-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CEX6RuUMC+RB/RRle3Lf0hf/axos/hNmTh7fC4c1aM1E0qGtY8AcMPAbY5Gkqlzr q/Rs7svUO8f7vQQbO9SRjQ== 0000093676-98-000002.txt : 19980209 0000093676-98-000002.hdr.sgml : 19980209 ACCESSION NUMBER: 0000093676-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971227 FILED AS OF DATE: 19980206 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARRETT L S CO CENTRAL INDEX KEY: 0000093676 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 042756926 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00367 FILM NUMBER: 98523424 BUSINESS ADDRESS: STREET 1: 121 CRESCENT ST CITY: ATHOL STATE: MA ZIP: 01331 BUSINESS PHONE: 5082493551 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 27, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from Commission file number 1-367 THE L. S. STARRETT COMPANY (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-1866480 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 121 CRESCENT STREET, ATHOL, MASSACHUSETTS 01331-1915 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 978-249-3551 Former name, address and fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Common Shares outstanding as of December 27, 1997 : Class A Common Shares 5,059,898 Class B Common Shares 1,820,990 Page 1 of 8 THE L. S. STARRETT COMPANY CONTENTS Page No. Part I. Financial Information: Item 1. Financial Statements Consolidated Statements of Earnings and Cash Flows - thirteen and twenty-six weeks ended December 27, 1997 and December 28, 1996 (unaudited) 3 Consolidated Balance Sheets - December 27, 1997 (unaudited) and June 28, 1997 4 Consolidated Statements of Stockholders' Equity - twenty-six weeks ended December 27, 1997 and December 28, 1996 (unaudited) 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II. Other information: Item 6. Exhibits and reports on Form 8-K 8 Page 2 of 8 THE L. S. STARRETT COMPANY Consolidated Statements of Earnings and Cash Flows (in thousands of dollars except per share data)(unaudited) 13 Weeks Ended 26 Weeks Ended EARNINGS 12/27/97 12/28/96 12/27/97 12/28/96 Net sales 68,638 64,587 133,851 123,223 Cost of goods sold (45,372) (43,898) (89,851) (84,468) Selling and general (14,216) (12,597) (27,010) (24,849) Other income and expense 382 394 842 765 Earnings before income taxes 9,432 8,486 17,832 14,671 Provision for federal, foreign and state income taxes 3,041 2,809 6,028 4,952 Net earnings 6,391 5,677 11,804 9,719 Earnings per share .93 .81 1.71 1.38 Dividends per share .19 .18 .38 .36 CASH FLOWS Cash flows from operating activities: Net earnings 6,391 5,677 11,804 9,719 Noncash expenses: Depreciation and amortization 2,650 2,542 5,395 5,045 Deferred taxes (254) 66 (208) 258 Unrealized translation losses 71 13 154 43 Working capital changes: Receivables 1,378 543 (6,027) (3,217) Inventories 1,234 231 3,389 (2,570) Other assets and liabilities (583) 2,356 3,051 224 Prepaid pension cost and other (1,113) (139) (1,532) (147) Net cash from operations 9,774 11,289 16,026 9,355 Cash flows from investing activities: Additions to plant and equipment (3,986) (3,136) (7,806) (5,773) (Increase)decrease in short-term investments (3,211) (1,369) (4,521) 1,331 Net cash used in investing (7,197) (4,505) (12,327) (4,442) Cash flows from financing activities: Short-term borrowings, net 101 (4,150) 101 (1,424) Long-term debt repayments (300) (300) (300) (300) Common stock issued 934 1,062 1,820 1,893 Treasury shares purchased (334) (1,845) (4,019) (3,196) Dividends (1,302) (1,258) (2,619) (2,519) Net cash used in financing (901) (6,491) (5,017) (5,546) Effect of translation rate changes on cash 25 36 26 31 Net increase (decrease) in cash 1,701 329 (1,292) (602) Cash, beginning of period 60 486 3,053 1,417 Cash, end of period 1,761 815 1,761 815 See notes to consolidated financial statements Page 3 of 8 THE L. S. STARRETT COMPANY Consolidated Balance Sheets (in thousands of dollars) Dec. 27 June 28 1997 1997 ASSETS (unaudited) Current assets: Cash 1,761 3,053 Investments 32,056 27,389 Accounts receivable (less allowance for doubtful accounts of $2,264,000 and $1,877,000) 42,819 36,625 Inventories: Finished goods 30,242 32,374 Goods in process and finished parts 26,353 26,698 Raw materials and supplies 16,270 16,774 72,865 75,846 Prepaid expenses and other current assets 2,006 4,682 Total current assets 151,507 147,595 Property, plant and equipment, at cost (less accumulated depreciation of $66,220,000 and $60,816,000) 66,788 64,101 Cost in excess of net assets acquired (less accumulated amortization of $3,717,000 and $3,514,000) 7,702 7,772 Prepaid pension cost 19,780 18,928 Other assets 1,247 350 247,024 238,746 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities 3,711 3,610 Accounts payable and accrued expenses 14,573 13,205 Accrued salaries and wages 5,856 6,628 Taxes payable 3,710 3,927 Employee deposits for stock purchase plan 74 434 Total current liabilities 27,924 27,804 Deferred income taxes 8,493 8,247 Long-term debt 6,200 6,500 Accumulated postretirement medical benefit obligation 16,059 15,730 Stockholders' equity: Class A Common $1 par (20,000,000 shrs. auth.; 5,059,898 outstanding in Dec.1997, excluding 1,059,014 in treasury; 5,038,013 outstanding in June 1997, excluding 995,943 in treasury) 5,060 5,038 Class B Common $1 par (10,000,000 shrs. auth.; 1,820,990 outstanding in Dec.1997, excluding 269,960 in treasury; 1,905,606 outstanding in June 1997, excluding 260,283 in treasury) 1,821 1,906 Additional paid-in capital 39,749 38,730 Retained earnings reinvested and employed in the business 143,818 137,788 Foreign currency translation adjustment (2,335) (3,155) Other equity adjustments 235 158 Total stockholders' equity 188,348 180,465 247,024 238,746 See Notes to Consolidated Financial Statements Page 4 of 8 THE L. S. STARRETT COMPANY Consolidated Statements of Stockholders' equity For the Twenty-six Weeks Ended December 27, 1997 and December 28, 1996 (in thousands of dollars) (unaudited) Common Addi- Stock Out- tional Equity standing Paid-in Retained Adjust- ($1 Par) Capital Earnings ments Total Balance June 29, 1996 7,055 36,650 128,272 (4,692) 167,285 Net earnings 9,719 9,719 Dividends ($.36) (2,519) (2,519) Treasury shares: Purchased (125) (699) (2,372) (3,196) Issued 61 1,480 1,541 Options exercised 20 332 352 Translation gain, net 2,352 2,352 Investment valuation 50 50 Balance Dec. 28, 1996 7,011 37,763 133,100 (2,290) 175,584 Balance June 28, 1997 6,944 38,730 137,788 (2,997) 180,465 Net earnings 11,804 11,804 Dividends ($.38) (2,619) (2,619) Treasury shares: Purchased (119) (745) (3,155) (4,019) Issued 46 1,579 1,625 Options exercised 10 185 195 Translation gain, net 820 820 Investment valuation 77 77 Balance Dec. 27, 1997 6,881 39,749 143,818 (2,100) 188,348 See Notes to Consolidated Financial Statements Page 5 of 8 THE L. S. STARRETT COMPANY Notes to Consolidated Financial Statements In the opinion of management, the accompanying financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of December 27, 1997 and June 28, 1997; the results of operations and cash flows for the thirteen weeks and twenty-six weeks ended December 27, 1997 and December 28, 1996; and changes in stockholders' equity for the twenty-six weeks ended December 27, 1997 and December 28, 1996. The Company follows the same accounting policies in the preparation of interim statements as described in the Company's annual report filed on form 10-K for the year ended June 28, 1997, and these financial statements should be read in conjunction with said annual report. Other income (expense) is comprised of the following (in thousands): Thirteen Weeks Twenty-six Weeks Ended December Ended December 1997 1996 1997 1996 Interest income 746 464 1,388 936 Interest expense and com- mitment fees (252) (179) (457) (364) Realized and unrealized ex- change losses (135) (35) (232) (84) Other 23 144 143 277 382 394 842 765 Approximately 80% of all inventories are valued on the LIFO method. At December 27, 1997, and June 28, 1997, total inventories are $25,322,000 and $24,790,000 less, respectively, than if determined on a FIFO basis. Long-term debt is comprised of the following (in thousands): December June 1997 1997 Industrial revenue bond 1,800 2,100 Revolving credit agreement 5,000 5,000 6,800 7,100 Less current portion 600 600 6,200 6,500 In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No.128, "Earnings per Share," which was effective during this quarter. SFAS No. 128 has had no effect on reported earnings per share. Page 6 of 8 THE L. S. STARRETT COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales Sales are up 6% for the quarter and 9% year to date. The increase in the quarterly comparison is primarily in domestic operations, reflecting continued good business conditions. The year to date increase is in both domestic and foreign operations. The strong pound as compared to European currencies and ongoing concerns about Brazil's economy are affecting volume at our foreign locations. Earnings Before Taxes Pretax earnings are up 11% for the quarter and 22% year to date. These results follow the increase in sales volume mentioned above and the related efficiencies from the increased manufacturing activity. Selling and general expense would have increased at a lower rate than sales had it not been for certain second quarter bad debt reserves established as a result of the Asian currency situation. Income Taxes The effective income tax rate is 32% for the quarter and 34% year to date. The rates were approximately the same in the corresponding periods in the prior year. The effect of lower rates in Brazil in fiscal 1997 has been offset by domestic income mix changes resulting in higher income taxes in Puerto Rico. LIQUIDITY AND CAPITAL RESOURCES 13 Weeks Ended 26 Weeks Ended 12/27/97 12/28/96 12/27/97 12/28/96 Cash provided by operations 9,774 11,289 16,026 9,355 Cash used in investing activities (7,197) (4,505) (12,327) (4,442) Cash used in financing activities (901) (6,491) (5,017) (5,546) Cash effect of translation rate changes 25 36 26 31 Net increase (decrease) in cash 1,701 329 (1,292) (602) Cash flow provided by the increase in net earnings has been used primarily to finance increases in receivables resulting from the overall improvement in business activity. The Company maintains sufficient liquidity and has adequate resources, including lines of credit, to fund its operations under current business conditions. The Company continues to maintain a strong financial position with a working capital ratio of 5.4 to 1 as of December 27, 1997 and 5.3 to 1 as of June 28, 1997. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This quarterly report includes forward-looking statements about the Company's business, sales, liquidity and capital resources, and other operating and capital requirements. In addition, forward-looking statements concerning those and other issues may be included in future Company documents and in oral statements by Company representatives to security analysts and investors. The Company is subject to risks that could cause actual events to vary materially from such forward-looking statements. Such risks relate to the unpredicta- bility of foreign operations (particularly in Brazil), to the cyclical nature of the Company's industry (including the level of capital spending by industrial companies), and to competition, including pricing pressures from low-wage foreign sources and the effects of changes in foreign currency relationships. These risks are discussed in greater detail in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Report on Form 10K for the year ended June 28, 1997. Page 7 of 8 THE L. S. STARRETT COMPANY PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K. 6(a) Exhibit 11. Calculation of shares for computation of Consolidated Earnings per share 13 Weeks Ended 26 Weeks Ended 12/27/97 12/28/96 12/27/97 12/28/96 Average number of shares out- standing during the period 6,864,625 7,018,606 6,894,107 7,029,014 Incremental shares computed on the assumption that dilutive stock options had been exercised with the proceeds used to purchase treasury stock 13,956 7,501 14,970 9,916 Average common and common equiva- lent shares outstanding 6,878,581 7,026,107 6,909,077 7,038,930 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE L. S. STARRETT COMPANY (Registrant) Date February 6, 1998 S/R.U.WELLINGTON, JR. R. U. Wellington, Jr. (Treasurer and Chief Financial Officer) Date February 6, 1998 S/S.G.THOMSON S. G. Thomson (Chief Accounting Officer) Page 8 of 8 EX-27 2
5 1,000 6-MOS JUN-27-1998 DEC-27-1997 1,761 32,056 45,083 2,264 72,865 151,507 133,008 66,220 247,024 27,924 6,200 0 0 6,881 181,467 247,024 133,851 133,851 89,851 89,851 0 0 457 17,832 6,028 11,804 0 0 0 11,804 1.71 1.71
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