-----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, DetKDFcGnfJo8tHQn+sj66gujx/1QMSIfu8ArqL2QOz4y2+7k8psP75/RHld26hC aVpXtABWsQ/8lRfRMTi40A== 0000093676-98-000004.txt : 19980511 0000093676-98-000004.hdr.sgml : 19980511 ACCESSION NUMBER: 0000093676-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980508 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: 98613339 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 28, 1998 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 filings requirements for the past 90 days. YES X NO Common Shares outstanding as of March 28, 1998 : Class A Common Shares 5,154,824 Class B Common Shares 1,734,723 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 28, 1998 and March 29, 1997 (unaudited) 3 Consolidated Balance Sheets - March 28, 1998 (unaudited) and June 28, 1997 4 Consolidated Statements of Stockholders' Equity - thirty-nine weeks ended March 28, 1998 and March 29, 1997 (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 3/28/98 3/29/97 3/28/98 3/29/97 Net sales 61,195 60,489 195,046 183,712 Cost of goods sold (41,317) (42,050) (131,168)(126,518) Selling and general (12,761) (12,426) (39,771) (37,275) Other income and expense 319 316 1,161 1,081 Earnings before income taxes 7,436 6,329 25,268 21,000 Provision for federal, foreign and state income taxes 2,441 2,077 8,469 7,029 Net earnings 4,995 4,252 16,799 13,971 Basic earnings per share .72 .61 2.43 1.99 Dividends per share .19 .18 .57 .54 CASH FLOWS Cash flows from operating activities: Net earnings 4,995 4,252 16,799 13,971 Noncash expenses: Depreciation and amortization 2,802 2,592 8,197 7,637 Deferred taxes 232 90 24 348 Unrealized translation losses(gains) (4) 154 39 Working capital changes: Receivables 2,265 1,763 (3,762) (1,454) Inventories 336 980 3,725 (1,590) Other assets and liabilities 169 (3,982) 3,220 (3,758) Prepaid pension cost and other (1,043) (324) (2,575) (471) Net cash from operations 9,756 5,367 25,782 14,722 Cash flows from investing activities: Additions to plant and equipment (4,242) (3,335) (12,048) (9,108) (Increase)decrease in short-term investments (2,070) (43) (6,591) 1,288 Net cash used in investing (6,312) (3,378) (18,639) (7,820) Cash flows from financing activities: Short-term borrowings, net (1,382) 1,835 (1,281) 411 Long-term debt repayments (2,000) (1,000) (2,300) (1,300) Common stock issued 820 838 2,640 2,731 Treasury shares purchased (505) (2,675) (4,524) (5,871) Dividends (1,304) (1,247) (3,923) (3,766) Net cash used in financing (4,371) (2,249) (9,388) (7,795) Effect of translation rate changes on cash (2) (38) 24 (7) Net decrease in cash (929) (298) (2,221) (900) Cash, beginning of period 1,761 815 3,053 1,417 Cash, end of period 832 517 832 517 See notes to consolidated financial statements Page 3 of 8 THE L. S. STARRETT COMPANY Consolidated Balance Sheets (in thousands of dollars) Mar. 28 June 28 1998 1997 ASSETS (unaudited) _______ Current assets: Cash 832 3,053 Investments 34,026 27,389 Accounts receivable (less allowance for doubtful accounts of $2,269,000 and $1,877,000) 40,178 36,625 Inventories: Finished goods 29,687 32,374 Goods in process and finished parts 26,283 26,698 Raw materials and supplies 15,933 16,774 71,903 75,846 Prepaid expenses and other current assets 1,926 4,682 Total current assets 148,865 147,595 Property, plant and equipment, at cost (less accumulated depreciation of $68,424,000 and $60,816,000) 67,842 64,101 Cost in excess of net assets acquired (less accumulated amortization of $3,790,000 and $3,514,000) 7,599 7,772 Prepaid pension cost 21,091 18,928 Other assets 1,244 350 246,641 238,746 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current maturities 2,329 3,610 Accounts payable and accrued expenses 15,528 13,205 Accrued salaries and wages 6,059 6,628 Taxes payable 2,034 3,927 Employee deposits for stock purchase plan 587 434 Total current liabilities 26,537 27,804 Deferred income taxes 8,603 8,247 Long-term debt 4,200 6,500 Accumulated postretirement medical benefit obligation 16,216 15,730 Stockholders' equity: Class A Common $1 par (20,000,000 shrs. auth.; 5,154,824 outstanding in 1998, excluding 1,048,448 held in treasury; 5,038,013 outstanding in 1997, excluding 995,943 held in treasury) 5,155 5,038 Class B Common $1 par (10,000,000 shrs. auth.; 1,734,723 outstanding in 1998, excluding 271,867 held in treasury; 1,905,606 outstanding in 1997, excluding 260,283 held in treasury) 1,735 1,906 Additional paid-in capital 40,466 38,730 Retained earnings reinvested and employed in the business 147,098 137,788 Foreign currency translation adjustment (3,653) (3,155) Other equity adjustments 284 158 Total stockholders' equity 191,085 180,465 246,641 238,746 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 28, 1998 and March 29, 1997 (in thousands of dollars) (unaudited) Common Addi- Stock Out- tional Equity standing Paid-in Retained Adjust- ($1 Par) Capital Earnings ments Total Balance June 29, 1996 (895,516 Class A and 220,572 Class B shares in treasury) 7,055 36,650 128,272 (4,692) 167,285 Net earnings 13,971 13,971 Dividends ($.54) (3,766) (3,766) Treasury shares: Purchased (217) (1,245) (4,409) (5,871) Issued 90 2,289 2,379 Options exercised 20 332 352 Translation gain, net 1,358 1,358 Investment valuation 81 81 Balance March 29, 1997 (991,156 Class A and 251,731 Class B shares in treasury) 6,948 38,026 134,068 (3,253) 175,789 Balance June 28, 1997 (995,943 Class A and 260,283 Class B shares in treasury) 6,944 38,730 137,788 (2,997) 180,465 Net earnings 16,799 16,799 Dividends ($.57) (3,923) (3,923) Treasury shares: Purchased (132) (826) (3,566) (4,524) Issued 68 2,377 2,445 Options exercised 10 185 195 Translation loss, net (498) (498) Investment valuation 126 126 Balance March 28, 1998 (1,048,448 Class A and 271,867 Class B shares in treasury) 6,890 40,466 147,098 (3,369) 191,085 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 28, 1998 and June 28, 1997; the results of operations and cash flows for the thirteen weeks and thirty-nine weeks ended March 28, 1998 and March 29, 1997; and changes in stockholders' equity for the thirty-nine weeks ended March 28, 1998 and March 29, 1997. 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. In the third quarter of fiscal 1998, the Company's operations in Brazil ceased to be considered highly inflationary and, accordingly, the Company now accounts for any resulting translation adjustments as a component of equity. Other income (expense) is comprised of the following (in thousands): Thirteen Weeks Thirty-nine Weeks Ended March Ended March 1998 1997 1998 1997 Interest income 711 528 2,099 1,464 Interest expense and com- mitment fees (171) (176) (628) (540) Realized and unrealized ex- change losses (237) (21) (469) (105) Other 16 (15) 159 262 319 316 1,161 1,081 Approximately 70% of all inventories are valued on the LIFO method. At March 28, 1998, and June 28, 1997, total inventories are $25,444,000 and $24,790,000 less, respectively, than if determined on a FIFO basis. Long-term debt is comprised of the following (in thousands): March June 1998 1997 Industrial revenue bond 1,800 2,100 Revolving credit agreement 3,000 5,000 4,800 7,100 Less current portion 600 600 4,200 6,500 In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (FASB) No.128, Earnings per Share, which was effective during the second quarter of fiscal 1998. The adoption of this standard has had no effect on reported earnings per share. The Company will also be required to adopt FASB No. 130, Other Comprehensive Income, and FASB No. 131, Disclosures about Segments of an Enterprise and Related Information, in fiscal 1998. 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 1% for the quarter and 6% year to date. The increase in the quarterly comparison is coming from domestic operations, and reflects continued good business conditions. The year to date increase is in both domestic and foreign operations. Volume at our foreign locations is being adversely affected by 1) the strong British pound, which makes our Scottish products less competitive in foreign markets and 2) general economic conditions in Brazil. Earnings Before Taxes Pretax earnings are up 17% for the quarter and 20% year to date. Again, these improvements are coming from domestic operations and follow the increase in sales volume mentioned above, the related efficiencies from the increased manufacturing activity, and the effects of various cost reduction initiatives. Income Taxes The effective income tax rate is 33% for the quarter and 34% year to date. The rates were approximately the same in the corresponding periods in the prior year, and reflect the normal benefits of nontaxable investment income and lower foreign and Puerto Rican tax rates. LIQUIDITY AND CAPITAL RESOURCES 13 Weeks Ended 39 Weeks Ended 3/28/98 3/29/97 3/28/98 3/29/97 Cash provided by operations 9,756 5,367 25,782 14,722 Cash used in investing activities (6,312) (3,378) (18,639) (7,820) Cash used in financing activities (4,371) (2,249) (9,388) (7,795) Cash effect of translation rate changes (2) (38) 24 (7) Net increase (decrease) in cash (929) (298) (2,221) (900) Increased cash flow provided by the increase in net earnings plus the net change in the components of working capital has been used primarily for increased additions to plant and short-term investments and repayment of bank debt. 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 5.6 to 1 as of March 28, 1998 and 5.3 to 1 as of June 28, 1997. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF1995 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 39 Weeks Ended 3/28/98 3/29/97 3/28/98 3/29/97 Average number of shares out- standing during the period 6,879,588 6,977,310 6,889,267 7,011,779 Incremental shares computed on the assumption that dilutive stock options had been exercised with the proceeds used to purchase treasury stock 14,819 14,034 14,919 11,289 Average common and common equiva- lent shares outstanding 6,894,407 6,991,344 6,904,186 7,023,068 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, 1998 S/R.U.WELLINGTON, JR. R. U. Wellington, Jr. (Treasurer and Chief Financial Officer) Date May 8, 1998 S/S.G.THOMSON S. G. Thomson (Chief Accounting Officer) Page 8 of 8 EX-27 2
5 1,000 9-MOS JUN-27-1998 MAR-28-1998 832 34,026 42,447 2,269 71,903 148,865 136,266 68,424 246,641 26,537 4,200 0 0 6,890 184,195 246,641 195,046 195,046 131,168 131,168 0 0 628 25,268 8,469 16,799 0 0 0 16,799 2.43 2.43
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