Schmitt Industries Announces Third Quarter Fiscal 2019 Operating Results
April 10 2019 - 8:30AM
Schmitt Industries, Inc. (NASDAQ: SMIT) (the “Company” or
“Schmitt”) today announced its operating results for the third
quarter of Fiscal 2019.
Highlights of the three and nine months ended
February 28, 2019:
- Total net sales for the Company
decreased 4.8% and 0.7% for the three and nine months ended
February 28, 2019, respectively, as compared to the three and nine
months ended February 28, 2018.
- Gross margin was reduced from 46.1%
to 32.8% for the third quarter of fiscal 2019 due to an inventory
reserve adjustment of $407,558. This adjustment was the outcome of
reorganization efforts to evaluate the types and levels of
inventory maintained across the Company’s three product lines.
- Operating expenses increased 12.1%
and 0.8% for the three and nine months ended February 28, 2019,
respectively, as compared to the three and nine months ended
February 28, 2018. These results include non-recurring
reorganization, legal and other professional expenses of $292,888
and $637,447 incurred during the three months and nine months ended
February 28, 2019, respectively, that were not incurred during the
same periods in the prior year.
- Net loss per fully diluted share,
or EPS, was $(0.12) and $(0.24) for the three and nine months ended
February 28, 2019.
- Non-GAAP EPS was $0.06 and $0.03
for the three and nine months ended February 28, 2019.
Michael Zapata, Executive Chairman and
President, commented, “Since announcing the reorganization on
November 27, 2018, the Schmitt team has invested strategically in
our people, technology, and client relationships, to continue
delivering industry leading quality and service in our SBS®, Xact®
and Acuity® business lines. We are beginning to see the impacts of
our focus on high return on investment priorities and improved
profitability as non-GAAP EPS improved on a year over year basis.
We expect GAAP financials to begin to normalize in the fourth
quarter of Fiscal 2019 as the team continues to execute across our
three product lines and we target underserved markets while
continuing to grow alongside our valued customers.”
Summary data for the three months ended February
28, 2019 and 2018:
|
Three Months Ended February 28, |
|
|
|
|
|
|
2019 |
|
2018 |
|
|
Change ($) |
|
Change (%) |
Total net sales |
$ |
3,082,181 |
|
|
$ |
3,238,858 |
|
|
$ |
(156,677 |
) |
|
(4.8 |
%) |
Balancer
segment |
|
1,961,636 |
|
|
|
2,137,811 |
|
|
|
(176,175 |
) |
|
(8.2 |
%) |
Measurement segment |
|
1,120,545 |
|
|
|
1,101,047 |
|
|
|
19,498 |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
32.8 |
% |
|
|
40.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
$ |
1,527,765 |
|
|
$ |
1,362,508 |
|
|
|
165,257 |
|
|
12.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(475,189 |
) |
|
$ |
15,553 |
|
|
|
(490,742 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
fully diluted share |
$ |
(0.12 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary data for the nine months ended February
28, 2019 and 2018:
|
Nine Months Ended February 28, |
|
|
|
|
|
|
2019 |
|
2018 |
|
|
Change ($) |
|
Change (%) |
Total net sales |
$ |
10,026,112 |
|
|
$ |
10,093,386 |
|
|
$ |
(67,274 |
) |
|
(0.7 |
%) |
Balancer
segment |
|
6,501,448 |
|
|
|
6,439,054 |
|
|
|
62,394 |
|
|
1.0 |
% |
Measurement segment |
|
3,524,664 |
|
|
|
3,654,332 |
|
|
|
(129,668 |
) |
|
(3.5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Gross margin |
|
37.1 |
% |
|
|
44.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
$ |
4,568,784 |
|
|
$ |
4,532,512 |
|
|
|
36,272 |
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(942,278 |
) |
|
$ |
(15,297 |
) |
|
|
(926,981 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
fully diluted share |
$ |
(0.24 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted Net Income and
Non-GAAP EPS:
|
Three Months Ended February 28, 2019 |
|
Nine Months Ended February 28, 2019 |
Net loss |
$ |
(475,189 |
) |
|
$ |
(942,278 |
) |
Adjusted for: |
|
|
|
|
|
Inventory
reserve adjustment |
|
407,558 |
|
|
|
407,558 |
|
Non-recurring reorganization, legal and other professional
expenses |
|
292,888 |
|
|
|
637,447 |
|
|
|
|
|
|
|
Adjusted net income
(non-GAAP) |
$ |
225,257 |
|
|
$ |
102,727 |
|
|
|
|
|
|
|
Non-GAAP earnings per
fully diluted share |
$ |
0.06 |
|
|
$ |
0.03 |
|
|
|
|
|
|
|
|
|
“Additionally, in line with our announced
reorganization, the board of directors has approved plans to
explore options to monetize Schmitt real estate, which may include
the sale of Schmitt properties,” Zapata added.
About Schmitt Industries
Schmitt Industries, Inc. (the “Company” or
“Schmitt”) designs, manufactures and sells high precision test and
measurement products for two main business segments: the Balancer
Segment and the Measurement Segment. For the Balancer Segment, the
Company designs, manufactures and sells computer-controlled
vibration detection, balancing and process control systems for the
worldwide machine tool industry, particularly for grinding
machines. The Company also provides sales and service for
Europe and Asia through its wholly owned subsidiary, Schmitt Europe
Limited (SEL), located in Coventry, England and through its sales
representative office located in Shanghai, China. For the
Measurement Segment, the Company has two core product lines: the
Acuity® product line, which consists of sales of laser and white
light sensor distance measurement and dimensional sizing products;
and the Xact® product line, which consists of sales of remote tank
monitoring products that measure the fill levels of tanks holding
propane, diesel and other tank-based liquids and revenues from the
related monitoring services associated with the transmission of
data from the tanks to a secure web site.
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking
statements made pursuant to the Private Securities Litigation
Reform Act of 1995. These statements are based upon current
expectations, estimates and projections about the Company’s
business that are based, in part, on assumptions made by
management. These statements are not guarantees of future
performance and involve risks and uncertainties that are difficult
to predict. Actual outcomes and results may differ materially
from what is expressed or forecasted in such forward-looking
statements due to numerous factors, including, but not limited to,
general economic conditions and global financial concerns, the
volatility of the Company’s primary markets, the ability to develop
new products to satisfy changes in consumer demands, the intensity
of competition, increased pricing pressure from both competitors
and customers, the effect on production time and overall costs of
products if any of our primary suppliers are lost or if a primary
supplier increases the prices of raw materials or components, the
ability to ramp up manufacturing to satisfy increasing demand,
maintenance of a significant investment in inventories in
anticipation of future sales, existing cash levels which may not be
sufficient to fund future growth, fluctuations in quarterly and
annual operating results, risks associated with operating a global
business including risks from international sales, reduction in
demand or loss of significant customers, changes in foreign import
tariffs and currency fluctuations including the United Kingdom’s
likely exit from the European Union, ability to reduce operating
costs if sales decline, attracting and retaining key management and
qualified technical and sales personnel, impact resulting from the
actions of activist shareholders, changes in effective tax rates,
protection of intellectual property rights and the increased costs
due to changes in securities laws and regulations.
For further information regarding risks and
uncertainties associated with the Company’s business, please refer
to Schmitt’s SEC filings, including, but not limited to, its Forms
10-K, 10-Q and 8-K.
The forward-looking statements in this release
speak only as of the date on which they were made, and the Company
does not undertake any obligation to update any forward-looking
statement to reflect events or circumstances after the date of this
release, or for changes to this document made by wire services or
internet service providers.
For more
information contact: |
Ann M. Ferguson, CFO and
Treasurer(503) 227-7908 or visit our web site at
www.schmitt-ind.com |
SCHMITT INDUSTRIES,
INC.CONSOLIDATED BALANCE
SHEETS(UNAUDITED)
|
February 28, 2019 |
|
May 31, 2018 |
ASSETS |
Current assets |
|
|
|
|
|
Cash and cash
equivalents |
$ |
1,168,930 |
|
|
$ |
2,053,181 |
|
Restricted cash |
|
56,835 |
|
|
|
58,352 |
|
Accounts receivable, net |
|
2,078,116 |
|
|
|
2,047,032 |
|
Inventories |
|
5,751,164 |
|
|
|
5,710,888 |
|
Prepaid expenses |
|
193,326 |
|
|
|
148,924 |
|
Income taxes receivable |
|
206 |
|
|
|
0 |
|
Total current assets |
|
9,248,577 |
|
|
|
10,018,377 |
|
|
|
|
|
|
|
Property and equipment, net |
|
863,361 |
|
|
|
770,915 |
|
Other assets |
|
|
|
|
|
Intangible assets, net |
|
418,331 |
|
|
|
496,768 |
|
TOTAL ASSETS |
$ |
10,530,269 |
|
|
$ |
11,286,060 |
|
|
LIABILITIES & STOCKHOLDERS’
EQUITY |
Current liabilities |
|
|
|
|
|
Accounts payable |
$ |
977,436 |
|
|
$ |
1,024,256 |
|
Accrued commissions |
|
194,943 |
|
|
|
194,797 |
|
Accrued payroll liabilities |
|
192,953 |
|
|
|
188,568 |
|
Other accrued liabilities |
|
437,209 |
|
|
|
358,790 |
|
Income taxes payable |
|
0 |
|
|
|
3,993 |
|
Current portion of long-term liabilities |
|
21,424 |
|
|
|
0 |
|
Total current
liabilities |
|
1,823,965 |
|
|
|
1,770,404 |
|
Total current
liabilities |
|
35,601 |
|
|
|
0 |
|
Stockholders’ equity |
|
|
|
|
|
Common stock, no par value, 20,000,000 shares authorized, 4,032,878
shares issued and outstanding at February 28, 2019 and 3,994,545
shares issued and outstanding at May 31, 2018 |
|
13,156,496 |
|
|
|
13,085,652 |
|
Accumulated other comprehensive loss |
|
(509,826 |
) |
|
|
(536,307 |
) |
Accumulated deficit |
|
(3,975,967 |
) |
|
|
(3,033,689 |
) |
Total stockholders’ equity |
|
8,670,703 |
|
|
|
9,515,656 |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
10,530,269 |
|
|
$ |
11,286,060 |
|
|
|
|
|
|
|
SCHMITT INDUSTRIES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE AND NINE MONTHS ENDED
FEBRUARY 28, 2019 AND 2018(UNAUDITED)
|
Three Months Ended February 28, |
|
Nine Months Ended February 28, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
3,082,181 |
|
|
$ |
3,238,858 |
|
|
$ |
10,026,112 |
|
|
|
10,093,386 |
|
Cost of
sales |
|
2,069,798 |
|
|
|
1,916,345 |
|
|
|
6,310,824 |
|
|
|
5,645,372 |
|
Gross profit |
|
1,012,383 |
|
|
|
1,322,513 |
|
|
|
3,715,288 |
|
|
|
4,448,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
General, administration and sales |
|
1,507,233 |
|
|
|
1,286,718 |
|
|
|
4,452,091 |
|
|
|
4,279,505 |
|
Research and development |
|
20,532 |
|
|
|
75,790 |
|
|
|
116,693 |
|
|
|
253,007 |
|
Total operating expenses |
|
1,527,765 |
|
|
|
1,362,508 |
|
|
|
4,568,784 |
|
|
|
4,532,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
(515,382 |
) |
|
|
(39,995 |
) |
|
|
(853,496 |
) |
|
|
(84,498 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
46,779 |
|
|
|
61,815 |
|
|
|
(69,468 |
) |
|
|
88,436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
(468,603 |
) |
|
|
21,820 |
|
|
|
(922,964 |
) |
|
|
3,938 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes |
|
6,586 |
|
|
|
6,267 |
|
|
|
19,314 |
|
|
|
19,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(475,189 |
) |
|
$ |
15,553 |
|
|
$ |
(942,278 |
) |
|
$ |
(15,297 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, basic |
$ |
(0.12 |
) |
|
$ |
0.00 |
|
|
$ |
(0.24 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares, basic |
|
4,000,990 |
|
|
|
3,706,050 |
|
|
|
3,996,970 |
|
|
|
3,230,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share, diluted |
$ |
(0.12 |
) |
|
$ |
0.00 |
|
|
$ |
(0.24 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares, diluted |
|
4,000,990 |
|
|
|
3,769,814 |
|
|
|
3,996,970 |
|
|
|
3,230,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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