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The L.S. Starrett Company Message Board

  • pmlljl pmlljl Jun 10, 2003 4:20 PM Flag

    Legacy costs:

    Those legacy costs are killers when a companies growth and profitability trends reverse. The pension and health care costs continue while the company tries to downsize and a larger portion of the company's cashflow goes to those people no longer working. Is this why the stock continues to decline? The price set a new low today. I don't know if I will ever buy this stock again. Comments anyone?

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    • dcanuel Jun 18, 2003 1:33 PM Flag

      I didn't grow up in Athol but I used to visit there all the time as I had an aunt who lived there -- She was an SCX employee and introduced me to the stock when I was just in high school. From her apt. window you could see the sign lit up at night. Also the railroad -- Boston & Maine I think.

      I agree Athol is a nice town. I also agree that the co. needs outside influence & directors. But sales / employee is extremely low by the standards of virtually any modern industry. I wish it weren't so, but I do think that the handwriting is on the wall to a certain extent. I would hate to see Athol close completely, and that's probably the most extreme outcome. But I'm afraid it will have to shrink, and it's probably sooner rather than later.

    • I honestly hear all the rumors that are going around, all I meant was I feel bad for the people because alot of people take pride in what they do for that company and the company doesn't care about the efforts that some put forth into their job.

      For Starretts not to be around in 5 years well who the hell knows, people in Athol are just holding on to jobs as I am sure it's tough anywhere else not just there I am originally from Athol and I have friends there so it hits home for me.

      Athol is a nice town...and for you to say it needs to close or shrink that's a little ridiculous if you grew up here you'd know what I meant.

      What the company needs is management and yes some people in that place need to be let go...but for the hard working people I think D.A. needs to look for a little outside influence other than close family members.

    • This stock is mispriced.

      This is from latest BS:
      Market Cap Now -- $82M
      Working Capital -- $101M
      Debt -- 5M

      So, basicly, the one who purchases LTX buys working capital net of debt of $96 for every $82 in stock. Put another way investor purchases $1.17 in LIQUID assets for every $1.00 invested.

      In addition investor receives for FREE:
      - ALL fixed assets
      - Goodwill, Brand-names, & customer accounts
      - Company that paid dividends for atleast 10 years.
      - Company with 123 year history (eg it survived -- wars, epidemics, recessions & booms)
      - A retirement plan for employees that is OVERFUNDED by $33 million(!!!!!)

      Now the above analyses is ONLY valid if there is good deal of assurance that SCX will come out of this ression. CASH is the one such assurance.

      Againe from latest BS:
      Cash -- 28M
      Debt -- 5M
      NET Cash -- 23M

      Compare net cash to latest quarterly losses of $1.3M. It will take 4 of years before existing cash runs out. Hopefully management will halt losses bofore that.

      Positive cash flow is another survival sign. So far in FY 03 they generated $18M. In FY 02 they generated $5M. Even though SCX has operating losses they can run down their working capital & squize cash well above the losses.

      NEXT reasonable question is how much this baby worth? This is the math:

      Average Annual Cash Flow for 10 years x Resonable PE + Cash per share.

      Some digging wil give:
      1.07 x 15 + 3.41 = $19.46

      Hope that helps!!

      • 1 Reply to levchuk2
      • I understand your analysis and thinking but the market has little confidence in the management of the company and its ability to fight off foreign competition in its industry. I suspect the market is right, at least for now, and they are driving the stock to new lows on increased volume. For now, I think it is at least partially a matter of priorities. With the company's business under siege in a weak economy, management will most likely try to save itself and as many employees as it can. With the continuing demands to fund healthcare costs and retirement costs, there will be little if anything left for shareholders. I am glad I no longer own this stock. But, if prospects brighten, I will consider it in the future.

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