<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 September 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.
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STARRETT CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
Consolidated Financial Statements:
Statement of Consolidated Financial Position - September 30, 1996.........3
Statement of Consolidated Financial Position - December 31, 1995..........4
Statements of Consolidated Operations - For the Nine Months
ended September 30, 1996 and 1995........................................5
Statements of Consolidated Operations - For the Three Months
ended September 30, 1996 and 1995........................................6
Statements of Consolidated Stockholders' Equity - September 30, 1996
and December 31, 1995....................................................7
Statements of Consolidated Cash Flows - For the Nine Months
ended September 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
Nine Months ended September 30, 1996 and 1995..........13
Exhibit B - Computation of Primary Earnings per Share - For the
Three Months ended September 30, 1996 and 1995.........14
2
<PAGE> 3
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
SEPTEMBER 30, 1996
(In Thousands)
(Unaudited)
<TABLE>
ASSETS:
<S> <C>
Cash and Cash Equivalents ........................ $ 7,060
Receivables ...................................... 45,973
Inventory of Real Estate ......................... 95,325
Investments in Joint Ventures .................... 5,246
Property and Equipment-Net ....................... 3,985
Land Held for Investment ......................... 1,697
Other Assets ..................................... 15,830
---------
Total ................................... $ 175,116
=========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Liabilities:
Payable Within One Year:
Accounts payable ................................ $ 35,697
Current portion of long-term obligations ........ 7,426
Accrued liabilities ............................. 12,034
---------
Total Liabilities Payable Within One Year 55,157
Deferred Income taxes ............................ 7,606
Other Liabilities ................................ 1,326
Long-Term Obligations ............................ 54,132
---------
Total ................................... 118,221
---------
Commitments 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 ............................... 27,694
Pension liability adjustment .................... (1,593)
Shares held in treasury-at cost ................. (1,590)
---------
Stockholders' Equity ............................. 55,010
---------
Total ................................... $ 175,116
=========
</TABLE>
See Notes to Consolidated Financial Statements
3
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STARRETT CORPORATION AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED FINANCIAL POSITION
DECEMBER 31, 1995
(In Thousands)
<TABLE>
ASSETS:
<S> <C>
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 Nine Months Ended September 30, 1996 and 1995
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues ............................. $93,535 $84,713
Equity in Earnings of Joint Ventures . 2,501 1,774
------- -------
Total Revenues .................. 96,036 86,487
Construction Costs ................... 47,775 44,001
------- -------
Income from Construction Contracts and
Related Revenues .................... 48,261 42,486
------- -------
Expenses:
General and Administrative .......... 23,498 19,671
Security Service Labor & Other Costs 8,274 8,086
Selling ............................. 4,081 3,963
Mortgage and Closing Costs .......... 4,789 3,730
Interest ............................ 289 329
------- -------
Total ........................... 40,931 35,779
------- -------
Income before Income Taxes ........... 7,330 6,707
Income Taxes ......................... 3,284 2,808
------- -------
Net Income ........................... $ 4,046 $ 3,899
======= =======
Earnings per Common Share:
Net Income ........................... $ .65 $ .62
======= =======
Weighted average number of shares .... 6,261 6,261
======= =======
Cash Dividends per Share ............. $ .1875 $ .1875
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
For The Three Months Ended September 30, 1996 and 1995
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Revenues ............................. $30,008 $31,878
Equity in Earnings of Joint Ventures . 886 927
------- -------
Total Revenues .................. 30,894 32,805
Construction Costs ................... 14,761 17,054
------- -------
Income from Construction Contracts and
Related Revenues .................... 16,133 15,751
------- -------
Expenses:
General and Administrative .......... 7,745 6,650
Security Service Labor & Other Costs 2,663 3,160
Selling ............................. 1,231 1,469
Mortgage and Closing Costs .......... 1,581 1,344
Interest ............................ 113 111
------- -------
Total ........................... 13,333 12,734
------- -------
Income before Income Taxes ........... 2,800 3,017
Income Taxes ......................... 1,288 1,221
------- -------
Net Income ........................... $ 1,512 $ 1,796
======= =======
Earnings per Common Share:
Net Income ........................... $ .25 $ .28
======= =======
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>
September 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 ........................... 27,694 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 STOCKHOLDERS' EQUITY .................. $ 55,010 $ 52,138
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE> 8
STARRETT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For The Nine Months Ended September 30, 1996 and 1995
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
-------- --------
OPERATING ACTIVITIES:
<S> <C> <C>
Net income .................................... $ 4,046 $ 3,899
Adjustments to reconcile net income to net cash
Used in operating activities:
Depreciation and amortization ............... 1,757 2,136
Deferred income taxes ....................... 1,229 776
Equity in earnings of joint ventures ........ (2,501) (1,774)
Changes in operating assets and liabilities:
Receivables ................................ (13,383) (1,857)
Inventories ................................ (36,236) (14,180)
Accounts payable ........................... 24,365 4,501
Other assets ............................... (4,798) (5,915)
Accrued liabilities ........................ (1,683) (1,392)
Deferred revenues .......................... (505)
-------- --------
Net cash used in operating activities ......... (27,204) (14,311)
-------- --------
INVESTING ACTIVITIES:
Investments in joint ventures ................. (1,401) (1,354)
Distributions from joint ventures ............. 5,183 2,395
Distributions from partnerships - net ......... 83 582
Purchase of property and equipment ............ (1,177) (991)
-------- --------
Net cash provided by investing activities ..... 2,688 632
-------- --------
FINANCING ACTIVITIES:
Repayment of long term obligations ............ (27,915) (10,189)
Proceeds from long term obligations ........... 47,627 13,763
Proceeds from minority interest ............... 1,885
Payment of cash dividends to common
stockholders ................................. (783) (782)
-------- --------
Net cash provided by financing activities ..... 20,814 2,792
-------- --------
Net decrease in cash and cash equivalents ..... (3,702) (10,887)
Cash and cash equivalents beginning of period . 10,762 17,778
-------- --------
Cash and cash equivalents end of period ....... $ 7,060 $ 6,891
======== ========
</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 nine months ended September 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 NINE AND THREE MONTHS
ENDED SEPTEMBER 30, 1996 AND 1995
During the nine and three months ended September 30, 1996, the Company
had income from operations of $7,330,000 and $2,800,000 as compared to
$6,707,000 and $3,017,000 in 1995, and net income of $4,046,000 or $.65 a share
and $1,512,000 or $.25 a share as compared to $3,899,000 or $.62 a share and
$1,796,000 or $.28 a share for the similar periods in 1995.
For the nine months ended September 30, 1996, revenues increased by
$9,549,000 due to higher deliveries in both Levitt's Florida and Puerto Rico
regions, offset by lower average selling prices in the Florida region resulting
from a change in product mix. The Company has invested and actively participates
in several home-building joint ventures in the Florida region which continue to
perform well.
Revenues and profits were marginally lower for the three months ended
September 30, 1996 as compared to the same period in 1995 due to lower
deliveries in Levitt's Puerto Rico region caused by bad weather conditions.
General and administrative expenses increased by $3,827,000 for the
nine months ended September 30, 1996, primarily due to the expansion of HRH
Construction into the interior construction and renovation field. The
significant increases were attributable to personnel and general office
overhead. The addition of this new business has significantly increased HRH's
backlog of construction management fees.
Mortgage operation costs increased due to the continued growth of the
mortgage operation business both domestically and in Puerto Rico.
Levitt's backlog of homes contracted for sale was $105,723,000 at
September 30, 1996 as compared to $107,619,000 at September 30, 1995. Included
in Levitt's sales backlog is its 50% interests in joint ventures.
During the nine months ended September 30, 1996, Levitt showed a net
increase of $36,236,000 in various development projects, increasing its
inventory in its single-family home division.
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.
10
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Homebuilding Operations
The Company generally meets its land acquisition, development and
construction needs through mortgage loans and unsecured revolving credit
facilities. During March 1996, 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. In August 1996 the credit
agreement was modified to increase the line of credit to $21,000,000. The
additional $6,000,000 line of credit is secured by mortgage notes on property
located in Puerto Rico.
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
$4,046,000, net adjustments for non-cash items of $485,000 plus a net change in
other operating assets and liabilities of $4,501,000, offset by an increase in
inventories of $36,236,000
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 net distributions
from joint ventures of $3,782,000, offset by other net investing activities of
$1,094,000.
Net cash provided by financing activities comprised net principal
borrowings on notes and mortgages payable of $19,712,000 plus proceeds from
minority interests of $1,885,000, offset by dividends paid to stockholders of
$783,000.
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: November 13, 1996
12
<PAGE> 1
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>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1996 1995
------- ------
<S> <C> <C>
Weighted average number of shares outstanding
during the period .......................... 6,261 6,261
======= ======
Net Income .................................. $ 4,046 $3,899
======= ======
Primary earnings per share:
Net Income ............................. $ .65 $ .62
======= ======
</TABLE>
13
<PAGE> 1
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
SEPTEMBER 30,
---------------------
1996 1995
-------- -------
<S> <C> <C>
Weighted average number of shares outstanding
during the period .......................... 6,261 6,261
======== ======
Net Income .................................. $ 1,512 $1,796
======== ======
Primary earnings per share:
Net Income ............................. $ .25 $ .28
======== ======
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,012,000
<SECURITIES> 48,000
<RECEIVABLES> 46,449,000
<ALLOWANCES> 476,000
<INVENTORY> 95,325,000
<CURRENT-ASSETS> 137,670,000
<PP&E> 12,440,000
<DEPRECIATION> 8,455,000
<TOTAL-ASSETS> 175,116,000
<CURRENT-LIABILITIES> 55,157,000
<BONDS> 0
0
0
<COMMON> 6,566,000
<OTHER-SE> 48,444,000
<TOTAL-LIABILITY-AND-EQUITY> 175,116,000
<SALES> 93,535,000
<TOTAL-REVENUES> 96,036,000
<CGS> 0
<TOTAL-COSTS> 47,775,000
<OTHER-EXPENSES> 40,642,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 289,000
<INCOME-PRETAX> 7,330,000
<INCOME-TAX> 3,284,000
<INCOME-CONTINUING> 4,046,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,046,000
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
