches Christian values to young children, but also provides parents with a powerful developmental tool that is based on pioneering university research findings on how children learn. [photo shows books from the Baby Blessings product line along with a baby holding Baby Blessings books] If you've recently built or remodeled a home, there's an excellent chance that another Standex business helped your contractor take care of one essential: the heating/air conditioning system. Our Standex Air Distribution Products unit designs and manufactures products for controlling airflows and improving air quality in your home. With nine manufacturing facilities across the U.S., we are in an excellent position to capitalize on the dynamic home building and renovation market-and to offer national and regional HVAC wholesalers and distributors ready availability of top-quality, price-competitive products. Through a "best practices" program developed as part of the integration of recent acquisitions, we have significantly enhanced the efficiency of our manufacturing processes. In addition, new proprietary machine capabilities have enabled us to develop some of the industry's most energy-efficient fittings, an important competitive advantage in a conservation-conscious marketplace with increasingly stringent building codes. Like many families, yours may enjoy the convenience and sense of discovery offered by mail order catalogues. Standex Direct's six catalogue units offer consumers a way to purchase a range of fresh and prepared gourmet foods-by phone or via the Internet, 24 hours a day. Our goal is to realize the marketing and cross-selling opportunities represented by our six mailing lists, and to maximize operating efficiencies by integrating fulfillment and logistics capabilities. Standex International 2000 Annual Report 15 management's discussion and analysis 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, general domestic and international business and economic conditions and market demand. Liquidity and Capital Resources During the fiscal year ended June 30, 2000, the Company invested $22.8 million in plant and equipment, purchased $12.8 million of its common stock and paid out $10.0 million in cash dividends to shareholders. These expenditures were primarily funded by net operating cash flows. Net cash provided by operating activities was $44.2 million in 2000, an increase of $7.1 million as compared to $37.1 million in 1999. An increase of $6.0 million in the amount of cash used to fund accounts receivable was offset by a decrease of $8.1 million in cash used for inventories; a focused effort by management served to partially reduce inventory levels. In addition, a restructuring charge, which is described below and in the Notes to the Consolidated Financial Statements, was recorded in the current year, and affected cash flows by approximately $4.2 million resulting in a reduction in inventories and an increase in accrued liabilities. These were somewhat offset by a decrease in accrued income taxes. As of June 30, 2000, the Company had the ability to borrow an additional $91.9 million under existing bank credit agreements. The Company believes that this resource, along with the Company's internally generated funds, will be sufficient to meet anticipated cash funding needs for the foreseeable future. The Company's existing bank credit agreements are described in the Notes to the Consolidated Financial Statements. The Company intends to continue its policy of using its funds to make acquisitions when conditions are favorable, invest in property, plant and equipment, pay dividends and purchase its common stock. Fiscal 2000 as Compared to Fiscal 1999 Net sales for the year ended June 30, 2000 of $637 million represents a decrease of $4.4 million or 0.7% from sales of $641.4 million for the year ended June 30, 1999. The previous year included $10.8 million of sales from divisions that were disposed of in fiscal 1999. The effect, on net sales, of changes in the average foreign exchange rates was not significant. For the year ended June 30, 2000 net sales in the Food Service Segment decreased by $7.7 million or 5.1% from the prior year. The decrease was, to a large extent, due to delays in healthcare projects caused by funding constraints and a slowdown in orders resulting from consolidations within the supermarket industry. Net sales in the Consumer Segment increased by $4.5 million or 2.1% from the prior year, which included $4.3 million in sales of a division which was disposed of in fiscal 1999. The increase is the result of additional stores in the Berean division and increased customer demand in the Standard Publishing and Standex Air Distribution Products divisions. Net sales in the Industrial Segment were $272.2 million for the year ended June 30, 2000 compared to $273.3 million for 1999. Fiscal Year 1999 included $6.5 million in sales of divisions that were disposed of in 1999. Customer demand increases, in the Spincraft, Custom Hoists, Standex Electronics, and North American Mold-Tech divisions, were offset by weakening demand in the James Burn, Jarvis Caster Group, and European Mold-Tech divisions. The overall gross profit margin percentage ("GPMP") remained essentially the same (32.9% vs. 32.8%) for the current and prior year. The Food Service Segment GPMP decreased to 29.3% from 31.0% in the prior year primarily due to the sales shortfalls described above. The Consumer Segment GPMP remained virtually the same at 37.2% in 2000 versus 37.1% in 1999, and the Industrial Segment GPMP increased slightly to 30.6% from the prior year's 30.1%. Consolidated selling, general and administrative ("SG&A") expenses remained stable overall at approximately 23% of net sales. 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. In June 2000, the Company recorded a restructuring charge of $5.4 million before taxes. The restructuring plan involves 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, Standex International 2000 Annual Report 16 management's discussion and analysis including selective personnel reductions. This charge, a significant portion of which was non-cash, is more fully described in the Notes to the Consolidated Financial Statements. Also, during the current fiscal year, 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 less than $200,000 in interest expense for the year was due primarily to a slight increase in average net borrowings. As a result of the above factors, income before income taxes was $46.9 million compared to $51.5 million in the prior year. The effective tax rate increased to 40.9% as compared to 39.1% in the prior year since a greater portion of the Company's income was generated in higher taxed countries. Net income decreased $3.7 million or 11.7% from the prior year. Fiscal 1999 as Compared to Fiscal 1998 Net sales for the year ended June 30, 1999 increased $25.2 million as compared to the same period in the prior year. The majority of this increase came from the added sales of ACME Manufacturing Company (ACME) which was acquired in October 1997. These added sales were partially offset by the absence of sales from the Doubleday Bros. product lines that were disposed of in the prior year. Excluding the acquisition and dispositions, management believes the majority of fluctuations in net sales reported by each segment were the result of changes in unit volumes and consumer demand. In addition, although changes in the average foreign exchange rates from 1998 to 1999 had a negative effect on net sales in 1999, the total effect of such changes was not significant. For the year ended June 30, 1999, the Food Service Segment reported a slight decrease in net sales as compared to the prior year. This decline was mainly due to the closure of a Nevada operation and sluggish demand in the beverage dispensing industry. Net sales in the Industrial Segment were flat as compared to the same period in the prior year. While most divisions in the Industrial Segment posted solid increases over last year, the poor performance of our binding division and the absence of sales from the disposition of Doubleday Bros. in the second half of fiscal 1998 offset these gains. The Consumer Segment's net sales increased by $26.0 million when compared to fiscal 1998 due to the acquisition of ACME, as noted above, and improved demand. Except for a small decline in one unit, all Consumer divisions experienced improved customer demand. The gross profit margin percentage ("GPMP") remained essentially the same (32.8% vs. 32.5%) for the current and prior year. The Food Service Segment reported a GPMP of 31.3%, as compared to the prior year percentage of 29.7%; this was the result of the disposition of a Nevada operation and reduced costs at several companies. The GPMP reported in the Industrial Segment was 31.1%, a small decline from the previous year's percentage of 31.9%. Continued poor performance from the Company's binding division offset solid positive performances at most of the other Industrial divisions. The Consumer Segment's GPMP remained relatively unchanged at 35.4% in fiscal 1999 versus 35.6% in fiscal 1998. Selling, general and administrative expenses ("SG&A") increased by $3.6 million when compared to the same period in the prior year. The majority of this increase ($2.9 million) was from the additional SG&A expenses of ACME, and the remainder was due primarily to the addition of two Berean Bookstores during fiscal 1998. None of the remaining 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 credit of $1,016,000 was recorded in the second half of fiscal 1999 and related to a $12.8 million restructuring charge recorded in the fourth quarter of fiscal 1998. This credit is more fully described in the Notes to the Consolidated Financial Statements. Interest expense increased by 3.5%, or $376,000, when compared to fiscal 1998 as the Company incurred a full year of interest charges on the increased borrowings related to the ACME acquisition as compared to nine months in the prior year and moderately higher interest rates. The above factors resulted in an $18.4 million increase in income before income taxes for the year ended June 30, 1999. The effective tax rate in fiscal 1999 did not vary from what was reported in fiscal 1998 (39.1%); as a result, net income rose $11.2 million or 55.6% when compared to the same period in the prior year. Other Matters Inflation Inflation has not been a significant factor in fiscal 2000, 1999 and 1998 mainly due to fairly stable labor and material costs. Standex International 2000 Annual Report 17 management's discussion and analysis 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. New Accounting Pronouncements In June 1998, the Financial Accounting Standards Board released Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities and will be effective for the Company in fiscal 2001. Management is currently evaluating the effect of adopting SFAS No. 133 on the Consolidated Financial Statements. In December 1999, the Securities and Exchange Commission (the "SEC") released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements and will be effective for the Company in fiscal 2001. Management is currently evaluating the effect of adopting SAB No. 101 on the Consolidated Financial Statements. 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, 2000, 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, 2000, a hypothetical 10% immediate increase in interest rates would increase the Company's annual interest expense by $577,000. The Company has interest rate swap agreements to fix the interest rate on $35 million of its variable rate borrowings. At June 30, 2000, the fair value of the Company's interest rate swap agreements would not be materially affected by a 10% change in interest rates. In addition to the $35 million of variable rate borrowings covered by interest rate swap agreements, the Company also has $69 million of long-term debt at fixed interest rates as of June 30, 2000. 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 $4 million as of June 30, 2000. Such fair value changes may affect the Company's determination as to whether to retain, replace or retire its long- term debt. Standex International 2000 Annual Report 18 five-year financial review
Standex International Corporation and Subsidiaries (In thousands, except per share data) 2000 1999 1998 1997 1996 Year Ended June 30 Summary of Operations Net sales $637,049 $641,400 $616,180 $564,623 $562,679 Gross profit margin 209,338 210,126 200,548 186,131 185,267 Interest expense 11,336 11,155 10,779 8,497 9,048 Income before income taxes 46,853 51,491 33,064 43,516 48,124 Provision for income taxes 19,150 20,130 12,915 16,597 17,410 Net income 27,703 31,361 20,149 26,919 30,714 Per Share Data Net sales (diluted) 49.91 49.20 46.61 41.85 40.40 Earnings: Basic 2.19 2.42 1.54 2.02 2.24 Diluted 2.17 2.41 1.52 2.00 2.21 Dividends paid 0.79 0.76 0.76 0.75 0.71 Book value 13.37 12.59 11.19 10.75 10.01 Average shares outstanding Basic 12,672 12,972 13,072 13,337 13,736 Diluted 12,763 13,037 13,219 13,491 13,927 June 30 Financial Condition Working capital 145,009 146,514 148,943 136,946 138,860 Current ratio 2.68 2.79 2.73 2.95 3.03 Property, plant and equipment - net 112,137 104,783 102,973 85,598 86,616 Total assets 424,200 410,042 411,242 341,038 335,333 Long-term debt 153,436 148,111 163,448 112,347 113,822 Stockholders' equity 164,815 162,301 146,197 141,185 134,691
Sales and Earnings by Quarter Year Ended June 30 (Unaudited)
2000 1999 (In thousands, except per share data) FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH Net sales $157,803 $163,050 $158,158 $158,038 $157,377 $171,171 $152,247 $160,605 Gross profit margin 49,693 55,255 51,924 52,466 49,917 58,611 50,655 50,943 Net income 9,517 7,613 6,460 4,113 7,957 9,404 6,631 7,369 Earnings per share Basic 0.74 0.59 0.52 0.34 0.61 0.72 0.52 0.57 Diluted 0.74 0.59 0.51 0.33 0.61 0.72 0.51 0.57
Common Stock Prices and Dividends Paid
Common Stock Price Range 2000 1999 Divi dends per Share Year Ended June 30 High Low High Low 2000 1999 First quarter $29 $22-7/16 $29-9/16 $21-3/16 $0.19 $0.19 Second quarter 27 19-1/2 28-1/8 19-3/8 0.20 0.19 Third quarter 21-1/4 14-11/32 27-1/4 21-5/8 0.20 0.19 Fourth quarter 18 15-3/16 28-9/16 21-3/16 0.20 0.19
Distribution of the 2000 Sales Dollar (In thousands) Materials and services $364,546 57% Wages, salaries and employee benefits 200,691 31 Depreciation and amortization 13,622 2 Interest on borrowed money 11,336 2 Income taxes 19,150 3 Reinvested in the Company 17,690 3 Dividends to stockholders 10,014 2 Total $637,049 100%
Standex International 2000 Annual Report 19 statements of consolidated income
Standex International Corporation and Subsidiaries Year Ended June 30 2000 1999 1998 Net Sales $637,048,705 $641,399,507 $616,180,090 Cost of Products Sold 427,710,922 431,273,630 415,632,167 Gross profit 209,337,783 210,125,877 200,547,923 Selling, General and Administrative 149,200,556 149,197,179 145,590,536 Restructuring charge (credit) 5,408,065 (1,015,762) 12,758,000 Income from Operations 54,729,162 61,944,460 42,199,387 Other income (expense) Interest expense (11,336,430) (11,154,869) (10,779,015) Interest and other income 749,903 701,672 1,993,533 Gain on stock received 2,710,647 - - Net loss on disposition of a business - - (350,000) Total (7,875,880) (10,453,197) (9,135,482) Income Before Income Taxes 46,853,282 51,491,263 33,063,905 Provision for Income Taxes 19,150,000 20,130,000 12,915,000 Net Income $27,703,282 $31,361,263 $20,148,905 Earnings Per Share Basic $ 2.19 $ 2.42 $ 1.54 Diluted $ 2.17 $ 2.41 $ 1.52 See notes to consolidated financial statements.
statements of consolidated stockholders' equity
Accumulated Additional Other Total Common Paid-In Retained Comprehensive Treasury Stock Stockholders' Year Ended June 30 Stock Capital Earnings Income Shares Amount Equity Balance, June 30, 1997 $41,976,417 $5,663,224 $313,908,303 $(1,082,401) 14,854,572 $(219,280,337) $141,185,206 Stock issued for employee stock options and stock purchase plan, net of related income tax benefit 1,329,545 (150,813) 2,251,057 3,580,602 Stock issued in conjunction with acquisition 1,523,575 (100,418) 1,509,691 3,033,266 Treasury stock acquired 314,604 (10,177,761) (10,177,761) Comprehensive income Net income 20,148,905 20,148,905 Foreign currency translation adjustment (1,646,188) (1,646,188) Total comprehensive income 18,502,717 Dividends paid (76 cents per share) (9,926,801) (9,926,801) Balance, June 30, 1998 41,976,417 8,516,344 324,130,407 (2,728,589) 14,917,945 (225,697,350) 146,197,229 Stock issued for employee stock options and stock purchase plan, net of related income tax benefit 641,320 (143,303) 2,181,706 2,823,026 Treasury stock acquired 314,074 (7,453,147) (7,453,147) Comprehensive income Net income 31,361,263 31,361,263 Foreign currency translation adjustment (749,567) (749,567) Total comprehensive income 30,611,696 Dividends paid (76 cents per share) (9,878,260) (9,878,260) Balance, June 30, 1999 41,976,417 9,157,664 345,613,410 (3,478,156) 15,088,716 (230,968,791) 162,300,544 Stock issued for employee stock options and stock purchase plan, net of related income tax benefit 116,749 (126,628) 1,951,629 2,068,378 Treasury stock acquired 697,463 (12,756,934) (12,756,934) Comprehensive income Net income 27,703,282 27,703,282 Foreign currency translation adjustment (4,486,875) (4,486,875) Total comprehensive income 23,216,407 Dividends paid (79 cents per share) (10,013,536) (10,013,536) Balance, June 30, 2000 $41,976,417 $9,274,413 $363,303,156 $(7,965,031) 15,659,551 $(241,774,096) $164,814,859 See notes to consolidated financial statements.
Standex International 2000 Annual Report 20 consolidated balance sheets
Standex International Corporation and Subsidiaries June 30 2000 1999 Assets Current Assets Cash and cash equivalents $10,437,856 $5,909,283 Receivables-less allowance of $3,400,000 in 2000 and $3,590,000 in 1999 104,430,867 97,871,014 Inventories 112,200,601 120,171,671 Prepaid expenses 4,316,186 4,202,170 Total current assets 231,385,510 228,154,138 Property, Plant and Equipment Land and buildings 83,588,845 76,098,470 Machinery and equipment 176,053,677 172,814,389 Total 259,642,522 248,912,859 Less accumulated depreciation 147,505,496 144,129,886 Property, plant and equipment - net 112,137,026 104,782,973 Other Assets Prepaid pension cost 38,334,036 32,623,677 Goodwill - net 31,184,247 32,110,262 Other 11,159,180 12,370,530 Total other assets 80,677,463 77,104,469 Total $424,199,999 $410,041,580 Liabilities and Stockholders' Equity Current Liabilities Current portion of debt $2,356,563 $3,962,765 Accounts payable 36,494,649 35,975,395 Accrued payroll and employee benefits 18,567,875 18,221,481 Income taxes 5,357,062 5,847,300 Other 23,600,274 17,633,469 Total current liabilities 86,376,423 81,640,410 Long-Term Debt - less current portion 153,436,016 148,111,366 Deferred Income Taxes 16,610,000 14,736,000 Other Non-current Liabilities 2,962,701 3,253,260 Commitments and Contingencies Stockholders' Equity Common stock-authorized, 60,000,000 shares in 2000 and 1999; par value, $1.50 per share; issued 27,984,278 shares in 2000 and 1999 41,976,417 41,976,417 Additional paid-in capital 9,274,413 9,157,664 Retained earnings 363,303,156 345,613,410 Accumulated other comprehensive income (7,965,031) (3,478,156) Less cost of treasury shares: 15,659,551 shares in 2000 and 15,088,716 in 1999 (241,774,096) (230,968,791) Total stockholders' equity 164,814,859 162,300,544 Total $424,199,999 $410,041,580 See notes to consolidated financial statements.
Standex International 2000 Annual Report 21 statement of consolidated cash flows
Standex International Corporation and Subsidiaries Year Ended June 30 2000 1999 1998 Cash Flows from Operating Activities Net income $27,703,282 $31,361,263 $20,148,905 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,621,846 13,769,691 13,851,599 Profit improvement incentive plan (40,000) 286,201 780,058 Deferred income taxes 1,874,000 2,799,000 (1,882,000) Net pension credit (1,998,000) (1,793,000) (2,353,000) Loss (gain) on sale of investments, real estate and equipment 203,520 205,594 (950,603) Loss on disposition of business - - 350,000 Increase (decrease) in cash from changes in assets and liabilities, net of effect of acquisitions and dispositions: Receivables - net (7,302,778) (1,337,293) (2,088,038) Inventories 7,924,044 (219,258) (5,089,382) Prepaid expenses and other assets (3,209,182) (1,005,113) 65,390 Accounts payable 333,749 (1,508,909) 2,807,411 Accrued payroll, employee benefits and other liabilities 5,646,776 (5,767,318) 5,389,358 Income taxes (549,444) 332,490 1,215,228 Net cash provided by operating activities 44,207,813 37,123,348 32,244,926 Cash Flows from Investing Activities Expenditures for property and equipment (22,786,886) (16,823,678) (19,849,069) Expenditures for acquisitions, net of cash acquired - (796,305) (49,277,002) Proceeds from sale of investments, real estate and equipment 857,689 1,517,468 2,483,933 Proceeds from disposition of businesses - 5,091,705 2,583,143 Net cash used for investing activities (21,929,197) (11,010,810) (64,058,995) Cash Flows from Financing Activities Proceeds from additional borrowings 12,828,803 25,000,000 52,213,051 Payments of debt (9,110,355) (39,868,747) (418,585) Stock issued under employee stock option and stock purchase plans 2,068,378 2,823,026 3,580,602 Cash dividends paid (10,013,536) (9,878,260) (9,926,801) Purchase of treasury stock (12,756,934) (7,453,147) (10,177,761) Net cash (used for) provided by financing activities (16,983,644) (29,377,128) 35,270,506 Effect of Exchange Rate Changes on Cash and Cash Equivalents (766,399) (82,443) (348,909) Net Changes in Cash and Cash Equivalents 4,528,573 (3,347,033) 3,107,528 Cash and Cash Equivalents at Beginning of Year 5,909,283 9,256,316 6,148,788 Cash and Cash Equivalents at End of Year $10,437,856 $5,909,283 $9,256,316 Supplemental Disclosure of Cash Flow Information Issued for acquisitions: Stock $ - $ - $3,033,266 Notes payable - 500,000 271,704 Cash paid during the year for: Interest 14,842,150 11,063,038 10,495,183 Income taxes 18,121,098 16,883,304 13,523,666 See notes to consolidated financial statements.
Standex International 2000 Annual Report 22 notes to consolidated financial statements Summary of Accounting Policies Basis of Consolidation The accompanying consolidated financial statements include the accounts of Standex International Corporation and its subsidiaries. Revenue Recognition 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 some cases, on a percentage of completion basis. Cash and Cash Equivalents Cash and cash equivalents include highly liquid investments purchased with a remaining 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 Inventories are stated at the lower of first-in, first-out cost or market. Property, Plant and Equipment Property, plant and equipment are depreciated over their estimated useful lives using primarily the straight-line method. 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 basis of assets and liabilities using enacted tax rates. Goodwill The excess of purchase price of acquired companies over the fair value of net identifiable assets at date of acquisition has been recorded as goodwill and is being amortized on a straight-line basis over a forty-year period. Accumulated amortization aggregated $11,102,000 and $10,016,000 at June 30, 2000 and 1999, respectively. The Company annually evaluates the net balance of goodwill based on the projected operating income of the respective businesses on an undiscounted cash flow 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. Forward Foreign Currency Exchange Contracts Forward foreign currency 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 sells the related foreign currency at a fixed price for settlement on or before the date of the related receipt, and thus protects the dollar value of the receipt. The Company enters into such contracts for hedging purposes only. Accordingly, for financial statement purposes gains or losses of forward contracts entered into to hedge commitments are deferred until the position is closed out. At June 30, 2000, the Company had no significant forward foreign currency contracts. Interest Rate Swap Agreements The net differential to be paid or received under the Company's interest rate swap agreements is accrued as interest rates change and is recognized over the life of the agreements. 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. 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 the Company's Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States of America necessarily requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 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. Standex International 2000 Annual Report 23 notes to consolidated financial statements 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: 2000 1999 1998 Basic - Average Shares Outstanding 12,672 12,972 13,072 Effect of Dilutive Securities - Stock Options 91 65 147 Diluted - Average Shares Outstanding 12,763 13,037 13,219 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 731,103; 407,015 and 33,880 for the years ended June 30, 2000, 1999 and 1998, respectively.
Reclassifications Certain prior year amounts have been reclassified to conform to the 2000 financial statement presentation. New Accounting Pronouncements In June of 1998, the Financial Accounting Standards Board released Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as amended, establishes new standards of accounting and reporting for derivative instruments and hedging activities and will be effective for the Company in fiscal 2001. Management is currently evaluating the effect of adopting SFAS No. 133 on the consolidated financial statements. In December 1999, the Securities and Exchange Commission (the "SEC") released Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements and will be effective for the Company in fiscal 2001. Management is currently evaluating the effect of adopting SAB No. 101 on the Consolidated Financial Statements. Inventories
Inventories are comprised of (in thousands): June 30 2000 1999 Raw materials $ 38,887 $ 40,180 Work in process 22,365 26,113 Finished goods 50,949 53,879 Total $112,201 $120,172
Debt
Debt is comprised of (in thousands): June 30 2000 1999 Bank credit agreements $ 83,069 $ 71,847 Institutional investors 6.8% to 7.13% (due 2001-2008) 67,857 75,000 Other 3.0% to 4.85% (due 2001-2018) 4,867 5,227 Total 155,793 152,074 Less current portion 2,357 3,963 Total long-term debt $153,436 $148,111
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, 2000, the effective rate of interest under the agreement was 7.19%. The Company is required to pay a commitment fee of 0.2% on the average daily-unused amount. As of June 30, 2000, the Company had borrowed $35 million under the agreement. At June 30, 1999, there were no outstanding borrowings. 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 5.50% to 7.41% during 2000. Available borrowings under the revolving credit agreement described above are reduced by unsecured short-term borrowings. At June 30, 2000, the Company had the ability to borrow an additional $91,931,000 under the aforementioned bank credit agreements. Institutional Investor Agreements At June 30, 2000, 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 a third institutional investor with a balance of $42,857,000 which bears interest at 7.13% annually and is payable in annual installments of $7,143,000. 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, 2000, the Company had three interest rate swap contracts with an aggregate notional amount of $35.0 million. These agreements convert variable rates to fixed rates ranging from 6.2% to 7.5% on aggregate notional amounts of $25 million and $10 million maturing in 2002 and 2003, respectively. Neither the Company nor the counterparties to the agreement, which are prominent financial institutions, are required to collateralize their respective obligations under these swaps. The Company is exposed to loss if one or more of the Standex International 2000 Annual Report 24 notes to consolidated financial statements counterparties defaults. At June 30, 2000, Standex had no exposure to credit loss on interest rate swaps. 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 cashflows. Open interest rate contracts are reviewed regularly by the Company to ensure that they remain effective as hedges of interest rate exposure. Management believes that the fair values of the rate swap agreements approximate the recorded amounts. 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 principal payments due under the institutional investor agreements are expected to be funded through additional unsecured short-term borrowings. Such borrowings, and the unsecured short-term borrowings outstanding at June 30, 2000, may be refinanced by the Company on a long-term basis under the revolving credit agreement. As such, the short-term outstanding borrowings, which are not expected to be paid within a year, including those expected to fund the institutional investor principal payments, are classified as long- term debt, and the debt repayment schedule as presented below, is based on the terms of the revolving credit agreement. Debt is due as follows: 2001, $2,357,000; 2002, $335,000; 2003, $102,813,000; 2004, $7,503,000; 2005, $7,143,000; and thereafter, $35,642,000. Accrued Payroll and Employee Benefits
This current liability caption consists of (in thousands): June 30 2000 1999 Payroll $14,776 $14,989 Benefits 3,141 2,548 Taxes 651 684 Total $18,568 $18,221
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, 2000, 1999 and 1998 was approximately $8,000,000; $7,900,000; and $7,500,000, respectively. At June 30, 2000, the minimum annual rental commitments under noncancelable operating leases, principally real estate, were approximately: 2001, $4,700,000; 2002, $3,700,000; 2003, $3,200,000; 2004, $2,800,000; 2005, $2,100,000; and thereafter, $5,800,000. 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 taxes consist of (in thousands): 2000 1999 1998 Current: Federal $13,088 $10,583 $ 8,014 State 1,304 2,838 1,771 Non-U.S 2,884 3,910 5,012 Total 17,276 17,331 14,797 Deferred 1,874 2,799 (1,882) Total $19,150 $20,130 $12,915
The components of income before income taxes are as follows (in thousands): 2000 1999 1998 U.S. Operations $42,694 $43,954 $23,872 Non-U.S. Operations 4,159 7,537 9,192 Total $46,853 $51,491 $33,064
A reconciliation of the U.S. Federal income tax rate to the effective income rate is as follows: 2000 1999 1998 Statutory tax rate 35.0% 35.0% 35.0% Non-U.S 2.6 (.2) (2.5) State taxes 3.8 3.9 3.0 Other items, net (.5) .4 3.6 Effective income tax rate 40.9% 39.1% 39.1%
Significant components of the company's net deferred tax liability are as follows (in thousands): 2000 1999 Deferred tax liabilities: Accelerated depreciation $ 8,933 $ 7,950 Net pension credit 13,086 11,570 Other items 1,120 1,056 Deferred tax assets: Expense accruals (5,544) (5,531) Restructuring charge (456) - Compensation costs (529) (309) Net deferred tax liability $16,610 $14,736
Standex International 2000 Annual Report 25 notes to consolidated financial statements
Deferred taxes: 2000 1999 1998 Accelerated depreciation $ 983 $(1,575) $(1,448) Net pension credit 1,517 1,491 1,277 Compensation costs (220) 89 (15) Restructuring charge (456) 2,846 (2,846) Expense accruals (13) (600) 821 Other items 63 548 329 Total $1,874 $2,799 $(1,882)
At June 30, 2000, accumulated retained earnings of non-U.S. subsidiaries totaled $28,318,000. 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 unremitted earnings is not practicable. Industry Segment Information The Company is composed of three product groups. These groups are described on pages 4-15. 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. 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.
Net Sales Depreciation and Amortization Year Ended June 30 (In thousands) 2000 1999 1998 2000 1999 1998 Food Service $144,089 $151,782 $155,706 $ 2,120 $ 2,134 $ 2,621 Consumer 220,724 216,272 192,051 3,765 3,800 3,291 Industrial 272,236 273,346 268,423 7,504 7,584 7,691 Corporate and Other - - - 233 252 249 Total $637,049 $641,400 $616,180 $13,622 $13,770 $13,852
Assets Employed Capital Expenditures As of and Year Ended June 30 (In thousands) 2000 1999 1998 2000 1999 1998 Food Service $75,018 $77,331 $79,027 $ 2,018 $ 1,416 $ 2,598 Consumer 122,287 123,287 129,716 2,988 3,900 8,177 Industrial 184,457 176,853 172,886 17,604 11,048 8,904 Corporate and Other 42,438 32,571 29,613 177 460 170 Total $424,200 $410,042 $411,242 $22,787 $16,824 $19,849
Income from Operations Year Ended June 30 (In thousands) 2000 1999 1998 Food Service $12,119 $17,498 $14,962 Consumer 25,426 24,171 23,765 Industrial 31,789 27,837 25,510 Corporate and Other (9,197) (8,578) (9,280) Restructuring (charge) credit (5,408) 1,016 (12,758) Total $54,729 $61,944 $42,199
Product Net Sales Information: Year Ended June 30 (In thousands) 2000 1999 1998 Food preparation, storage and presentation products $225,768 $234,609 $234,505 Printing and publishing products 134,198 133,774 134,752 Home and road construction products 130,985 123,796 98,749 Aerospace, automotive and electronic products 126,639 118,842 111,432 Miscellaneous 19,459 30,379 36,742 Total $637,049 $641,400 $616,180
Standex International 2000 Annual Report 26 notes to consolidated financial statements
Financial Data related to U.S. and non-U.S. operations: U.S NON-U.S. As of and Year Ended June 30 (In thousands) 2000 1999 1998 2000 1999 1998 Net Sales $547,553 $542,463 $517,586 $89,496 $98,937 $98,594 Income from Operations 61,320 59,945 52,604 8,014 9,561 11,633 Assets Employed 313,263 301,663 310,101 68,499 75,808 71,528 The Corporate segment and the restructuring credit and charge are 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 2000 1999 1998 Service cost $ 5,329 $ 5,049 $ 4,064 Interest cost 10,357 9,616 9,055 Expected return on plan assets (16,526) (15,283) (13,925) Amortization of prior service cost 248 247 159 Recognized actuarial loss 340 326 67 Amortization of transition asset (1,746) (1,748) (1,773) Total (1,998) (1,793) (2,353) Curtailment/settlement 5 87 (784) Net pension credit $(1,993) $(1,706) $(3,137)
The following table sets forth the funded status and amounts recognized as of June 30, 2000 and 1999 for the Company's U.S. and non-U.S. defined benefit pension plans (in thousands): Year Ended June 30 2000 1999 Change in benefit obligation: Benefit obligation, beginning of year $148,170 $134,912 Service cost 5,329 5,049 Interest cost 10,357 9,616 Employee contributions 270 339 Amendments/settlements/curtailments 400 81 Actuarial (gain)/loss (11,442) 5,084 Foreign currency exchange rate changes (1,711) 222 Benefits paid (8,176) (7,133) Benefit obligation, end of year $143,197 $148,170
Year Ended June 30 2000 1999 Change in plan assets: Fair value of plan assets, beginning of year $180,604 $181,017 Return on plan assets 9,714 4,693 Employer contribution 1,867 960 Employee contributions 270 339 Foreign currency exchange rate changes (1,152) 144 Benefits paid (7,481) (6,549) Fair value of plan assets, end of year $183,822 $180,604 Fund status $ 40,625 $ 32,434 Unrecognized transition asset (3,144) (4,902) Unrecognized net actuarial gain (4,898) (802) Unrecognized prior service cost 2,788 2,641 Net amount recognized 35,371 29,371 Amounts recognized in the balance sheet consist of: Prepaid benefit cost 38,334 32,624 Accrued benefit liability (2,963) (3,253) Net amount recognized $ 35,371 $ 29,371
Year Ended June 30 2000 1999 Weighted average assumptions as of June 30 Discount rate 6.25 - 8.00% 5.25 - 7.75% Expected return on assets 8.75 - 10.00% 8.75 - 10.00% Rate of compensation increase 4.00 - 4.50% 3.50 - 4.50%
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 $7,436,000, $6,656,000 and $0, respectively, as of June 30, 2000 and $13,555,000, $12,412,000 and $5,802,000, respectively, as of June 30, 1999. 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 $1,863,000, $1,967,000 and $1,706,000 in 2000, 1999, and 1998, respectively. Standex International 2000 Annual Report 27 notes to consolidated financial statements Employees' Stock Ownership Plan The Company had an Employee Stock Ownership Plan (ESOP) covering certain salaried employees. Amounts provided for this plan were approved by the Board of Directors and aggregated $1,500,000 and $1,200,000 for the years ended June 30, 1999 and 1998, respectively. Effective July 1, 1999, the Board of Directors approved the merger of the ESOP and the Employee Savings Plans. The amount provided for the ESOP component of the merged plan aggregated $1,200,000 for the year ended June 30, 2000. Employee Savings Plans 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 were approximately $871,000 and $466,000 during 1999 and 1998, respectively. Effective July 1, 1999, the Board of Directors approved the merger of the ESOP and the Employee Savings Plans. The amount provided for the Employee Savings Plans component of the merged plan aggregated $919,000 for the year ended June 30, 2000. Profit Improvement Participation Share Plan The Company has maintained a profit improvement incentive plan in which certain officers and employees participate. The plan is being 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 are charged or credited to operations to reflect this liability. Amounts (credited) charged to operations for the years ended June 30, 2000, 1999 and 1998 were $(40,000), $286,000, and $780,000, respectively. 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 2000 1999 Change in benefit obligation: Benefit obligation, beginning of year $7,961 $8,017 Service cost 137 77 Interest cost 638 558 Actuarial loss (gain) (532) (111) Benefits paid (461) (580) Benefit obligation, end of year 7,743 7,961 Fair value of plan assets - - Funded status (7,743) (7,961) Unrecognized net actuarial gain (1,859) (1,327) Unrecognized transition obligation 5,800 6,244 Net amount recognized $(3,802) $(3,044)
The assumed weighted average discount rate as of June 30, 2000 and 1999 was 8.00% and 7.25% respectively. The annual assumed rate of increase in the per capita cost of covered health care benefits is 4.0% for retirees under age 65 in both 2000 and 1999 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 $654,000 and the net postretirement cost by $83,000 in 2000.
Net postretirement benefit costs are as follows (in thousands): Year Ended June 30 2000 1999 1998 Service cost $ 137 $ 77 $ 65 Interest cost 638 558 583 Amortization of transition obligation 444 446 446 Net amortization and deferral - (45) (129) Net postretirement benefit cost $1,219 $1,036 $965
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, 2000, 1,369,751 shares of common stock were reserved for issuance under these plans. Of this amount, and as noted in the table below, 787,563 shares are for options granted but unexercised and 131,714 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 Standex International 2000 Annual Report 28 notes to consolidated financial statements 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. Income tax benefits attributable to stock options exercised are credited to capital in excess of par value. At June 30, 2000, 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 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 2000 and 1999, the Company granted 123,814 and 7,900 shares, respectively, of restricted stock to eligible employees. At June 30, 2000, restrictions on the stock lapse between 2001 through 2010. Through June 30, 2000 restrictions on 2,400 shares have lapsed. The compensation expense associated with the restricted shares at the date of grant is charged to income ratably over the restriction period. The Company recorded compensation expense related to restricted stock awards of $610,000 and $20,000 for the years ended June 30, 2000 and 1999, respectively. Long-Term Compensation Program Under a long-term compensation program adopted in year 2000, 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, 2000, 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 at the date of grant is recorded to expense as the achievement of future performance objectives appears likely. A summary of stock options issued under the plans is as follows:
Weighted Average Number Exercise Year Ended June 30 of Options Price Outstanding, June 30, 1997 ($7.50 to $31.00 per share) 489,160 $20.51 Granted ($27.1875 to $32.1875 per share) 201,150 28.55 Exercised ($7.50 to $31.00 per share) (79,554) 13.55 Canceled ($20.75 to $31.5625 per share) (18,970) 29.54 Outstanding, June 30, 1998 ($7.50 to $32.1875 per share) 591,786 23.89 Granted ($21.875 to $25.875 per share) 92,700 25.64 Exercised ($7.50 to $22.50 per share) (36,800) 10.42 Canceled ($24.75 to $31.5625 per share) (17,031) 28.42 Outstanding, June 30, 1999 ($9.00 to $32.1875 per share) 630,655 24.81 Granted ($16.4375 to $23.375 per share) 228,700 22.82 Exercised ($9.00 to $15.8125 per share) (31,550) 12.09 Canceled ($23.00 to $31.5625 per share) (40,242) 27.91 Outstanding, June 30, 2000 ($10.315 to $32.1875 per share) 787,563 24.58 Exercisable, June 30, 2000 ($10.315 to $32.1875 per share) 448,167 $24.83
Standex International 2000 Annual Report 29 notes to consolidated financial statements The following table sets forth information regarding options outstanding at June 30, 2000:
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 190,560 $10.315 - $23.00 $19.20 2 175,160 $19.34 204,334 23.00 - 23.375 23.17 6 2,068 23.00 132,017 23.375 - 27.1875 25.83 6 61,845 26.03 149,667 27.875 - 28.375 28.34 10 106,104 28.33 110,985 28.375 - 32.1875 29.86 6 102,990 29.88 787,563 $10.315 - $32.1875 $24.58 6 448,167 $24.83
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) 2000 1999 1998 Income Before Income Taxes $45,361 $50,009 $31,952 Provision for Income Taxes 19,008 20,030 12,850 Net Income $26,353 $29,979 $19,102 Earnings Per Share Basic $ 2.08 $ 2.31 $ 1.46 Diluted $ 2.07 $ 2.30 $ 1.45
Options granted during 2000, 1999 and 1998 had a weighted average grant date fair value of $11.55, $8.87 and $8.42, 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 2000 1999 1998 Range of risk-free interest rates 5.72% 4.84% 5.74% to 6.83% to 5.53% to 6.4% Range of expected life of option grants (in years) 3 to 7 2 to 7 9 Expected volatility of underlying stock 30.6% 29.0% 17.1% to 33.6% to 32.2% to 23.0% Range of expected quarterly dividends $0.19 $0.19 $0.19 (per share) 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. STOCK PURCHASE PLANS Short-Term Incentive Program Under an annual incentive program, key employee participants can opt to purchase restricted stock at a discount to the market based on the lower closing price on the date of the grant or the day the award is paid out. The restrictions on the stock expire after three years. At June 30, 2000, 11,726 shares of restricted stock are outstanding and subject to restrictions that lapse between 2000 and 2001. 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 $29,000 for the year ended June 30, 2000. Employee Stock Purchase Plan The Company has an Employee Stock Purchase Plan which 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 173,906 at June 30, 2000. Shares purchased under this plan aggregated 92,568, 106,506 and 71,261 in 2000, 1999 and 1998, respectively. Rights Agreement The Company has a stock Rights Agreement 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. Standex International 2000 Annual Report 30 notes to consolidated financial statements Acquisitions and Dispositions During fiscal 1998, the Company purchased two companies and a product line for a total of $52,800,000 in cash, stock and a note. In October 1997, the acquisition of the net assets of ACME Manufacturing Company for cash and a note was completed. ACME is a manufacturer of heating, ventilation and air conditioning pipe, duct and fittings for the home building industry. During the second quarter, the Company purchased a hardware product line, which included inventory and machinery, of an unrelated company. In March, the Company acquired ATR Coil Company, Inc. for cash and shares of the Company's common stock. ATR Coil is a manufacturer of electronic coils and windings for the industrial, automotive and consumer markets. These transactions were accounted for as purchases and, accordingly, the consolidated financial statements include the results of operations of the acquired businesses from their respective acquisition dates. The purchase price of the acquisitions was allocated to the assets acquired based on their respective fair market values and resulted in the recognition of goodwill of approximately $18,500,000. If the acquisitions had occurred as of July 1, 1997, the unaudited pro forma consolidated results of operations would have been as follows:
Year Ended June 30, 1998 (In thousands except per share data) Net sales $632,771 Net income 20,702 Earnings per share: Basic 1.58 Diluted 1.57
As part of its restructuring, the Company sold three divisions in fiscal 1999. These transactions are more fully described in the Restructuring footnote below. In February 1998, the Company sold a division for net proceeds of approximately $2,600,000 and a net loss of $350,000. Restructuring In June 2000, the Company recorded a restructuring charge of $5,408,000 before taxes. The restructuring plan involves 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 has been recorded in the line item "Restructuring charge (credit)" in the Statements of Consolidated Income. The components of the charge include involuntary employee severance and benefits costs totaling $1,036,000, asset impairments of $3,775,000 and shutdown costs of $597,000. In 2000, $190,000 was paid in cash. During fiscal 1998, the Company recorded a restructuring charge of $12,758,000 before taxes. This action was intended to close, dispose of, or liquidate certain small under-performing and unprofitable plants, product lines and businesses. As part of this restructuring, the Company sold for approximately $5,100,000 in cash and notes its Christmas Tree Stand product line in December 1998, its SXI Technologies division in January 1999 and its Williams Healthcare division in April 1999. The following schedule reflects the Company's restructuring activities in fiscal 1999 (in thousands):
Involuntary Employee Severance and Asset Shutdown Benefits Costs Impairment Costs Total Reserve beginning balance $1,665 $10,061 $1,032 $12,758 Expended: Cash 1,696 - 840 2,536 Non-cash (disposals and write-offs) - 8,620 587 9,207 Total 1,696 8,620 1,427 11,743 Reduction and changes in estimated costs $ (31) $1,441 $(395) $1,015
Both the restructuring charge of $12,758,000 and the credit of $1,015,762 noted above are shown in the line item "Restructuring charge (credit)" in the Statements of Consolidated Income. Quarterly Results of Operations (Unaudited) The unaudited quarterly results of operations for the years ended June 30, 2000 and 1999 are set forth on page 19. Standex International 2000 Annual Report 31 independent auditors' report To the Board of Directors and Stockholders of Standex International Corporation: We have audited the accompanying consolidated balance sheets of Standex International Corporation and subsidiaries as of June 30, 2000 and 1999, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2000. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Standex International Corporation and subsidiaries as of June 30, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2000, in conformity with accounting principles generally accepted in the United States of America. /s/Deloitte & Touche Boston, Massachusetts August 15, 2000 Delotitte & Touche [logo] Corporate Headquarters Standex International Corporation 6 Manor Parkway Salem, NH 03079 (603) 893-9701 Facsimile: (603) 893-7324 http://www.standex.com Common Stock Listed on the New York Stock Exchange (Ticker symbol:SXI) Transfer Agent and Registrar: Fleet National Bank c/o Equiserve P.O. Box 8040 Boston, MA 02266-8040 (781) 575-3400 http://www.equiserve.com Counsel Hale and Dorr 60 State Street Boston, MA 02109 Independent Auditors Deloitte & Touche LLP 200 Berkeley Street Boston, MA 02116-5022 Shareholder Services Stockholders should contact Standex's Transfer Agent (Fleet National Bank c/o Equiserve, P. O. Box 8040, Boston, MA 02266-8040) regarding changes in name, address or ownership of stock; lost certificates or dividends; and consolidation of accounts. Form 10K Shareholders may obtain a copy of Standex's Form 10K Annual Report, as filed with the Securities and Exchange Commission without charge by writing to: Standex Investor Relations Department, 6 Manor Parkway, Salem, NH 03079. Stockholder Meeting The Annual Meeting of Stockholders will be held at 11:00 a.m. on Tuesday, October 31, 2000 at FleetBoston, Auditorium, Main Lobby, 100 Federal Street, Boston, MA. Standex International 2000 Annual Report 32 Design: Benes Brand Imaging Group, Lexington, MA essential products for your world BOARD OF DIRECTORS Thomas L. King* Chairman of the Board Edward J. Trainor* President and Chief Executive Officer John Bolten, Jr.+ Consultant David R. Crichton Executive Vice President/Operations Samuel S. Dennis 3d*+ Retired Partner, Hale and Dorr, Attorneys William R. Fenoglio Former President and Chief Executive Officer of Augat Inc. Walter F. Greeley Chairman, High Street Associates, An Investment Partnership Daniel B. Hogan, Ph.D. President, The Apollo Group, Management Consultants C. Kevin Landry* Managing Partner, T.A. Associates, A Venture Capital Firm H. Nicholas Muller, III, Ph.D. President, CEO Frank Lloyd Wright Foundation Edward F. Paquette Vice President and Chief Financial Officer Sol Sackel Former Senior Vice President of the Company CORPORATE OFFICERS Thomas L. King Chairman of the Board Edward J. Trainor President and Chief Executive Officer David R. Crichton Executive Vice President/Operations Edward F. Paquette Vice President and Chief Financial Officer Deborah A. Rosen Vice President, General Counsel and Secretary Daniel C. Potter Treasurer and Tax Director Robert R. Kettinger Corporate Controller Steven G. Brown Assistant Secretary OPERATING DIVISIONS INDUSTRIAL David R. Crichton Group Vice President Industrial Group Jarvis Caster Group Can-Am Casters and Wheels Standex Electronics ATR Coil Company James Burn Custom Hoists Spincraft Standex Engraving Group Eastern Engraving Keller-Dorian Mold-Tech Roehlen Engraving Standex GmbH FOOD SERVICE Jerry G. Griffin Group Vice President Food Service Group BKI Worldwide BKI USA BKI Europe Master-Bilt Products Federal Industries United Service Equipment Company General Slicing H.F. Coors China Mason Candlelight Procon Products CONSUMER Peter G. Gerstberger, Ph.D. Group Vice President Consumer Group Standard Publishing Bereanr Christian Stores Standex Direct Standex Air Distribution Products Snappy/ACME/ALCO *Member of Executive Committee +Founder of Company inspireme Berean Christian Stores offers a broad range of products including bibles, books, music gifts, art, clothing and church supplies. [photo shows the Berean Christian Store located in Fresno, CA] serveme USECO's Unitron V provides a food delivery system that maintains flavor and freshness for hot and cold products in institutional settings such as hospitals, schools, prisons and nursing homes. [photo is of the USECO Unitron V delivery system] carbonateme Procon Products' pumps are used in carbonated beverage dispensing machines as well as espresso machines. [photo shows a Procon pump] bindme James Burn International provides double-loop wire binding products to the printing industry. [photo shows materials with the James Burn International binding products] prepareme General Slicing provides a variety of products utilized in the preparation and sale of cold cuts, vegetables, cheese, etc. [photo is of the General Slicing food] deliverme Jarvis Caster Group manufactures casters and wheels for luggage carts for all the major hotels in the world. Brass Birdcager Cart courtesy of Forbes Industries, Ontario, CA. [photo shows the Brass Birdcage Card] graspme Standex Engraving provides the texture for making mobile phones easier to use. [photo shows a mobile phone] STANDEX 6 MANOR PARKWAY SALEM, NH 03079 603.893.9701 www.standex.com 931-AR-00