Sales up 9% from fiscal 2020;
currency-neutral sales up 15%
Diluted EPS of $2.11 increases 170% from
fiscal 2020
Financial Highlights:
Sales and order intake return to
pre-pandemic levels
- Currency-neutral sales up 15% from fiscal 2020, up 7% from
fiscal 2019
Restructuring activities drive improved
margins
- Operating income increased by $22 million from fiscal 2020
- Gross margin improved by 250 bps from fiscal 2020
- Adjusted operating income up to 7.8% of sales for fiscal
2021
Improved operating performance and cash
flow strengthen Balance Sheet:
- Debt reduced by 29% from prior year
- Pension and post-retirement benefit liability reduced by 44%
from prior year
The L.S. Starrett Company (NYSE: SCX) (“Starrett” or “the
Company,”) a global innovator, manufacturer and marketer of
precision measuring tools, cutting tools and equipment, and
high-end metrology solutions for industrial, professional, and
consumer markets, today announced operating results for the fiscal
year ended June 30, 2021.
Sales and order intake return to
pre-pandemic levels
Sales and order intake trends began to improve in the second
quarter of fiscal 2021, as international sales, particularly in
Brazil, began to strengthen due to strength in the consumer DIY
(“do-it-yourself”) and food sectors. The Company’s Tru-Stone
subsidiary also experienced strong sales growth due to increased
demand in equipment for the high-end chipmaking industry. The March
2021 quarter sales of $54.9 million and the June 2021 quarter sales
of $61.2 million (cumulatively $116.2 million) compares favorably
to the $50.0 in the March 2020 quarter and $42.5 million in the
June 2020 quarter of fiscal year 2020 (cumulatively $92.5 million),
emphasizing the continuous and steady sales recovery throughout
fiscal 2021.
Fiscal 2021 sales were $219.6 million, an increase of $18.2
million, or 9.0%, from fiscal 2020. On a currency-neutral basis,
fiscal 2021 sales increased 14.7% from fiscal 2020.
See “Non-U.S. GAAP Financial Measures” below for a definition of
and further explanation about the use of the term “currency-neutral
basis” when comparing sales over different time periods.
“Fiscal 2021 was a strong year for Starrett, and our Company’s
resiliency was on full display and rewarding on many fronts,” said
Douglas A. Starrett, Chairman and CEO. “Our team accomplished our
goals, while successfully navigating the pandemic. We strengthened
our financial profile and successfully completed our strategic
initiatives with results exceeding our expectations, all setting us
up for a strong future.”
Restructuring activities drive improved
margins
The overall restructuring plan, announced on September 22, 2020,
has been consummated. This included facility cost reductions,
manufacturing footprint rationalization, consolidation of global
saw manufacturing in Brazil, an overall headcount reduction, a
reduction in capital expenditures, amendment of the credit
facilities to provide additional flexibility, and the sale of the
Company’s facility in Mt. Airy, North Carolina.
The Company recorded restructuring charges of $3.6 million in
fiscal 2021 and $1.6 million in fiscal 2020. These charges related
to the Company’s strategic restructuring efforts, all of which were
fully realized and successfully completed by June 30, 2021. These
efforts are expected to result in annual savings of $10 million to
$14 million in manufacturing costs and selling, general and
administrative expenses.
Gross margin of 33.4% in fiscal 2021 increased 250 basis points
from 30.9% in fiscal 2020. The improvement primarily related to the
Company’s restructuring activities.
Selling, general and administrative expenses of $56.3 million in
fiscal 2021 decreased $3.1 million, or 5.3%, from $59.4 million in
fiscal year 2020, also primarily due to the restructuring
activities.
Operating income was $16.6 million, or 7.5% of sales in fiscal
2021, compared to an operating loss of $5.3 million, or (2.6%) of
sales, in fiscal 2020. Adjusted operating income, was $17.0
million, or 7.8% of sales, in fiscal 2021 compared to $2.8 million,
or 1.4% of sales, in fiscal 2020.
See “Non-U.S. GAAP Financial Measures” below for a definition of
and further explanation about the use of the term “adjusted
operating income.”
Improved operating performance and cash
flow strengthen Balance Sheet
With the improvements in operating income and working capital
management, reduction in capital expenditure, and the proceeds from
the sale of the Mt. Airy, North Carolina facility, the Company
reduced its debt by $9.0 million, contributed $8.0 million toward
its pension liability, and met all cash requirements related to
restructuring activities.
In addition, in fiscal 2021, the Company took measures to
improve the overall status of its pension and post-retirement
benefit liabilities, including a settlement in the U.S. Retirement
Plan, as well as additional measures, all of which are expected to
result in annualized savings of $0.4 million. The funded status of
the Company’s pension and post-retirement benefit plans improved
$29.6 million, or 44%, to an underfunded amount of $37.7 million on
June 30, 2021 from an underfunded amount of $67.3 million on June
30, 2020.
Use of Non- U.S. GAAP Financial
Measures
The Company uses the following non-U.S. GAAP financial measures:
“currency-neutral sales,” which are sales calculated using actual
exchange rates in use during the comparative prior year period to
enhance the visibility of the underlying business trends excluding
the impact of translation arising from foreign currency exchange
rate fluctuations; and “adjusted operating income”, which adjusts
for restructuring costs, gain on the sale of assets, or the
impairment of intangibles that are reflected in one period but not
the other, in order to show comparative operational
performance.
The Company discusses these non-U.S. GAAP financial measures
because management believes they assist investors in comparing the
Company’s performance across reporting periods on a consistent
basis by eliminating items that the Company does not believe are
indicative of its core operating performance. Such non-U.S. GAAP
financial measures assist investors in understanding the ongoing
operating performance of the Company by presenting financial
results between periods on a more comparable basis. Such measures
should be considered in addition to, and not in lieu of, the
financial measures calculated and presented in accordance with
accounting principles generally accepted in the United States of
America (“U.S. GAAP”).
References to currency-neutral sales and adjusted operating
income should not be considered in isolation or as a substitute for
other financial measures calculated and presented in accordance
with U.S. GAAP, and may not be comparable to similarly titled
non-U.S GAAP financial measures used by other companies. In
evaluating these non-U.S. GAAP financial measures, investors should
be aware that in the future the Company may incur expenses or be
involved in transactions that are the same as or similar to some of
the adjustments in this press release. The Company’s discussion of
non-U.S. GAAP financial measures should not be construed to imply
that its future results will be unaffected by any such adjustments.
Non-U.S. GAAP financial measures have limitations as analytical
tools, and investors should not consider them in isolation or as a
substitute for analysis of our results as reported under U.S.
GAAP.
About The L.S. Starrett
Company:
Founded in 1880 by Laroy S. Starrett and incorporated in 1929,
The L.S. Starrett Company is a leading manufacturer of high-end
precision tools, cutting equipment, and metrology systems for
industrial, professional and consumer markets and is engaged in the
business of manufacturing over 5,000 different products for
industrial, professional and consumer markets. The Company has a
long history of global manufacturing experience and currently
operates three major global manufacturing plants. All subsidiaries
principally serve the global manufacturing industrial base with
concentration in the metalworking, construction, machinery,
equipment, aerospace and automotive markets. The Company offers its
broad array of measuring and cutting products to the market through
multiple channels of distribution throughout the world. Starrett is
a brand recognized around the world for precision, quality and
innovation. For more information, please visit:
https://www.starrett.com.
Forward-Looking Statements:
This press release contains forward-looking statements
concerning the Company’s expectations, anticipations, intentions,
beliefs or strategies regarding the future. These forward-looking
statements are based on its current expectations and beliefs
concerning future developments and their potential effects on the
Company. There can be no assurance that future developments
affecting the Company will be those that it has anticipated. These
forward-looking statements involve a number of risks, uncertainties
(some of which are beyond its control) or other assumptions that
may cause actual results or performance to be materially different
from those expressed or implied by these forward-looking
statements, and other risks and uncertainties described in its
Annual Report on Form 10-K, which was filed with the Securities and
Exchange Commission on September 2, 2021 in the section entitled
"Risk Factors," and in its other filings from time to time with the
Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should any of its
assumptions prove incorrect, actual results may vary in material
respects from those projected in these forward-looking statements.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements.
L.S. Starrett Company Summary
of Operations
Fiscal YearEnded06/30/2021 Comparison to
Fiscal Year 2020 Comparison to Fiscal Year 2019
(Amounts in Thousands) 6/30/2020 $ Change %
Change 6/30/2019 $ Change % Change Net
Sales
$
219,644
$
201,451
+18,193
9.0%
$
228,022
(8,378)
-3.7%
Gross Margin
73,342
62,210
11,132
17.9%
74,941
(1,599)
-2.1%
as % of Net Sales
33.4%
30.9%
32.9%
Selling, general, and administrative expenses
56,316
59,437
(3,121)
-5.3%
63,720
(7,404)
-11.6%
as % of Net Sales
25.6%
29.5%
27.9%
Restructuring Charges
3,664
1,580
2,084
131.9%
-
3,664
100.0%
Impairment Charges
-
6,496
(6,496)
-100.0%
-
-
0.0%
Gain on sale of building
(3,204)
-
(3,204)
-100.0%
-
(3,204)
-100.0%
Operating income
16,566
(5,303)
+21,869
-412.4%
11,221
+5,345
47.6%
as % of Net Sales
7.5%
-2.6%
4.9%
Other income (expense), net
860
(14,694)
+15,554
-105.9%
(1,611)
+2,471
-153.4%
Income before income taxes
17,426
(19,997)
+37,423
-187.1%
9,610
+7,816
81.3%
Income tax expense (benefit)
1,893
1,842
+51
2.8%
3,531
(1,638)
-46.4%
Net Income (loss)
$
15,533
$
(21,839)
+37,372
171.1%
$
6,079
+9,454
155.5%
L.S. Starrett Company Adjusted
Operating Income Reconciliation
Fiscal YearEnded06/30/2021 Comparison to Fiscal
Year 2020 Comparison to Fiscal Year 2019 (Amounts in
Thousands) 6/30/2020 $ Change % Change
6/30/2019 $ Change % Change Operating income,
as reported
$
16,566
$
(5,303)
+21,869
412.4%
$
11,221
+5,345
47.6%
add back Restructuring charges
3,664
1,580
2,084
131.9%
-
3,664
100.0%
add back Intangibles impairment
-
6,496
(6,496)
-100.0%
-
-
0.0%
remove Gain on sale of building
(3,204)
-
(3,204)
-100.0%
-
(3,204)
-100.0%
Adjusted operating income
$
17,026
$
2,773
+14,253
514.0%
$
11,221
+5,805
51.7%
as % of Net Sales
7.8%
1.4%
+640 bps
4.9%
+290 bps
L.S. Starrett Company FY21
Currency Neutral Net Sales Reconciliation
Fiscal YearEnded06/30/2021 Comparison to
Fiscal Year 2020 Fiscal YearEnded06/30/2021
Comparison to Fiscal Year 2019 (Amounts in Thousands)
6/30/2020 $ Change % Change 6/30/2019
$ Change % Change Net Sales, as reported
$
219,644
$
201,451
+18,193
9.0%
$
219,644
$
228,022
(8,378)
-3.7%
Change when converting FY21 sales in non USD functional currencies
at the same exchange rates used in the comparison period +11,361
-
+11,361 +5.6% +24,695
-
+24,695 +10.8% FY21 Currency Neutral Net Sales
$
231,005
$
201,451
+29,554
14.7%
$
244,339
$
228,022
+16,317
7.2%
L.S. Starrett Company
Consolidated, Condensed Balance Sheet (Amounts in
Thousands)
ASSETS 6/30/2021 6/30/2020 Cash
$
9,105
$
13,458
Accounts receivable
35,076
29,012
Inventories, net
60,572
52,987
Prepaid expenses and other current assets
14,467
8,641
Total current assets
119,220
104,098
Property, plant and equipment, net
35,992
37,090
Other Long-Term Assets
29,274
4,465
Total assets
$
184,486
$
172,683
LIABILITIES AND STOCKHOLDERS’ EQUITY 6/30/2021
6/30/2020 Notes payable and current maturities of long-term
debt
$
15,959
$
4,532
Accounts payable
17,229
7,579
Other Curent Liabilities
18,501
15,723
Total current liabilities
51,689
27,834
Other Long Term Liabilities
5,600
5,187
Long-term debt, net of current portion
6,010
26,341
Postretirement benefit and pension obligations
37,652
67,338
Total Liabilities
100,951
126,700
Stockholders' Equity
83,535
45,983
Total Liabilities and Stockholders' Equity
$
184,486
$
172,683
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210902005725/en/
John C. Tripp Chief Financial Officer (978) 249-3551
jtripp@starrett.com
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