Ladies and gentlemen, thank you for standing by, and welcome to Standex International’s Second Quarter 2017 Earnings Conference Call. At this time, all participants' lines have been placed in a listen-only mode and the floor will be opened for your questions following today's prepared remark. [Operator Instructions] It is now my pleasure to turn the call over to Matt Roche to begin. Please go ahead.

Thank you, Maria. 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 statement on slide two. 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, purchase accounting, acquisition related expenses and one-time items. We will also refer to 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 President and Chief Executive Officer, David Dunbar; and Chief Financial Officer, Tom DeByle. Please turn to slide three, as I turn the call over to David. David?

Thank you, Matt, and good morning. Second quarter fiscal 2017 sales declined 4.4% to $173.9 million from a year ago, primarily driven by soft refrigeration and market conditions as expected as well as customer project push outs in Engineering Technologies and Engraving. GAAP operating margin was down by 120 basis points on the sales decline. However, non-GAAP operating margin was relatively flat. The performance was a result of good operating execution in our business. Adjusted EPS of $1.01 was flat to last year, and we ended the quarter in a net debt position of $3 million. In the quarter, we were pleased that earnings held up despite the soft topline. We also completed the acquisition of Horizon Scientific in the quarter and are happy to see our newest business off to a great start at Standex. Finally, in our Electronics business, yesterday we announced an agreement to acquire OKI Sensor Device Corporation, a Japanese manufacturer of reed switches. The acquisition expands on global reach in our Electronics business and increases our ability to capitalize our new sensor opportunities in Asia. We will present details of this exciting acquisition after reviewing our quarterly results. I'll touch more on our achievements in each business when I go through the segment review. First, Tom will review our second quarter results. Tom?

Good morning. Slide four shows our historical trend of adjusted earnings per share and sales on a GAAP basis as well as on adjusted basis without the U.S. Roll, Plate, and Machining, or RPM business. On a trailing 12-month adjusted basis without RPM, earnings per share were $4.36 through December 31, 2016 versus $4.58 in the 12 months ended December 31, 2015, which is a 6.8% decrease. Sales on an adjusted basis were $716 million on a trailing 12-month basis as of December 31, 2016 versus $743 million in the prior year period. Please turn to slide five, which details our revenue changes by segment. You can see that Electronics reported positive organic sales growth for the second quarter. The acquisition of Horizon Scientific contributed 4.1% to our sales growth, while the divesture of RPM had a negative effect of 2.7%. Going forward, we should see organic growth in the second half of our fiscal year due to increased orders, backlog, and easier year-over-year comparison to prior year. Slide six summarizes our second quarter results on a GAAP and adjusted basis. Adjusted gross margin increased 70 basis points against the 1.8% adjusted sales decline compared to the last year. Adjustments from GAAP to non-GAAP operating income were $4.3 million this quarter and are itemized on the bridge on the following slide. Please turn to slide seven, which is a bridge that illustrates the impact of special items on net income from continuing operations. Tax effected special items include restructuring charges of $1.2 million, purchase accounting of $0.8 million related to the Scientific -- Horizon Scientific acquisition. Other acquisition-related costs of $1.1 million and $0.5 million of discrete tax benefits. GAAP net income was down 17.6% and adjusted net income was nearly flat year-over-year. Turn to slide eight. Networking capital at…

Thank you, Tom. Please turn to slide 13, and I'll begin our segment overview with Food Service Equipment Group. Sales increased 1.4% in the quarter including a $7.4 million contribution from the Horizon Scientific acquisition. Organic growth declined 6.7%, driven mostly by continued weakness in Refrigeration business, specifically in the dollar store market and in national chains which we anticipated. We believe we let the trough in the small footprint retail market and the large national chain market. Beginning in the third quarter, we will have lapsed sales declines in the dollar stores and we expect a minimal impact on sales going forward. We anticipate the national chain sales activity will increase during the second half of the fiscal year due to planned investments by our customers. Horizon Scientific performed well during its first quarter with Standex and the integration plan is on-track. We also experienced solid performance out of our NorLake Scientific brand. Despite the sales decline, the Refrigeration business increased their margin rate on operating improvements and cost management. After the close of the quarter, we announced Kevin Fink as our new Refrigeration Group President. Kevin is an experienced industry Executive. We are pleased to have him join our team and we look forward to his contributions. Moving on to Cooking Solutions, sales were down approximately 9.7%, primarily due to non-recurring rollouts in the supermarket channel that were fulfilled in the prior year, coupled with our proactive rationalization of lower margin products to improve profitability, which affected sales by approximately $1 million. Cooking Solutions remains on-track with its product rollout strategy, including the most recent launches of the mini combi oven, the conveyor oven, and the speed oven. We have seen early success for these products which will be on display at NAFEM, the North American Association of…

Yes. Thanks. A couple of questions on the acquisition. In terms of the guidance that you gave 40% to 45% -- $0.40 to $0.45 for fiscal year 2018, can you give a little more specific in terms of – are there any growth assumptions behind that for that segment?

Well, there's 2.3% of the industry growth we anticipate and there will be some sales synergies as we start to implement our long-term plan on -- going to have more sensors with that acquisition in Asia.

Modest growth in those numbers for 2018. So, the fiscal year OKI Corporation ends modestly. The last official numbers we have are from a year ago. So, we [indiscernible] took the 2016 numbers, inflated them slightly to FY 2018 to come up with that number.

Got you. Okay. And obviously mix -- great sense in the geographical side, are there any specific markets that they have done a better job penetrating automotive, consumer electronic, et cetera that you might leverage further?

Well, we're -- because we saw similar products in North America and Europe, we're basically in the same industries and the same applications. However, maybe did this in the future, we almost showed the relative spilt of the industry served, but they are very similar. OKI has a higher concentration in automotive and in various industrial applications in China, but you win similar applications in North America and Europe.

Got you. Just from a -- kind of logistic standpoint, I mean can you give a little more specific in terms of the number of employees you are bringing over that -- the footprint there that you're acquiring et cetera?

Yes. About 100 employees. It’s a very highly automated plant in Japan. Actually I'll be there Monday. Walk-in and understand so they can put a face to a name. We will just report into the Electronics organization, so the current President of that Sensor business will report directly to John Meeks, our Electronics President. We have a dedicated integration manager who will put on the ground over there. We also had planned in our model to add a couple people, one could be essentially VP of Business Development for Asia to drive these synergies. And we also need a finance leader who is very familiar with U.S. GAAP as well as Japanese GAAP. So, that's sort of the headlines today about our integration plan.

Got you. Okay. And last question on the acquisition, what are the biggest hurdles that you face in terms of actually making this happen?

First of all, there's a 12 -- there's a 14-hour time difference. Everything goes through interpretation or translation. However, I would tell you, we've been working with OKI for 20 years and this goes back to Meder organization back in the 1990s became the distribution channel for OKI into Europe and started the working relationship back then. We acquired the Meder business in 2012 and with that came the relationship. So, there's already a high degree of trust and a very effective working relationship between the two businesses. So, the challenges we see are -- I would just say logistical than normal challenges you'd expect in integrating a new business and one across time zones and language.

Got you. All right. Thank you. Let me jump back in line.

Thank you, Chris.

All right. Thanks Chris.

Our next question comes from the line of Chris McGinnis from Sidoti & Company.

Good morning. Thanks for taking my question and congrats on the acquisition. I guess as a follow-up on one of the questions regarding the acquisition just on the purchase price, is that I guess that valuation kind of industry standard or can you maybe just comment on that a little bit?

When you say about a 100 -- it’s a Japanese yen price, Japanese yen earnings, the dollar has moved a lot. When we first started talking with them, the dollar was 105, but if you look at it now, purchase price today, dollar value now with their past earnings, it’s a mouthful, just under 9, which is probably on the low end of recent multiples in that space.

Great. And then just turning to the other parts of the business. It sounds like obviously there's easier comps in the second half of the year in the food side. Can you maybe just talk a little about that confidence of -- are you seeing orders already move from the retail side? It sounds like--

We are. I think in the last -- we are. In the last earnings call, we said we were getting early indications from customers. They were planning these national programs. We started to see the RFQs and the request. We're beginning to see the orders. So, yes, we do see that playing out.

And then just on the Engraving; is it really just kind of timing? It's been soft a little bit for the first half of the year on the organic side. Can you maybe just talk a little more about that and the confidence?

Yes. If you were to go back and look at -- I know you've been following the business for a while, because if you look at the Engraving performance quarter-to-quarter, there isn’t inherent choppiness in the business, and there's no typical seasonality as there is with which we would service. We also have good data from the auto OEMs of their scheduled new model rollouts and last year, we had a strong first half, weak second half. This year is going to be a weak second half -- not weak but weaker first half stronger second half. And as we mentioned today, most of that has to do with pushouts of North American programs, Jeep and Ford program that slipped into Q3, Q4. But constant to what we stated in the text today that we'll see trip up in the second half.

Great. And then two more questions. One just on the aviation, can you just comment a little bit about -- just your comment, it sounded like do you need to get better with the timing or was it more of in servicing the client or was it more of the client delay?

This is more the client delays and the key program which is a growth engine for our lipskin business and as well for Enginetics is geared turbo fan. And the geared turbo fan has had a rough ramp-up. UTC has changed their scheduled deliveries, pushing more out in the next year and the year after. And we had a bit of a slowdown in demand from them for engine parts this last quarter as a result of that rescheduling. However, if you look at our aviation business, last quarter aviation was actually down year-on-year. In the second half, we'll see that Engineering Technologies post growth over last year. So, even though the pushout net schedules still represents growth for us.

Okay. And then lastly just with the change in the administration, I know it's still really early just with the Mexican business, are you worried at all about that and maybe just talk a little bit about your thoughts in terms if there are any changes, does that change your business at all?

Yes. We have -- in business we have -- Mexico two plants, we have a cooking plant where we also do pumps for PROCON, and an electronics plant. And the first thing we did -- where do our competitors manufacture and our competitors are overseas as well. So, from a competitive standpoint, we're not concerned about it. From the hassle-fact standpoint, we're very concerned about it. We are looking at contingency plans in different scenarios for both of those plants depending on what happened with the Board of Directors and with a competitive environment. But I would say we'll be -- we anticipate we'll be no more soft than our competitors.

Great. Thanks very much. I appreciate the time today.

Thank you, Chris.

[Operator Instructions] Our next question comes from the line of Liam Burke of Wunderlich.

Thank you. Good morning David, good morning Tom.

Hello Liam.

Hello Liam.

David on Engraving, you've mentioned new technologies several quarters, when do they begin to move the needle on the revenue front and what kind of margin profile do they have vis-à-vis the rest of the Engraving business?

Yes, well so far the margin profile -- we always get asked what's Engraving, are you over-earning in Engraving? In different quarters, we'll be mid to upper 20s, but this is very solid business with a solid competitive advantage. And the new technologies keep us a step ahead of competition with a leading supply of a new visitor our plant in Detroit, with a leading supplier of engraved textured surfaces in the auto industry, we are the only one of our competitors in mold texturizing, that can also offer nickel shell and we've got the design hub and the design services. So, in terms of moving the needle, the three of those things combined last quarter were $3 million and that's a big chunk and that further distances us from our competition. So, think those -- our assumption is those technologies help us maintain our competitive position and continue to deliver the margins the business has demonstrated.

Great. And FSEG, I know that Horizon is the biggest part of the medical piece of that business. A, how is that integration going? And B, how is the rest of the medical, although small, how it that growing?

Yes, I'd say the rest of medical is growing very well too. I think you know in the NorLake brand, we have very nice product line, good margins, good position, good reputation. It's been $10 million, $11 million, $12 million for years. It's up over 20% from prior year. Horizon Scientific is growing -- also had a very good quarter. If you add the two together, we've got mid-$40 million Scientific business. I was just down at Horizon Scientific on Monday, to basically close out the 100-day integration plan. We've got a wonderful workforce down there, very motivated. They've got some great ideas. We've identified some cost synergies. For example, when we acquire a business like that, one of the first things we do is get them under our UPS contract, there's a nice pick-up for them on that. They have identified some cross-selling opportunities between the channel presence that NorLake has and Horizon Scientific has. I'd say we're on-track for the 100-day integration plan and now well into the synergy planning and delivery phase.

Thank you, David.

At this time, I'm showing no further questions. I'll turn the floor back over to management for additional or closing remarks.

I want to thank everybody for their interest in Standex and we're obviously very excited about the opportunities presented by the OKI acquisition and looking forward to a strong second half and we look forward to reporting to you on our Q3 results in about three months. Thank you.

Thank you.

Thank you ladies and gentlemen. This does conclude Standex International’s second quarter 2017 earnings conference call. You may now disconnect.