-----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, WUjJ6wAQPNuOTDG/oq9fq0Hbcg3ZggHeAqJvLVvHBziq4HhON6NBd1nh/qKyce/Y tadUMmRErqTKN4fiWZf4qg== 0000093676-95-000003.txt : 19950515 0000093676-95-000003.hdr.sgml : 19950515 ACCESSION NUMBER: 0000093676-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941224 FILED AS OF DATE: 19950206 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: 1934 Act SEC FILE NUMBER: 001-00367 FILM NUMBER: 95505426 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 24, 1994 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 24, 1994 : Class A Common Shares 4,856,909 Class B Common Shares 2,205,143 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 24, 1994 and December 25, 1993 (unaudited) 3 Consolidated Balance Sheets - December 24, 1994 (unaudited) and June 25, 1994 4 Consolidated Statements of Stockholders' Equity - twenty-six weeks ended December 24, 1994 and December 25, 1993 (unaudited) 5 Calculation of Shares for Computation of Consolidated Earnings per Share - thirteen and twenty-six weeks ended December 24, 1994 and December 25, 1993 (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 12/24/94 12/25/93 12/24/94 12/25/93 Net sales 56,132 47,317 103,448 89,309 Cost of goods sold (39,425) (33,639) (73,479) (64,512) Selling and general (10,879) (9,274) (20,905) (18,449) Other income and expense 433 (116) 514 (731) Earnings before income taxes 6,261 4,288 9,578 5,617 Provision for federal, foreign and state income taxes 2,416 1,220 3,573 1,342 Net earnings 3,845 3,068 6,005 4,275 Earnings per share .55 .43 .85 .60 Dividends per share .17 .17 .34 .34 CASH FLOWS Cash flows from operating activities: Net earnings 3,845 3,068 6,005 4,275 Noncash expenses: Depreciation and amortization 2,330 2,179 4,656 4,343 Deferred taxes 197 264 881 496 Unrealized translation losses 9 1,070 310 2,830 Working capital changes: Receivables (1,423) (3,380) (4,119) (5,386) Inventories 1,912 896 1,436 1,923 Other assets and liabilities 2,328 779 4,851 2,614 Prepaid pension cost and other (792) (380) (1,272) (906) Net cash from operations 8,406 4,496 12,748 10,189 Cash flows from investing activities: Additions to plant and equipment (2,323) (901) (4,293) (3,572) Increase in short-term investments (2,304) (1,654) (5,085) (4,818) Net cash used in investing (4,627) (2,555) (9,378) (8,390) Cash flows from financing activities: Long-term debt repayments (300) (300) (300) (300) Common stock issued 507 747 522 766 Treasury shares purchased (1,090) (523) (1,565) (1,025) Dividends (1,208) (1,199) (2,415) (2,399) Net cash used in financing (2,091) (1,275) (3,758) (2,958) Effect of translation rate changes on cash 19 (28) (38) (67) Net increase (decrease) in cash 1,707 638 (426) (1,226) Cash, beginning of period 245 981 2,378 2,845 Cash, end of period 1,952 1,619 1,952 1,619 See notes to consolidated financial statements Page 3 of 9 THE L. S. STARRETT COMPANY Consolidated Balance Sheets (in thousands of dollars) Dec. 24 June 25 1994 1994 ASSETS (unaudited) Current assets: Cash 1,952 2,378 Short-term investments 32,215 27,055 Accounts receivable (less allowance for doubtful accounts of $1,017,000 and $954,000) 32,718 29,133 Inventories: Finished goods 22,706 23,530 Goods in process and finished parts 16,603 16,111 Raw materials and supplies 12,778 13,524 52,087 53,165 Prepaid expenses and other current assets 1,761 4,732 Total current assets 120,733 116,463 Property, plant and equipment, at cost (less accumulated depreciation of $53,408,000 and $48,786,000) 57,353 57,386 Cost in excess of net assets acquired (less accumulated amortization of $2,578,000 and $2,386,000) 8,662 8,822 Prepaid pension cost 16,121 14,897 Other assets 426 464 203,295 198,032 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities 600 1,583 Accounts payable and accrued expenses 11,771 11,222 Accrued salaries and wages 4,531 4,276 Taxes payable 3,934 2,327 Employee deposits for stock purchase plan 961 601 Total current liabilities 21,797 20,009 Deferred income taxes 7,608 7,110 Long-term debt 10,000 10,843 Accumulated postretirement medical benefit obligation 13,625 13,422 Stockholders' equity: Class A Common $1 par (10,000,000 shrs. auth.) 4,857 4,851 Class B Common $1 par (10,000,000 shrs. auth.) 2,205 2,256 Additional paid-in capital 32,405 32,272 Retained earnings reinvested and employed in the business 115,606 113,147 Equity Adjustments (4,808) (5,878) Total stockholders' equity 150,265 146,648 203,295 198,032 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 24, 1994 and December 25, 1993 (in thousands of dollars) (unaudited) Common Addi- Stock Out- tional Equity standing Paid-in Retained Adjust- ($1 Par) Capital Earnings ments Total Balance June 26,1993 (1,303,954 Class A and 111,482 Class B shares in treasury) 7,065 30,023 110,259 (5,925) 141,422 Net earnings 4,275 4,275 Dividends ($.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 Losses (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 (6,701) 142,263 Balance June 25, 1994 (1,251,378 Class A and 133,397 Class B shares in treasury) 7,107 32,272 113,147 (5,878) 146,648 Net earnings 6,005 6,005 Dividends ($.34) (2,415) (2,415) Treasury shares: Purchased (73) (361) (1,131) (1,565) Issued 8 161 169 Options exercised 20 333 353 ESOP loan repayments 543 543 Translation gains 819 819 Investment valuation (292) (292) Balance Dec. 24, 1994 (1,306,060 Class A and 143,969 Class B shares in treasury) 7,062 32,405 115,606 (4,808) 150,265 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 12/24/94 12/25/93 12/24/94 12/25/93 Average number of shares out- standing during the period 7,086,749 7,061,934 7,093,029 7,059,870 Incremental shares computed on the assumption that dilutive stock options had been exercised with the proceeds used to purchase treasury stock 4,826 7,089 6,866 8,299 Average common and common equiva- lent shares outstanding 7,091,575 7,069,023 7,099,895 7,068,169 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 24, 1994 and June 25, 1994; the results of operations and cash flows for the thirteen weeks and twenty-six weeks ended December 24, 1994 and December 25, 1993; and changes in stockholders' equity for the twenty-six weeks ended December 24, 1994 and December 25, 1993. Except as discussed in the next paragraph, 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 25, 1994, and these financial statements should be read in conjunction with said annual report. The Company has adopted FAS 115 (Accounting for Certain Investments in Debt and Equity Securities) effective as of the beginning of the current fiscal year. The effect on financial condition and results of operations was not significant. The Company considers all its investments "available for sale." Other income (expense) is comprised of the following (in thousands): Thirteen Weeks Twenty-six Weeks Ended December Ended December 1994 1993 1994 1993 Interest income 333 253 661 483 Interest expense and com- mitment fees (212) (168) (433) (339) Realized and unrealized ex- change gains and losses 249 (248) 13 (1,113) Other 63 47 273 238 433 (116) 514 (731) 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 24, 1994, and June 25, 1994, total inventories are $25,445,000 and $25,391,000 less, respectively, than if determined on a FIFO basis. Long-term debt is comprised of the following (in thousands): December June 1994 1994 Industrial revenue bond 3,600 3,900 ESOP guaranteed bank loan 543 Revolving credit agreement 7,000 7,000 10,600 11,443 Less current portion 600 600 10,000 10,843 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 19% for the quarter and 16% year to date. The increase in the quarterly and year to date comparisons is in both foreign and domestic operations and reflects an overall improvement in business conditions. Earnings Before Taxes Pretax earnings are up 46% for the quarter and 71% year to date. This is primarily the result of the increase in foreign and domestic sales volume mentioned above, particularly in Brazil, as well as an increase in factory operating hours resulting in higher overhead absorption. The improvement in the December 1994 quarter over the 1993 quarter was not quite as large as the year to date improvement, partly because of the effect of a favorable LIFO inventory layer reduction in the December 1993 quarter and higher advertising and R&D expenditures in the December 1994 quarter. Income Taxes The effective income tax rate is 39% for the quarter and 37% year to date compared to 28% and 24% for the same periods in the prior year. Last year's rates were unusually low, particularly in the first quarter, because of the relative contribution to overall pretax income from tax-exempt interest and operating earnings in Puerto Rico. The 1994 tax rates are more normal, but have been adversely affected by a change in monetary policy in Brazil that has reduced inflation, at least temporarily. The effect of this change is a high current year tax rate in Brazil that is expected to come down next year when inventories purchased prior to the policy change have been used up. Accounting Change The Company has adopted FAS 115 (Accounting for Certain Investments in Debt and Equity Securities) effective as of the beginning of the current fiscal year. The effect on financial condition and results of operations was not significant. The Company considers all its investments "available for sale." Included in investments at December 24, 1994 is $3.3 million of liquid AAA rated Puerto Rico debt obligations. These investments were made during the first quarter of fiscal 1995 for the purpose of reducing repatriation taxes and have maturities of up to ten years. LIQUIDITY AND CAPITAL RESOURCES The Company continues to maintain a strong financial position with a working capital ratio of 5.5 to one on December 24, 1994 and 5.8 to one on June 25, 1994. Cash and short-term investments are up over $4 million compared to June 1994, but June tends to be a low point. The fact that changes in receivables and payables in the Statement of Cash Flows do not match the changes in the balance sheet is mainly because of in- flation in Brazil. These differences are not uses and sources of cash, but rather are noncash adjustments to net income to arrive at cash generated from operations. They tend to be offset by unrealized exchange gains and losses. Borrowings under the Company's $20 million revolving credit agreement were 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 money market instruments and should be considered when analyzing overall cash flow. 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 EX-27 2 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 1,000 QTR-2 JUN-24-1995 DEC-24-1994 1,952 32,215 33,735 1,017 52,087 120,733 110,761 53,408 203,295 21,797 10,000 7,062 0 0 143,203 203,295 56,132 56,132 39,425 39,425 0 0 212 6,261 2,416 3,845 0 0 0 3,845 .55 .55
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