The L.S. Starrett Company (Starrett) 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, has 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. 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.
“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 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.
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.
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