Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Standex International's Inc. Q3 2018 Earnings Call. [Operator Instructions] Thank you. I will now turn the call over to David Calusdian. Please go ahead, sir.

Thank you, Christie. 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 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, 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 to the company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in Standex's third quarter news release. On the call today is Standex's Chairman, President and Chief Executive Officer, David Dunbar and Chief Financial Officer, Tom DeByle. Please turn to Slide 3, as I turn the call over to David.

Thank you, David. We delivered another solid quarter with top-line growth across four of our five business segments. Overall revenues increased to 17.3% to $216.7 million with organic sales, up 5.7% and acquisitions contributing 8.5% growth. We had strong backlog growth of 19% and strength across our end markets. Operating income was up 69% in Q3 and GAAP EPS was $1 per share. Adjusted operating income increased 22.6%; EBITDA increased 27.9% to $29 million, while adjusted EPS grew 13.3% to $1.11 a share. Though it is not shown on the chart here, I would like to point out that our trailing 12-month EBITDA is $121.6 million, a record for Standex. We had a net debt position of $108.4 million at the end of Q3. Engraving, Electronics and Hydraulics reported robust organic revenue increases. During the quarter, we advanced growth laneways made progress in selling new offerings in the recent Piazza Rosa and Standex Electronics Japan acquisitions that continue to exceed our expectations. Food Service Equipment sales were up on the strength of Refrigeration national account purchases and Specialty Solutions growth. Our restructuring initiatives in the Cooking and Refrigeration business in our Food Service segment are taking hold. And we expect to exit the current fourth quarter with sustainable improvements to Food Service margins. In Engineering Technologies, although we continue to see bottom-line drag as we navigate through legacy business pricing pressure and the timing of new platform ramp-ups. We remain encouraged by the long-term prospects of this business and expects that the operational improvements that we have made will pay off meaningfully once we move past this trough. Overall, I'm proud of the progress that our teams continue to make by deploying the Standex value creation system across all businesses to position Standex to be a best-in-class operating company to deliver sustainable shareholder value. With diverse and growing end markets a strong performance across our growth engines and restructuring improvements beginning to take hold, we are entering the final quarter of our year with momentum and we remain excited for the opportunities ahead at Standex. With that, Tom will review our third quarter results. Tom?

Thank you, David, and good morning, everyone. Slide 4 shows our historical trend of adjusted earnings per share and sales on a GAAP basis as well as on an adjusted basis. On a trailing 12 month basis, GAAP earnings were $2.98 through March 31, 2018. This compares with $3.47 through March 31, 2017. Our trailing 12 month adjusted earnings as of March 31, 2018 were $4.97 versus $4.47 in the prior year period, which is an 11% increase. Q3 sales were up 17.3% year-over-year to $216.7 million. Sales on a trailing 12 month basis were up 17.9% to $858 million as of March 31, 2018. As shown on the chart at the bottom of the slide, our revenue and earnings performance this quarter were consistent with our historical seasonal trends. Generally, our sales and earnings are the highest in Q1 and Q4 during the heavier construction season. We typically experienced lower sales and earnings in Q2 at bottom in Q3 as cold weather slows activities. We did see momentum build at the end of the third quarter in both sales and earnings. We anticipate improved performance in Q4 based on these trends. Please turn to 5, which details our revenue changes by segment. Overall, organic growth was up 5.7% in Q3 with four of our five businesses, Food Service, Engraving, Electronics and Hydraulics demonstrating organic growth. For the quarter, the acquisitions of Standex Electronics Japan and Piazza Rosa contributed 8.5% to our sales growth and foreign exchange had a positive impact of 3.1%. On a year-to-date basis, all five segments demonstrated organic growth. Please turn to Slide 6, which summarizes our third quarter results on a GAAP and adjusted basis. Operating income was up 270 basis points on a GAAP basis and 40 basis points on a non-GAAP basis. EBITDA…

Thank you, Tom. Please turn to Slide 13 and I’ll begin our segment overview with the Food Service Equipment group. Revenues for this segment overall increased 3% led by strong sales in a refrigeration federal in Procon groups, which were partially offset by lower cooking sales, where we experienced slower grocery store and fried chicken chain demand. Refrigeration solution sales were up $3.4 million or 7%, as we saw resume strength from nearly all top national accounts. A reflection of improved market conditions as well as our focus on customer service. In fact by taking a methodical 80/20 approach to customer excellence our sales team has improved its conversion rate on quotes. In Specialty Solutions, Procon sales were up 11% on strength in the espresso market. Cooking sales were down largely due to project timing. Scientific sales were down slightly due to project timing and product rationalization and cooking. Also in the quarter, Scientific implemented a new ERP system, which caused a onetime adjustment in the quarter affecting profitability. Overall segment profitability was also negatively impacted by lower mix of high margin specialty business and a continued drag from our low margin commercial refrigeration and cooking product line businesses. We made excellent progress with the restructuring programs for these two businesses, delivering bottom line improvements as we exited the quarter. We expect to realize a full quarter of benefits from our restructuring efforts in Q4. Looking ahead, we are focused on leveraging the strong momentum with our restructuring programs to deliver meaningful and sustainable margin improvements by year end, while we also drive improved operational efficiencies in our Nogales plant. We will also advance our strategy to grow differentiated products through expanded market tests and growth laneways, while we take full advantage of the many new product rollouts that are…

[Operator Instructions] Your first question comes from Chris Moore with CJS Securities.

Maybe we can start on the Electronics side. Just see kind of – what's behind the current tight supply of reed switches and how long you think that that will likely continue?

Well, first of all, strong market demand in all the sectors that we serve in Electronics around the world. We are seeing new applications for reed switches in alternative in alternative energies and solar and wind, there is growth in the electric vehicles. These are not yet significant volumes, but they are a sign of future growth prospects for the reed switch market. The underlying -- I guess the underlying issue is just simply a market -- market demand.

Are the Electronics opportunities in North America say versus Asia are they -- are there many significant differences between the two?

They are in similar end markets, if that's what you mean. In fact many of the applications and the NBOs that we win in North America end up being manufactured in China. So, in our view from a business development and sales growth standpoint, there's not really a difference.

Now, you had mentioned in the past that OKI kind of gave you an insight into the Asian markets that you didn't have before, so I wasn't sure if there was something else [Multiple Speakers].

Well, let me, okay. No, you let me comment on that, I misunderstood your question. There are fundamentally similar markets, but prior to that OKI acquisition, we didn't really have the window to the value add opportunities in Asia. Now, we have that window and I will say that we are exceeding the expectations we had for our Asia value-added sales based on the window that OKI has given us.

On the Food Service restructuring, you're talking about as you exit Q4, the margins will be more in line. Can you -- what so kind of a reasonable expectation for operating margins in that area as you exit Q4?

Well, within the quarter, we definitely saw it from January, February and March made a very strong March. February, we saw in the plans that we've been working on improvements in February, March was very strong and March was very strong. And I guess the way I would frame the answer to your question is relative to our commitment to getting this segment to 15% at 2020, and you'll see in Q4 step in the right direction with the margins if you look on a year-on-year compare, you'll see an improvement.

Last question, just in terms of R&D, what percent of your revenue do you currently spend on R&D and is that a level you're comfortable with, is that increasing, can you just talk about that a little bit?

It is a level that will be increasing, especially in Electronics, Engraving. We'll talk a bit more about this at the Investor Day in a couple of weeks. When we think about R&D, we think about business development. We've put some resources into both our Electronics and our Engraving businesses that are focused on business development, on new applications and on new technologies that aren't specifically engineers and R&D. So, I’d say, wait for the Investor Day for a little more on that, but you know that the punch line to the answer is, this is new area we want to increase.

Your next question is from George Godfrey with C.L. King.

A couple of questions. First one, the restructuring charges this quarter of $1.33 million, are those all in the Food Service or there is some charges in other segments?

There is minor charges in other segments, specifically in Engraving, we had a – of a $200,000 but primarily in Food Service.

And then the acquisition-related costs, those are just Engraving and the Electronics segment, is that correct?

That was actually Food Service, where we had a prior earnout that’s captured in that figure.

So, really that $2.5 million really is then, if we can adjust the margin, it really is all and the Food Service is just about?

Correct.

And then in Engineering Technologies, particularly low margin this quarter and for the year, can this division still be double-digit operating margin you think as we move forward into 2018 and – excuse me fiscal 2019 and 2020?

This has all been predicated - for the few years we've been talking about this, it's all predicated on those new generation platforms getting to full volume. When we won the first lipskin awards back, gosh, when I started in early 2014, January 2014 was our first lipskin award.

We’re talking Engraving,

I’m sorry. I thought I said Engineering Technologies.

No. I did say Engineering Technologies.

Engineering Technologies, the projection from Pratt and Whitney on their gear turbofan for the A320neo will there be a full volume in 2017 that is now looking like 2019. When we talk to our customers now GE, you had engine providers as well as the frame providers, the discussion is all about capacity. Are we ready for the ramp, are we ready for the ramp? Now, many of the decisions, but those factors are outside of our control, but the payday for this whole business is ramp on these new engine we've been talking about this for years and it does look like we are quarters away from that ramp beginning.

And that was my follow-on question, because you call out you’re waiting for the volume ramp for the long-term aviation programs begin this summer. So, specifically the lipskin programs is what you're waiting for?

Well, it’s also Enginetics, the engine business that's really been struggling the most of last few quarters has a strong position in the geared turbo fan, also in the next-generation engines from GE and we have some parts with roles as well. So it’s important for that business to mix in these next-generation parts which are, which would be higher margin.

And then the last question is Electronics, you know that margin up a 170 basis points year-over-year and now it looks like you know the first three quarters of this year roughly 22%. Is that a peak level performance do you think in the Electronic segment as the product and the portfolio is constructed today?

I wouldn’t call it peak, but we think this is the level it can perform at. Now, there were a couple sources of improving expansion in margin, but a significant one just moving up the value chain, because as we move up from a bare reed switch to relays or molded packaged switches and sensors, we have a higher gross margin on the higher value add and we’ve really made progress in the last year moving our mix with the higher value add.

[Operator Instructions] And your next question comes from Chris McGinnis with Sidoti & Company.

Just one quick question, just on the Engraving side. You talked about kind of new products coming in at a lower margin and they take time to kind of ramp up, and can you maybe just walk through that process and your experience before as starting to add – offer a lot more products I guess as you explain that, that division?

So the new products, these were tools finishing, laser and nickel shell. Nickel shell and laser has an upfront investment that is showing up in deprecation right now in that business. All three of the businesses, we put in business development people to derive their sales, so there is some dedicated SG&A to it. In the early days of the ramp-up, there – the margins in these businesses are running in the teens. The gross margins of these offerings are similar to our – to the gross margins across the rest of the Engraving business. We are confident as they ramp to volume, they will – they'll deliver EBITs in the low 20 range – low $20 million range.

And just on the Food Service, I know you guys were expecting obviously that to pick up significantly in four – 4, but I guess just any way to bracket that improvement in terms of maybe looking at it historically how strong it can be?

You mean for Q4?

Yes for Q4, or maybe even longer term where – I know you have numbers out there longer term, but how quickly can we get this through I guess a stronger operating margin?

Well, I guess I'd answer it this way. We left the quarter confident that the restructuring is on track and is delivering. And we saw in our internal numbers month to month, it doesn't show when you report the entire quarter. And that gives us confidence that this – getting to that 15% in 2020, we're on track to do that. But I guess, I wouldn't put out any intermediate waypoints, maybe we wait – let's wait to see how Q4 comes in and we'll – we can update the bridge, typically every year we've been updating that bridge to 15% at that point.

And Chris, we also - I mean we showed you the seasonal trends in Food Service definitely follows that seasonal trend. Q1 it’s high, a little bit less in Q2, lowest in Q3, and then up in Q4.

No. I appreciate this.

Let’s say, yes, that’s the remodeling.

Thanks very much and good luck in Q3 or Q4.

There are no further questions at this time. I'll turn the presentation back to Mr. David Dunbar for any closing remarks.

I want to thank you all for joining us today. We look forward to coming back to you at the end of our fiscal year reporting on our Q4 results. Thank you.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day.