<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996 Commission File No. 1-6736
STARRETT CORPORATION
(Exact Name of Registrant as specified in its charter)
NEW YORK 13-5411123
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
909 THIRD AVENUE, NEW YORK, NEW YORK 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)751-3100
NONE
(Former name, former address and former 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the close of the period covered by this report.
6,566,402 shares of common stock.
<PAGE> 2
STARRETT CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
Consolidated Financial Statements:
Statement of Consolidated Financial Position - June 30, 1996..................3
Statement of Consolidated Financial Position -
December 31, 1995............................................................4
Statements of Consolidated Operations - For the Six Months
ended June 30, 1996 and 1995.................................................5
Statements of Consolidated Operations - For the Three Months
ended June 30, 1996 and 1995.................................................6
Statements of Consolidated Stockholders' Equity - June 30, 1996
and December 31, 1995........................................................7
Statements of Consolidated Cash Flows - For the Six Months
ended June 30, 1996 and 1995.................................................8
Notes to Consolidated Financial Statements....................................9
Management's Discussion of Financial Condition and
Results of Operations.......................................................10
Signatures...................................................................12
Exhibit A - Computation of Primary Earnings per Share - For the
Six Months ended June 30, 1996 and 1995....................13
Exhibit B - Computation of Primary Earnings per Share - For the
Three Months ended June 30, 1996 and 1995..................14
2
<PAGE> 3
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
JUNE 30, 1996
(In Thousands)
(Unaudited)
<TABLE>
ASSETS:
<S> <C>
Cash and Cash Equivalents ....................................... $ 3,775
Receivables ..................................................... 39,119
Inventory of Real Estate ........................................ 86,056
Investments in Joint Ventures ................................... 4,499
Property and Equipment-Net ...................................... 4,099
Land Held for Investment ........................................ 1,697
Other Assets .................................................... 15,382
---------
Total .................................................. $ 154,627
=========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable Within One Year:
Accounts payable ............................................... $ 23,039
Current portion of long-term obligations ....................... 7,064
Accrued liabilities ............................................ 12,015
---------
Total Liabilities Payable Within One Year .............. 42,118
Deferred Income taxes ........................................... 7,079
Other Liabilities ............................................... 1,326
Long-Term Obligations ........................................... 48,330
---------
Total .................................................. 98,853
---------
Committments and Contingencies
Minority Interest ............................................... 1,885
---------
Stockholders' Equity
Common stock-par value, $1.00; authorized,
18,000 shares ................................................. 6,566
Capital in excess of par value ................................. 23,933
Retained earnings .............................................. 26,573
Pension liability adjustment ................................... (1,593)
Shares held in treasury-at cost ................................ (1,590)
---------
Stockholders' Equity ............................................ 53,889
---------
Total .................................................. $ 154,627
=========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
DECEMBER 31, 1995
(In Thousands)
<TABLE>
<S> <C>
ASSETS:
Cash and Cash Equivalents ....................................... $ 10,762
Receivables ..................................................... 32,590
Inventory of Real Estate ........................................ 59,052
Investments in Joint Ventures ................................... 6,527
Property and Equipment-Net ...................................... 3,622
Land Held for Investment ........................................ 1,734
Other Assets .................................................... 12,058
---------
Total ...................................................... $ 126,345
=========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable Within One Year:
Accounts payable .............................................. $ 11,332
Current portion of long-term obligations ...................... 7,387
Accrued liabilities ........................................... 13,326
---------
Total Liabilities Payable Within One Year .................. 32,045
Deferred Income Taxes ........................................... 6,377
Other Liabilities ............................................... 1,326
Long-Term Obligations ........................................... 34,459
---------
Total ...................................................... 74,207
---------
Commitments and Contingencies
Stockholders' Equity:
Common stock-par value, $1.00; authorized,
18,000 shares ................................................ 6,566
Capital in excess of par value ................................ 23,933
Retained earnings ............................................. 24,822
Pension liability adjustment .................................. (1,593)
Shares held in treasury-at cost ............................... (1,590)
---------
Stockholders' Equity ............................................ 52,138
---------
Total ...................................................... $ 126,345
=========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For The Six Months Ended June 30, 1996 and 1995
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues ............................................. $65,142 $53,682
Construction Costs ................................... 33,014 26,947
------- -------
Income from Construction Contracts and
Related Revenues .................................... 32,128 26,735
------- -------
Expenses:
General and Administrative .......................... 15,753 13,021
Security Service Labor and Other Cost ............... 5,611 4,926
Selling ............................................. 2,850 2,494
Mortgage and Closing Costs .......................... 3,208 2,386
Interest ............................................ 176 218
------- -------
Total ........................................... 27,598 23,045
------- -------
Income before Income Taxes ........................... 4,530 3,690
Income Taxes ......................................... 1,996 1,587
------- -------
Net Income ........................................... $ 2,534 $ 2,103
======= =======
Earnings per Common Share:
Net Income ........................................... $ .40 $ .34
======= =======
Weighted average number of shares .................... 6,261 6,261
======= =======
Cash Dividends per Share ............................. $ .125 $ .125
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For The Three Months Ended June 30, 1996 and 1995
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues .............................................. $32,381 $23,401
Construction Costs .................................... 16,090 10,045
------- -------
Income from Construction Contracts and
Related Revenues ..................................... 16,291 13,356
------- -------
Expenses:
General and Administrative ........................... 7,825 6,626
Security Service Labor and Other Cost ................ 3,015 2,447
Selling .............................................. 1,256 1,042
Mortgage and Closing Costs ........................... 1,611 1,176
Interest ............................................. 104 110
------- -------
Total ............................................ 13,811 11,401
------- -------
Income before Income Taxes ............................ 2,480 1,955
Income Taxes .......................................... 1,114 841
------- -------
Net Income ............................................ $ 1,366 $ 1,114
======= =======
Earnings per Common Share:
Net Income ............................................ $ .22 $ .18
======= =======
Weighted average number of shares ..................... 6,261 6,261
======= =======
Cash Dividends per Share .............................. $ .0625 $ .0625
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE> 7
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY
(In Thousands Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Common Stock - Par Value, $1.00; Authorized,
18,000,000 shares; Issued, 6,566,402 shares ....... $ 6,566 $ 6,566
Capital in Excess of Par Value ..................... 23,933 23,933
Retained Earnings .................................. 26,573 24,822
Pension Liability Adjustment ....................... (1,593) (1,593)
Less: Shares Held in Treasury - at cost;
1996 and 1995, 305,442 shares ............. (1,590) (1,590)
-------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY .................. $ 53,889 $ 52,138
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE> 8
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For The Six Months Ended June 30, 1996 and 1995
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................ $ 2,534 $ 2,103
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization ....................... 1,323 1,330
Deferred income taxes ............................... 702 369
Equity in earnings in joint ventures ................ (1,615) (847)
Changes in operating assets and liabilities:
Receivables ........................................ (6,529) 976
Inventories ........................................ (26,967) (11,059)
Accounts payable ................................... 11,707 6,772
Other assets ....................................... (4,182) (3,140)
Accrued liabilities ................................ (1,703) (1,922)
Deferred revenues .................................. (959)
-------- --------
Net cash used in operating activities ................. (24,730) (6,377)
-------- --------
INVESTING ACTIVITIES:
Investment in joint ventures .......................... (1,015) (1,217)
Proceeds from joint ventures .......................... 4,658 551
Investments in and advances to partnerships ........... 80 233
Purchase of property and equipment .................... (1,022) (682)
-------- --------
Net cash provided by (used in) investing activities ... 2,701 (1,115)
-------- --------
FINANCING ACTIVITIES:
Repayment of long term obligations .................... (23,692) (7,180)
Proceeds from long term obligations ................... 37,240 7,242
Proceeds from minority interest ....................... 1,885
Payment of cash dividends to common
stockholders ......................................... (391) (783)
-------- --------
Net cash provided by (used in) financing activities ... 15,042 (721)
-------- --------
Decrease in cash and cash equivalents ................. (6,987) (8,213)
Cash and cash equivalents beginning of period ......... 10,762 17,474
-------- --------
Cash and cash equivalents end of period ............... $ 3,775 $ 9,261
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
8
<PAGE> 9
STARRETT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Starrett
Corporation and its subsidiaries have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The consolidated financial
statements as of and for the six months ended June 30, 1996 and 1995 are
unaudited and are subject to year-end audit and adjustments. The results of
operations for the interim periods are not necessarily indicative of the results
of operations for the fiscal year. For comparability purposes, certain 1995
amounts have been reclassified to conform with the 1996 classifications. For
further information, refer to the consolidated financial statements and
footnotes included thereto in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
9
<PAGE> 10
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
COMPARISON OF SIX AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
During the six and three months ended June 30, 1996, the Company had
income from operations of $4,530,000 and $2,480,000 as compared with $3,690,000
and $1,955,000 in 1995, and net income of $2,534,000 or $.40 a share and
$1,366,000 or $.22 a share as compared to $2,103,000 or $.34 a share and
$1,114,000 or $.18 a share for the similar periods in 1995.
The increase in income was primarily attributable to Levitt
Corporation's operations.
For the three months ended June 30, 1996, revenues increased by
$8,980,000 due to significantly higher deliveries in Levitt's Puerto Rico
region, offset by lower average selling prices resulting from a change in
product mix. Despite an increase in gross profit from house sales, the gross
profit percentage decreased as newer projects are realizing lower gross profit
margins.
Levitt's backlog of homes contracted for sale was $91,400,000 at June
30, 1996 as compared to $90,442,000 at June 30, 1995. Included in Levitt's sales
backlog is its 50% interests in joint ventures.
HRH Construction Corporation reported an increase in operating
revenues, offset by a rise in general and administrative expenses relating to
the Company's expansion in the interior construction field.
Costs and expenses increased during the six and three months ended June
30, 1996 reflecting the increased level of operations discussed above.
Financial Condition and Capital Resources
The Company meets its short-term financing needs with cash generated
from operations and funds available under several unsecured credit agreements.
On January 31, 1996, Levitt satisfied a $14,400,000 unsecured credit facility
through a $4,400,000 payment from working capital and a $10,000,000 payment from
an unsecured term loan. The new loan requires semi-annual principal payments of
$1,000,000 and $1,500,000 in July and January, respectively, through January
2000.
Homebuilding Operations
The Company generally meets its land acquisition, development and
construction needs through mortgage loans and unsecured revolving credit
facilities. During March 1996,
10
<PAGE> 11
the Company renewed and extended its $15,000,000 revolving unsecured credit
agreement used to finance its Puerto Rico homebuilding operation for an
additional three years.
Mortgage Operations
During 1995 the Company entered into a credit agreement with a Puerto
Rico bank to provide an unsecured revolving line of credit of $3,000,000 to
finance the working capital needs of the expanding Puerto Rico mortgage banking
operation.
Development/Construction Management
During 1995 and 1996 the Company entered into a credit agreement with a
New York bank to provide a $4,500,000 unsecured line of credit to finance
development, construction and other operating activities.
1996 Cash Flow
Net cash used in operating activities comprised net income of
$2,534,000 and net adjustments for non-cash items of $410,000, offset by an
increase in inventories of $26,967,000 and a net change in other operating
assets and liabilities of $707,000.
The increase in inventories is due to Levitt's investment in various
development projects, increasing its inventory in its single-family home
division.
Net cash provided by investing activities comprised distributions from
joint ventures of $4,658,000, offset by other net investing activities of
$1,957,000.
Net cash provided by financing activities comprised net principal
borrowings on notes and mortgages payable of $13,548,000 plus proceeds from
minority interests of $1,885,000, offset by dividends paid to stockholders of
$391,000.
Seasonality
The timing of introducing Levitt's new projects to the market, weather
conditions in certain of Levitt's regions, and traditional periods of greater
customer activity have tended to create seasonal trends in Levitt's residential
home building activities. Historically, the number of homes delivered has been
greater in the second half of the calendar year.
Except as discussed above, management is not aware of any trends or
events, commitments or uncertainties that will impact liquidity in a material
way.
11
<PAGE> 12
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.
STARRETT CORPORATION
(Registrant)
/s/ Paul Milstein
-------------------------------------
Paul Milstein - Chairman
/s/ Lewis A. Weinfeld
-------------------------------------
Lewis A. Weinfeld - Executive Vice
President and Chief Financial Officer
(Principal Accounting Officer)
DATE: August 13, 1996
12
<PAGE> 13
EXHIBIT A
STARRETT CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF PRIMARY
EARNINGS PER SHARE INFORMATION
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1996 1995
------- ------
<S> <C> <C>
Weighted average number of shares outstanding during
the period ............................................. 6,261 6,261
======= ======
Net Income .............................................. $ 2,534 $2,103
======= ======
Primary earnings per share:
Net Income ......................................... $ .40 $ .34
======= ======
</TABLE>
13
<PAGE> 14
EXHIBIT B
STARRETT CORPORATION AND SUBSIDIARIES
EXHIBIT SETTING FORTH THE COMPUTATION OF PRIMARY
EARNINGS PER SHARE INFORMATION
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------
1996 1995
------- ------
<S> <C> <C>
Weighted average number of shares outstanding during
the period ............................................. 6,261 6,261
======= ======
Net Income .............................................. $ 1,366 $1,114
======= ======
Primary earnings per share:
Net Income ......................................... $ .22 $ .18
======= ======
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,727,000
<SECURITIES> 48,000
<RECEIVABLES> 39,595,000
<ALLOWANCES> 476,000
<INVENTORY> 86,056,000
<CURRENT-ASSETS> 119,386,000
<PP&E> 12,300,000
<DEPRECIATION> 8,201,000
<TOTAL-ASSETS> 154,627,000
<CURRENT-LIABILITIES> 42,118,000
<BONDS> 0
0
0
<COMMON> 6,566,000
<OTHER-SE> 47,323,000
<TOTAL-LIABILITY-AND-EQUITY> 154,627,000
<SALES> 65,142,000
<TOTAL-REVENUES> 65,142,000
<CGS> 33,014,000
<TOTAL-COSTS> 33,014,000
<OTHER-EXPENSES> 27,422,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176,000
<INCOME-PRETAX> 4,530,000
<INCOME-TAX> 1,996,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,534,000
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
