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Schmitt Industries Inc. Reports Operating Results (10-Q)

January 11, 2011 | About:
10qk

10qk

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Schmitt Industries Inc. (SMIT) filed Quarterly Report for the period ended 2010-11-30.

Schmitt Industries Inc. has a market cap of $9.8 million; its shares were traded at around $3.4 with and P/S ratio of 1.4. SMIT is in the portfolios of Steven Cohen of SAC Capital Advisors, Mario Gabelli of GAMCO Investors, Jim Simons of Renaissance Technologies LLC.
This is the annual revenues and earnings per share of SMIT over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of SMIT.


Highlight of Business Operations:

For the three months ended November 30, 2010, total sales increased $1.0 million, or 51.6%, to $2.9 million from $1.9 million in the three months ended November 30, 2009. For the six months ended November 30, 2010, total sales increased $2.2 million, or 69.1%, to $5.3 million from $3.1 million for the six months ended November 30, 2009. Balancer segment sales focus throughout the world on end-users, rebuilders and original equipment manufacturers of grinding machines with the target geographic markets in North America, Asia and Europe. Balancer segment sales increased $591,000, or 42.8%, to $2.0 million for the three months ended November 30, 2010 compared to $1.4 million for the three months ended November 30, 2009. Balancer segment sales increased $1.2 million, or 54.7%, to $3.5 million for the six months ended November 30, 2010 compared to $2.3 million for the six months ended November 30, 2009. The increases this quarter and the first six months of Fiscal 2011 are due to higher volumes of shipments as the worldwide automotive and manufacturing industries have begun to recover from the previous low levels experienced due to the global economic downturn. The Measurement segment product line consists of both laser-based light scatter, distance measurement and dimensional sizing products and ultrasonic measurement systems. Total Measurement segment sales increased $401,000, or 74.1%, to $942,000 for the three months ended November 30, 2010 compared to $541,000 for the three months ended November 30, 2009. Total Measurement segment sales increased $937,000, or 106.2%, to $1.8 million for the six months ended November 30, 2010 compared to $882,000 for the six months ended November 30, 2009. The increases are primarily due to higher volumes of shipments of distance measurement and dimensional sizing laser-based measurement products and Lasercheck, a laser-based surface roughness measurement product, which was acquired during the second quarter of the prior year and the sale of a CASI Scatterometer during the second quarter of Fiscal 2011.

The Company has continued to closely monitor its expenses across the entire Company. Operating expenses have increased $230,000, or 19.8%, to $1.4 million for the three months ended November 30, 2010 from $1.2 million for the three months ended November 30, 2009. Operating expenses have increased $312,000, or 13.6%, to $2.6 million for the six months ended November 30, 2010 from $2.3 million for the six months ended November 30, 2009. General, administration and sales expenses have increased $244,000, or 23.6%, to $1.3 million for the three months ended November 30, 2010 from $1.0 million for the same period in the prior year. General, administration and sales expenses have increased $391,000, or 19.6%, to $2.4 million for the six months ended November 30, 2010 from $2.0 million for the six months ended November 30, 2009. Research and development expenses have decreased $14,000, or 11.2%, to $113,000 for the three months ended November 30, 2010 from $127,000 for the three months ended November 30, 2009. Research and development expenses have decreased $79,000, or 26.2%, to $222,000 for the six months ended November 30, 2010 from $301,000 for the six months ended November 30, 2009. Net income was $41,000, or $0.01 per fully diluted share, for the three months ended November 30, 2010 as compared to net loss of $224,000, or $0.08 per fully diluted share, for the three months ended November 30, 2009. Net loss was $72,000, or $0.02 per fully diluted share, for the six months ended November 30, 2010 as compared to net loss of $799,000, or $0.28 per fully diluted share, for the six months ended November 30, 2009.

Sales in the Balancer segment increased $1.2 million, or 54.7%, to $3.5 million for the six months ended November 30, 2010 compared to $2.3 million for the six months ended November 30, 2009. This increase is primarily due to higher unit sales volumes in Asia and North America during the first half of Fiscal 2011. Sales in Asia increased $732,000, or 81.9%, for the six months ended November 30, 2010 as compared to the six months ended November 30, 2009. North American sales increased $503,000, or 55.6%, in the six months ended November 30, 2010 compared to the same period in the prior year. The increases in the Asian and North American markets are due primarily to higher volumes of shipments as the automotive and industrial markets in these markets have begun to recover from the previous low levels due to the global economic downturn. European sales decreased $13,000, or 3.1%, in the half of Fiscal 2011 compared to the same period in Fiscal 2010. The decrease in the European market has been caused by the continuing weaknesses in the automotive, bearing and aircraft industries and its impact on the machine tool industry in this region. Sales in other regions of the world increased $15,000 in the first half of Fiscal 2011 as compared to the same period in Fiscal 2010.

Other income – Other income consists of interest income, foreign currency exchange gain (loss) and other income (expense). Interest income was $1,000 and $3,000 for the three months ended November 30, 2010 and 2009, respectively. Interest income was $2,000 and $8,000 for the six months ended November 30, 2010 and 2009, respectively. Interest income has decreased due to lower interest rates and decreased cash and investment balances. Foreign currency exchange gains were $4,000 and $3,000 for the three months ended November 30, 2010 and 2009, respectively. Foreign currency exchange gains (losses) were $(6,000) and $6,000 for the six months ended November 30, 2010 and 2009, respectively. The changes in the foreign currency exchange gain (loss) are primarily due to the movement of foreign currencies against the US dollar during the current periods.

Net income – Net income increased $265,000 to net income of $41,000, or $0.01 per diluted share, for the three months ended November 30, 2010 as compared to a net loss of $224,000, or $0.08 per diluted share, for the three months ended November 30, 2009. Net loss decreased $727,000 to a net loss of $72,000, or $0.02 per diluted share, for the six months ended November 30, 2010 as compared to a net loss of $799,000, or $0.28 per diluted share, for the six months ended November 30, 2009. The net income increased or the net loss decreased due primarily to higher sales and related gross profit and lower research and development expenses offset by higher general, administrative and selling expenses during the three and six months ended November 30, 2010.

At November 30, 2010, the Company had accounts receivable of $1.6 million as compared to $1.1 million at May 31, 2010. The increase in accounts receivable of $415,000 was due to the increase in sales in the first half of Fiscal 2011. At November 30, 2010, inventories increased $125,000 to $3.8 million from $3.6 million as of May 31, 2010. The increase in inventories is primarily due to higher purchasing levels necessary to support the higher sales volumes in the first half of Fiscal 2011. At November 30, 2010, total current liabilities increased $100,000 to $1.3 million as compared to $1.2 million at May 31, 2010. The increase was primarily due to the higher accounts payable associated with the increased inventories and higher accrued commissions associated with higher sales volumes.

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