Standex International Corporation

1866–1983

Standex International Corporation operates as a global multi-industry conglomerate that manufactures over 48,000 products in three key areas including Food Service, Industrial Products, and Consumer Products. With over 90 plants in the United States, Western Europe, Canada, Mexico, Australia, Singapore, and Mexico, the company's diverse product line includes items such as ovens and rotisseries used in supermarkets, restaurants, delicatessens, and convenience stores; rolls and texturizing molds used for car interiors; heating and air conditioning ductwork used in homes; Master-Bilt products including cold cases used in the beverage and frozen food industry; hydraulic cylinders used for construction dump trucks; casters and wheels; and pumps used in beverage dispensing machines. Standex also sells bibles, books, music, art, clothing, and church supplies through its Berean Christian Stores outlets and publishes Christian-based material through its Standard Publishing business. The company's Standex Direct business offers unique foods including fruits, vegetables, and salsas through six different catalogs.

Postwar Origins

The origins of Standex International may be traced to shortly after World War II, when Bolta Plastics, a vinyl sheeting company, was founded by John Bolten, Sr.; his son, John, Jr.; Samuel Dennis III; and Daniel Hogan, a former Navy officer and Bolten, Sr.'s son-in-law. In less than a decade, Bolten and his partners grew Bolta from a $1 million-a-year startup to a mature $28 million concern. In 1954, General Tire and Rubber bought the company for $4 million, and within a year Bolten and partners had reinvested the money in Standard Publishing, a Cincinnati-based publisher of religious materials founded in 1866, and Roehlen Engraving, a Rochester, New York-based manufacturer of steel-engraved embossing rollers for creating decorative impressions on tiles, upholstery, and other surfaces. They renamed the business Standard International Corporation; Standard Publishing and Roehlen Engraving later became the core of Standex's Consumer group and Industrial Group, respectively.

Through early acquisitions like Everedy cookware, Lestoil, and Bon Ami cleansing product manufacturers, and Coca-Cola bottling franchises in South America, Standard initiated a strategy of growth that by the mid-1990s had totaled more than 125 acquisitions. In a 1979 interview with Forbes magazine, Hogan, who had early on succeeded Bolten, Sr., as company president, described the "five laws" that guided Standex's acquisition policy during his tenure: 1. Beware of the time of the hump--when a company inflates its earnings in anticipation of a sale. 2. The price of an acquisition varies inversely with the square of the distance from New York. 3. Companies that have made money for ten years in a row will probably make it again in the eleventh. 4. Companies with loss carryforwards have a demonstrable capacity for losing money. 5. Concentrate on small private businesses that have some sort of proprietary position in their market and which are for sale because of estate problems or lack of professional management.

Almost without exception, all the companies Standex acquired grew at a faster, more profitable rate within the conglomerate than they had on their own. By focusing only on market leaders in basic U.S. industries that were largely unaffected by rapid technological change, Standex immediately positioned itself at the forefront of a new industry segment every time it acquired a company. "If you look at our stable of companies," Hogan told the Boston Globe in 1983, "you'll find that in every case they have a definite niche and a small industry dominant position, in some cases almost a monopolistic position."

Going Public in the 1960s

In 1964, Hogan's management team took Standard International public and began defining the product groups in which it believed the company had the most expertise and around which its acquisition strategy should coalesce. From these early decisions the three basic product groups that would characterize Standex's product identities and market niches for the next three decades were established: industrial products such as pumps, electronic assemblies and switches, and "texturizing" systems for product surfaces; institutional products like restaurant china, casters and wheels, and commercial cooking and refrigeration equipment; and graphics/mail order/consumer products such as religious publications, election forms, mail order food goods, and bookbinding systems.

Early on, Standard adopted a corporate policy of balanced acquisition, ensuring a strong, even cash flow by acquiring cash-generating businesses (like Crest Fruit, purchased in April 1972) at the same time as capital-intensive companies (like Master-Bilt, added in November 1971). Exploiting high inflation rates to largely nullify the four- and five-percent interest charged on the loans it used to fuel its expansion, between January 1967 and June 1968 alone Standard acquired 11 new companies. Standard's growth strategy, however, was coupled with a policy of unceremoniously dumping companies whose profitability or competitiveness in their market niches showed signs of slipping. Through a system of tight financial controls in which all banking matters and cash requests passed through corporate headquarters, Standard focused on unusual requests for cash from it subsidiaries to weed out those potentially ripe for divestiture.

In less than a decade, Bolten and his partners grew Bolta from a $1 million-a-year startup to a mature $28 million concern.

1969–2000

Beyond financial matters, however, Standard encouraged subsidiaries to run their businesses in an independent, entrepreneurial fashion. Indeed, in 1996 Standex's corporate headquarters would consist of only 46 people, managing everything from banking, taxes, and legal affairs to insurance, audits, and investor relations.

Rapid Expansion in the 1970s

Renamed Standex International in 1973, the company continued to fill out its three basic product groups throughout the 1970s and 1980s, adding the firms that would constitute the roughly 25 businesses in its mid-1990s roster of manufacturers. Between 1969 and 1970, Standex acquired Jarvis and Jarvis (now Jarvis Caster Group, Standex's industrial caster and wheel manufacturer), United Service Equipment Co.(now USECO, a manufacturer of food service feeding systems for hospitals, prisons, and schools), and Mason Candlelight (a producer of candles and candle lamps for table top lighting). In 1971, Standex added Spincraft, a Wisconsin firm specializing in the power spinning of metals, and Master-Bilt Refrigeration, a manufacturer of commercial refrigeration equipment ranging from ice cream dipping cabinets to refrigerated warehouses. Within a year, Standex had also added General Slicing Machine Company, a manufacturer of commercial refrigeration equipment, and Crest Fruit Company, a mail-order grapefruit distributor. The company also continued to weed out unprofitable or uncompetitive units--usually at a profit. Of the 25 businesses Standex divested in its first 40-odd years, only one was sold for a loss.

Between 1971 and 1975, Standex's net sales rose from $119 million to $176 million, a 48 percent leap. Industrial products comprised one-third of all sales, followed by consumer products at 28 percent; graphics (i.e., its publishing and printing operations) at 22 percent; and institutional products at 17 percent. In the same period, Standex acquired industrial engraving plants in West Germany, France, and Australia to capitalize on its library of 100,000 industrial embossing master rolls. In 1977, Standex added further to the core of firms with the acquisition of Barbecue King of Greenville, South Carolina (a manufacturer of commercial cooking equipment) and, a year later, the Wire-O Corporation (a producer of wire book binding products), H.F. Coors (a California-based manufacturer of china and cookware), and Williams Manufacturing (a Chicago producer of chiropractic and traction tables that would become the core of Standex's Williams Healthcare Systems operation until the late 1990s).

Standex's strategy of maintaining a mix of varied manufacturers through a rolling series of acquisitions and divestitures amounted to a kind of self-investing diversified mutual fund; the conglomerate could count on the positive performance of any given segment of its product line to offset the shaky performance of any other. Indeed, when appropriate acquisition targets were unavailable or too expensive, Standex literally did invest in itself, choosing to repurchase huge blocks of its own stock rather than invest in other companies. It thus spread the risks of dramatic cyclical downturns throughout the corporation's operations and virtually assured enhanced shareholder value and steadily rising quarterly dividend payments. In fact, through 2000, Standex had increased quarterly dividends 27 times in the past 30 years.

The business press began describing Standex as a "mini-conglomerate" and "one of the best of the small conglomerates," but company management preferred the term "diversified manufacturer," claiming there had never been a "grand plan" to create a multinational conglomerate. As Hogan told Forbes magazine in 1979, when Standex acquired new companies "we just thought we were making good investments. Then we found out we were a conglomerate."

In 1977, Standex's sales broke the $200 million mark for the first time, and in the following year management launched a program of intensive capital spending that by 1981 had topped $70 million. It added commercial food service equipment manufacturer Barbecue King of South Carolina (later renamed BK Industries) to its stable in 1977, acquired the company's British operation in 1979, and opened a manufacturing facility for its Industrial Products Group in Kent, England, that was soon producing more than 20 million reed switches a year for electronic applications.

As the 1970s wound down, Standex's plans for future expansion were centered on a single giant purchase in a new product area or several small acquisitions to its existing business lines. Preferring to pay cash for its new purchases, Standex arranged a four-year, $12 million loan through three banks in 1979, and the following year added James Burn Bindings Ltd., a British book binding operation, to its Graphics/Mail Order Group.

1982–1996

Challenges in the 1980s

A rash of mergers and acquisitions in the 1980s coupled with rising interest rates, however, put a brake on Standex's expansion plans. As Wall Street corporate raiders drove the asking prices for available companies skyward, acquisitive conglomerates, even those who, like Standex, were looking only for long-term investments in niche-leading companies, were branded guilty by association. In contrast to its 30 acquisitions during the 1970s, Standex acquired only 11 firms in the 1980s.

Partly as a result of this inactivity, by 1984 Standex's total debt-to-capital ratio had fallen from 38 percent in the mid-1970s to 20 percent, and it had accumulated $100 million of potential debt capacity for acquisitions. Sales broke the $375 million mark in 1984, and for perhaps the first time in its 30-year history Standex had no money-losing businesses. And for all its emphasis on development-through-acquisition, by 1984 more than 60 percent of Standex's historical expansion growth had come through internal growth. In May, Standex's management joined with a Boston investment firm in an attempt to acquire Standex through a $250 million friendly leveraged buyout. By putting up a percentage of the purchase price and borrowing the rest, with the company itself offered as collateral, Standex's management hoped to buy up its stock and take the corporation private, thereby avoiding the requirement to disclose financial information to the Securities and Exchange Commission and its own shareholders. Within weeks, however, Standex management had withdrawn the offer, citing new uncertainty about the economy. In 1985, Standex nevertheless began aggressively repurchasing its stock on the open market, and by 1996 a total of 17,860,000 shares had been bought back at a cost of over $200 million, reducing the number of outstanding common shares by 57 percent from 1985 levels.

After 37 years at the helm, Daniel Hogan stepped down as president in 1985, leaving the $480 million firm in the hands of Thomas L. King, a Standex veteran of 24 years and, like Hogan, an Ivy Leaguer and former Navy man. King continued to collect the companies' that would comprise Standex's corporate roster in the new millennium. Federal Industries, a Wisconsin-based manufacturer of refrigerated and nonrefrigerated display cases for the food service industry was added to the Institutional Products Group in 1986; and Custom Hoists Inc., a manufacturer of hydraulic cylinders for dump trucks and other vehicles, joined the Industrial Products Group in 1988.

The 1990s and Beyond

In 1991, Sapemo S.A.'s multiple ring binding product line was incorporated into the James Burn International bookbinding operations and, a year later, Standex acquired Toastwell, a St. Louis-based manufacturer of commercial toasters, waffle irons, griddles, and food warmers, for its Institutional Products Group. In mid-1995, Metal Products Manufacturing of Milwaukee, Oregon, was acquired to extend Standex's Snappy Air Distribution product line into the Pacific Northwest. Reflecting the diversity of the product lines Standex sought for acquisition, in 1989 Standex acquired the assets of a massage/traction table manufacturer and two years later bought the entire product line of a Christmas tree stand manufacturer (making Standex, by 1996, the world leader in that market niche).

In June 1995, Tom King retired as Standex's CEO after ten years at the helm, giving way to Edward J. Trainor, a former president of the Institutional Products Group. Standex's prospects for the remainder of the 1990s appeared quite positive. Revenues, net income, earnings per share, return on equity, return on sales, and book value per share all hit record highs in fiscal 1995. Almost half of all sales came from the three components of its Institutional Products Group--Institutional Products, Air Distribution Products, and Commercial Products--and another quarter was generated by the four operations in its Industrial Products Group--Roehlen/Europe, Roehlen/North America, Standex Precision Engineering, and Standex Electronics. In the mid-1990s, Standex added new product lines to its Master-Bilt subsidiary and increased the capacity of its cooler and pipe, duct, and fitting manufacturing operations. Its European subsidiaries, which duplicated its U.S. product lines, experienced renewed growth, and it initiated a marketing campaign in the South American market, expanded the "quality circle" program it launched in 1982, and continued to explore potential new acquisitions for the corporate stable. The company's essential identity, however, remained fundamentally unchanged; as former CEO Dan Hogan put it laconically in 1983, "We manufacture widgets and we sell them and that's all we do."

Refocusing Company Operations

1997–2001

The late 1990s however, were characterized by a refocus of company operations. Under the leadership of Trainor, Standex began investing in companies that would bolster what would become its new core segments. ACME Manufacturing Company was purchased in October 1997, enabling its Air Distribution group to enter new regional markets in the United States. It also purchased Fellowship Bookstores along with three mail order companies, which included various assets of the Vidalia Onion Store and Salsa Express.

In early 1998, the company's Doubleday Bros. & Co. division was sold, signaling Standex's commitment to divest under-performing, smaller business operations. It was during this time that the firm adopted a strategy of focusing on larger, growth oriented business operations related to its reorganized business segments: Industrial, Consumer, and Food Service. As such, ATR Coil Company Inc., a manufacturer catering to the industrial, automotive, and consumer markets, was purchased, complementing Standex's Industrial unit. The Industrial segment also secured a contract with the Boeing Company worth an estimated $147 million. Standex also expanded its Berean Christian Stores division, which in 1998 operated 23 stores in ten states, as part of its growth efforts in its Consumer division. The firm's new strategy appeared to pay off when sales for 1998 reached a high of $616.2 million.

During 1998, Standex sold its SXI Technologies division along with its Christmas Tree Stand product line. The company completed its restructuring efforts in 1999 with the sale of its Williams Healthcare Systems division. Sales for the year continued to grow and reached $641.4 million.

Standex entered the new millennium operating larger, more focused business units. Sales growth came to a halt however, and while earnings remained strong in the Industrial and Consumer group segments, the Food Service group experienced a decline. Weakening economies in several of Standex's key markets and an unstable stock market were cited as culprits in the decline. As a result, management again looked to a possible restructuring of operations. CEO Trainor stated in a 2001 company press release, "Standex has reported net income for 46 consecutive years, has paid dividends for 147 consecutive quarters, and has increased its dividend rate 35 times. This record of success demonstrates that our diversity has served us very well; however, we may need to refocus our portfolio of businesses in order to fully capitalize on the changes that are occurring across all of our varied markets."

Sales for fiscal 2001 fell by 5.8 percent over the previous year. Nevertheless, management remained optimistic about future growth. With a strong focus on new technology, gaining increased market share, operational efficiency, and making key acquisitions, Standex appeared to be on the right track to securing future revenue gains.