The L.S. Starrett Company Implements Strategic Measures to Strengthen Financial Profile

ATHOL, MA, Sept. 22, 2020 (GLOBE NEWSWIRE) -- 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.