Slide 1: Schmitt Industries, Inc. Investor Presentation
Schmitt Industries, Inc. (NASDAQ: SMIT) Investor Presentation
Slide 2: Safe Harbor Language: Additional Information
Safe Harbor Language Additional Information In connection with its 2018 Annual Meeting of Shareholders (the “Annual Meeting”), Schmitt Industries, Inc. (the “Company”) has filed a definitive proxy statement dated September 14, 2018 (the “Proxy Statement”) and other documents related to the Annual Me
Slide 3: Safe Harbor Language: Forward-Looking Statements
Safe Harbor Language Forward-Looking Statements Certain statements in this presentation are “forward-looking statements.” 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 sta
Slide 4: SMIT Timeline
SMIT Timeline Jan. 8, 2016 James A. Fitzhenry resigned as President and CEO after serving as CEO for over 3 years. Mr. Fitzhenry did not receive any severance payments. David M. Hudson, a director, was appointed as interim president and CEO. In addition, SMIT announced that it decided to reduce the
Slide 5: SMIT's History of Engagement with Sententia
SMIT’s History of Engagement with Sententia May 14, 2018 Mr. Michael Zapata of Sententia sent a private letter to the SMIT Board. Jun. 14, 2018 Mr. Zapata met with members of the Board and SMIT’s counsel in person. Jun. 18, 2018 Mr. Zapata proposed to Mr. Ellsworth a settlement asking for the additi
Slide 6: FY2017 Strategy: Comments on 2017 Earnings
FY2017 Strategy: Comments on 2017 Earnings “…, [W]e were able to improve company-wide margin through our product sales mix and reduction of operating expenses to limit the impact to our overall net loss. ……,” commented David M. Hudson. “Our SBS sales group had great response from our customers and p
Slide 7: FY2017 Strategy: Comments on 2018 Earnings
FY2017 Strategy: Comments on 2018 Earnings “……We expect the sales activities for both the Acuity and Xact product lines to strengthen as we move through the rest of Fiscal 2018,” Hudson concluded.— Q1’18 Earnings “ ……We are working diligently to achieve profitability on a consistent basis in the sec
Slide 8: FY2017-2018: New Strategy & Accomplishments
FY2017-2018: New Strategy & Accomplishments In the last two years, SMIT’s FY2017 Strategy implemented by the Board and Management included conscious decisions to: Focus on three successful business lines: Balancing, Xact, and Acuity Eliminated unproductive businesses: CASI, LaserCheck; halted invest
Slide 9: The FY2017 Strategy has Created Shareholder Value
The FY2017 Strategy has Created Shareholder Value Source: Factset. Data as of 6/10/2018, the last day before Sententia Capital filed 13D. “In the first six months of FY2017, we have been shifting our focus and resources towards our three largest product lines – SBS, Acuity and Xact,” David M. Hudson
Slide 10: Financial Performance
Financial Performance
Slide 11: Improved Net Sales as a Result of the FY2017 Strategy
Improved Net Sales as a Result of the FY2017 Strategy Source: SMIT’s 10-K Filings.
Slide 12: FY2017 Strategy Improved EBITDA Margin
FY2017 Strategy Improved EBITDA Margin Source: SMIT’s 10-K Filings.
Slide 13: Sales Have Translated Into Net Income and EBITDA
Sales Have Translated Into Net Income and EBITDA as a Result of the FY2017 Strategy Source: SMIT’s 10-K Filings.
Slide 14: FY2017 Strategy Decreased SG&A
FY2017 Strategy Decreased SG&A Source: SMIT’s 10-K Filings. SG&A Expenses % of Net Sales
Slide 15: FY2017 Strategy Decreased Operating Expenses
FY2017 Strategy Decreased Operating Expenses Source: SMIT’s 10-K Filings. 15 Operating Expenses % of Net Sales
Slide 16: SMIT's Successful Rights Offering led to Increase in Cash
SMIT’s Successful Rights Offering led to Increase in Cash SMIT was facing a cash flow issue starting in FY2016. SMIT management and the Board were looking for a solution to this issue and explored various options, including sale of its real estate. To alleviate the cash flow problem, SMIT distribute
Slide 17: Board and Corporate Governance
Board and Corporate Governance
Slide 18: Board is open to refreshment
Board is open to refreshment In the last three years, SMIT has refreshed 40% of its Board. In May 2016, the Board appointed Charles Davidson as an independent director. Mr. Davidson brought knowledge needed at SMIT in Innovation, Sales, Marketing, and Software systems. In January 2018, David Case wa
Slide 19: Sententia's Critiques are Misleading: Third Party Inquiries
Sententia critique: The Board is unwilling to consider third party inquiries into acquiring its businesses. Sententia’s Critiques are Misleading This is false. The Board reviews and evaluates all acquisition inquiries individually and in great detail. None have yet met the valuation criteria for com
Slide 20: Sententia's Critiques are Misleading: CEO Appointment
Sententia’s Critiques are Misleading Sententia critique: Mr. David Case was promoted to CEO because he is the son of the founder. The Board weighed the option of an outside hire against Mr. Case and determined it was in the best interests of the Company and its shareholders to appoint Mr. Case. Mr.
Slide 21: Our Nominee: David W. Case
Our Nominee: David W. Case Mr. Case has been Vice President of Operations of the Company since 1996 until appointment to Chief Executive Officer and President in January 2018. Due to his long tenure of 32 years with the Company, Mr. Case has extensive knowledge of all of SMIT diverse markets, techno
Slide 22: Our Nominee: Maynard E. Brown
Our Nominee: Maynard E. Brown Mr. Brown has more than 40 years of experience in advising publicly held corporations in securities law, corporate structure and matters related to financial and stock exchange transactions. Mr. Brown provides essential analytical support for the board in its evaluation
Slide 23: Our Board has the right mix of necessary skills and experience
Our Board has the right mix of necessary skills and experience Name Title Legal Experience Technology Experience Industry Experience Financial Experience Other Board Experience Michael J. Ellsworth, MBA Chairman P P P P David W. Case President, CEO & Director P P Charles Davidson Independent Directo
Slide 24: Sententia Nominee: Andrew P. Hines
Sententia Nominee: Andrew P. Hines Mr. Hines offers nothing unique to the composition of the board and has duplicative skills; he has no experience in the industries served. Mr. Hines has a poor track record as a public company director at IMP and TROX. The Board does not believe it is in the intere
Slide 25: Sententia Nominee: Michael R. Zapata
Sententia Nominee: Michael R. Zapata Mr. Zapata has no relevant experience in SMIT’s industries. Despite the Board’s repeated attempts to engage Mr. Zapata in substantive business decisions, he has declined to do so beyond a first meeting. The Board values members that are willing to engage in open
Slide 26: Sententia's nominees' track record of failure as directors
Sententia’s nominees’ track record of failure as directors In July 2016, Zapata and Hines joined the board of Intermap Technologies Corporation, a company operating in the unrelated industry of geospatial mapping and whose stock trades on the Toronto Stock Exchange (IMP) and the OTC Bulletin Board (
Slide 27: Sententia's Plan: Sale of real estate and non-core business
Sententia’s “Plan”: Sale of real estate Sententia’s “Plan” Does Not Work All SMIT’s real estate are presently being used for operations. Schmitt spends very little on property operational costs at this time. Selling real estate would result in higher operational costs and require a lot of management
Slide 28: Sententia's Plan: Instill operational discipline
Sententia’s “Plan”: Instill operational discipline Sententia’s “Plan” Does Not Work Sententia claims it would use “targeted cost-cutting” and “improve working capital management” but fails to address how it would specifically achieve these goals. Since David Case’s appointment as CEO in January 2018
Slide 29: SMIT's FY2017 Strategy is Working
SMIT’s FY2017 Strategy is Working SMIT has dedicated time and resources to its FY2017 Strategy since July 2016. Any change to the FY2017 Strategy will interrupt its current progress. SMIT and its shareholders are experiencing the positive results of its FY2017 Strategy as evidenced by multiple quart