L.S. Starrett Company
Address:
121 Crescent Street
Athol, Massachusetts 01331-1915
U.S.A.
Telephone: (978) 249-3551
Fax: (978) 249-8495
http://www.starrett.com
Statistics:
Public Company
Incorporated: 1900
Employees: 2,800
Sales: $175.7 million (2003)
Stock Exchanges: New York
Ticker Symbol: SCX
NAIC: 333515 Cutting Tool and Machine Tool Accessory Manufacturing; 332212 Hand and Edge Tool Manufacturing; 332213 Saw Blade and Handsaw Manufacturing; 334513 Instruments and Related Product Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables; 334519 Other Measuring and Controlling Device Manufacturing
Company Perspectives:
Starrett, founded in 1880, manufactures more than 5,000 variations of Precision Tools, Gages, Metrology Systems and Saw Blades for Industrial and Professional markets worldwide.
Key Dates:
1880: L.S. Starrett opens his own shop in Athol, Massachusetts.
1900: The company incorporates.
1935: The company acquires the indicator business of Henry A. Lowe Co.
1958: The company founds subsidiaries in Brazil and Scotland.
1962: Starrett acquires Webber Gage Co. and Rhode Island Tool Co.
1986: Evans Rule Co. is acquired.
1996: Starrett opens its first Chinese subsidiary.
2001: The company recalls defective measuring devices.
2002: A federal investigation is launched relating to the 2001 recall; Starrett's stock plummets.
2004: The company closes several of its warehouses and its plants in Skipton, England, and Alum Bank, Pennsylvania, moving the business offshore to the Dominican Republic.
Company History:
Founded in 1880, the L.S. Starrett Company manufactures more than 5,000 industrial, professional, and consumer products. However, the company is perhaps best known for its precision hand tools, some of which are considered virtual works of art. Starrett is also a leading manufacturer of saw blades and makes many tools for the metalworking industry. Its products range from huge machines and measuring devices designed for industrial use to smaller equipment made for the do-it-yourself handyman market. Starrett sells its products across the United States and in more than 100 foreign countries. It maintains manufacturing facilities in Ohio, Pennsylvania, and North and South Carolina. It also operates factories in Brazil, Scotland, England, Germany, Australia, and China. Its customers are primarily found in the marine, automotive, aviation, farm equipment, and appliance industries. Its single largest customer is Sears Roebuck and Co., which accounts for more than 10 percent of sales. Although Starrett is a public company, the conservatively managed business remains, after more than 100 years, a family-run operation. Starrett family members and current and past company employees hold about 40 percent of the company's stock.
Getting a Start in the 1880s
The founder, Laroy Sunderland Starrett, one of 12 children of a Maine farmer, rented a 600-acre Newburyport, Massachusetts, farm in 1861. Mechanically inclined, he also patented a number of inventions, including a meat chopper, a washing machine, and a butter working machine. In 1868, Starrett became general agent and superintendent of the Athol Machine Co. of Athol, Massachusetts, incorporated with the purpose of manufacturing his inventions. He eventually took out about 100 patents.
Among Starrett's inventions were a number of hand tools useful in the building trades. The first of these devices, patented in 1879, was a combination square that contained a steel rule with a sliding head. With the aid of the head, it could be used as a square or mitre, a bevel, or a plumb bob. Starrett established a shop on Athol's Crescent Street in 1880 to manufacture the popular hand tool. Ambitiously seeking out new markets for his inventions, he made his name known worldwide by establishing agencies in London and Paris in 1882. Also during the 1880s, Starrett manufactured steel rules and tapes, micrometers, calipers, and dividers.
As business increased, Starrett established a larger factory on the other side of Crescent Street. In 1894, the compound was expanded to span Millers River, and it occupied some 60,000 square feet in 1901. A year later, a new building of more than twice the floor space was erected on an adjoining site. The enterprise was incorporated in 1900, with Starrett as president and treasurer; along with him, four other members constituted the stockholders and directors. By 1906, Starrett was employing about 1,000 workers in the Athol factory and a caliper-manufacturing plant in Springfield, Massachusetts.
L.S. Starrett Co. reported assets of $8.6 million in 1918. By the time its founder died in 1922, the Athol factory was being hailed as the largest plant in the world wholly devoted to making fine mechanical tools. These products included micrometer gauges of more than 30 different styles and nearly 200 types of calipers and dividers. In addition, L.S. Starrett maintained offices and stores in New York, Chicago, and London, and special agencies in England, Germany, France, Belgium, Italy, Switzerland, Sweden, Denmark, Austria, Argentina, Australia, and Japan.
Ups and Downs in the Mid-20th Century
When L.S. Starrett was reincorporated in 1929, its assets had fallen to $4.8 million and the number of employees to about 720. In 1934, as the nation was slowly emerging from the depths of the Great Depression, assets were down to $3.8 million and employment to 402. However, following deficits in both 1932 and 1933, the company had earned a net income of $190,134 on sales of over $1.3 million, a distinct improvement over the $734,110 in sales registered in 1932 and $856,845 in 1933. At the end of the year, Starrett was able to resume dividends, which had not been paid in 1932 or 1933. In 1935, Starrett acquired the Last Word indicator business of Henry A. Lowe Co. in Cleveland, Ohio, and moved its equipment to the Athol factory. Throughout the remainder of the decade, Starrett gradually recovered from the Depression despite damage to the company's facilities from river floods in 1936 and 1938.
In fiscal year 1941 (ending June 30, 1940) L.S. Starrett's net income was $740,978 on record sales of more than $3.6 million. The number of employees had grown to 1,300 and the number of stockholders to 1,742. During World War II, Starrett increased its output eightfold, operating around the clock. Net sales advanced to a peak of $12.9 million in fiscal 1943. During this period of prosperity, Arthur H. Starrett, the founder's grandson, assumed the presidency. Starrett took control of the company in 1946, only to watch postwar sales slump to $6.9 million in 1950. As a result, net income declined from $1.4 million in 1943 to $486,129 in 1950, and by 1950 employment fell to 1,135 from the 1943 high of 2,034.
The advent of the Korean War in the early 1950s created a new surge in business for Starrett that the company was able to sustain after the 1953 armistice. In fiscal year 1957--Starrett's best year of the decade--the company earned $1.5 million on net sales of $16.2 million. Shortly thereafter, Starrett began a modest program of acquisitions. In 1959, the company purchased Bristol Engineering & Manufacturing Co. based in Rehoboth, Massachusetts. Further, Starrett acquired Rhode Island Tool Co. of Providence for shares of common stock in 1962. That same year, Starrett acquired Webber Gage Co. of Cleveland, Ohio, for 20,000 shares of stock and $840,000 in cash. The acquisition of Webber, a manufacturer of precision gage blocks and certain types of optical measuring tools, enabled Starrett to begin manufacturing extremely high precision products.
Meanwhile, Transue & Williams Steel Forging Corporation of Alliance, Ohio, a maker of forgings and stampings for the automotive, truck, and tractor industries, was buying significant amounts of Starrett stock. Together with stock purchases by Russell McPhail, chairman of Transue & Williams, and his McPhail Candy Corporation, these holdings represented about 30 percent of Starrett's outstanding stock in 1964, with a value of $6.8 million. At the 1963 annual meeting, McPhail unsuccessfully proposed a cumulative-voting proposal that would have made it easier for him and other minority stockholders to win seats on the company's board of directors. This challenge to Starrett's family management ended in October 1964, when the company purchased and retired the McPhail-Transue & Williams stock holdings for $31 a share, or about $6.8 million.
In the 1960s, Starrett's fortunes were favorably tied to war once again as the conflict in Vietnam escalated throughout the decade. Net sales, only $12.8 million in fiscal 1959, surged to $33.1 million in 1968, while net income grew from $886,588 to $4.2 million during this period. By the end of the decade, the company had major branches in Chicago; Cleveland; Los Angeles; Providence, Rhode Island; and Springfield, New Jersey, and a warehouse in Toronto. Further, Starrett established subsidiaries in Brazil and Scotland in 1958 to manufacture products for foreign markets, and a Canadian subsidiary was established in 1962. Starrett also owned Herramientas de Precision--a Mexican subsidiary--from 1972 to 1985.
During this period, Starrett was also making its presence known in nonmilitary markets. While it would seem that hand-operated tools should have been rendered obsolete with the advent of power machinery and automation, the reality was that a growing number of do-it-yourself property owners were in the market for affordable and easy-to-use hand tools for repair and maintenance. At the other end of the spectrum, the increasing complexity of modern industry stimulated demand for all kinds of specialized hardware, some of which Starrett was manufacturing.
Holding Its Own in the 1970s-80s
In fiscal 1970, Starrett bought Herman Stone Co., a Dayton, Ohio, producer of granite slabs for measuring tables, for $308,000 worth of stock. It was made a division of Starrett and moved to Mount Airy, North Carolina, in 1972. During the 1970s, Starrett's net sales grew from $28.7 million in 1971 to $92.9 million in 1979, while net income rose from $2.7 million to $10.8 million over that period. By this time, Starrett tools and instruments were being sold in over 100 countries through a network of industrial distributors. By far, the largest consumer of Starrett's products was the metalworking industry--which constituted about 65 percent of the company's revenue--but other important costumers were automotive, aviation, marine, and farm equipment shops, as well as tradesmen such as builders, carpenters, plumbers, and electricians.
Douglas R. Starrett, who had joined the company as an apprentice tool-and-die maker in 1941, succeeded his father as president in 1962. By 1985, the Starrett headquarters was a little-changed four-story brick factory and the company's inventory of small metal parts was piled haphazardly into wooden boxes. Despite its outmoded appearance, Starrett's profit margin of 10.7 percent was three times that of the rest of the machine-tool industry. Even in the face of Japanese competition and its own high prices, Starrett's tools were selling because they were so finely made. Ground to within two-thousandths of an inch and sometimes triple-plated, these tools were valued by machinists as the equivalent of works of art.
Half the company's shares were being held by present and retired employees under a retirement-benefits plan adopted in 1946. In fact, the Starrett family held only slightly more than 2 percent of the stock. However, after the employee stock-ownership plan purchased 400,000 shares in the Starrett treasury in 1984, the company bought 341,514 shares from stockholders at $30 a share to avoid dilution of the existing shareholders' voting power. As added protection against any future takeover attempts of the company, Starrett adopted a "poison pill" defense in 1990.
After a sharp slide in fiscal 1983 due to a severe recession, Starrett's sales resumed steady growth later in the decade, reaching $169.9 million in 1988, when net income came to $15.8 million. In 1986, the company bought Evans Rule Co. of North Charleston, South Carolina, for between $20 million and $30 million. A subsidiary of Masco Corporation, Evans was producing measuring tapes and associated items. Interviewed for New England Business in 1987, Douglas Starrett reaffirmed his company's commitment to manufacturing. "We could have reduced ourselves to a selling organization," he said, citing companies that had abandoned domestic manufacturing in favor of foreign-made goods. While expressing confidence that Starrett could compete with Japanese and German competitors, Starrett admitted that he was troubled by potential low-wage rivals from China, Taiwan, or South Korea, subsidized production overseas, and product dumping in U.S. markets.
During the 1980s, L.S. Starrett began manufacturing coordinate measuring machines, which combine the functions of several tools and allow for faster and more efficient measuring. A new division for this purpose was established in Mount Airy. To complement this investment, Starrett acquired in 1990 Sigma Optical, a British firm designing and manufacturing optical measuring projectors, and established a new division for this purpose in Farmington Hills, Michigan.
Globalizing Operations in the 1990s
As Starrett entered the 1990s, net sales, which had reached a peak of $201.6 million during fiscal 1990, fell to $174.8 million three years later. Net earnings dropped from $18.8 million to $8.7 million over this period. In the 1993 annual report, Douglas Starrett deemed 1990 "the year of the largest federal tax increase in history" and went on to say that "because of that tax increase, the economy has gone downhill ever since." Sales increased slightly to $180.2 million and earnings to $9 million in fiscal 1994.
Among the products being manufactured by Starrett in the 1990s were precision tools, tape measures, levels, electronic gages, dial indicators, gage blocks, digital readout measuring tools, granite surface plants, optical measuring projectors, coordinate measuring machines, vices, M1 lubricant, hacksaw blades, hole saws, band saw blades, jigsaw blades, reciprocating saw blades, and precision ground flat stock. Subsidiaries in Brazil and Scotland were making hacksaw and band saw blades and a limited line of precision tools and measuring tapes. These foreign operations accounted for 26 percent of the company's sales in 1994. One retailer, Sears, accounted for about 11 percent of the company's sales. Starrett's Brazilian subsidiary owned and occupied a facility in Itu, Brazil. The Scottish subsidiary owned a manufacturing plant in Jedburgh, Scotland, and also leased manufacturing space in Skipton, England. The Canadian subsidiary owned and occupied a building in Toronto.
The company was described by Barron's (August 11, 1997) as "nicely profitable" from the mid-1980s through the mid-1990s. Starrett's business was cyclical, and the company endured troughs like the drop in earnings in 1993. On the whole, however, the company did well during this period. In the middle years of the 1990s, its earnings rose solidly, so that Starrett paid out $1.28 per share in 1994 and raised the payout to $2.45 by 1996. The company's Brazilian subsidiary did particularly well during this period. With business there very strong in the mid-1990s, more than half of the company's total profits came from overseas operations. In 1996, Starrett opened a small factory in Suzhou, China, an area where the company expected business to grow. The Chinese facility only employed 24 people in its first few years of operation, but it gave Starrett a foothold in Asia.
The late 1990s were boom years for the U.S. economy in general, as evidenced by the galloping stock market. Yet the industrial manufacturing sector of the economy was a different story. By 1999, the industrial manufacturing sector was shrinking both in the United States and abroad, and Starrett felt the effects. While 1998 had been a record year for the company, with sales of $262 million, 1999 saw an 11 percent drop in sales to $232 million, and an even steeper drop, of 27 percent, in earnings. In January 1999, the Brazilian government devalued its currency by 40 percent, cutting deeply into Starrett's profits from its vigorous Brazilian subsidiary. Manufacturing cutbacks in the United Kingdom forced the company's Scottish subsidiary to lower prices in order to remain competitive. Starrett's chairman Douglas R. Starrett claimed that the company had done well in 1999 despite the dip in sales and profits; it had not laid off employees and had performed reasonably in spite of the sharp blow to its Brazilian business. The company had continued to invest in its facilities and equipment, spending some $20 million over 1999.
Struggles in the 2000s
Douglas R. Starrett expected the company to do well in 2000 despite a worsening world industrial picture. However, the company faced increasing pressure as ever larger numbers of its customers and competitors moved their businesses abroad to low-wage countries. Starrett began laying off employees in 2000. In 2001, revenue fell to $183.1 million, down more than 7 percent from a year earlier. The company saw its future as increasingly dependent on overseas operations. Douglas R. Starrett's son, Douglas A. Starrett, who had been president of the company since 1994, had been responsible for pushing the company into more global markets. In 2001, the younger Starrett became chairman and CEO, and his father, at the age of 81, finally retired. The elder Starrett promised to stay on as his son's assistant, but he died within two months after retiring. The company then faced new troubles.
Starrett brought out a new generation of measuring devices in the late 1990s called Rapid Check. The new devices turned out to be plagued with problems that made them unreliable, and in March 2001 the company began replacing them at no charge to its customers. Starrett claimed it had been aware of the problem and had been dealing with it properly, yet in 2002 a former subcontractor alerted investigators with the U.S. Defense Department, and federal agents raided Starrett's Mt. Airy, North Carolina plant, evidently looking for evidence of fraud concerning the Rapid Check devices. Starrett's stock price plunged in the wake of this event, while the company sought to prevent documents related to the allegations from being released publicly. A resident of Athol characterized the drama to a reporter from the Worcester, Massachusetts, Telegram & Gazette as "the first time in a hundred years anything serious has happened up there."
The federal investigation yielded nothing damaging, and it was terminated in December 2003 with no charges filed. Yet sales were flat for 2002, and the company ended the fiscal year with a net loss of $380,000. From mid-2002 on, Starrett lost money quarter after quarter. The company struggled to reduce its inventory in order to hang on to cash that might be needed in the future. Between 2000 and 2004, Starrett cut some 800 jobs worldwide. In 2004, the company closed a warehouse in Cleveland and proposed shutting its remaining three warehouses as well as the plant in Mt. Airy. Starrett closed its plant in Skipton, England, that year. It also closed its plant in Alum Bank, Pennsylvania, moving the business offshore to the Dominican Republic. The company was in a money-losing slide, which it blamed principally on the movement of both its customers and competitors overseas.
Principal Subsidiaries: Starrett Industria e Comercio Ltda. (Brazil); L.S. Starrett Co. (Australia); L.S. Starrett Co. Ltd. (Scotland); Starrett GmbH (Germany); Starrett Tools (Shanghai) Co. Ltd. (China); Starrett Tools (Suzhou) Co. Ltd. (China).
Principal Competitors: The Stanley Works; General Tools Manufacturing Company; Robert Bosch Tools Corporation.
Further Reading:
- Baldwin, William, "The Antique Shop in Athol," Forbes, November 4, 1985, pp. 54, 58.
- Bodor, Jim, "Athol Stands with Starrett," Telegram & Gazette (Worcester, Mass.), November 17, 2002, p. E1.
- Brammer, Rhonda, "Tempting Trio," Barron's, August 11, 1997, p. 38.
- Chesto, Jon, "Athol-Based Tool Maker to Shut Penn., U.K. Units," Boston Herald, February 7, 2004, p. 29.
- Crane, Ellery Bicknell, ed., History of Worcester County Massachusetts, Vol. 2, New York and Chicago: Lewis Historical Publishing Co., 1924, pp. 79-80, 829, 845-46.
- Donker, Peter P., "Starrett Had Some Setbacks in '99, but Predicts Healthy Growth in 2000," Telegram & Gazette (Worcester, Mass.), September 16, 1999, p. E1.
- "Douglas R. Starrett Dies at 81," Industrial Distribution, December 2001, p. 17.
- Esposito, Andi, "'D. R.' Starrett Hands the Reins to 'D. A.,'" Telegram & Gazette (Worcester, Mass.), September 20, 2001, p. E1.
- Lazo, Shirley A., "Road Warrior," Barron's, June 9, 2003, p. 36.
- McLaughlin, Mark, "The Tales of Two Survivors," New England Business, September 21, 1987, pp. 11, 13, 15-16.
- Mitman, Carl W., "Laroy S. Starrett," Dictionary of American Biography, Vol. 17, New York: Scribner's, 1943, pp. 535-36.
- "Over 100 Years of Measuring History," Industrial Distribution, January 1996, p. 74.
- Pasztor, Andy, "U.S. Is Investigating Allegations L.S. Starrett Defrauded Customers," Wall Street Journal, September 12, 2002, p. A3.
- The Starrett Story, Athol, Mass.: L.S. Starrett Co., 1991.
- Wilson-Youngquist, Sherry, "Contractor Faults Starrett Instruments," Winston-Salem Journal, September 13, 2002, p. B2.
- ------, "Federal Agents Seize Computers at Plant," Winston-Salem Journal, September 6, 2002, p. B1.
- Vasilash, Gary S., "Best of Both Worlds," Automotive Manufacturing & Production, December 2000, p. 58.
Source: International Directory of Company Histories, Vol.64. St. James Press, 2004.
