performance; however, they evaluate the merits of dividend distribution each quarter.
FINANCIAL CONDITION Our financial condition remains strong with a current ratio of 5.0 to 1 and net working capital of $121.2 million. Book value per share declined to $18.89 at the end of this year, compared to $22.67 last year driven principally by foreign exchange loss and pension expense. In addition to dividends and
normal earnings retained in the
business, the aforementioned fluctuations in foreign currency and pension can have a significant effect on our book value per share. The Company’s cash and investments declined $4.2 million to $23.8 million. This is the result of building inventory during the year to improve services levels and restock our global supply chain. Total debt increased $22.2 million, primarily the result of borrowing $15.2 million to finance the Bytewise acquisition.
PLANT ADDITIONS Capital expenditures for plant and equipment were $10.8 million in 2012, compared to $6.8 million in 2011. Depreciation for the year was $9.0 million in 2012 compared to $9.3 million in 2011.
EMPLOYEE 2012,
STOCKHOLDERS During fiscal 2012, options for 9,290 shares were exercised by employees. As of June 30,
employees of the Company
hold options for 85,539 shares that can be exercised over the next two years. Our experience over the years has been that employee stock ownership contributes to the success of a company, which is good for all stockholders and employees. Present and former employees hold a significant portion of the Company’s outstanding stock.
TREASURY STOCK During 2012, the Company did not purchase any shares of its own stock for the treasury. Consistent with cash needs, the Company may acquire additional shares from time to time, both on the New York Stock Exchange and in private transactions. This is to have stock available for miscellaneous corporate
purposes and to reduce the dilutive effect on existing stockholders of the issuance of shares under the various employee stock ownership plans.
GENERAL COMMENTS Not much has appreciably changed in the global economy since last year. Volatility and uncertainty are still the name of the game. I think it is fair to say the economies in the developed countries are troubled and most are saddled with too much debt. That can certainly be said for the United States. The manufacturing sector has been the strongest part of the economy since the recovery began in 2010 and we can be thankful that this is the sector that we primarily service.
Looking ahead, despite some of the landmines in certain economies around the world, we are guardedly optimistic that the global economy will start to improve; although we do not expect anything rapid or dramatic. I hope this improvement will include the U.S., but that will hinge on the upcoming elections.
Today, about 55% of our sales revenue is generated outside the U.S. While I am pleased with our progress, it is critical that we become more internationally diversified in our revenue mix so that we become less dependent on any one market. Our operations in Brazil, Scotland and China contribute significantly to our success and we expect them to grow as they support the developing regions of the Americas, Eastern Europe and S.E. Asia, respectively. A major portion of our business still remains in the U.S. and we are working hard every day to keep a manufacturing base in the United States. Today, we are the sole remaining full line manufacturer of metrology equipment in this country. We believe that we can protect and grow our market share in the domestic market if we have a level playing field. This remains an uphill battle because the structural costs of doing business (taxes and regulations) in the U.S. are not competitive with the rest of the world.
As I write this, we are in the final stages of the most important Presidential election in my lifetime. The heavy costs of government
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have brought us to a tipping point – an untenable federal deficit, Social Security and Medicare on life support, and high unemployment. Romney and Ryan have defined the battle lines and in this election you have a clear choice – bigger government or smaller government. After four years of riding the bigger government bus, I am ready for a mini-van. I believe it was President Reagan who said, “Big government is the problem – not the solution.”
I believe we
can turn things around in this country and tackle our problems, but nothing positive is going to happen until we rid ourselves of this administration and the politicians who have gotten us into this mess.
We have strived for 132 years to not only be a successful company for our shareholders and employees, but to be good corporate citizens in the communities that we operate. This year the Town of Athol, where our Company was founded, celebrated its 250th Anniversary. Happy Birthday, Athol! We are proud to have been an integral part of Athol’s long history, as the town has played an important part in our success.
This year’s annual report cover features our people and their dedication to providing great products and real solutions for the industrial markets. These are the people who make the difference for our customers and are responsible for our success.
President and CEO September 14, 2012
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