The L.S. Starrett Company Implements Strategic Measures to Strengthen Financial Profile
September 22 2020 - 8:10AM
The L.S. Starrett Company (NYSE: SCX) (Starrett or the Company), a
leading manufacturer of high-end precision tools, cutting
equipment, and metrology systems for industrial, professional and
consumer markets, today announced key strategic measures the
Company has taken to strengthen its financial profile as a
result of the global COVID-19 pandemic.
At the start of the global COVID-19 pandemic,
Starrett immediately took measures to ensure the safety and
well-being of its employees, the long-term financial health of the
Company, while remaining in operation as an “essential business”.
As a result of instituting extensive safety protocols throughout
its global business, the Company mitigated risk and protected the
health and safety of its valued employees, customers, distributors
and communities. Simultaneously, the Company initiated a
re-engineering of its cost structure and believes such measures
will position the Company for a more profitable future. These
actions are designed to reduce overhead and preserve cash by
executing both one-time and permanent cost reductions. Such actions
include:
- Facility cost reductions and manufacturing footprint
rationalization;
- Consolidation of worldwide saw manufacturing in Brazil;
- Global headcount reduction of 14% and flexing hours and
headcount across direct, indirect and selling and general
administrative staffing to match demand and meet delivery
requirements;
- Lowering capital expenditures by approximately $5.0 million in
fiscal year 2021 to preserve cash; and
- Amended its credit facility to provide additional flexibility
and relaxation of restrictive covenants.
As a result of these actions, the Company has
recorded a charge of $8.1 million within sales, general and
administrative expense in fiscal 2020. Included in this charge is a
one-time $6.5 million non-cash impairment charge to Goodwill and
Intangible Assets and a cash restructuring charge of $1.6 million
related to the Company’s cost-reduction efforts.
The Company anticipates an additional $2.4
million charge in fiscal 2021 related to the completion of its
restructuring plan. The anticipated financial return of these
restructuring actions is expected to result in a payback period of
less than one year.
In addition, the Company also recorded a
non-cash charge of $16.7 million in Other Income (Expense) in
fiscal 2020 primarily as a result of the significant decline in the
discount rate due to the global COVID-19 pandemic The Company
adopted mark-to-market as the method for its pension accounting in
2011, and accounts for pension gains and losses as a period expense
within the given fiscal year.
Douglas A. Starrett, Chairman, Starrett
President and CEO, commented, “Our restructuring initiatives are
focused on achieving a cost structure that will deliver sustainable
operating income and cash generation in order to emerge from the
global COVID-19 pandemic in a stronger financial position and with
the resources to reinvest in our business for future growth. We
expect to realize significant operating income improvements when we
return to pre-pandemic revenue levels. I am incredibly proud of our
global associates, who have worked together tirelessly and
professionally to execute our mission and to support one another
during these extraordinary times, and to ensure we will continue to
serve our customers and support our communities around the
globe.”
The Company expects to file its Annual Report on
Form 10-K for the fiscal year ended June 30, 2020 on September 22,
2020.
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
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 four 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 brand recognized around the world for
precision, quality and innovation. For more information, please
visit: https://www.starrett.com/.
Forward-Looking Statement: This
press release contains forward-looking statements
concerning the Company’ 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
August 26, 2019 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.
Contact:
Mr. John Tripp – Chief Financial Officer
(978) 249-3551
jtripp@starrett.com
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