Standex move to more tech acquisitions pays off
Overall, company sees slight rise in sales, big jump in income
Despite slower economic growth and trade war disruptions, Standex International Corp. has been able to slightly increase sales and sharply increase annual income, according to the company’s most recent financial filings.
The results are primarily due to acquisitions, headcount reductions and a lower tax bill.
The Salem-based conglomerate reported $209 in million sales in the fourth quarter, nearly $6 million more than the same quarter last year, resulting in a slightly lower quarterly net income of $12.4 million, or 99 cents a diluted share. For the fiscal year, sales went up by 2.7% to $792 million, resulting in a net income of nearly $68 million, or $5.38 a share, almost double the $36 million reported in fiscal 2018.
But it would have been slight loss without the $20 million sale of its unprofitable cooking division and a $20 million reduction in its federal tax bill. The latter was due mainly to the 2018 tax cuts, which hit the company hard last fiscal year (when it had a 55% effective tax rate) because of repatriation of foreign income. But now the cuts benefit the company.
Many of those foreign operations are in China. Indeed, the company has more facilities in Asia than in the United States (and about a third of its workforce overseas as well)
“As part of our low-cost country sourcing strategy, we (i) maintain manufacturing facilities in China and (ii) import certain components and finished goods from our own facilities and third-party suppliers in China,” the company explained in its annual filing. “Many of the components and finished goods we import from China are subject to tariffs recently enacted by the United States government as well as additional proposed tariffs.”
This, and a slowdown in the auto industry particularly contributed decreases in segments of its engraving division (down 19%) and electric division (down 9.4%). The company also reported a 7% decline in sales and 19% drop in income from food service equipment, its largest and most unprofitable even after the sale of the cooking equipment division.
Instead, Standex has shifted toward higher-margin high-tech businesses, such as the $39.2 million acquisition last September of Agile Magnetics, a manufacturer in Concord that provides components for transformers, inductors and coils for the semiconductor, military, aerospace, healthcare, and industrial markets. Agile already added about $9.3 million in sales to the company’s electronic division. A new “cost competitive” plant in India, is expected to help matters in that division as well.
The company also is “reducing headcount” in unprofitable operations particularly in engraving and food operations, it said. (The company did not say how many people would be laid off or where.)
The company’s engineering division performed the best in the fiscal year. Sales jumped 16 percent and income rose 72%. Nearly three-quarters of those sales were due to aviation and space customers.
The company’s hydraulics division (which supplies equipment for garbage trucks and some construction vehicles) is also doing well, with sales up 12 percent and profits up 20 percent.
This will be the last Standex earnings report for chief financial officer Thomas DeByle, who will be leaving to become the CEO of NN Inc., another diversified industrial company, based in North Carolina. He will be replaced by Ademir Sarcevic, former senior vice president and chief accounting officer of Pentair plc, an Ireland-based water treatment company with a U.S. office in Minneapolis.