TO STARRETT STOCKHOLDERS AND ALL STARRETT PERSONNEL: PRESIDENT’S LETTER
Fiscal 2012 was a strong year for our Company. Revenues of $260 million were the second highest in the history of the Company. With recessionary comparisons behind us, our business grew 6.2%. The downside to this year is that we had a tsunami hit us in the form of U.S. pension expense to the tune of $15.2 million charged in the fourth quarter that decimated our earnings. This is a non-cash charge and does not reflect how well the Company operated during the year. I will discuss this issue in more detail in the pension section below, but keep my comments here relative to our performance without pension expense. There is a table on the next page that highlights the effects of the pension hit.
Net income, excluding pension expense, was $10 million, an increase of 45%. The improved financial performance was realized in both our domestic and international markets as demand for our products increased. This was the result of our initiatives to grow our global brand presence and to protect our market share in our home markets. In Fiscal 2012, we continued to invest in our future in these areas.
CAPITAL INVESTMENTS During the year, we completed a $3.0 million dollar expansion of plant and equipment at our Tru-Stone facility. This investment will enable us to capture new business and help keep us in a leadership position in the
high precision, custom granite business. New equipment additions and machining cells in our global manufacturing operations reduced our lead-times, improved manpower utilization, and increased capacity and productivity.
SALES AND MARKETING We added sales personnel in strategic areas globally and have focused on training those assets and the distribution partners they support. As we drive our global business initiatives,
we participated in several
important exhibitions in Brazil, Germany, Argentina, China and our first major foray into Russia. We opened a new distribution center in Mexico in June of this year. This is in response to our success in Mexico and our belief that the Mexican economy is keeping pace with many of the faster growing regions in the world and has the potential to become a key trading partner in the Americas.
The impact of digital marketing will be critical to our future success and is bringing a dramatic shift in the way we bring our brand and products to market. The explosive growth of the web and the rapid innovation of the supporting technology make it incumbent on us to harness these new marketing frontiers to give us a competitive edge. To that end, we have embarked on a project to deliver the Starrett brand consistently across these global digital mediums and to leverage these technologies to win a new generation of
Starrett customers.
INVENTORY Last year our supply chain and ability to deliver were challenged due to the strong rebound in demand coming off recessionary lows. During the year, we built inventory. This, in combination with investment in capital equipment, lean initiatives, and cell implementation, improved our fill-rates as lead-times and scrap rates declined. This year our goals are to maintain our service levels and reduce our global inventory.
NEW PRODUCTS During Fiscal 2012, the Company expanded its reach in both the test and measurement and dimensional measurement fields with several new product additions. These include a range of force measurement systems, surface roughness testers, roundness test equipment, and water resistant electronic indicators. In the field of non-contact measurement, we have introduced HDV (horizontal digital video) and FOV (field of view) vision systems.
ACQUISITION In November 2011, the Company acquired Bytewise Development Corp., a manufacturer of non-contact lasers and software for both off-line and in-line applications. This acquisition broadens our portfolio of engineered metrology solutions from discrete to in-process gaging. The industry-
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