Standex settles ice machine lawsuit; reports 3Q earnings

But the company did not admit fault in the Louisiana lawsuit

Standex International Corp. has agreed to pay $6 million to settle a lawsuit that blames the Salem-based manufacturing conglomerate for supplying faulty freezers for bagged ice machines that leaked in grocery stores, according to the company’s financial disclosure forms filed last week with the U.S. Securities and Exchange Commission.

The company did not admit fault in the March settlement that was approved by a Louisiana state court. It said it will record a $2.8 million expense, cutting down net earnings to $9.6 million, or 76 cents a share, for the third quarter of its fiscal year, which ended March 31.

That’s still a $500,000 improvement from the same quarter the previous year, as the company continues to benefit from jettisoning its unprofitable Air Distribution Products business and its $43 million acquisition of Meder, a German-based manufacturer of reed switches, relays and sensors that doubled quarterly sales and earnings for Standex’s electronics division. Indeed, the Meder acquisition was responsible for 9.3 percent of the company’s 10.2 percent sales growth to $166 million for the quarter.

It was the food service equipment group that was hit by the settlement to the suit filed by Ultra Pure Waters Technologies Inc., based in Lafayette, La. Ultra Pure developed a product called ICEX Ice Island, which makes, bags, stores and vends ice on site for sale at retail locations, primarily grocery stores and convenience stores chains.

Ultra Pure hired a contract manufacturer, Courtesy Manufacturing Company, which subcontracted the freezers to Standex through its Master-Bilt division, and then leased them to Food Lion and Safeway groceries. But Safeway terminated the deal because melting ice was leaking onto the floor, creating hazardous conditions for customers, according to Ultra Pure, which wanted its money back from Standex.

Standex – among other defenses – said leaks weren’t due to a freezer defect, but to the way it was put together with the rest of the apparatus. The company blamed Ultra Pure and Courtesy, and the case went up to the Louisiana Court of Appeals, only to be remanded back to the lower courts in May 2012. It was settled in March 2013, during the course of the trial.

Standex’s food equipment division sales decreased 1.5 percent to $86.6 million and income dropped 17.6 percent, to $5.3 million.

The company said it hopes to improve its bottom line by laying off workers at its engraving group sales division and opening up a facility in Brazil, though the move will cost Standex some money in the short run.

Standex was also able to save $2.8 million by dropping life insurance for its retirees.