UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 23, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 1-367
THE L. S. STARRETT COMPANY
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1866480
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
121 CRESCENT STREET, ATHOL, MASSACHUSETTS 01331-1915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 508-249-3551
Former name, address and fiscal year, if changed since last report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filings requirements for the past 90 days.
YES X NO
Common Shares outstanding as of September 23, 1995 :
Class A Common Shares 4,992,361
Class B Common Shares 2,069,106
Page 1 of 9
<PAGE>
THE L. S. STARRETT COMPANY
CONTENTS
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Earnings and
Cash Flows - thirteen weeks ended
September 23, 1995 and September 24, 1994
(unaudited) 3
Consolidated Balance Sheets - September 23,
1995 (unaudited) and June 24, 1995 4
Consolidated Statements of Stockholders'
Equity - thirteen weeks ended September 23,
1995 and September 24, 1994 (unaudited) 5
Calculation of shares for Computation of
Consolidated Earnings per Share - thirteen
weeks ended September 23, 1995 and
September 24, 1994 (unaudited) 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information:
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Page 2 of 9
<PAGE>
THE L. S. STARRETT COMPANY
Consolidated Statements of Earnings and Cash Flows
(in thousands of dollars except per share data)
(unaudited)
13 Weeks Ended
EARNINGS 9/23/95 9/24/94
Net sales 52,000 47,316
Cost of goods sold (36,775) (34,054)
Selling and general (12,033) (10,026)
Other income and expense 754 81
Earnings before income taxes 3,946 3,317
Provision for federal, foreign and
state income taxes 1,383 1,157
Net earnings 2,563 2,160
Earnings per share .36 .30
CASH FLOWS
Cash flows from operating activities:
Net earnings 2,563 2,160
Noncash expenses (income):
Depreciation and amortization 2,354 2,326
Deferred taxes 404 684
Unrealized translation losses (gains) (2) 301
Working capital changes:
Receivables 3,689 (2,696)
Inventories (7,519) (476)
Other current assets and liabilities (410) 2,523
Prepaid pension cost and other (136) (480)
Net cash from operating activities 943 4,342
Cash flows from investing activities:
Additions to plant and equipment (2,644) (1,970)
(Increase) decrease in short-term investments 1,707 (2,781)
Net cash used in investing activities (937) (4,751)
Cash flows from financing activities:
Common stock issued 623 15
Treasury shares purchased (1,912) (475)
Dividends (1,267) (1,207)
Net cash used in financing activities (2,556) (1,667)
Effect of translation rate changes on cash (10) (57)
Net increase (decrease) in cash (2,560) (2,133)
Cash, beginning of period 2,589 2,378
Cash, end of period 29 245
See notes to consolidated financial statements
<PAGE>
Page 3 of 9
THE L. S. STARRETT COMPANY
Consolidated Balance Sheets
(in thousands of dollars)
Sept. 23 June 24
1995 1995
ASSETS (unaudited)
Current assets:
Cash 29 2,589
Investments 26,736 28,511
Accounts receivable (less allowance for
doubtful accounts of $1,276,000
and $1,071,000) 34,793 38,716
Inventories:
Finished goods 26,930 22,698
Goods in process and finished parts 19,483 18,928
Raw materials and supplies 17,077 14,571
63,490 56,197
Prepaid expenses and other current assets 2,272 4,625
Total current assets 127,320 130,638
Property, plant and equipment, at cost
(less accumulated depreciation of $54,636,000
and $52,722,000) 58,367 58,135
Cost in excess of net assets acquired (less accumu-
lated amortization of $2,846,000 and $2,766,000) 8,386 8,488
Prepaid pension cost 16,638 16,328
Other assets 351 351
211,062 213,940
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities 600 600
Accounts payable and accrued expenses 12,777 14,080
Accrued salaries and wages 4,981 5,102
Taxes payable 4,922 6,005
Employee deposits for stock purchase plan 288 378
Total current liabilities 23,568 26,165
Deferred income taxes 8,232 8,093
Long-term debt 8,700 8,700
Accumulated postretirement medical benefit obligation 14,252 14,153
Stockholders' equity:
Class A Common $1 par (10,000,000 shrs. auth.) 4,992 4,951
Class B Common $1 par (10,000,000 shrs. auth.) 2,069 2,166
Additional paid-in capital 34,831 34,610
Retained earnings reinvested and employed in
the business 119,348 119,506
Other equity adjustments (4,930) (4,404)
Total stockholders' equity 156,310 156,829
211,062 213,940
See Notes to Consolidated Financial Statements
<PAGE>
Page 4 of 9
THE L. S. STARRETT COMPANY
Consolidated Statements of Stockholders' equity
For the Thirteen Weeks Ended September 23, 1995 and September 24, 1994
(in thousands of dollars)
(unaudited)
Common Addi-
Stock Out- tional Equity
standing Paid-in Retained Adjust-
($1 Par) Capital Earnings ments Total
Balance June 25, 1994
(1,251,378 Class A
and 133,397 Class B
shares in treasury) 7,107 32,272 113,147 (5,878) 146,648
Net earnings 2,160 2,160
Dividends ($0.17) (1,207) (1,207)
Treasury shares:
Purchased (22) (101) (352) (475)
Issued 1 14 15
ESOP loan repayments 272 272
Translation gain, net 443 443
Balance Sept. 24, 1994
(1,266,993 Class A
and 138,511 Class B
shares in treasury) 7,086 32,185 113,748 (5,163) 147,856
Balance June 24, 1995
(883,556 Class A
and 155,628 Class B
shares in treasury) 7,117 34,610 119,506 (4,404) 156,829
Net earnings 2,563 2,563
Dividends ($0.18) (1,267) (1,267)
Treasury shares:
Purchased (84) (374) (1,454) (1,912)
Issued 28 595 623
Translation loss, net (555) (555)
Investment valuation 29 29
Balance Sept. 23 1995
(901,689 Class A
and 193,773 Class B
shares in treasury) 7,061 34,831 119,348 (4,930) 156,310
See Notes to Consolidated Financial Statements
<PAGE>
Page 5 of 9
THE L. S. STARRETT COMPANY
Calculation of Shares for Computation of
Consolidated Earnings per Share
(unaudited)
13 Weeks Ended
9/23/95 9/24/94
Average number of shares outstanding
during the period 7,086,868 7,099,308
Incremental shares computed on the
assumption that dilutive stock
options had been exercised with
the proceeds used to purchase
treasury stock 10,596 8,906
Average common and common equivalent
shares outstanding 7,097,464 7,108,214
See Notes to Consolidated Financial Statements
<PAGE>
Page 6 of 9
THE L. S. STARRETT COMPANY
Notes to Consolidated Financial Statements
In the opinion of management, the accompanying financial statements contain
all adjustments, consisting only of normal recurring adjustments, necessary
to present fairly the financial position of the Company as of September 23,
1995 and June 24, 1995; and also the results of operations, cash flows and
changes in stockholders' equity for the thirteen weeks ended September 23,
1995 and September 24, 1994.
The Company follows the same accounting policies in the preparation of interim
statements as described in the Company's annual report filed on form 10-K for
the year ended June 24, 1995, and these financial statements should be read
in conjunction with said annual report.
Other income (expense) is comprised of the following (in thousands):
Thirteen Weeks Thirteen Weeks
September 1995 September 1994
Interest income 516 328
Interest expense and com-
mitment fees (176) (221)
Realized and unrealized ex-
change losses (28) (236)
Other 442 210
754 81
The net effect of changes in foreign currency exchange rates includes realized
exchange gains and losses from foreign currency transactions along with
unrealized translation gains and losses from our subsidiary in Brazil, a
country with a hyperinflationary economy. Translation gains and losses on
short-term borrowings and marketable securities in Brazil are netted against
the related interest charged or earned. Similar losses on accounts receivable
are treated as sales discounts and are netted against sales.
Approximately 80% of all inventories are valued on the LIFO method. At
September 23, 1995, and June 24, 1995, total inventories are $25,720,000 and
$25,627,000 less, respectively, than if determined on a FIFO basis.
Long-term debt is comprised of the following (in thousands):
September June
1995 1995
Industrial revenue bond 3,300 3,300
Revolving credit agreement 6,000 6,000
9,300 9,300
Less current maturities 600 600
8,700 8,700
Page 7 of 9
<PAGE>
THE L. S. STARRETT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales
Sales for the September quarter are 10% above the corresponding quarter of a
year ago. The increase is in both foreign and domestic operations and reflects
an overall improvement in business conditions.
Earnings Before Taxes
Pretax earnings are up 19% from the September 1994 quarter. This primarily
reflects the increase in foreign and domestic sales volume mentioned above as
well as the efficiencies resulting from increased manufacturing activity. High
real interest rates on short-term investments and a reduction in unrealized
exchange losses mitigated increased selling and general expense.
Income Taxes
The overall effective income tax rate is 35% in the current quarter as well
as the prior year's quarter. The rate has been adversely affected in both
years by monetary policy changes in Brazil that have dramatically reduced
inflation but also caused high taxes in U.S. dollars.
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to maintain a strong financial position with a working
capital ratio of 5.4 to one on September 23, 1995 and 5.0 to one on June 24,
1995.
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 inflation in Brazil. 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, these differences tend to
be offset by unrealized exchange gains and losses.
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. These temporary cash investments should be considered when
analyzing overall cash flow.
Page 8 of 9
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
(a) A regular meeting of shareholders was held on September 20, 1995.
(c) The following directors were elected:
abstentions
Votes Votes and broker
For Withheld non-votes
A shares voting as separate class:
J. Richard Bullock 4,337,163 32,921 N/A
A and B shares voting together:
George B. Webber 24,570,317 153,387 N/A
ITEM 6. Exhibits and Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE L. S. STARRETT COMPANY
(Registrant)
Date November 2, 1995 S/ R. U. WELLINGTON, JR.
R. U. Wellington, Jr. (Treasurer
and Chief Financial Officer)
Date November 2, 1995 S/ S. G. THOMSON
S. G. Thomson (Chief Accounting Officer)
Page 9 of 9
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> SEP-23-1995
<CASH> 29
<SECURITIES> 26,736
<RECEIVABLES> 36,069
<ALLOWANCES> 1,276
<INVENTORY> 63,490
<CURRENT-ASSETS> 127,320
<PP&E> 113,003
<DEPRECIATION> 54,636
<TOTAL-ASSETS> 211,062
<CURRENT-LIABILITIES> 23,568
<BONDS> 8,700
<COMMON> 7,061
0
0
<OTHER-SE> 149,249
<TOTAL-LIABILITY-AND-EQUITY> 211,062
<SALES> 52,000
<TOTAL-REVENUES> 52,000
<CGS> 36,775
<TOTAL-COSTS> 36,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 176
<INCOME-PRETAX> 3,946
<INCOME-TAX> 1,383
<INCOME-CONTINUING> 2,563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,563
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
