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The L.S. Starrett Company Reports Operating Results (10-Q)

November 04, 2010 | About:

The L.S. Starrett Company (NYSE:SCX) filed Quarterly Report for the period ended 2010-09-25.

The L.s. Starrett Company has a market cap of $79.6 million; its shares were traded at around $12.03 with and P/S ratio of 0.4. The dividend yield of The L.s. Starrett Company stocks is 1.9%.SCX is in the portfolios of Arnold Van Den Berg of Century Management, Chuck Royce of Royce& Associates, Mario Gabelli of GAMCO Investors, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The first quarter of fiscal 2011 continued the favorable sales growth experienced in the second half of fiscal 2010 and increased significantly from the recession levels of the first quarter of fiscal 2010. Net sales increased $16.9 million or 42% from $40.5 million in fiscal 2010 to $57.5 million in fiscal 2011. Operating income improved $5.6 million as a gross margin improvement of $8.6 million more than offset an increase in selling and general expenses of $3.0 million. Net income was $0.8 million or $0.12 per share compared to a net loss of $3.1 million or $0.47 per share.

Net sales in North America increased $7.4 million or 35% from $21.0 million to $28.4 million. All divisions achieved higher sales levels, with particularly strong gains in precision tools and custom granite solutions. International sales increased $9.5 million or 48% from $19.6 million to $29.1 million with Brazil and Scotland registering strong sales improvement. Exchange rate fluctuation represented $1.1 million or 11% of the International revenue gains.

Gross margins improved $8.6 million with volume and margin improvement representing $4.2 and $4.4 million, respectively. North American gross margins increased $4.8 million with increased volume accounting for $1.2 million and improved efficiency representing $3.6 million. Improved plant utilization was the key factor for the margin improvement as selling prices remained constant compared to the same quarter of the prior year. International gross margins increased $3.8 million with volume representing $3.0 million and margin improvement and exchange rates each accounting for $0.4 million. Consolidated gross margins increased 7.8 % from 24.7% in fiscal 2010 to 32.5% in fiscal 2011, with North America and International posting margins of 29% and 36%, respectively.

Selling and General expenses increased $3.0 million or 21%. North American expenses increased $1.2 million principally due to amortization of the development expenses related to our recently installed ERP system, restoration of a 10% salary reduction for management and return to full time hours from reduced hours for staff personnel. International expenses increased $1.8 million or 29%. International expenses increased primarily due to a recovery to normal staffing levels, sales commissions and legal fees. A weaker U.S. dollar increased international expenses $0.3 million. Excluding the impact of exchange rates, international expenses increased $1.5 million or 24%.

Earnings before taxes increased $6.2 million from a fiscal 2010 loss of $4.7 million to a fiscal 2011 profit of $1.5 million. As outlined above, the significantly improved performance is due to the comparative economic recovery in fiscal 2011 versus the recession in the first quarter of fiscal 2010.

Net cash increased $2.5 million due to improved profitability, proceeds from investments and short-term borrowings. Compared to fiscal 2010, the favorable $3.8 million swing was primarily due to reduced net debt repayments.

Read the The complete Report

About the author:

Charlie Tian, Ph.D. - Founder of GuruFocus. You can now order his book Invest Like a Guru on Amazon.

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