Strong third quarter EPS of $0.57 improves
39% from prior year quarter, 68% sequentially from second quarter
of Fiscal 2022.
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 quarter
and nine months ending March 31, 2022.
Fiscal 2022 Third Quarter Financial
Highlights
- Net sales of $60.5 million were up 10% compared to the third
quarter of the prior year. All areas of the business continue to
exceed pre-pandemic order intake, which exceeded $75 million in the
quarter. As of March 31, 2022, backlog remained at historical high
levels. Currency neutral net sales were $59.2 million, representing
an increase of 8% compared to the third quarter of the prior
year.
- Gross margin for the quarter was 34.8%, an improvement of 180
basis points from the third quarter of the prior year. Benefits
from the Company’s Fiscal 2021 restructuring program have been
partially offset by macro and inflationary pressures, including
increased supply chain costs related to the pandemic. In addition,
labor shortages in North America have driven significant wage
increases and reduced plant utilization. In an effort to mitigate
the impact of these challenges, the Company had implemented price
increases in the first quarter of fiscal 2022 in Brazil and the
U.S. Additional price increases and surcharges on shipped orders
were successfully implemented throughout the third quarter and
taking nearly full effect by its conclusion, resulting in an
overall gross margin improvement of 390 basis points compared to
the second quarter of fiscal 2022, to 34.8%.
- Third quarter operating income was 8.9%, compared to 7.0%
reported in the third quarter of the prior year, Non-U.S. GAAP
adjusted operating income when comparing the two periods shows an
improvement from 8.4% in the prior year to 10.0% for this
quarter.
- In response to pandemic related supply chain challenges and
transportation delays, the company has continued to operate with
above normal working capital levels in order to meet strong demand,
resulting in operating cash consumption and an increase in
debt.
- Third quarter diluted GAAP EPS was $0.57 compared to $0.41 for
the third quarter in the prior fiscal year, representing an
improvement of 39%
- The Company continued its efforts to improve operating leverage
by initiating a project to reduce selling and distribution cost in
Asia, recording a restructuring charge of $0.4 million in the
quarter with an additional $0.5 million expected to be recorded in
the fourth quarter. The project is expected to yield an annualized
savings of $0.6 million in SG&A costs.
- The Company successfully refinanced and enhanced its credit
facilities with HSBC Bank, and established a new global banking
relationship. The new facilities replaced the previous credit
facilities held with TD Bank.
See “Non-U.S. GAAP Financial Measures” below for a definition of
and further explanation about the use of the term “adjusted
operating income.”
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 “non-US GAAP adjusted operating income,”
which adjusts for restructuring costs 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 may contain 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
Quarter Ending and Fiscal 2022
Year to Date
March 31, 2022
Quarter Ended
3/31/2022
Comparison to Quarter Ended
03/31/2021
Fiscal 2022 YTD
3/31/2022
Comparison Fiscal 2021 YTD
3/31/2021
(Amounts in Thousands, except income per share)
3/31/2021
$ Change
% Change
3/31/2021
$ Change
% Change
Net Sales
$
60,479
$
54,944
+5,535
10.1
%
$
183,311
$
158,408
+24,903
15.7
%
Gross Margin
21,020
18,149
2,871
0
60,114
51,326
8,788
0
as % of Net Sales
34.8
%
33.0
%
32.8
%
32.4
%
Selling, general, and administrative expenses
14,988
13,511
+1,477
10.9
%
45,750
41,126
+4,624
11.2
%
as % of Net Sales
24.8
%
24.6
%
25.0
%
26.0
%
Restructuring Charges
658
788
(130
)
-16.5
%
658
1,518
(860
)
-56.7
%
Gain on sale of building
-
-
-
0.0
%
-
(3,204
)
3,204
-100.0
%
Operating income
5,374
3,850
+1,524
39.6
%
13,706
11,886
+1,820
15.3
%
as % of Net Sales
8.9
%
7.0
%
7.5
%
7.5
%
Other income, net
684
663
+21
3.2
%
249
236
+13
5.5
%
Income before income taxes
6,058
4,513
+1,545
34.2
%
13,955
12,122
+1,833
15.1
%
Income tax expense
1,774
1,496
+278
18.6
%
3,911
1,132
+2,779
245.5
%
Net Income
$
4,284
$
3,017
+1,267
42.0
%
$
10,044
$
10,990
(946
)
8.6
%
Basic income per share
$
0.59
$
0.42
$
0.17
40.5
%
$
1.39
$
1.56
$
(0.17
)
-10.9
%
Diluted income per share
$
0.57
$
0.41
$
0.16
39.0
%
$
1.34
$
1.50
$
(0.16
)
-10.7
%
L.S. Starrett Company
Consolidated, Condensed
Balance Sheet
March 31, 2022
ASSETS
3/31/2022
6/30/2021
Cash
$
8,020
$
9,105
Accounts receivable
41,415
35,076
Inventories, net
73,075
60,572
Prepaid expenses and other current assets
15,018
14,467
Total current assets
137,528
119,220
Property, plant and equipment, net
38,927
35,992
Other Long-Term Assets
29,431
29,274
Total assets
$
205,886
$
184,486
LIABILITIES AND STOCKHOLDERS’ EQUITY
3/31/2022
6/30/2021
Notes payable and current maturities of long-term debt
$
22,832
$
15,959
Accounts payable
17,908
17,229
Other Current Liabilities
18,216
18,501
Total current liabilities
58,956
51,689
Other Long Term Liabilities
7,255
5,600
Long-term debt, net of current portion
9,405
6,010
Postretirement benefit and pension obligations
33,977
37,652
Total Liabilities
109,593
100,951
Stockholders' Equity
96,293
83,535
Total Liabilities and Stockholders' Equity
$
205,886
$
184,486
L.S. Starrett Company
Adjusted Operating Income and
Currency Neutral Sales Reconciliations
Quarter Ending and Fiscal 2022
Year to Date
March 31, 2022
US GAAP to NON-U.S. GAAP Reconciliation
Quarter Ended
3/31/2022
Comparison to Quarter Ended
03/31/2021
Fiscal 2022 YTD
3/31/2022
Comparison Fiscal 2021 YTD
3/31/2021
(Amounts in Thousands)
3/31/2021
$ Change
% Change
3/31/2021
$ Change
% Change
Operating income, as reported
$
5,374
$
3,850
+1,524
39.6
%
$
13,706
$
11,886
+1,820
15.3
%
Restructuring charges
658
788
(130
)
-16.5
%
658
1,518
(860
)
-56.7
%
Gain on sale of building
-
-
-
-
-
(3,204
)
3,204
-100.0
%
Adjusted operating income
$
6,032
$
4,638
+1,394
30.1
%
$
14,364
$
10,200
+4,164
40.8
%
as % of Net Sales
10.0
%
8.4
%
+160 bps
7.8
%
6.4
%
+140 bps US GAAP to NON-U.S. GAAP Reconciliation
Quarter Ended
3/31/2022
Comparison to Quarter Ended
03/31/2021
Fiscal 2022 YTD
3/31/2022
Comparison Fiscal 2021 YTD
3/31/2021
(Amounts in Thousands)
3/31/2021
$ Change
% Change
3/31/2021
$ Change
% Change
Net Sales, as reported
60,478
54,944
+5,534
10.07
%
183,310
158,408
+24,902
15.7
%
Change when converting FY22 sales in non USD functional currencies
at the same exchange rates used in the comparison period
(1,270
)
-
(1,270
)
-2.31
%
(2,531
)
-
(2,531
)
-1.60
%
FY22 Currency Neutral Net Sales
$
59,208
$
54,944
+4,264
7.76
%
$
180,779
$
158,408
+22,371
14.1
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220509005035/en/
John C. Tripp Chief Financial Officer (978) 249-3551
jtripp@starrett.com
LS Starrett (NYSE:SCX)
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