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Schmitt Industries, Inc. Message Board

  • jrn69panther jrn69panther Jan 9, 2013 4:39 PM Flag

    Pretty UGLY Report

    ----one just has to wonder just who and he** where the large shareholders privy to these dismal results some 4 months ago when the intense selling in SMIT shares began? Expanded overhead with decreased sales does not make for a very good combo going forward. IMHO $2-50 here we come.

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    • another SEQUENTIAL quarterly collapse in Xact sales down to just $101,000 in the fiscal second quarter of 2013. In the immediately preceding quarter the Xact sales were $287,000 and in the quarter before that $426,000. It looks like whoever was in charge of that operation must have decided to "pick up their ball and go home". Clearly the odds now favor a writeoff of that operation at the end of this fiscal year. Yes jrn, by May 31 SMIT will own all of Xact but it will be like that old Porgy and Bess song : "I got plenty of nothin". This is a personal embarrassment to the former CEO who had been sheparding that product line and it may be responsible for his decision to step down.

      A few tough decisions need to be made fairly quickly: 1. Xact needs to be buried and mourned for the poor money losing proposition it has been for 5 years. 2. Headcount needs to be addressed (to your point about overhead out of whack w/revenues). There is cash on the Balance Sheet and an available credit line untapped that could be used for cash severance requirements. 3. The Case family legacy (stock position) needs to be monetized before it evaporates, or I suppose all family members could just keep working at the company drawing salary and impacting margins until the bitter end. The better move would be to hand off the company to an interested buyer and cash out to enjoy their golden years, and also provide shareholders w/a moderate boost to the share price.

      All the news was not bad. Despite dismal sales, gross margin and even gross profit was higher. The real problem here (outside of the obvious failure of Xact) is a lack of visibility, and ever more so, predictability. The auto industry had a gangbusters December quarter and SMIT's North American sales and profitability were ugly when they should have been stellar. Europe was actually up when I thought there would be a complete collapse there. The company is simply unable to be modeled in terms of future financial performance--it's always a wild guess as to how the next quarter will turn out. The previous first fiscal quarter of 2013 was much better than the break-even I was looking for. This one was worse. But if you told me sales would have been only $2.7 million for the quarter--I would have expected the loss per share to be much worse.

      We should know who sold stock aggressively ahead of this about mid-Feb.

      • 1 Reply to roboklerk
      • jrn, your (i.e. all shareholders) best hope is that a lot of the stock selling has already taken place ahead of the results. It's a "dirty game", but that is the silver lining. The co. remains debt free, fat (personnel and unprofitable product lines) can be trimmed, the assets are worth something, and the current CEO has a large enough equity stake to keep him motivated to realize value. The big mistake here IMO was not owning up to the folly of Xact. The company still refuses to do that. My guess is it will soon be out of the company's hands and into the accountants. Strong managements don't just rely on the CYA of boilerplate listing of potential risks facing the co. They are forthcoming, admit a mistake, take the medicine, make the appropriate (headcount, inventory, cap ex., etc.) adjustments and move on.

 
SMIT
2.78+0.03(+1.03%)Jan 28 11:16 AMEST

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