-----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, ct/cHzbYpaIbGMNHEzEPN4tm4dIJm2UYUp1ImBFYsbyQeTHStJWZdnUpHBhuldYo Q1LAeJK1MSL7pF2y54ZIrQ== 0000093676-95-000008.txt : 19950509 0000093676-95-000008.hdr.sgml : 19950509 ACCESSION NUMBER: 0000093676-95-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950325 FILED AS OF DATE: 19950508 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: 95535201 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 March 25, 1995 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 March 25, 1995 : Class A Common Shares 4,844,502 Class B Common Shares 2,188,401 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 thirty-nine weeks ended March 25, 1995 and March 26, 1994 (unaudited) 3 Consolidated Balance Sheets - March 25, 1995 (unaudited) and June 25, 1994 4 Consolidated Statements of Stockholders' Equity - thirty-nine weeks ended March 25, 1995 and March 26, 1994 (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 39 Weeks Ended EARNINGS 3/25/95 3/26/94 3/25/95 3/26/94 Net sales 52,720 43,671 156,168 132,980 Cost of goods sold (37,853) (31,202) (111,332) (95,714) Selling and general (10,944) (9,731) (31,849) (28,180) Other income and expense 647 (785) 1,161 (1,516) Earnings before income taxes 4,570 1,953 14,148 7,570 Provision for federal, foreign and state income taxes 1,751 561 5,324 1,903 Net earnings 2,819 1,392 8,824 5,667 Earnings per share .40 .20 1.25 .80 Dividends per share .17 .17 .51 .51 CASH FLOWS Cash flows from operating activities: Net earnings 2,819 1,392 8,824 5,667 Noncash expenses: Depreciation and amortization 2,345 2,214 7,001 6,557 Deferred taxes 406 (130) 1,287 366 Unrealized translation losses (182) 1,871 128 4,701 Working capital changes: Receivables 1,533 117 (2,586) (5,269) Inventories 443 (1,436) 1,879 487 Other assets and liabilities 1,217 2,495 6,068 5,109 Prepaid pension cost and other 15 (619) (1,257) (1,525) Net cash from operations 8,596 5,904 21,344 16,093 Cash flows from investing activities: Additions to plant and equipment (3,286) (1,455) (7,579) (5,027) Increase in short-term investments (3,304) (2,242) (8,389) (7,060) Net cash used in investing (6,590) (3,697) (15,968) (12,087) Cash flows from financing activities: Long-term debt repayments (1,000) (2,000) (1,300) (2,300) Common stock issued 155 568 677 1,334 Treasury shares purchased (802) (365) (2,367) (1,390) Dividends (1,137) (1,201) (3,552) (3,600) Net cash used in financing (2,784) (2,998) (6,542) (5,956) Effect of translation rate changes on cash 7 (7) (31) (74) Net increase (decrease) in cash (771) (798) (1,197) (2,024) Cash, beginning of period 1,952 1,619 2,378 2,845 Cash, end of period 1,181 821 1,181 821 See notes to consolidated financial statements Page 3 of 8 THE L. S. STARRETT COMPANY Consolidated Balance Sheets (in thousands of dollars) Mar. 25 June 25 1995 1994 ASSETS (unaudited) Current assets: Cash 1,181 2,378 Short-term investments 35,586 27,055 Accounts receivable (less allowance for doubtful accounts of $1,131,000 and $954,000) 31,478 29,133 Inventories: Finished goods 21,711 23,530 Goods in process and finished parts 17,261 16,111 Raw materials and supplies 12,780 13,524 51,752 53,165 Prepaid expenses and other current assets 1,387 4,732 Total current assets 121,384 116,463 Property, plant and equipment, at cost (less accumulated depreciation of $55,613,000 and $48,786,000) 58,262 57,386 Cost in excess of net assets acquired (less accumulated amortization of $2,674,000 and $2,386,000) 8,578 8,822 Prepaid pension cost 16,419 14,897 Other assets 388 464 205,031 198,032 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities 600 1,583 Accounts payable and accrued expenses 13,223 11,222 Accrued salaries and wages 3,974 4,276 Taxes payable 3,665 2,327 Employee deposits for stock purchase plan 1,456 601 Total current liabilities 22,918 20,009 Deferred income taxes 7,792 7,110 Long-term debt 9,000 10,843 Accumulated postretirement medical benefit obligation 13,727 13,422 Stockholders' equity: Class A Common $1 par (10,000,000 shrs. auth.) 4,845 4,851 Class B Common $1 par (10,000,000 shrs. auth.) 2,188 2,256 Additional paid-in capital 32,379 32,272 Retained earnings reinvested and employed in the business 116,696 113,147 Equity Adjustments (4,514) (5,878) Total stockholders' equity 151,594 146,648 205,031 198,032 See Notes to Consolidated Financial Statements Page 4 of 8 THE L. S. STARRETT COMPANY Consolidated Statements of Stockholders' equity For the Thirty-nine Weeks Ended March 25, 1995 and March 26, 1994 (in thousands of dollars) (unaudited) Common Addi- Stock Out- tional Equity standing Paid-in Retained Adjust- ($1 Par) Capital Earnings ments Total Balance June 26,1993 (1,303,954 Class A and 111,482 Class B shares in treasury) 7,065 30,023 110,259 (5,925) 141,422 Net earnings 5,667 5,667 Dividends ($.51) (3,600) (3,600) Treasury shares: Purchased (57) (245) (1,088) (1,390) Issued 48 1,117 1,165 Options exercised 9 160 169 ESOP loan repayments 813 813 Translation losses (1,372) (1,372) Balance Mar. 26, 1994 (1,294,287 Class A and 130,354 Class B shares in treasury) 7,065 31,055 111,238 (6,484) 142,874 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 8,824 8,824 Dividends ($.51) (3,552) (3,552) Treasury shares: Purchased (109) (535) (1,723) (2,367) Issued 15 309 324 Options exercised 20 333 353 ESOP loan repayments 543 543 Translation gains 1,121 1,121 Investment valuation (300) (300) Balance Mar. 25, 1995 (1,327,337 Class A and 151,841 Class B shares in treasury) 7,033 32,379 116,696 (4,514) 151,594 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 March 25, 1995 and June 25, 1994; the results of operations and cash flows for the thirteen weeks and thirty-nine weeks ended March 25, 1995 and March 26, 1994; and changes in stockholders' equity for the thirty-nine weeks ended March 25, 1995 and March 26, 1994. 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 Thirty-nine Weeks Ended March Ended March 1995 1994 1995 1994 Interest income 507 253 1,168 736 Interest expense and com- mitment fees (192) (153) (625) (492) Realized and unrealized ex- change gains (losses) 396 (965) 409 (2,078) Other (64) 80 209 318 647 (785) 1,161 (1,516) 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 March 25, 1995, and June 25, 1994, total inventories are $25,473,000 and $25,391,000 less, respectively, than if determined on a FIFO basis. Long-term debt is comprised of the following (in thousands): March June 1995 1994 Industrial revenue bond 3,600 3,900 ESOP guaranteed bank loan 543 Revolving credit agreement 6,000 7,000 9,600 11,443 Less current portion 600 600 9,000 10,843 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 21% for the quarter and 17% 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 134% for the quarter and 87% 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 March 1995 quarter over the 1994 quarter is somewhat exaggerated compared to the year to date improvement because of the low level of pretax earnings in the March 1994 quarter. Income Taxes The effective income tax rate is 38% for the quarter and 38% year to date compared to 29% and 25% 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 1995 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 annualized 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 March 25, 1995 is $4.4 million of liquid AAA rated Puerto Rico debt obligations. These investments were made 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 5.3 to one on March 25, 1995 and 5.8 to one on June 25, 1994. Cash and short-term investments are up over $7 million compared to June 1994. June tends to be a low point, but inventory reductions are also responsible for the increase. 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 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 39 Weeks Ended 3/25/95 3/26/94 3/25/95 3/26/94 Average number of shares out- standing during the period 7,051,267 7,060,172 7,079,108 7,059,970 Incremental shares computed on the assumption that dilutive stock options had been exercised with the proceeds used to purchase treasury stock 10,150 8,930 7,961 8,509 Average common and common equiva- lent shares outstanding 7,061,417 7,069,102 7,087,069 7,068,479 6(b) 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 May 8, 1995 S/ R. U. Wellington, Jr. R. U. Wellington, Jr. (Treasurer and Chief Financial Officer) Date May 8, 1995 S/ S. G. Thomson S. G. Thomson (Chief Accounting Officer) Page 8 of 8 EX-27 2
5 1000 9-MOS JUN-24-1995 MAR-25-1995 1,181 35,586 32,609 1,131 51,752 121,384 113,875 55,613 205,031 22,918 9,000 7,033 0 0 144,561 205,031 156,168 156,168 111,332 111,332 0 0 625 14,148 5,324 8,824 0 0 0 8,824 1.25 1.25
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