SXI
#The two major contributors to that were the sale of the sale of the BevLes product line last summer.
That was in June.
And the exit of their UK direct-sale presence.
So just over $1.5 million in the quarter.
Now, the product rationalization work continues in the business.
So as we've said before, the food service equipment business, our sales could get smaller before they get larger as we focus on the more profitable core products.
No.
No, I don't think so.
I'd have to answer that no today.
The history of the refrigeration business, if you go back over several years, within ---+ and to follow Standex, the refrigeration business has had these cycles kind of trending upwards.
But it has been cyclical.
As national chains have launched rollouts, we benefit from those, then they slowdown.
Gosh, back in 2011, Walgreens was building 600 stores.
That was a chief source of growth for the business.
That declined.
Subway grew.
And these other customers we've referred to have created this sort of lumpiness on the top line.
So our expectation of long-term growth hasn't changed.
You know, we'll continue to communicate as we get closer to our customers and understand where the market is going.
But we just see this as kind of a combination of timing and the natural cyclicality in national rollouts.
Great questions.
So let me first take ---+ in general, the capital allocation story, we've been pretty clear about how we prioritize our capital allocation.
First, to maintenance capital, then growth capital.
If we are highly levered, then we want to manage our debt, we pay down our debt.
The next priority is acquisitions, and then finally returning cash to shareholders in the form of dividends.
And in the past, it was potentially a buyback.
But <UNK>, we didn't really have a tool to buy shares from the market.
Our authorization was focused on countering the dilution from executive comp.
So I think the first thing to understand is this completes our capital allocation toolkit, if you will.
And our intent here is really just to use this opportunistically.
We believe in the long-term prospects and the long-term value creation of the business.
And we think the market will present us with opportunities to purchase shares opportunistically.
You also mentioned the M&A pipeline.
That ---+ it is getting busier.
I am personally spending more of my time on M&A activities now than I did a year ago.
I'd say the first couple years I was here, focused a lot on putting in place OpEx, the growth disciplines, getting the organic management processes in place.
And as I visualize the pie chart in my time, there is a much bigger slice going to M&A.
I'll tell you, that pipeline is more active.
So please don't read into the buyback that there is any dampening of our expectations on the M&A side.
I'll let <UNK> handle your last question.
<UNK>, like <UNK> said, in the priority list it's at the bottom.
We want first to have the maintenance capital, the growth capital.
If we are levered, pay down debt.
And then look at acquisitions and then finally return cash to shareholders through either dividends or share buybacks.
So I wouldn't anticipate a large purchase of shares.
We have nothing planned right now.
We are just doing it opportunistically when the market disconnects from our price.
I'll tell you, <UNK>, that is a work in process.
As you know, in ---+ let's separate again the three parts of the business: cooking, specialty, and refrigeration.
Refrigeration has continued to churn out new products in the sense that there are sort of variations on platforms and there's continuous evolution of the product line.
That has continued more or less on pace in refrigeration.
Cooking, I'd say new product development really went on the back burner as we were going through the consolidation.
And especially the last move that got so much attention a year ago, the move to Nogales.
And our new product development is beginning to ramp up.
We have some market tests going on in cooking solutions to explore what opportunities are out there, where we want to develop.
A little early for me to communicate what our expectation is about how extensive that will be.
Although at NRA, you will see some new products coming from our different business.
Our BKI brand has a new gas rotisserie, for example.
Our Combi Oven; we have a mini Combi we'll be presenting.
And we also have a conveyor oven that's a new product from the Bakers Pride brand.
So maybe one way to answer it is we are probably in kind of the second inning of that game and just starting to ramp up our new product development engine.
The third thing ---+ and the specialty side probably continues on pace, certainly in federal.
Although we are starting to see some pretty attractive opportunities in the pump business that could result in some growth this next year.
So I'd say if I'm not overly confusing you here, cooking needs to ramp it up.
And they.
ve started the market tests to identify the opportunities.
I think it's kind of a combination of both.
We are not the biggest player out there.
And where we succeed is where we can enter into a relationship with a customer who has an ---+ a change initiative, a change plan, we can work with them to develop equipment that fits their new kitchen concept.
Or in the case of a Combi Oven, to help them develop their menu around it.
So our sweet spot tends to be maybe smaller regional chains, higher-end chains, where there's some level of customization and customer intimacy possible.
So I'd say the challenge is more finding the right customers in the marketplace.
And our innovation follows those customer needs.
How to answer that.
I guess first, from a macro standpoint, our long-term expectation in this electronics business we've communicated we think it's a 4% to 5% growth business.
And I'd say that the magnitude of the opportunities that we're being awarded and that we are developing in the marketplace support that level of business.
As I mentioned in the script, some of our recent awards have been with our traditional sensors.
We also are expanding into adjacent spaces with new technology.
Last quarter, we communicated a new capacitive level sensor, which is a new technology for us.
We showed a picture in ---+ of a product that actually is a Northlake product, which is for a sort of an intelligent circuit breaker that's being rolled out at Florida Power & Light to help them more efficiently manage their grid.
So this high reliability magnetic space in supporting electrical grid, electrical distribution, is a growth area for us as well.
You know what.
I was ---+ if anyone on the line ever wants to go to a very interesting tradeshow, the Space Symposium in Colorado Springs.
I was there a few weeks ago.
And I view the space business ---+ there was some turbulence in the space business with the emergence of, call it, Space 2.0, the commercialization of space.
That will change the way the dollars are spent in space.
But our view is that the market continues along with sort of a slow growth; maybe 2% growth.
And our participation in that we believe will continue to be lumpy, as it has been in the past.
But our long-term expectation is that it remains about where it's been for us with slight growth.
Yes, that is a great question and one that's got us preoccupied.
I'd say every chain has a slightly different story, but the variation on the theme is there is uncertainty to us when national programs will be rolled out.
We are participating in bids and RFQs.
We are working with customers on prospective rollouts, with drug stores and with some of our supermarkets.
But when they will pull the plug on these new programs is unclear to us.
Well, yes, I guess I'd comment to focus on those growth opportunities we do see.
There are companies like Walgreens is building fewer stores.
Subway is investing outside of North America.
So there are some ---+ some of the national chains that have been big customers in the recent past don't seem to have anything on the horizon.
However, there are others that do have opportunities.
We are pursuing those.
It's the timing of those opportunities that's unclear.
Thank you for asking about hydraulics.
Our hydraulics president will be appreciative of the interest.
It's somewhat fragmented because there are a lot of smaller players in custom hydraulics.
And if you imagine the kinds of specialty vehicles with, say, scissor lifts to bring food and concessions up to ---+ to raise them to door during the plane changeover.
We'll provide the hydraulics to those scissor lifts, so a customer like a JBT that makes equipment like that.
That's right.
Yes.
Yes.
So let me elaborate on that.
So the midteens margins, the one caveat I would put out there is the potential timing of some of the space shipments, these large domes.
And you've seen them.
They can ship a quarter or two.
We have shipments scheduled in May and June.
If those go out, midteens.
I think the last time we talked, about 15% in the quarter that it will be highly dependent on the shipments of the space domes.
However, we are confident that double-digit margins in any case and absolute growth year on year.
It's those two things.
It's space shipments and the aviation ramp.
So yes, the Wisconsin plant will make some contribution, but they will really be making their first shipments in June.
So this has more to do with the ramp-up of the existing aviation contracts, ramp-up in Enginetics, and the space projects.
Well, I'll tell you what.
We have a backup plan.
So if we have troubles with our plant, we have outsourcing partners we can continue to meet customer needs.
So we've got customers protected, and of course, that means that our top line will ---+ commitments will be met, but that the outsourcing would be a higher cost.
So from that standpoint, we've got our deliveries well scheduled.
We are confident in that.
For the moment, the ramp-up is going well.
We think it's being well managed and we are on track to produce in June.
No.
No would be the short answer to that question.
You know in the past, <UNK>, we communicated our expectations of the growth for this business is 5% to 7%.
And they have continually exceeded that in the past.
So we look at the market indicators of new model rollouts and refreshes, which support that 5% to 7%.
And I think that's ---+ we think that's a reasonable number.
Now, we do have some growth initiatives out there.
To the extent we are able to grow with nickel shell, that's a new source of revenue for us.
Laser engravings are at a higher price point than chemical etching.
So as that becomes a bigger part of the market, there is maybe some growth from there.
It's a little early for us to revise our expectations based on those initiatives.
So that 5% to 7% number is a safe range.
Yes, it's just shy of $300,000, $400,000 of startup costs.
And what these are is, as I mentioned: the laser engraving.
And in fact, in recent earnings release, we talked about the investments we're making in laser in North America and China.
And the laser sales this last quarter in North America were just very, very slow.
We are still commissioning the machine.
We had all the cost in the revenue.
We put in place nickel shell in Detroit.
And the revenue will start this quarter.
And we also have fully staffed a design hub in Detroit.
So these are all North American investments where we are taking the growth initiatives that have been successful in Europe and building them in North America.
So our view is based on the success we've had in Europe, based on the discussions we are having with customers in North America, that this is a timing issue of the ramp of these new offerings.
But let me comment on the margin, too, because we often get asked about the margins: what's the margin expectation for engraving.
And they have quarters in the 20%s and mid-20%s.
And I think over time, we've said reasonable expectations: upper teens to low 20%s depending on the quarter and the phasing of the projects we get.
They'll be in the Q, right, <UNK>.
Yes.
They are going to be in the Q later today.
So food service: $38 million basically in backlog.
And that's to be delivered in both a year and beyond a year, right.
Yes, that's correct.
Engraving is $18.5 million, engineering technologies is $86 million, electronics is $43 million, and hydraulics is $5.7 million.
So it's $192 million versus $204 million last year.
But there's some lumpiness in there that, again, we even say in our Q that this is not a quote unquote leading indicator.
This is backlog can be very lumpy.
You'll get it later today.
One thing (inaudible) aviation.
I guess what I would do is I'd just refer back to previous communications we've had about the size of some of the awards that we won in the last couple years.
The lipskin, the plug-in nozzle and the two lipskin awards all total ---+ with the press release, if you add the value we put in the press release is it's $13 million to $15 million if you add all those together.
We have ---+ in the last earnings release, we said that we believe the market we serve has into the 2020 is a CAGR of 7% growth.
But we haven't put a number out there of what we think this aviation business can grow to.
Obviously, we have planning assumptions internally, but we haven't communicated that.
I guess we'll have to ---+ I'm looking at <UNK>.
We'll think about it in the future how we set expectations.
Because we remain very bullish about the segment and it becoming a more important supplier to those key customers.
On oil and gas, whether I'm confident or not ---+ what was it, $800,000 or something in the quarter.
So it doesn't have much farther to drop.
So I think there is some MRO business.
There's some parts for ---+ to support installed products in the field.
And we anticipate continuing to get some of that.
So that's why ---+ that's where I come from in saying it will bounce along the bottom.
So the products that we deliver, we have two applications.
Out of our UK plant, we deliver shims that are part of the mooring system on offshore platforms.
That business, you know, we are skeptical ---+ if that comes back, that will be longer term because that's more expensive ---+ is a more expensive source of oil.
In North America, we serve the energy markets by selling parts that going to land-based turbines that you find in oil and gas compression and distribution.
So it's kind of midstream investments.
I thank everybody for their interest in Standex.
We continue to be confident we are working on the right priorities and pleased with the operational progress we see in our business.
We look forward to following up with you next quarter.
Thank you.
