David C. Calusdian - Executive Vice President and Partner Roger L. Fix - Chief Executive Officer, President, Executive Director and Member of Executive Committee Thomas D. DeByle - Chief Financial Officer, Vice President and Treasurer

Joseph Bess - Roth Capital Partners, LLC, Research Division Jason Nacca - Sidoti & Company, LLC

Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Standex International Earnings Conference Call. My name is Derek, and I'll be your operator for today. [Operator Instructions] We shall facilitate a question-and-answer session at the end of the conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. David Calusdian from Sharon Merrill. Please proceed. David C. Calusdian: Thank you, Derek. Please note that the presentation accompanying management's remarks can be found on Standex's Investor Relations website, www.standex.com. Please see Standex's Safe Harbor passage on Slide 2. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to Standex's recent SEC filings and public announcements for a detailed list of risk factors. In addition, I would like to remind you that today's discussion will include references to EBITDA, which is earnings before interest, taxes, depreciation and amortization; adjusted EBITDA, which is EBITDA, excluding restructuring expenses and onetime item; non-GAAP net income; non-GAAP income from operations; non-GAAP net income from continuing operations and free operating cash flow. These non-GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in Standex's second quarter news release. On the call today is Standex Chief Executive Officer, Roger Fix; and Chief Financial Officer, Tom DeByle. I'd now like to turn the call over to Roger. Roger L. Fix: Thank you, David, and good morning, everyone. Please turn to Slide 3. We continued to perform well in the second quarter, reporting 8.9% growth in revenue, with 0.5% increase in organic revenue and acquisition growth of 8.5%. Foreign exchange was negative at 0.1%. Our year-over-year organic growth rate was negatively impacted by difficult year-over-year comparison in Q2 at our Engineering Technologies segment as a result of lower sales of high-margin products to the oil and gas market, as well as softening demand we experienced late in the second quarter. On the bottom line, we reported year-over-year non-GAAP operating income growth of 15%, with the Electronics and Hydraulics segments reporting double-digit increases. Non-GAAP EPS from continuing operations was up 10.8% to $0.92 per diluted share. This included accretion from our Meder acquisition. During the quarter, we booked $0.7 million of income from operations from a retrospective payment from a customer in the space sector related to incremental costs reported in the cost of sales in prior periods, which were attributable to customer-supplied materials. Given the softening demand environment that we experienced in several of our end-user sectors, we're pleased with our overall top and bottom line performance in the quarter. Looking at the balance sheet, we generated good cash flow in the quarter, which resulted in net debt at December 31 of $29 million, a sequential decrease of about $6 million from the first quarter and our net-debt-to-capital ratio improved to 9.8%. As a result, we remain in a very good position to make further strategic acquisitions. Please turn to Slide 4, which provides an update on the transformation that we've made on the bottom line performance of the company over the past 4 years. With the $0.92 per share we reported in Q2, we've now achieved $3.59 per share in non-GAAP EPS for the trailing 12 months. This demonstrates the impact of our lower-cost structure and the success of our organic and acquisition growth initiatives. With that, Tom will discuss our second quarter results in some detail. After which, I'll discuss the recent performance of each our business segments. Tom? Thomas D. DeByle: Thank you, Roger, and good morning, everyone. Please turn to Slide 5, which summarizes our second quarter results. Net sales for the second quarter increased 8.9% to $168.6 million from $154.9 million in the second quarter last year. Excluding special items, operating income grew 15% to $17.3 million from $15.1 million a year ago. Adjusted EBITDA grew 16.5% to $21.4 million. As Slide 6 illustrates, net income from continuing operations for the quarter include posttax $645,000 of restructuring charges and $59,000 of acquisition-related costs. The second quarter of 2012 included $459,000 of restructuring charges. Excluding these items from both periods, non-GAAP net income from continuing operations increased 11.3% to $11.7 million. Earnings per share from continuing operations, excluding special items, grew 10.8% year-over-year to $0.92 per share. Turning to Slide 7, net working capital at the end of the second quarter was $130 million compared with $131 million at the end of Q1 and $116 million at the end of Q2 last year. Working capital turns were 5.2 turns in Q2, down from 5.3 turns at the end of Q2 last year. Inventory turns were 4.8 compared with 5.1 a year ago. We continue to strive for working capital turns hovering around the sixth level. Looking at Slide 8, we had free cash flow from continuing operations of $10.3 million during the quarter, up from $8.9 million in Q2 last year. Capital spending for Q2 of fiscal 2013 was $4.8 million, consistent with our previously disclosed increase to our capital budget to fund top line growth and productivity improvement. In fiscal 2013, we continue to expect that our capital spend will be slightly greater than depreciation, more in the range of $14 million to $15 million. Slide 9 illustrates our net debt as of December 31st. Our net debt decreased both sequentially and on a year-over-year basis to $28.9 million from $37.6 million a year ago and $35 million at the end of Q1. We define net debt as funded debt less cash. Our balance sheet leverage ratio of net debt to capital was 9.8% at the end of the second quarter of fiscal 2013 compared with 13.3% a year earlier and 12.1% in the sequential first quarter. Our strong balance sheet is well positioned to meet our needs. We continue to have ample financial flexibility to fund growth, acquisitions and other strategic initiative. With that, I'll turn the call back to Roger. Roger L. Fix: Thank you, Tom. Please turn to Slide 11, Food Service Equipment Group, and I'll begin our segment overview. Sales and operating income at Food Service were essentially flat for the quarter. On the refrigeration side of the business, continuing strong sales to quick-serve restaurant chains were substantially offset by softness at drug retail stores. We also saw a seasonal pause in demand at the dollar store segment. We continue to expect full year sales in dollar stores to be equal to or greater than in fiscal 2012, and we believe this segment will be a very good long-term growth opportunity for us. To enhance our competitiveness in the drug retail, dollar store and convenience store segments, we have begun working aggressively to reduce the costs of our refrigerated merchandising cabinet product line. These efforts include value engineering of products to standardize components in order to reduce part count and weight of the cabinets, while adding features as well as aligning our manufacturing processes using lean manufacturing techniques to lower labor costs. On past calls, we provided details on our rack refrigeration, ultra low scientific refrigeration and Value Line refrigeration offerings. These products continue to be well received by the market and should yield good growth for the foreseeable future. Turning to Cooking Solutions. Demand further softened in the retail grocery segment in the U.K. as a result of the macroeconomic conditions there. We also experienced lower sales to the U.S. grocery store segment, where key customers continue to constrain capital spending. We've implemented headcount reductions in both the overhead and direct labor areas in light of the lower volume in this segment. On the positive side, the Cooking Solutions Group made good progress in our effort to penetrate a greater number of major chains, both domestically and internationally, much like we have successfully done on the refrigeration side of the business. We've also done well in expanding our presence in the dealer channel. Our beverage dispensing pump business also continue to be weak in Europe. We saw good growth from our custom merchandising businesses in the quarter, although these sales can be lumpy due to timing of rollouts. Please turn to Slide 12, Engraving Group. Standex Engraving Group sales were up 2.3% in the second quarter and operating income was up 1.5%. Excluding the impact of foreign exchange, Engraving sales were up 3.6% on a constant currency basis. During the quarter, soft demand for automotive program work for mold texturizing in North America was offset by strength in Europe and China. Based on the current schedule for major platform launches, we expect this trend to reverse in the second half of this fiscal year. Let me give you some context on how we see the year shaping up in Engraving. On our year end 2012 call, we discussed our expectation for lower mold texturizing sales this year than in fiscal 2012, which was far and away, a record year. But we also expected that fiscal 2014 would be even better than the record 2012 for mold texturizing due to major automotive platform launch schedules. Based on our performance in the first half of the year, we now expect that fiscal 2013 sales will be flat, and we continue to believe that fiscal 2014 will be a record year. Over a year ago, we began a sales initiative to increase our penetration in the domestic Chinese automotive OEM market for mold texturizing. And we're seeing nice progress. Our sales efforts in China have been historically focused on American, European and Japanese OEMs. As discretionary income has increased in that country, auto consumers are now seeking higher-quality vehicles with enhanced interior styling. As a result, domestic Chinese automotive OEMs are turning to Standex for our high-quality engraving capabilities. Turning to our roll, plate and machinery business, we continue to see early signs of improvement driven by building product applications. We also continue to make progress in executing on our emerging economy strategy in Engraving, which includes drawing our infrastructure in China, Asia Pacific and South America. During the quarter, we completed the move into a bigger and better-equipped facility in Brazil where we see good opportunities despite a difficult economy. The distraction of the move did detract somewhat from sales and profitability in the quarter in that geography. We also planned our new facility in Korea. As planned, we're already performing mold texturizing out of that facility. The facility and our capabilities have been well received by both the Korean automotive OEMs and with General Motors, which uses Korea as a center for the design of many of their smaller vehicles. As a result, this new Standex location is not only important for domestic Korean sales, but also to obtain business in North America. Looking ahead a few quarters, our fourth facility in India remains on target and should be open in Q1 of fiscal 2014. And finally, we're in the process of moving our Mexican operation into a larger facility in an area about 200 miles Northwest of Mexico City. This region has become a growing center for automotive production. A number of OEMs, toolmakers and tier 1 auto and tier [ph] suppliers are opening plants in this region, which we believe will make this a good growth opportunity for our Engraving operations going forward. Please turn to Slide 13 and our Engineering Technologies Group. Engineering Technologies sales were essentially flat, and our operating income was down 1% year-over-year in the second quarter. A year ago, we shipped a very large high-margin order to the oil and gas market, so our year-over-year comparison was difficult. We expect that the oil and gas market will remain soft for the remainder of the fiscal year and then begin to strengthen again in fiscal 2014. As I mentioned in my opening remarks, during the quarter, we booked $0.7 million of operating income from a retrospective payment from a customer in the space sector related to incremental cost reported in cost of sales in prior periods, which were attributable to customer supply and materials. During the quarter, we continue to see good quoting activity in the space sector for both developmental and production work for NASA, as well as commercial space customers. We're seeing good opportunities in the NASA Space Launch System or SLS program and are positioned well with participation in fuel tanks, capsules and rocket engines being developed in this manned space flight program. We're also seeing good long-term opportunities in the land based gas-fired turbine market. In addition to some recovering demand from our major customer in this segment, we have gained market share at several other customers as a result of our efforts to diversify our customer base. In the aviation market, we're generating significant interest from customers seeking our capabilities for jet engine lipskins and a number of other components internal to jet engines for commercial aviation applications. Customers recognized that our advanced forming techniques and unique engineering solutions provide a very cost effective and technologically sound value. Please turn to Slide 14, Electronics. Electronic sales were up 122% and operating income increased by 127%. I'll discuss our legacy Electronics business first and then talk about the continued success we're having with our Meder acquisition, which was again accretive to earnings in the second quarter. At the legacy business, sales from new customer programs for magnetics and sensors continue to build and more than offset soft reed switch sales in China and Asia Pacific. We have a robust pipeline for new products and customer programs that we expect will contribute to revenue growth in future quarters. Our Meder acquisition also performed well. We continue to exceed our original expectations. The integration is proceeding on plan, and we've completed the first round of training of engineers and sales people from both organizations about the respective product offerings. We've also begun to introduce the combined product portfolio to our global sales channels and customer base, and initial reactions have been very good. We're now working with our customers on the engineering test and evaluation process and remain confident that our expectations for sale synergies will come to fruition. In addition to sale synergies, we're making progress in the realization of cost synergies in 2 specific areas: First, we've identified approximately $0.5 million in material and procurement savings that will be implemented in the next 12 months; and second, we will begin to implement facility rationalizations in the second half of this fiscal year that will be completed early next fiscal year. We expect these facility rationalizations will generate between $1 million and $1.5 million of annualized cost savings. We're enthusiastic about the opportunities created by the acquisition of Meder and look forward to reporting continued progress leveraging both sales and cost synergies. Please turn to the Hydraulics Group on Slide 15. Hydraulics segment sales were down 5.2%. While sales were down, operating income grew 23.3% due to cost reduction and productivity improvement initiatives as well as a greater mix of sales from our China facility. We continue to see weak demand from the North American market for dump trailer and dump truck systems, as well as export sales to Mexico, Australia and South America. This weakness was more than offset -- more than offset growth from the refuse handling application market leading to a decline in sales. During the quarter, we continue to experience growing demand from refuse handling applications as a result of our ongoing efforts to penetrate this market. To date, most of our success in the refuse market has been in roll-off trucks. We're in the process of launching new products for the refuse market later this calendar year, specifically for garbage trucks, which we believe will allow us to further grow sales in this segment. Our facility in China, which has been instrumental in our ability to grow share in the refuse handling market, was the other bright spot in terms of second quarter Hydraulics sales and profitability. We continue to use our low-cost position in China to penetrate new accounts around the world in both telescopic and rod cylinders. Please turn to the summary on Slide 16. Overall, we're pleased with our financial results for the quarter, given the challenging conditions we're experiencing in several of our end-user markets. Our performance on the bottom line continues to improve, and we're now on an annualized run rate of about $90 million in EBITDA. We also reported strong cash generation, lowered our debt and positioned the company very favorably to continue to execute our organic and acquisition growth strategies. We're seeing the results of our organic growth strategy in all of our operating segments. Each has a number of organic growth initiatives that we have been executing for the past several years, including the introduction of new products and technologies, penetration of new end user and geographic markets and development of specific customer solutions, which we will continue -- which we believe will continue to allow us grow our top line through market share gains. We're also demonstrating the success of our acquisition strategy as well, given the year-to-date accretion and expected sales and bottom line contributions from Meder. We continue to have a solid pipeline of acquisition candidates and our balance sheet is very well positioned to complete additional acquisitions. Going forward, we're confident that we have the right strategy to continue to grow sales, increase profits and generate long-term shareholder value. With that, Tom and I will be pleased to take your questions.

[Operator Instructions] Our first question will be coming from the line of Joe Bess from Roth Capital Partners. Joseph Bess - Roth Capital Partners, LLC, Research Division: Roger, I was hoping that you could drill down a little bit more into the cost savings that you're going to be looking at achieving with the merchandise cabinets. What sort of percentage of revenue would you say that these cabinets provide to Food Service Equipment? And then also, is this margin meaningfully -- is their margin meaningfully below the total group? Roger L. Fix: We don't go into percentage of sales. But what I can tell you is that we're targeting on the order of a 20% cost reduction in total between the material and labor savings. We believe that will be very significant. It's really not so much about improving operating margin as it is improving our competitive position to be able to take share and grow the top line. And we think the 20% move in cost will be very significant in our ability to generate top line growth. Joseph Bess - Roth Capital Partners, LLC, Research Division: Okay. So are you anticipating that with these cost reductions, you'll be dropping price and you'll be able to get a little bit more revenue? Roger L. Fix: As required. Again, many of these opportunities are very large in scope, requiring obviously more aggressive pricing, which is pretty consistent with large project or roll-offs as we call them. So yes, I think it will improve our competitiveness and allow us to take share. Joseph Bess - Roth Capital Partners, LLC, Research Division: Okay. So with that, we shouldn't see too much affecting operating margin, but revenue growth should improve as you guys improve these margins then? I'm trying to get an idea just of how meaningful this can be to the top line then. Roger L. Fix: Well, again, we haven't given specific guidance. But what I can tell you is a typical dollar store, and we're looking at the major players, the value add of these systems per store is probably between $10,000 and $25,000 per store depending on the size of the store, the number of cases, that type of thing. And the dollar stores have total installed base. And the largest guy is about 6,000 stores. They're growing stores anywhere from 250 to 1,000 stores for some of the larger guys. So there's a sizable market growth out there as well as replacement opportunities as the equipment ages and needs to be replaced. Joseph Bess - Roth Capital Partners, LLC, Research Division: Okay, that's really helpful. And then also on the M&A pipeline, are you able to talk about what you guys are seeing? What the type of valuations are out there? And then is -- which may be segments that you guys see, things that could be coming in the near term? Roger L. Fix: Well, we don't disclose which segment. I can say we're looking broadly across the portfolio, looking again for very strategic sales and cost synergies to help us build our existing platforms. As far as multiples, I think they tended up, certainly, over the last say, 12 to 18 months. But again, it's very much size dependent as well as driven by the kind of the strategic fit. So tending up a bit.

[Operator Instructions] Your next question is from the line of Jason Nacca from Sidoti. Jason Nacca - Sidoti & Company, LLC: I just want to first go into the drugstores and those sales you're seeing. I understand there's a bit of a slowdown, but I'm just wondering what you guys are seeing? If this is kind of a shift in strategy to employ refrigeration? Or maybe this is just some seasonal softness you're seeing? Roger L. Fix: Well, there's really a couple of trends going on. As we talked about, specifically, drugstores, which the biggies clearly are Walgreens, CVS and Rite Aid. If you look certainly at the public filings of Walgreens over the last 2 to 3 years, they've significantly reduced the number of store openings. For example, they're working more on improving their same-store sales as in comparison to building more stores. So that's a longer-term trend that we expect to continue. It would appear that they've kind of bottomed out. They used to build between 400 and 500 stores a year, 450 was a good average. They're now down to around 200 to 250. But again, that seems to have stabilized. In other cases, even at Walgreens, they're introducing new programs, they're introducing a wellness program that's been very well advertised on national TV, and we're participating in some significant opportunities for rack refrigeration to support that. So on one hand, their new store sales are down, but their capital spending on some of these programs are up. The other trend I think we referred to, you maybe intermixing here is in the dollar store area. That's a whole another opportunity for us, and that's clearly one that's on a growth trajectory. We've mentioned it in past calls that a lot of retailer -- retail stores that historically may not have had an emphasis on food, prepared food programs are incorporating them because they see that there's good margin and gross opportunities in them. And the dollar store and the C-store areas are classic examples where over the last 2 or 3 years, there's been considerable emphasis on adding, what we call, food programs. And as a result of that, obviously, capital equipment. What we mentioned in our comments is that, again, particularly in the dollar store segment, which is in our case, more new store driven, there's a seasonal low and it's kind of the late second quarter, November, December, early part of our third quarter but the projections that we're seeing from our customers are that they would expect to resume building in the spring timeframe. And again, their -- the current projections for build count are equal to or greater than what we saw last year. Jason Nacca - Sidoti & Company, LLC: Okay. And shifting gears to Engineering Technologies. I was just wondering if you could go further into the jet engine lipskins and that opportunity and if this is something kind of new? And where you see this going? Roger L. Fix: We've participated in a lipskin market for a number of years. Goodrich, on the regional jet side, has been where most of our work goes. Again, the lipskin is that kind of silvery looking piece on the inlet side for the inlet of a jet engine. More recently, we're seeing opportunities in some of the larger aircraft. The -- say it, the Boeing and Airbus kind of products, so that represents a new opportunity for us to kind of come off of the regional jet into the bigger aircraft. The other opportunity we refer to is internal through the jet engines. And this is an opportunity that is relatively new for us. We've been working on it for the last year or so. In this case, we're providing near net-shaped spun components that go into the hot sections of the jet engine, which replace forgings. The value proposition here is the forgings are very expensive. You typically throw away 40% to 50% of the weight of the forging in terms of the chips that are machined off of the forging and then you have, obviously, all the machine time required to actual machine the component to finished shape. We're able to take a flat sheet of metal and spin it into near net [ph] condition and save a considerable amount for our customers. So this is a new opportunity, one that will take us several years to develop. But we see it as a very significant opportunity in the future for us. Jason Nacca - Sidoti & Company, LLC: Okay. And now going over to Engraving. Just give us a little color on the Korean -- regarding the Engraving. What you're planning to do with that? And the schedule that you're going to see this plant starting to get online? Roger L. Fix: Well, again, the 2 major OEMs from Korea that are global players. Obviously, their design center, their engineering, their interior design is all headquartered in Korea. So having a facility on the ground where we can do mold texturizing, work specifically with the designers in regards to grain selection, grain development, working on the interiors of the vehicles in the early days of design is very important to being -- to be able to capture business there. The other aspect is -- and this is not unique to Korea. But General Motors has -- is using Korea currently as the design center for, as I mentioned in my comments, a number of their smaller car platforms. And this is kind of consistent. Ford has become and started to use Thailand in more of their design center work. VW is coming outside of Germany into China for some of the design work. So our global infrastructure, having not only having plants, but technicians and sales engineers that can work directly with these OEMs is very important because when you capture business it's done at the design center, but then that work, historically, could be done anywhere in the world. In other words, obviously, GM is producing vehicles here in North America. But a lot of the design selection, a lot of the texturing selection is being done in Korea. So having that opportunity to call on the customer in Korea then creates more work for us in North America in this case. Jason Nacca - Sidoti & Company, LLC: Okay. Now besides new applications, still in the Engraving segment, are you seeing some pickup in the roll and plate engraving based on some stronger signs in the economy? Roger L. Fix: Yes. As I mentioned, a lot of our roll and plate work is on building product-related applications. So things like decking material, engraved or embossed plywood materials, wallpaper material, things of that nature are produced by, again, taking either wood or nonwoven material. In the case of say a metal door, metal, running in between 2 engraved or embossed rolls to create the finished product. Obviously, that's driven by both new home construction as well as repair and renovation work. But the new building side of that is very important. So as we've seen housing starts over the last 12 months begin to improve, we've seen a definite improvement in the number of sales and the number of rolls that are being purchased in that area.

At this time, I'm showing no further questions in queue. I would like to turn the call back over to Mr. Roger Fix for any closing remarks. Roger L. Fix: Well, thank you, everyone, for participating in the questions. And we look forward to talking to you next quarter. Thank you very much.

Ladies and gentlemen, that concludes today's conference. We thank you for your participation. You may now disconnect. Have a great weekend.