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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended JUNE 25, 1994 Commission File No. 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
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 508-249-3551
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Class A Common - $1.00 Per Share Par Value New York Stock Exchange
Class B Common - $1.00 Per Share Par Value Not applicable
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes X No
The Registrant had 4,848,688 and 2,253,544 shares, respectively, of its $1.00
par value Class A and B common stock outstanding on July 22, 1994. On that
date, the aggregate market value of the common stock held by nonaffiliates was
approximately $112,000,000.
The exhibit index is located on page 27.
Documents incorporated by reference
Proxy Statement dated August 17, 1994 - Part III
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PART I
Item I - Business
The Company was founded in 1880 and incorporated in 1929 and is engaged in the
business of manufacturing industrial, professional, and consumer products. The
total number of different items made and sold by the Company exceeds 5,000.
Among the items produced are precision tools, tape measures, levels, electronic
gages, dial indicators, gage blocks, digital readout measuring tools, granite
surface plates, optical measuring projectors, coordinate measuring machines,
vises, M1 lubricant, hacksaw blades, hole saws, band saw blades, jigsaw blades,
reciprocating saw blades, and precision ground flat stock. Much of the
Company's production is concentrated in hand measuring tools (such as
micrometers, steel rules, combination squares and many other items for the
individual craftsman) and precision instruments (such as vernier calipers,
height gages, depth gages and measuring instruments that manufacturing
companies buy for the use of their employees).
These tools and instruments are sold throughout the United States and Canada
and over 100 foreign countries, primarily through distributors. By far the
largest consumer of these products is the metalworking industry, but other
important consumers are automotive, aviation, marine and farm equipment shops,
do-it-yourselfers and tradesmen such as builders, carpenters, plumbers and
electricians. One retailer, Sears, accounts for approximately 11% of the
Company's sales.
Most of the Company's products are made from steel purchased from steel mills.
Forgings, castings, and a few small finished parts are purchased from other
manufacturers. Raw materials have always been readily available to the
Company.
At June 25, 1994, the Company had 2,563 employees.
The Company is one of the largest producers of mechanics' hand measuring tools
and precision instruments. In the United States, there are three other major
companies and numerous small competitors in the field, with the result that the
industry is highly competitive. During the fiscal year ended June 25, 1994,
there were no material changes in the Company's competitive position. During
recent years, changes in the volume of sales of the Company have, in general,
corresponded with changes throughout the industry. In saws and precision
ground flat stock, the Company in the United States competes with many
manufacturers. The Company competes principally through the high quality of
its products and the service it provides its customers.
In recent years, direct foreign competition has affected the Company's domestic
business to a limited extent.
Sales order backlog of the Company at any point in time is negligible.
The operations of the Company's foreign subsidiaries are consolidated in its
financial statements. The subsidiaries located in Brazil and Scotland are
actively engaged in the manufacture of hacksaw and band saw blades and a
limited line of precision tools and measuring tapes. The Company expects its
foreign subsidiaries to continue to play a significant role in its overall
operations. A summary of the Company's foreign operations is contained in the
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footnotes to the Company's 1994 financial statements found in item 8 of this
Form 10K and is hereby incorporated by reference.
The Company generally fills orders from finished goods inventories on hand;
total inventories amounted to approximately $53,165,000 at June 25, 1994, and
$53,567,000 at June 26, 1993. The Company uses the last-in, first-out (LIFO)
method of valuing most inventories, which results in more realistic operating
costs and profits. Inventory amounts are approximately $25,391,000 and
$25,757,000 lower, respectively, than if determined on a first-in, first-out
(FIFO) basis.
The Company does apply for patent protection on new inventions and presently
owns a number of patents. Its patents are considered important in the
operation of the business, but no single patent is of material importance when
viewed from the standpoint of its overall business. The Company relies on its
continuing product research and development efforts, with less dependence on
its present patent position. It has for many years maintained engineers and
supporting personnel engaged in research, product development, and related
activities. The expenditures for these activities during fiscal years 1994,
1993 and 1992 were approximately $2,718,000, $3,122,000 and $3,662,000,
respectively, all of which was expensed in the Company's financial statements.
The Company uses trademarks with respect to its products. All of its important
trademarks are registered.
Compliance with federal, state and local provisions that have been enacted or
adopted regulating the discharge of materials into the environment or otherwise
relating to protection of the environment is not expected to have a material
effect on the capital expenditures, earnings and competitive position of the
Company.
The business of the Company is to some extent seasonal, with sales and earnings
generally at the lowest level during the first quarter of the fiscal year.
Item 2 - Properties
The Company's principal plant is located in Athol, Massachusetts, on about 15
acres of Company-owned land. The plant consists of 25 buildings, mostly of
brick construction of varying dates, with approximately 535,000 square feet of
production and storage area.
The Webber Gage Division, Cleveland, Ohio, owns and occupies two buildings
containing approximately 46,000 square feet.
The Company-owned facility in Mt. Airy, North Carolina has approximately
219,000 square feet. It is occupied by the Company's Saw Division, Granite
Surface Plate Division, Coordinate Measuring Machine Division, Optical
Comparator Division, Ground Flat Stock Division and Vise Division. This plant
is subject to a mortgage collateralizing a $3,900,000 Industrial Revenue Bond.
The Company's Advanced Technology Division, located in Gardner, Massachusetts,
occupies about 8,000 square feet of leased facilities.
The Company's Evans Rule Division, located in North Charleston, South Carolina,
owns and occupies a 136,000 square foot building. In addition, this division
leases 32,000 square feet of manufacturing space located in Mayaguez, Puerto
Rico.
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The Company's Level Division is located in Alum Bank, Pennsylvania and owns and
occupies a 50,000 square foot building.
The Company's Brazil subsidiary is located in a 140,000 square foot building.
The Company's Scotland subsidiary occupies a 187,000 square foot building and
also leases approximately 16,000 square feet of manufacturing space in Skipton,
England, where its wholly owned subsidiary manufactures optical measuring
projectors. A subsidiary in Mississauga, Canada occupies a 25,000 square foot
building. With the exception of Skipton, these facilities are all owned.
In addition, the Company owns and operates warehouses/sales offices in Atlanta,
Georgia; Buena Park, California; Elmhurst, Illinois; and Farmington Hills,
Michigan. The Company's two granite quarries in North Carolina were sold in
fiscal 1994.
In its opinion, all of the Company's property, plant and equipment is in good
operating condition, well maintained and adequate for its needs.
Item 3 - Legal Proceedings
The Company is not involved in any material pending legal proceedings.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended June 25, 1994.
Executive Officers of the Registrant
The information under the caption Executive Officers of the Registrant in item
10 of this Form 10K is hereby incorporated by reference.
PART II
Item 5 - Market for the Registrant's Common Equity and Related
Stockholder Matters
The Company's Class A common stock is traded on the New York Stock Exchange.
Quarterly dividend and high/low closing market price information is presented
in the table below. The Registrant's Class B common stock is generally
nontransferable, except to lineal descendants and thus has no established
trading market, but it can be converted into Class A common stock at any time.
The Class B common stock was issued on October 5, 1988, and the Registrant has
paid the same dividends thereon as have been paid on the Class A common stock
since that date. At July 22, 1994, there were 2,713 registered holders of
Class A common stock and 2,321 registered holders of Class B common stock.
Quarter ended Dividends High Low
June 1994 $ 0.17 $ 24.38 $ 21.50
March 1994 0.17 25.50 23.50
December 1993 0.17 25.50 24.13
September 1993 0.17 25.88 23.00
June 1993 0.17 25.38 24.13
March 1993 0.17 25.88 24.00
December 1992 0.17 26.50 21.75
September 1992 0.17 25.13 22.88
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Item 6 - Selected Financial Data
Years ended in June ($000 except per share data)
1994 1993 1992 1991 1990
Net sales $180,178 $174,801 $180,275 $188,432 $201,625
Net earnings before
accounting changes 9,041 8,743 10,537* 12,062 18,752
Earnings per share before
accounting changes 1.28 1.25 1.52* 1.74 2.71
Long-term debt 10,843 14,527 18,212 16,898 19,854
Total assets 198,032 194,436 198,002 181,185 177,128
Dividends per share 0.68 0.68 0.68 0.68 0.65
* Before charge of $7,729,000 ($1.12 per share) for cumulative effect on prior
year earnings of accounting changes for postretirement benefits and income
taxes.
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Sales
Sales are up 3% compared to a year ago. This follows a 3% decrease in 1993.
The current year increase is all domestic, with the weakening pound in Scotland
during the early part of the year and lower volume in Brazil holding foreign
sales flat. The sales decline in 1993 was among all divisions and generally
a result of worldwide economic conditions as well as the drop in the pound.
Earnings Before Taxes
Pretax earnings are down 9% for the year. This includes a 18% increase in
domestic pretax earnings as a result of increased sales. The foreign decline
is almost all in Brazil where price competition has been intense. In addition,
realized and unrealized exchange losses in Brazil, which are included in other
income and expense, are up over $1 million as a result of the extremely high
inflation during the year. The 20% drop in pretax earnings in 1993 was
primarily the result of a decrease in domestic margins because of lower volume
as well as one-time expenses associated with the move of our Saw Division to
Mt. Airy, N.C.
Net Earnings
The current year net earnings trend is the opposite of the pretax trend, with
1994 improving 3% over 1993. The effective tax rate is only 17% in 1994
compared to 26% in 1993 and 30% in 1992 (a more normal year). Tax-exempt
interest, Puerto Rico tax incentives and dividends on ESOP stock always
contribute to an overall effective tax rate that is slightly lower than the
normal U.S. statutory rate of 34%. The decline of the effective tax rate in
1994, however, comes from the favorable tax treatment of a fourth quarter
dividend from Scotland and also from Brazil, where two things happened. Higher
than usual inflation in Brazil resulted in large tax deductions for so-called
monetary correction (an accounting concept unique to Brazil), about doubling
the expected tax benefit. In addition, there was a favorable partial
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resolution ($350,000) to a tax dispute we have been having with the government
since 1991.
The 1993 versus 1992 reduction in rate relates to: 1) domestic income mix
favoring Puerto Rico, where the effective tax rate is lower and 2) the
favorable tax treatment of a third quarter dividend from Scotland.
Accounting Changes
The Company adopted both FAS 106 (retiree medical benefits) and FAS 109 (income
taxes) in fiscal 1992, recording the cumulative effect in the first quarter of
1992. The cumulative effect of the income tax change comes from recording the
deferred taxes associated with a 1987 acquisition. The cumulative effect of
the retiree medical benefit change relates to benefits earned for past service.
In fiscal 1995, the Company will adopt Statement of Financial Standards No.
115, Accounting for Certain Investments in Debt and Equity Securities, which
will not have a material effect on the financial condition or results of
operations of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position with a working
capital ratio of 5.8 to one on June 25, 1994 as well as June 26, 1993. Cash and
short-term investments are up over $3 million compared to June 1993. This
resulted from being able to hold receivables and inventory even despite
increasing sales, along with lower than average fixed asset additions.
The fact that the changes in receivables and payables in the Statement of Cash
Flows do not exactly match the changes in the related balance sheet accounts
is because of changes in foreign exchange rates. These differences should not
be interpreted as uses and sources of cash, but rather as noncash adjustments
to net income to arrive at cash generated from operations. Also, in Brazil,
these differences tend to be offset by unrealized exchange gains and losses.
Borrowings under the Company's $20 million revolving credit agreement have been
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 government securities and other
money market investments.
Item 8 - Financial Statements and Supplementary Data
Contents: Page
Report of Independent Auditors 7
Consolidated Statements of Earnings and Cash Flows 8
Consolidated Balance Sheets 9
Consolidated Statements of Stockholders' Equity 10
Notes to Consolidated Financial Statements 11-17
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REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Directors of
The L.S. Starrett Company
We have audited the accompanying consolidated balance sheets of The L.S.
Starrett Company and subsidiaries as of June 25, 1994 and June 26, 1993, and
the related consolidated statements of earnings and cash flows, and
stockholders' equity for each of the three years in the period ended June 25,
1994. Our audits also included the financial statement schedules listed in item
14(a)2 of this Form 10K. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company and subsidiaries as
of June 25, 1994 and June 26, 1993, and the results of their operations and
their cash flows for each of the three years in the period ended June 25, 1994,
in conformity with generally accepted accounting principles. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
As discussed in the Accounting Changes note to the consolidated financial
statements, in 1992 the Company changed its methods of accounting for income
taxes and postretirement benefits other than pensions.
S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 29, 1994
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THE L.S. STARRETT COMPANY
Consolidated Statements of Earnings and Cash Flows
For the years ended in June (in thousands of dollars except per share data)
1994 1993 1992
EARNINGS
Net sales $180,178 $174,801 $180,275
Cost of goods sold (129,485) (125,131) (126,349)
Selling, general and administrative expense (37,832) (36,476) (36,002)
Other income and expense (2,007) (1,305) (2,972)
Earnings before income taxes and cumulative
effect of accounting changes 10,854 11,889 14,952
Income taxes 1,813 3,146 4,415
Net earnings before cumulative effect of
accounting changes 9,041 8,743 10,537
Cumulative effect of accounting changes for
postretirement benefits and income taxes 7,729
Net earnings $ 9,041 $ 8,743 $ 2,808
Earnings per share before cumulative effect
of accounting changes $ 1.28 $ 1.25 $ 1.52
Cumulative effect of accounting changes 1.12
Earnings per share $ 1.28 $ 1.25 $ .40
CASH FLOWS
Cash flows from operating activities:
Net earnings $ 9,041 $ 8,743 $ 2,808
Noncash expenses:
Depreciation and amortization 8,681 8,306 7,802
Deferred taxes (254) 1,209 252
Cumulative effect of accounting changes 7,729
Unrealized translation losses 5,476 5,371 6,332
Working capital changes:
Receivables (8,499) (5,061) (7,856)
Inventories (17) 4,137 2,557
Other current assets and liabilities 3,400 (85) 2,898
Prepaid pension and other (1,457) (801) (933)
Net cash from operating activities 16,371 21,819 21,589
Cash flows from investing activities:
Business acquired (1,590)
Additions to plant and equipment (6,567) (7,518) (13,915)
Increase in short-term investments (3,657) (6,955) (4,690)
Net cash used in investing activities (10,224) (14,473) (20,195)
Cash flows from financing activities:
Long-term borrowings 3,000
Debt repayments (2,600) (2,600) (600)
Common stock issued 2,678 3,635 2,061
Treasury shares purchased (1,735) (1,304) (1,315)
Dividends (4,805) (4,767) (4,704)
Net cash used in financing activities (6,462) (5,036) (1,558)
Effect of translation rate changes on cash (152) (258) (57)
Net increase (decrease) in cash (467) 2,052 (221)
Cash beginning of year 2,845 793 1,014
Cash end of year $ 2,378 $ 2,845 $ 793
Supplemental cash flow information:
Interest paid $ 662 $ 958 $ 1,343
Taxes paid $ 1,359 $ 3,791 $ 2,680
See Notes to Consolidated Financial Statements
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THE L.S. STARRETT COMPANY
Consolidated Balance Sheets
(in thousands of dollars)
June 25 June 26
ASSETS 1994 1993
Current assets:
Cash $ 2,378 $ 2,845
Short-term investments 27,055 23,478
Accounts receivable (less allowance for doubtful
accounts of $954,000 and $1,001,000) 29,133 29,057
Inventories 53,165 53,567
Prepaid expenses and other current assets 4,732 3,355
Total current assets 116,463 112,302
Property, plant and equipment, at cost:
Land 1,995 1,962
Buildings (less accumulated depreciation of
$15,227,000 and $13,859,000) 21,283 22,868
Machinery and equipment (less accumulated
depreciation of $33,518,000 and 29,708,000) 34,108 34,788
Total property, plant and equipment 57,386 59,618
Cost in excess of net assets acquired (less accumu-
lated amortization of $2,386,000 and $2,034,000) 8,822 9,205
Prepaid pension cost 14,897 12,870
Other assets 464 441
$198,032 $194,436
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities $ 1,583 $ 1,311
Accounts payable and accrued expenses 10,018 10,078
Accrued salaries and wages 4,276 4,042
Taxes payable 2,327 2,360
Dividend payable 1,204 1,198
Employee deposits for stock purchase plan 601 433
Total current liabilities 20,009 19,422
Deferred income taxes 7,110 6,101
Long-term debt 10,843 14,527
Accumulated postretirement benefit obligation 13,422 12,964
Stockholders' equity:
Class A Common Stock $1 par (10,000,000 shrs. auth.) 4,851 4,640
Class B Common Stock $1 par (10,000,000 shrs. auth.) 2,256 2,425
Additional paid-in capital 32,272 30,023
Retained earnings reinvested and employed in
the business 113,147 110,259
ESOP guaranteed bank loan (543) (1,627)
Foreign currency translation adjustment (5,335) (4,298)
Total stockholders' equity 146,648 141,422
$198,032 $194,436
See Notes to Consolidated Financial Statements
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THE L.S. STARRETT COMPANY
Consolidated Statements of Stockholders' Equity
For the years ended in June, 1992 through 1994
(in thousands)
Common Addi- Equity Adjustments
Stock Out- tional Currency
standing Paid-in Retained Trans-
($1 Par) Capital Earnings ESOP lation Total
Balance, 6/29/91
(1,400,325 Class A
and 77,439 Class B
shares in treasury)$ 6,911 $25,017 $110,262 $(3,798) $(1,404) $136,988
Net earnings 2,808 2,808
Dividends ($0.68) (4,704) (4,704)
Treasury shares:
Purchased (55) (207) (1,053) (1,315)
Issued 81 1,829 1,910
Options exercised 8 143 151
ESOP loan repayments 1,086 1,086
Translation gain,net 1,928 1,928
Balance, 6/27/92
(1,357,654 Class A
and 94,790 Class B
shares in treasury) 6,945 26,782 107,313 (2,712) 524 138,852
Net earnings 8,743 8,743
Dividends ($0.68) (4,767) (4,767)
Treasury shares:
Purchased (54) (220) (1,030) (1,304)
Issued 91 2,106 2,197
Options exercised 83 1,355 1,438
ESOP loan repayments 1,085 1,085
Translation loss,net (4,822) (4,822)
Balance, 6/26/93
(1,303,954 Class A
and 111,482 Class B
shares in treasury) 7,065 30,023 110,259 (1,627) (4,298) 141,422
Net earnings 9,041 9,041
Dividends ($0.68) (4,805) (4,805)
Treasury shares:
Purchased (72) (315) (1,348) (1,735)
Issued 102 2,341 2,443
Options exercised 12 223 235
ESOP loan repayments 1,084 1,084
Translation loss,net (1,037) (1,037)
Balance, 6/25/94
(1,251,378 Class A
and 133,397 Class B
shrs in treasury) $ 7,107 $32,272 $113,147 $ (543) $(5,335) $146,648
See Notes to Consolidated Financial Statements
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THE L. S. STARRETT COMPANY
Notes to Consolidated Financial Statements
SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation: The consolidated financial statements include the
accounts of The L.S.Starrett Company and subsidiaries, all of which are
wholly-owned. All significant intercompany items have been eliminated. The
fiscal years of the Company's subsidiaries in Scotland and Brazil end in May
and April, respectively.
Fair market value of financial instruments: The Company's financial instruments
consist primarily of current assets, current liabilities, and long-term debt.
Current assets, except inventory (see Inventories), and current liabilities
are stated at cost, which approximates fair market value; long-term debts,
which are at current market interest rates, also approximate fair market
value.
Short-term investments: Short-term investments, carried at cost, which
approximates market, consist primarily of marketable securities, including
treasury bills, certificates of deposit, municipal securities and money
market preferreds.
Inventories: Inventories are stated at the lower of cost or market. For
approximately 80% of all inventories, cost is determined on a last-in, first-
out (LIFO) basis. For all other inventories, cost is determined on a first-
in, first-out (FIFO) basis. LIFO inventories are $39,984,000 and $38,383,000
at the end of 1994 and 1993, respectively, such amounts being $25,391,000 and
$25,757,000 less than if determined on a FIFO basis. During 1994, 1993 and
1992, the Company reduced the level of certain LIFO inventories that were
carried at significantly lower costs prevailing in prior years. The effect
of the LIFO inventory reduction was to increase net earnings approximately
$443,000 in 1994 ($.06 per share), $1,420,000 in 1993 ($.20 per share) and
$825,000 in 1992 ($.12 per share).
Total inventories at year end are as follows (in thousands):
Goods in Pro-
cess and Raw Materials
Finished Goods Finished Parts and Supplies Total
1994 $23,530 $16,111 $13,524 $53,165
1993 21,324 19,189 13,054 53,567
Income taxes: Deferred tax expense results from differences in the timing of
certain transactions for financial reporting and tax purposes. Deferred
taxes have not been recorded on undistributed earnings of foreign
subsidiaries (approximately $45,000,000 at June 1994) or the related
unrealized translation adjustments because such amounts are considered
permanently invested and, if remitted, the resulting taxes would be offset
by foreign tax credits.
Property, plant and equipment: Buildings and equipment are depreciated using
straight-line and accelerated methods over estimated useful lives as follows:
buildings 15 to 50 years, building improvements 10 to 20 years, machinery and
equipment 5 to 12 years, motor vehicles 3 to 5 years.
Cost in excess of net assets acquired: These costs are being amortized on a
straight-line basis over 10 to 40 years.
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Research and development: Research and development costs are $2,718,000 in
1994, $3,122,000 in 1993 and $3,662,000 in 1992.
Earnings per share: Earnings per share are computed using the weighted average
number of shares and common stock equivalents (stock options) outstanding
during the year.
Translation of foreign currencies: Assets and liabilities in nonhyperinfla-
tionary economies are translated at exchange rates in effect on reporting
dates, and income and expenses are translated at rates in effect on
transaction dates. The resulting differences due to changing exchange rates
are charged or credited directly to the "foreign currency translation
adjustment" account included as part of stockholders' equity. For the
Company's subsidiary in Brazil ( a hyperinflationary economy), the
translation method is the same except that inventories and plant and the
related charges to cost of sales and depreciation expense are translated at
rates in effect at the time the assets were purchased, and the resulting
translation gains and losses are included in the determination of net
earnings. Translation gains and losses on short-term borrowings and
marketable securities in Brazil are netted against the related interest
charged or income earned. Similar losses on accounts receivable are treated
as sales discounts and are netted against sales.
ACCOUNTING CHANGES
In fiscal 1992, the Company adopted Statement of Financial Accounting Standards
No. 109 (FAS 109), Accounting for Income Taxes, and FAS 106, Accounting for
Postretirement Benefits Other Than Pensions.
The effect of adopting FAS 109 was to increase net earnings $56,000 ($0.01 per
share) in 1992, which included a negative cumulative effect on prior years of
$251,000 ($0.04 per share) resulting primarily from the effect of a 1987
acquisition.
The effect of adopting FAS 106 was to decrease net earnings $7,623,000 ($1.10
per share) in 1992, which included the cumulative effect on prior years of
$7,478,000 ($1.08 per share), and is net of a $4,985,000 tax benefit. FAS 106
requires companies to recognize the future cost of postretirement medical and
other nonpension benefits on an accrual basis during an employee's service in
a manner similar to the present accounting method for pension costs.
OTHER INCOME AND EXPENSE
Other income and expense consists of the following (in thousands):
1994 1993 1992
Interest income $ 1,035 $ 1,147 $ 1,027
Interest expense and commitment fees (662) (812) (1,425)
Realized and unrealized translation gains
and losses (2,708) (1,594) (2,659)
Other 328 (46) 85
$(2,007) $(1,305) $(2,972)
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INCOME TAXES
The provision for income taxes consists of the following (in thousands):
1994 1993 1992
Current:
Federal $ 863 $ 629 $ 1,888
Foreign 615 844 1,528
State 589 464 747
Deferred (254) 1,209 252
$ 1,813 $ 3,146 $ 4,415
The 1994 resolution of a tax dispute in Brazil resulted in a reduction of
foreign tax expense of $350,000. Pretax domestic income was $8,916,000,
$7,546,000 and $12,219,000 in 1994, 1993 and 1992, respectively.
A reconciliation of expected tax expense at the U.S. statutory rate to actual
tax expense is as follows (in thousands):
1994 1993 1992
Expected tax expense $ 3,690 $ 4,042 $ 5,084
Decrease resulting from:
State and Puerto Rican taxes net
of federal benefit (378) (380) (24)
Foreign taxes net of federal credits (1,034) (12) (203)
Nontaxable investment income (158) (140) (114)
Other (307) (364) (328)
Actual tax expense $ 1,813 $ 3,146 $ 4,415
Deferred income taxes at year end are attributable to the following (in
thousands):
1994 1993
Deferred assets:
Retiree medical benefits $(5,302) $(5,121)
Inventories (692) (809)
Foreign loss carryforwards (1,198)
Other (911) (796)
(8,103) (6,726)
Deferred liabilities:
Prepaid pension 5,933 5,092
Other employee benefits 692 647
Depreciation 5,590 5,224
Other 938 1,116
13,153 12,079
Current portion 2,060 748
$ 7,110 $ 6,101
Foreign loss carryforwards begin expiring in 1998.
EMPLOYEE BENEFIT PLANS
The Company has several pension plans, both defined benefit and defined
contribution, covering all of its domestic and approximately half of its
nondomestic employees. In addition, certain domestic employees participate in
an Employee Stock Ownership Plan (ESOP). Ninety percent of the actuarially
determined annuity value of their ESOP shares is used to offset retirement
benefits otherwise due under the domestic noncontributory defined benefit
pension plan. The total cost (benefit) of all such plans for 1994, 1993 and
1992, considering the combined projected benefits and funds of the ESOP as well
as the pension plans, was $(124,000), $240,000 and $257,000, respectively.
-13-
<PAGE>
Under both domestic and foreign defined benefit plans, benefits are based on
years of service and final average earnings. Plan assets, including those of
the ESOP, consist primarily of investment grade debt obligations, marketable
equity securities and approximately 1,000,000 shares of the Company's common
stock. The cost of these defined benefit plans, including the ESOP, consists
of the following components (in thousands):
1994 1993 1992
Cost of benefits earned during current year $ 1,876 $ 1,943 $ 1,748
Interest on projected benefit obligation 3,083 3,124 3,278
Actual return on assets (1,150) (8,929) (7,381)
Net amortization and deferral (4,714) 3,417 1,996
$ (905) $ (445) $ (359)
The plans' funded status at year end is as follows (in thousands):
1994 1993 1992
Vested accumulated benefit obligation $57,103 $53,539 $53,940
Nonvested accumulated benefit obligation 1,856 1,638 79
Effect of future compensation increases 5,798 8,812 11,086
Projected benefit obligation 64,757 63,989 65,105
Plan assets at fair market value 93,957 96,054 90,786
Funded status 29,200 32,065 25,681
Unrecognized portion of net assets 14,303 19,195 14,325
Prepaid pension cost $14,897 $12,870 $11,356
The assumed discount rate and rate of increase in compensation used in
determining the projected benefit obligation are 7% and 5%, respectively, for
the domestic plan and 8% and 6.5% for the foreign plan. The assumed long-term
rate of return on plan assets is 7% for the domestic plan and 8% for the
foreign plan.
The Company provides certain medical and life insurance benefits for most
retired employees in the United States. See Accounting Changes note regarding
the adoption of FAS 106 in fiscal 1992.
The status of these plans at year end is as follows (in thousands):
1994 1993
Accumulated postretirement benefit obligation:
Retirees $ 6,601 $ 6,095
Active plan participants 9,074 8,379
Unrecognized loss (2,253) (1,510)
Accumulated postretirement benefit obligation
accrued $13,422 $12,964
Postretirement benefit expense consists of the following (in thousands):
1994 1993 1992
Service cost $ 414 $ 400 $ 301
Interest cost 1,039 950 845
Amortization cost 53
$ 1,506 $ 1,350 $ 1,146
The Company's portion of the annual rate of increase in the per capita cost of
covered benefits is assumed to be 2%. A one percentage point increase in the
assumed cost escalation rate would increase the accumulated benefit obligation
by $1.2 million and the annual expense by $150,000. A discount rate of 7% was
used in determining the accumulated benefit obligation.
-14-
<PAGE>
LONG-TERM DEBT
At year end, long-term debt consists of the following (in thousands):
1994 1993
Industrial revenue bond $ 3,900 $ 4,500
ESOP guaranteed loan 543 1,627
Revolving credit agreement 7,000 9,000
11,443 15,127
Less current maturities 600 600
$10,843 $14,527
The industrial revenue bond is collateralized by the Company's plant in Mt.
Airy, North Carolina. Principal is payable in semiannual installments of
$300,000. Interest is at 92% of the 90 day CD rate (3.3% at June 25, 1994).
Interest on the ESOP guaranteed loan is at LIBOR plus 1/2% (4.6% at June 25,
1994). The ESOP guaranteed loan was used to purchase 800,000 shares of Company
stock under a ten-year bank term loan that was guaranteed by the Company.
Dividends and Company contributions to the ESOP are used to repay the term
loan, and the shares sold to the ESOP are being allocated to employee accounts
at the rate of 10% per year. Additional contributions are made to replace the
dividends used for debt service. The revolving credit agreement is for
$20,000,000 with two banks and requires commitment and other fees of .3%.
Interest rates vary, but approximate LIBOR plus 3/8% (4.8% as of June 25,
1994). Borrowings are payable in 16 equal quarterly installments commencing
December 1995. All debt agreements contain financial covenants, the most
restrictive of which is that at June 25, 1994 the Company must have tangible
net worth of $124,000,000. Annual principal payments on debt (excluding ESOP)
are required as follows: 1995 $600,000, 1996 $1,913,000, 1997-1999 $2,350,000,
thereafter $1,337,000.
COMMON STOCK
Class B Common Stock is identical to Class A except that it has 10 votes per
share, is generally nontransferable except to lineal descendants, cannot
receive more dividends than Class A, and can be converted to Class A at any
time. Class A Common Stock is entitled to elect 25% of the directors to be
elected at each meeting with the remaining 75% being elected by Class A and
Class B voting together. In addition, the Company has a stockholder rights
plan, adopted in 1990, to protect stockholders from attempts to acquire the
Company on unfavorable terms not approved by the Board of Directors. Under
certain circumstances, the plan entitles each Class A or Class B share to
additional shares of the Company or an acquiring company, as defined, at a 50%
discount to market. Generally, the rights will be exercisable if a person or
group acquires 15% or more of the Company's outstanding shares. The rights
trade together with the underlying common stock. They can be redeemed by the
Company for $.01 per right and expire in the year 2000.
Under the Company's stock purchase plans, the purchase price of the optioned
stock is 85% of the lower of the market price on the date the option is granted
or the date it is exercised. Options become exercisable exactly two years from
the date of grant and expire if not exercised. The average purchase price of
the optioned stock outstanding at the end of 1994, 1993 and 1992 was $20.33,
$20.66 and $18.11, respectively. Changes in optioned and unoptioned shares
under the plans were as follows:
-15-
<PAGE>
On Option Unoptioned
Balance, June 29, 1991 116,845 566,823
Options granted 27,874 (27,874)
Options exercised ($19.13 and $19.55) (7,808)
Options canceled (24,537) 24,537
Balance, June 27, 1992 112,374 563,486
Options authorized 800,000
Options granted 51,594 (51,594)
Options exercised ($16.90 and $20.19) (83,466)
Options canceled (21,166) (557,254)
Balance, June 26, 1993 59,336 754,638
Options granted 31,453 (31,453)
Options exercised ($19.34 and $20.40) (11,946)
Options canceled (17,287) 17,287
Balance, June 25, 1994 61,556 740,472
At June 25, 1994, a total of 802,028 shares of Class A common stock are
reserved for issuance under the plans. The outstanding options include the
following: Number of 85% of market price
Expiration date Class A shares on date of grant
October 27, 1994 23,836 $20.40
May 25, 1995 11,010 21.25
November 16, 1995 12,076 20.94
May 23, 1996 14,634 19.02
61,556
In addition, 304,633 shares of Class A common stock are reserved for the
Company's 401(k) plan at June 25, 1994. Since inception in 1986, 451,212 Class
A and 44,155 Class B shares have been issued under this plan.
OPERATING DATA
The Company is engaged in the single business segment of producing and
marketing industrial, professional and consumer products. Revenues, operating
income and identifiable assets of the Company's domestic and foreign operations
are summarized as follows (in thousands):
Elimina- Consoli-
Domestic Foreign tions dated
1994:
Sales $132,804 $ 47,374 $180,178
Intercompany transfers 1,437 6,665 $ (8,102)
Revenues 134,241 54,039 (8,102) 180,178
Operating income 7,695 5,166 12,861
Identifiable assets 152,128 55,059 (9,155) 198,032
Net assets 107,237 45,386 (5,975) 146,648
1993:
Sales $125,376 $ 49,425 $174,801
Intercompany transfers 1,247 5,542 $ (6,789)
Revenues 126,623 54,967 (6,789) 174,801
Operating income 6,604 6,590 13,194
Identifiable assets 145,059 57,542 (8,165) 194,436
Net assets 101,593 46,357 (6,528) 141,422
1992:
Sales $129,025 $ 51,250 $180,275
Intercompany transfers 1,034 4,619 $ (5,653)
Revenues 130,059 55,869 (5,653) 180,275
Operating income 11,165 6,759 17,924
Identifiable assets 142,349 64,314 (8,661) 198,002
Net assets 94,359 50,575 (6,082) 138,852
-16-
<PAGE>
Operating income is computed exclusive of other income and expense and income
taxes. Transfers are recorded at normal selling price for finished goods and
at cost plus a percentage to cover expenses for finished parts, work in process
and raw materials. Eliminations relate to investments in subsidiaries and
intercompany transactions and balances.
The Company believes it has no significant concentrations of credit risk as of
June 25, 1994. Trade receivables are disbursed among a large number of
retailers, distributors and industrial accounts in many countries. One customer
accounted for approximately 11% of sales in 1994 and 10% in 1993.
The significant foreign operations of the Company are located in Scotland and
Brazil. These two locations accounted for approximately the following
percentages of the indicated foreign information listed above:
1994 1993 1992
Scotland Brazil Scotland Brazil Scotland Brazil
Revenues 49% 51% 49% 51% 52% 48%
Operating income 66% 34% 52% 48% 71% 29%
Identifiable assets 50% 50% 52% 48% 55% 45%
QUARTERLY FINANCIAL DATA (UNAUDITED)(in thousands except per share data)
Earnings
Before Earnings
Net Gross Income Net per
Quarter ended Sales Profit Taxes Earnings Share
June 1994 $ 47,197 $13,427 $ 3,284 $ 3,374 $ 0.48
March 1994 43,672 12,469 1,953 1,392 0.20
December 1993 47,317 13,678 4,288 3,068 0.43
September 1993 41,992 11,119 1,329 1,207 0.17
$180,178 $50,693 $10,854 $ 9,041 $ 1.28
June 1993 44,906 12,572 3,133 2,330 0.33
March 1993 39,900 11,678 2,284 2,026 0.29
December 1992 45,888 12,315 2,933 2,095 0.30
September 1992 44,107 13,105 3,539 2,292 0.33
$174,801 $49,670 $11,889 $ 8,743 $ 1.25
The fiscal 1994 fourth quarter tax provision was negative primarily as a result
of the favorable tax effects of a Scotland dividend and the partial settlement
of a Brazil tax dispute.
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<PAGE>
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company had no such changes in or disagreements with its independent
auditors.
PART III
Item 10 - Directors and Executive Officers of the Registrant
Directors
The information concerning the Directors of the Registrant is contained on
pages 1 through 3 in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on September 21, 1994, and is hereby
incorporated by reference.
Executive Officers of the Registrant
Held Present
Name Age Office Since Position
Douglas R. Starrett 74 1962 President and Director
George B. Webber 73 1962 Vice President
Webber Gage Division
and Director
Charles H. Morrow 59 1976 Vice President Sales
Douglas A. Starrett 42 1985 Executive Vice Presi-
dent and Director
Roger U. Wellington, Jr. 53 1984 Treasurer and Chief
Financial Officer and
Director
Peter MacDougall 56 1990 Clerk
Douglas R. Starrett, George B. Webber, Charles H. Morrow, and Roger U.
Wellington, Jr. have served in the same capacities as listed above for at least
the past five years. Douglas A. Starrett (son of Douglas R. Starrett) was
previously Vice President of Operations for the Company. Except in the case
of Peter MacDougall, the positions listed above represent their principal
occupations and employment during the last five years. Peter MacDougall,
elected clerk in July 1990, has been a partner in Ropes & Gray, counsel for the
Company, throughout that period.
The President, Treasurer and Clerk hold office until the first meeting of the
directors following the next annual meeting of stockholders and until their
respective successors are chosen and qualified, and each other officer holds
office until the first meeting of directors following the next annual meeting
of stockholders, unless a shorter period shall have been specified by the terms
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<PAGE>
of his election or appointment or, in each case, until he sooner dies, resigns,
is removed or becomes disqualified.
There have been no events under any bankruptcy act, no criminal proceedings and
no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
Item 11 - Executive Compensation
The information concerning management remuneration is contained on pages 4
through 9 in the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on September 21, 1994 and, except for the
information under the caption "Compensation Committee Report," is hereby
incorporated by reference.
Item 12 - Security Ownership of Certain Beneficial Owners and
Management
(a) Security ownership of certain beneficial owners:
The information concerning a more than 5% holder of any class of the
Company's voting shares is contained on page 3 of the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on September 21, 1994, and is hereby incorporated by reference.
(b) Security ownership of management:
The information concerning the beneficial ownership of each class of
equity securities by all directors, and all directors and officers of the
Company as a group, is contained on pages 2 and 3 of the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on September 21, 1994, and is hereby incorporated by reference.
(c) The Company knows of no arrangements which may, at a subsequent date,
result in a change in control of the Company.
Item 13 - Certain Relationships and Related Transactions
(a) Transactions with management and others:
None
(b) Certain business relationships:
Not applicable
(c) Indebtedness of management:
None
(d) Transactions with promoters:
Not applicable
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<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) 1. Financial statements filed in item 8 of this annual report:
Consolidated Statements of Earnings and Cash Flows for the
Three Years in the Period ended June 25, 1994
Consolidated Balance Sheets at June 25, 1994 and June 26, 1993
Consolidated Statements of Stockholders' Equity for the Three
Years in the Period Ended June 25, 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedules - years ended June, 1992 through
1994:
I - Short-term investments
V - Property, plant and equipment
VI - Accumulated depreciation of property, plant and equipment
VIII - Valuation and qualifying accounts
IX - Short-term borrowings
X - Supplementary income statement information
All other financial statements and schedules are omitted because
they are inapplicable, not required under the instructions, or the
information is reflected in the financial statements or notes
thereto.
3. See Exhibit Index below on page 27.
(b) There were no reports on Form 8-K filed in the last quarter of the
period covered by this report.
(c) See Exhibit Index below on page 27.
(d) Not applicable.
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<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SCHEDULE I - SHORT-TERM INVESTMENTS
JUNE 25, 1994
Amount
at which-
Principal Market carried in
Description Amount Cost Value Balance Sheet
Maturities/tenders to
August 31,1994:
Treasury bills $ 2,000,000 $ 1,988,196 $ 1,988,196 $ 1,988,196
Tax exempt auction
rate preferreds 3,500,000 3,500,000 3,500,000 3,500,000
Bank CD's:
Taxable 4,439,427 4,439,427 4,439,427 4,439,427
Nontaxable 2,776,622 2,776,622 2,776,622 2,776,622
Tax exempt money
market funds 772,402 772,402 772,402 772,402
Tax exempt municipal
bonds and notes 2,460,000 2,460,098 2,460,000 2,460,098
15,948,451 15,936,745 15,936,647 15,936,745
Maturities/tenders from
September 1, 1994 to
December 31, 1994:
Treasury bills 2,000,000 1,979,525 1,979,525 1,979,525
Tax exempt auction
rate preferreds 2,500,000 2,500,000 2,500,000 2,500,000
Tax exempt municipal
bonds and notes 1,345,000 1,367,773 1,365,327 1,367,773
5,845,000 5,847,298 5,844,852 5,847,298
Maturities/tenders from
January 1, 1995 to
June 30, 1995:
Tax exempt auction
rate preferreds 1,500,000 1,500,000 1,500,000 1,500,000
Tax exempt municipal
bonds and notes 3,610,000 3,709,805 3,685,278 3,709,805
5,110,000 5,209,805 5,185,278 5,209,805
$26,903,451 $26,993,848 $26,966,777 $26,993,848
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<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
THREE YEARS IN THE PERIOD ENDED JUNE 25, 1994
Classification
Machinery
and
Land Buildings Equipment Total
BALANCE, JUNE 29, 1991 $1,972,921 $32,599,192 $50,545,582 $85,117,695
FAS 109 adjustment 239,475 2,560,525 2,800,000
Exchange rate changes (4,232) 219,132 460,000 674,900
Additions at cost 10,000 7,860,789 6,979,224 14,850,013
Fully depreciated (6,998) (2,412,814) (2,419,812)
Retirements or sales (8,420) (147,702) (630,161) (786,283)
Transfers (1,405,150) 1,405,150
BALANCE, JUNE 27, 1992 1,970,269 39,358,738 58,907,506 100,236,513
Exchange rate changes (6,747) (521,077) (1,205,689 (1,733,513)
Additions at cost 1,464,827 6,053,317 7,518,144
Fully depreciated (157,479) (1,482,721) (1,640,200)
Retirements or sales (1,375) (222,417) (971,486) (1,195,278)
Transfers (3,195,294) 3,195,294
BALANCE, JUNE 26, 1993 1,962,147 36,727,298 64,496,221 103,185,666
Exchange rate changes (6,863) (126,697) (246,586) (380,146)
Additions at cost 1,177,905 5,388,941 6,566,846
Fully depreciated (34,490) (2,403,632) (2,438,122)
Retirements or sales (1,182) (238,911) (562,785) (802,878)
Transfers 40,403 (994,686) 954,283
BALANCE, JUNE 25, 1994 $1,994,505 $36,510,419 $67,626,442 $106,131,366
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<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION
OF PROPERTY, PLANT AND EQUIPMENT
THREE YEARS IN THE PERIOD ENDED JUNE 25, 1994
Description
Machinery
and
Buildings Equipment Total
BALANCE, JUNE 29, 1991 $11,224,737 $21,099,204 $32,323,941
FAS 109 adjustment 55,878 1,071,256 1,127,134
Exchange rate changes 76,238 192,083 268,321
Charged to earnings 1,362,953 6,095,717 7,458,670
Fully depreciated (6,998) (2,412,814) (2,419,812)
Retirements or sales (43,225) (161,364) (204,589)
BALANCE, JUNE 27, 1992 12,669,583 25,884,082 38,553,665
Exchange rate changes (210,315) (646,645) (856,960)
Charged to earnings 1,632,988 6,303,493 7,936,481
Fully depreciated (157,479) (1,482,721) (1,640,200)
Retirements or sales (75,300) (349,934) (425,234)
BALANCE, JUNE 26, 1993 13,859,477 29,708,275 43,567,752
Exchange rate changes (57,993) (138,780) (196,773)
Charged to earnings 1,533,019 6,788,900 8,321,919
Fully depreciated (34,490) (2,403,632) (2,438,122)
Retirements or sales (73,179) (436,501) (509,680)
BALANCE, JUNE 25, 1994 $15,226,834 $33,518,262 $48,745,096
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<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS IN THE PERIOD ENDED JUNE 25, 1994
Balance at Additions Deductions Balance at
Beginning Charged to from End of
Description of Year Income Reserve Year
Reserves deducted from assets -
allowance for doubtful
accounts:
1994 $1,001,000 $ 476,203 $ 523,203 $ 954,000
1993 1,036,000 826,000 861,000 1,001,000
1992 809,000 803,000 576,000 1,036,000
NOTE:Included in deductions from reserve are translation losses of $14,000,
$63,000 and $341,000 in 1994, 1993 and 1992, respectively.
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<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SCHEDULE IX - SHORT-TERM BORROWINGS
THREE YEARS IN THE PERIOD ENDED JUNE 25, 1994
Weighted Maximum Average Weighted
Average Amount Amount Average
Interest Out- Out- Interest
Balance Rate Standing Standing Rate
Category of Aggregate End of End of During During During
Short-Term Borrowings Year Year Year Year Year
Notes payable, 1994 $ 983,000 12% $ 983,000 $1,580,000 6%
Notes payable, 1993 711,000 7% 1,598,000 3,050,000 4%
Notes payable, 1992 1,598,000 11% 2,860,000 1,940,000 26%
NOTES:
Interest rates reflect the hyperinflationary conditions in Brazil and should
not be compared to typical short-term rates in the United States.
Average outstandings computed on a daily basis.
Weighted average interest rate during period computed by dividing actual
interest expense by average outstanding balances.
-25-
<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS IN THE PERIOD ENDED JUNE 25, 1994
1994 1993 1992
Charged to Costs Charged to Costs Charged to Costs
Item and Expenses and Expenses and Expenses
Maintenance and repairs $4,227,173 $4,298,521 $3,626,274
Depreciation, amortization,
and depletion $8,680,775 $8,305,596 $7,801,981
Advertising costs $3,640,754 $2,988,242 $3,961,004
Other information is omitted because it is either inapplicable or the
information required is immaterial as defined in the instructions.
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<PAGE>
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
(3i) Restated Articles of Organization dated December 20, 1989, filed
with Form 10-Q for the quarter ended December 23, 1989, are hereby
incorporated by reference.
(3ii) Bylaws, filed with Form 10-Q for the quarter ended September 28,
1991, are hereby incorporated by reference.
(4a) Loan Agreement and related documents, relative to $3,900,000
Industrial Revenue Bond financing dated as of September 1, 1985,
between The Surry County Industrial Facilities and Pollution
Control Financing Authority and The L.S. Starrett Company will be
furnished to the Commission upon request.
(4b) Common Stock Rights Agreement, dated as of June 6, 1990, between
the Company and The First National Bank of Boston, as Rights Agent,
including Form of Common Stock Purchase Rights Certificate and
Summary Common Stock Purchase Rights, filed on June 13, 1990 with
the Company's Form 8-A, are hereby incorporated by reference.
(10a) $20,000,000 Credit Agreement dated as of May 27, 1993, between The
L.S. Starrett Company and The First National Bank of Boston and
Wachovia Bank of Georgia, N.A., filed with Form 10-K for the year
ended June 26, 1993, is hereby incorporated by reference.
(10b) Term Loan Agreement dated as of November 7, 1984, between The
L.S. Starrett Company Employee Stock Ownership Trust and Wachovia
Bank and Trust Company, N.A., filed on November 8, 1984 as Exhibit
(b)(2) to the Company's Schedule 13E-4, is hereby incorporated by
reference.
(10c) Guaranty dated as of November 7, 1984 of the Company, filed on
November 8, 1984 as Exhibit (b) (4) to the Company's Schedule
13E-4, is hereby incorporated by reference.
(11) Statement re: Calculation of Shares for Computation of
Consolidated Earnings Per Share. See page 28.
(21) Subsidiaries of the Registrant. See page 29.
(23) Independent Auditors' Consent. See page 30.
(27) Financial Data Schedule submitted in electronic format.
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<PAGE>
Exhibit 11
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
CALCULATION OF SHARES FOR COMPUTATION
OF CONSOLIDATED EARNINGS PER SHARE
1994 1993 1992 1991 1990
PRIMARY EARNINGS PER SHARE
Average shares outstanding
during the year 7,062,926 7,002,647 6,916,347 6,902,941 6,891,229
Incremental shares comput-
ed on the assumption that
dilutive stock options
had been exercised, with
the proceeds used to
purchase treasury stock 8,210 12,766 29,154 21,332 18,374
Average common and common
equivalent shares
outstanding 7,071,136 7,015,413 6,945,501 6,924,273 6,909,603
FULLY DILUTED EARNINGS PER SHARE
Average shares outstanding
during the year 7,062,926 7,002,647 6,916,347 6,902,941 6,891,229
Incremental shares comput-
ed on the assumption that
dilutive stock options
had been exercised, with
the proceeds used to pur-
chase treasury stock,
using year-end market
prices where such prices
were in excess of average
yearly prices, to deter-
mine the amount of
treasury stock purchased 8,210 13,103 31,817 25,132 20,201
Average common and common
equivalent shares used to
calculate fully diluted
earnings per share 7,071,136 7,015,750 6,948,164 6,928,073 6,911,430
The Company's average common and common equivalent shares (both primary and
fully diluted) during the above years do not, in the aggregate, dilute earnings
per share 3% or more.
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<PAGE>
Exhibit 21
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
JUNE 25, 1994
The parent company, The L.S. Starrett Company, incorporated in Massachusetts,
has the following subsidiaries, all of which are wholly owned:
Fiscal
Year End
Starrett Securities Corporation Incorporated in Last Sat.
Massachusetts in June
Evans Rule Company, Inc. Incorporated in Last Sat.
New Jersey in June
The L.S. Starrett Co. of Canada Incorporated in Last Sat.
Limited Canada in June
The L.S. Starrett International Incorporated in Last Sat.
Company Barbados in June
The L.S. Starrett Company Incorporated in May 31
Limited Scotland
Starrett Industria e Incorporated in April 30
Comercio Ltda. Brazil
Level Industries, Inc. Incorporated in Last Sat.
Massachusetts in June
-29-
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
The L.S. Starrett Company
We consent to the incorporation by reference in the Registration Statements No.
33-31276 and No. 33-3112 of The L.S. Starrett Company on Form S-8, of our
report dated July 29, 1994, included in the Company's Annual Report on Form
10-K for the year ended June 25, 1994.
S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 7, 1994
-30-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By S/ROGER U. WELLINGTON, JR.
Roger U. Wellington, Jr.,
Treasurer and Chief Financial Officer
Date: September 7, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
S/DOUGLAS R. STARRETT S/DOUGLAS A. STARRETT
Douglas R. Starrett, Sept. 7, 1994 Douglas A. Starrett, Sept. 7, 1994
President and Director Executive Vice President and Director
S/WILLIAM S. HURLEY
Andrew B. Sides, Jr., Sept. 7, 1994 William S. Hurley, Sept. 7, 1994
Director Director
S/GEORGE B. WEBBER
J. Richard Bullock, Sept. 7, 1994 George B. Webber, Sept. 7, 1994
Director Vice President Webber Gage Division
and Director
S/STEVEN G. THOMSON S/ROGER U. WELLINGTON, JR.
Steven G. Thomson, Sept. 7, 1994 Roger U. Wellington,Jr, Sept. 7, 1994
Chief Accounting Officer Treasurer and Chief Financial Officer
and Director
-31-
<PAGE>
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