leading laser technology from Bytewise is consistent with our reputation for providing world class precision measuring equipment that meets industry’s most stringent standards. Bytewise products provide a real value proposition for the shop floor by improving process control, thereby reducing scrap, increasing yields and lowering costs. The addition of Bytewise brings to the Company new technology and engineering expertise that we can leverage in new and legacy markets.
FINANCIAL HIGHLIGHTS Fourth Quarter Net Sales
Gross Margin % of Sales
S, G & A Expenses Net Earnings (Loss) Earnings (loss) per share
FY2012 Pension GAAP $70.0
13.0
18.6% 22.7
($4.6) ($0.68) $12.0 3.2 $9.1 $1.35
Adj Non-GAAP $70.0
25.0
FY2012 FY2011 GAAP $71.2
23.7
35.7% 33.3% 19.5
19.5 $4.5 $0.67 $1.5 $0.23
Our earnings (as mentioned above) were hurt by a significant non-cash pension expense this fiscal year, the majority of which was incurred in the fourth quarter. The results, as reported under “Generally Accepted
Accounting Principles” (GAAP)
in the attached 10-K, include these fourth quarter pension charges and are as follows: Sales in Fiscal 2012 were $260.1 million, an increase of $15.3 million or 6%. Income before tax was $0.1 million, a decrease of $13.1 million from $13.2 million in Fiscal 2011. Net income was $0.9 million ($0.13 per share) compared to $6.8 million ($1.02 per share) in Fiscal 2011.
The Company’s financial results, excluding the Fiscal 2012 fourth quarter pension expense charge, provide a clearer picture of our results in comparison to last year and are as follows: Sales in Fiscal 2012 were $260.1 million, an increase of $15.3 million
9
the method for our pension accounting. We informed you that going forward we would treat the gains and losses as a period expense within the given fiscal year rather than the former method that spreads the gains and losses over a long period of time. This year we got clobbered with a $15.2 million pension charge to earnings incurred in the fourth quarter of Fiscal 2012. Our pension accounting is driven by three factors – service costs of the pension, expected return on the pension assets and the discount rate. The principal reason for this extraordinarily large pension charge is the volatility in the bond market. Federal Reserve policy under “Operation Twist” has driven down long-term bond yields and the discount rate which is a significant factor in pension accounting. The Company has some control over the first two factors - not so with the discount rate. A small movement in the discount rate has a major impact on
$260.1 78.1
30.0% 79.9
$0.9 $0.13
or 6%. Income before tax was $15.3 million, an increase of $2.1 million (16%) from $13.2 million in Fiscal 2011. Net income was $10 million ($1.48 per share), an increase of 45% compared to $6.8 million ($1.02 per share) in Fiscal 2011.
A picture is worth a thousand words, and the table below clearly illustrates the impact of the non-cash pension charge for the fourth quarter and year.
PENSION Last year we adopted mark-to-market as
$(Millions) Annual
FY2012 Pension GAAP
$12.0 3.2 $9.1 $1.35 Adj
Non-GAAP $260.1
90.1
34.6% 76.7
$10.0 $1.48
FY2012 FY2011 GAAP
$244.8 81.8
33.4% 70.8
$6.8 $1.02
The accounting piece is governed by the Financial
our pension liability. This year the discount rate fell to historic lows from 5.4% to 3.9%, which resulted in this additional $15.2 million charge. There are two components to pensions – Funding and Accounting. The first affects cash; the second affects earnings. Just recently, Congress addressed the funding issue and passed a law that reflected the volatility of our financial markets and the recent Federal Reserve manipulation of interest rates by spreading out the factors for funding requirements based on bond rates over many years.
Accounting Standards Board,
which requires that public companies use the discount rate as of the last day of their financial year. This is short sighted on their part and with no regard to the financial volatility that has been a reality since the 2008 market collapse. This distorts earnings and is not understandable to the average investor and does not reflect how well the business has operated during the year.
DIVIDENDS We increased the dividend to $0.40 per share this year from $0.32 last year. Our philosophy has been to set the dividend at a level that we can maintain while having adequate cash to improve our plant, equipment, and invest in the future through acquisitions and new development. We take a long-term view of this policy and the Board of Directors feels that the current dividend level is appropriate, given our financial
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126