-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Tbx1Ica7TMs3xaUPnYH1ecU07NeR/MEZPBPt1dOXNcJxhxtnXkD1E/0zl3/nAiKS iGljsX2slrK4Nl34mQx4+A== 0000093676-94-000003.txt : 19940208 0000093676-94-000003.hdr.sgml : 19940208 ACCESSION NUMBER: 0000093676-94-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19931225 FILED AS OF DATE: 19940207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARRETT L S CO CENTRAL INDEX KEY: 0000093676 STANDARD INDUSTRIAL CLASSIFICATION: 3420 IRS NUMBER: 042756926 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 34 SEC FILE NUMBER: 001-00367 FILM NUMBER: 94504833 BUSINESS ADDRESS: STREET 1: 121 CRESCENT ST CITY: ATHOL STATE: MA ZIP: 01331 BUSINESS PHONE: 5082493551 10-Q 1 10QDEC93 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 25, 1993 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 508-249-3551 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 filings requirements for the past 90 days. YES X NO Common Shares outstanding as of December 25, 1993 : Class A Common Shares 4,713,627 Class B Common Shares 2,342,653 Page 1 of 9 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 25, 1993 and December 26, 1992 (unaudited) 3 Consolidated Balance Sheets - December 25, 1993 (unaudited) and June 26, 1993 4 Consolidated Statements of Stockholders' Equity - twenty-six weeks ended December 25, 1993 and December 26, 1992 (unaudited) 5 Calculation of Shares for Computation of Consolidated Earnings per Share - thirteen and twenty-six weeks ended December 25, 1993 and December 26, 1992 (unaudited) 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Part II. Other information: Item 6. Exhibits and reports on Form 8-K 9 Page 2 of 9 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 12/25/93 12/26/92 12/25/93 12/26/92 Net sales 47,317 45,887 89,309 89,994 Cost of goods sold (33,639) (33,572) (64,512) (64,574) Selling and general (9,274) (9,037) (18,449) (18,114) Other income and expense (116) (345) (731) (834) Earnings before income taxes 4,288 2,933 5,617 6,472 Provision for federal, foreign and state income taxes 1,220 838 1,342 2,085 Net earnings 3,068 2,095 4,275 4,387 Earnings per share .43 .30 .60 .63 CASH FLOWS Cash flows from operating activities: Net earnings 3,068 2,095 4,275 4,387 Noncash expenses: Depreciation and amortization 2,179 2,103 4,343 4,195 Deferred taxes 264 308 496 1,012 Unrealized translation losses 1,070 1,256 2,830 2,602 Working capital changes: Receivables (3,380) (2,429) (5,386) (1,794) Inventories 896 2,611 1,923 3,116 Other assets and liabilities 779 366 2,614 2,586 Prepaid pension cost and other (380) (264) (906) (738) Net cash from operations 4,496 6,046 10,189 15,366 Cash flows from investing activities: Additions to plant and equipment (901) (1,638) (3,572) (3,380) Increase in short-term investments (1,654) (3,821) (4,818) (9,234) Net cash used in investing (2,555) (5,459) (8,390) (12,614) Cash flows from financing activities: Long-term debt repayments (300) (300) (300) (300) Common stock issued 747 1,812 766 1,840 Treasury shares purchased (523) (502) (1,025) (600) Dividends (1,199) (1,194) (2,399) (2,374) Net cash used in financing (1,275) (184) (2,958) (1,434) Effect of translation rate changes on cash (28) (185) (67) (194) Net increase (decrease) in cash 638 218 (1,226) 1,124 Cash, beginning of period 981 1,699 2,845 793 Cash, end of period 1,619 1,917 1,619 1,917 See notes to consolidated financial statements Page 3 of 9 THE L.S. STARRETT COMPANY Consolidated Balance Sheets (in thousands of dollars) Dec. 25 June 26 1993 1993 ASSETS (unaudited) Current assets: Cash 1,619 2,845 Short-term investments 28,162 23,478 Accounts receivable (less allowance for doubtful accounts of $1,006,000 and $1,001,000) 29,697 29,057 Inventories: Finished goods 21,781 21,324 Goods in process and finished parts 16,586 19,189 Raw materials and supplies 12,669 13,054 51,036 53,567 Prepaid expenses and other current assets 1,221 3,355 Total current assets 111,735 112,302 Property, plant and equipment, at cost (less accumulated depreciation of $47,338,000 and $43,641,000) 58,716 59,618 Cost in excess of net assets acquired (less accumu- lated amortization of $2,202,000 and $2,034,000) 8,991 9,205 Prepaid pension cost 13,963 12,870 Other assets 429 441 193,834 194,436 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities 600 1,311 Accounts payable and accrued expenses 10,750 11,276 Accrued salaries and wages 3,667 4,042 Taxes payable 2,485 2,360 Employee deposits for stock purchase plan 693 433 Total current liabilities 18,195 19,422 Deferred income taxes 6,527 6,101 Long-term debt 13,685 14,527 Accumulated postretirement medical benefit obligation 13,164 12,964 Stockholders' equity: Class A Common $1 par (10,000,000 shrs. auth.) 4,714 4,640 Class B Common $1 par (10,000,000 shrs. auth.) 2,343 2,425 Additional paid-in capital 30,572 30,023 Retained earnings reinvested and employed in the business 111,335 110,259 ESOP guaranteed bank loan (1,085) (1,627) Foreign currency translation adjustment (5,616) (4,298) Total stockholders' equity 142,263 141,422 193,834 194,436 See Notes to Consolidated Financial Statements Page 4 of 9 THE L.S. STARRETT COMPANY Consolidated Statements of Stockholders' equity For the Twenty-six Weeks Ended December 25, 1993 and December 26, 1992 (in thousands of dollars) (unaudited) Equity Adjustments Common Addi- Stock Out- tional Currency standing Paid-in Retained Trans- ($1 Par) Capital Earnings ESOP lation Total Balance June 27,1992 (1,357,654 Class A and 94,790 Class B shares in treasury) 6,945 26,782 107,313 (2,712) 524 138,852 Net earnings 4,387 4,387 Dividends ($.34) (2,374) (2,374) Treasury shares: Purchased (26) (100) (474) (600) Issued 24 547 571 Options exercised 75 1,194 1,269 ESOP loan repayments 542 542 Translation loss (5,384) (5,384) Balance Dec. 26, 1992 (1,350,531 Class A and 102,633 Class B shares in treasury) 7,018 28,423 108,852 (2,170) (4,860) 137,263 Balance June 26, 1993 (1,303,954 Class A and 111,482 Class B shares in treasury) 7,065 30,023 110,259 (1,627) (4,298) 141,422 Net earnings 4,275 4,275 Dividends ($.34) (2,399) (2,399) Treasury shares: Purchased (42) (183) (800) (1,025) Issued 25 572 597 Options exercised 9 160 169 ESOP loan repayments 542 542 Translation loss (1,318) (1,318) Balance Dec. 25, 1993 (1,308,902 Class A and 123,800 Class B shares in treasury) 7,057 30,572 111,335 (1,085) (5,616) 142,263 See Notes to Consolidated Financial Statements Page 5 of 9 THE L.S. STARRETT COMPANY Calculation of Shares for Computation of Consolidated Earnings per Share (unaudited) 13 Weeks Ended 26 Weeks Ended 12/25/93 12/26/92 12/25/93 12/26/92 Average number of shares outstanding during the period 7,061,934 7,009,061 7,059,870 6,975,663 Incremental shares computed on the assumption that dilutive stock options had been exercised with the proceeds used to purchase treasury stock 7,089 4,792 8,299 16,185 Average common and common equivalent shares outstanding 7,069,023 7,013,853 7,068,169 6,991,848 See Notes to Consolidated Financial Statements Page 6 of 9 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 25, 1993 and June 26, 1993; the results of operations and cash flows for the thirteen weeks and twenty-six weeks ended December 25, 1993 and December 26, 1992; and changes in stockholders' equity for the twenty-six weeks ended December 25, 1993 and December 26, 1992. 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 26, 1993, 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 1993 1992 1993 1992 Interest income 253 268 483 501 Interest expense and com- mitment fees (168) (193) (339) (446) Realized and unrealized ex- change gains and losses (248) (514) (1,113) (934) Other 47 94 238 45 (116) (345) (731) (834) The net effect of changes in foreign currency exchange rates includes realized exchange gains and losses from foreign currency transactions along with unrealized translation gains and losses from our subsidiary in Brazil, a country with a hyperinflationary economy. Translation gains and losses on short-term borrowings and marketable securities in Brazil are netted against the related interest charged or earned. Similar losses on accounts receivable are treated as sales discounts and are netted against sales. Approximately 80% of all inventories are valued on the LIFO method. At December 25, 1993, and June 26, 1993, total inventories are $25,543,000 and $25,757,000 less, respectively, than if determined on a FIFO basis. Long-term debt is comprised of the following (in thousands): December June 1993 1993 Industrial revenue bond 4,200 4,500 ESOP guaranteed bank loan 1,085 1,627 Revolving credit agreement 9,000 9,000 14,285 15,127 Less current portion 600 600 13,685 14,527 Page 7 of 9 THE L. S. STARRETT COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Sales Sales are up 3% for the quarter and down 1% for the six months compared to a year ago. The increase in the quarterly comparison is due primarily to improvement in domestic unit volume. Exchange rate changes in Scotland have adversely affected the six month comparison, particularly in the first quarter. Earnings Before Taxes Pretax earnings are up 46% for the quarter but down 13% for the six month comparison. The increases in domestic sales volume and overhead absorption are responsible for the improvement in the quarterly comparison. The six month comparison is pulled down by the first quarter, where exchange rates in Scotland and a relatively strong prior year quarter in Brazil played a part. Income Taxes The overall effective income tax rate is 28% for the quarter and 24% for the six months. This compares to 29% and 32% in the prior year. The year to year changes relate to the change in the contribution to overall pretax income from Brazil, where the effective tax rate is higher than elsewhere in the Company, from tax- exempt interest and from operating earnings in Puerto Rico, where the tax rate is low. The first quarter of this year and, therefore, the six months were affected by all three. LIQUIDITY AND CAPITAL RESOURCES The Company continues to maintain a strong financial position with a working capital ratio of 6.1 to one on December 25, 1993 and 5.8 to one on June 26, 1993. Cash and short-term investments are up over $3 million compared to June 1993. June tends to be a low point, but continued reduction of domestic inventories has also contributed to this increase in cash and short-term investments. The fact that the changes in receivables and payables in the Statement of Cash Flows do not exactly match the changes in the related balance sheet accounts is because of the high inflation in Brazil. These differences should not be interpreted as uses and sources of cash, but rather as noncash adjustments to net income to arrive at cash generated from operations. Also, these differences tend to be offset by unrealized exchange gains and losses. Borrowings under the Company's $20 million revolving credit agreement have been used to finance acquisitions. The Company believes that existing cash balances, funds generated from operations and available funds under its credit line will be sufficient to meet foreseeable cash needs. Cash not immediately required for working capital needs is invested in short-term government securities and other money market investments. Page 8 of 9 THE L. S. STARRETT COMPANY PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K. None 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 7, 1994 S/ R. U. WELLINGTON, JR. R. U. Wellington, Jr. (Treasurer and Chief Financial Officer) Date February 7, 1994 S/ S. G. THOMSON S. G. Thomson (Chief Accounting Officer) Page 9 of 9 -----END PRIVACY-ENHANCED MESSAGE-----