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 29, 1996 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 5,055,185 and 1,994,285 shares, respectively, of its $1.00
par value Class A and B common stock outstanding on July 26, 1996. On that
date, the aggregate market value of the common stock held by nonaffiliates was
approximately $162,000,000.
The exhibit index is located on page 22.
Documents incorporated by reference
Proxy Statement dated August 16, 1996 - Part III
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, jig saw
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.
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 29, 1996, the Company had 2,855 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, including direct foreign
competitors. As a result, the industry is highly competitive. During the
fiscal year ended June 29, 1996, 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.
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
footnotes to the Company's 1996 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 $70,296,000 at June 29, 1996, and
$56,197,000 at June 24, 1995. 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 $25,852,000 and
$25,627,000 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 1996,
1995 and 1994 were approximately $3,472,000, $3,769,000 and $2,718,000,
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 Company's business 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 50,000 square feet.
The Company-owned facility in Mt. Airy, North Carolina has approximately
234,000 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 $2,700,000 Industrial Revenue Bond.
The Company's Advanced Technology Division, located in Gardner, Massachusetts,
occupies about 9,000 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 45,000 square feet of manufacturing space located in Mayaguez, Puerto
Rico.
The Company's Exact Level Division is located in Alum Bank, Pennsylvania and
owns and occupies a 50,000 square foot building.
The Company's Brazil subsidiary occupies several buildings totaling 209,000
square feet. 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; Glendale, Arizona; and Elmhurst, Illinois. The Company's Buena Park,
California warehouse operations were moved to Glendale, Arizona in fiscal 1995
and the Company's Farmington Hills, Michigan sales office was closed at the end
of fiscal 1996.
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 29, 1996.
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 26, 1996, there were 2,437 registered holders of
Class A common stock and 2,008 registered holders of Class B common stock.
Quarter ended Dividends High Low
September 1994 0.17 $ 22.88 $ 20.38
December 1994 0.17 22.50 20.00
March 1995 0.17 22.75 21.50
June 1995 0.18 23.88 21.88
September 1995 0.18 23.50 22.00
December 1995 0.18 25.88 22.50
March 1996 0.18 25.38 23.50
June 1996 0.18 26.38 24.13
Item 6 - Selected Financial Data
Years ended in June ($000 except per share data)
1996 1995 1994 1993 1992
Net sales $235,467 $214,215 $180,178 $174,801 $180,275
Net earnings before
accounting changes 17,331 13,487 9,041 8,743 *10,537
Earnings per share before
accounting changes 2.45 1.91 1.28 1.25 *1.52
Long-term debt 7,100 8,700 10,843 14,527 18,212
Total assets 227,312 213,940 198,032 194,436 198,002
Dividends per share 0.72 0.69 0.68 0.68 0.68
* 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 increased 10% in 1996 following a 19% increase a year ago. Domestic sales
accounted for almost all of the increase in the current year due to better
economic conditions in our industry and some added distribution channels.
Foreign sales increased only modestly as Brazil struggled with the effects of
high real interest rates. Last year's sales increase came primarily from our
foreign operations. Exchange rate changes in both Scotland and Brazil
contributed somewhat, but the main factor was the Brazilian economy causing
1995 unit volume there to be up 60%.
Earnings Before Taxes
Pretax earnings are up 16% for the year. This follows a 107% increase in 1995.
Looking at domestic results only, pretax earnings are up 59% this year and were
up 33% last year, both year's increases being due primarily to volume and the
related effects of increased factory hours and overhead absorption. On the
foreign side, significant unit volume and price increases achieved in Brazil
in fiscal 1995 could not be improved upon in 1996 as the economy fought the
effects of high real interest rates. Mandated wage increases in Brazil during
a period when it was difficult to raise prices caused a decline in pretax
income in 1996.
Net Earnings
1996 net earnings are up 29% over 1995 while 1995 earnings were up 49% over
1994. The effective tax rate is 34% in 1996 compared to 40% in 1995 and 17% in
1994. The fiscal 1996 effective tax rate is back to a normal range after two
years of wide fluctuation. Tax-exempt interest, Puerto Rico tax incentives and
dividends on ESOP stock usually contribute to an overall effective tax rate
that is slightly lower than the combined domestic statutory rate. The increase
in the effective tax rate in 1995 came about because of the monetary plan
instituted in Brazil two years ago that caused high local taxable income until
pre plan inventories were sold, which has largely happened by the end of 1996.
In addition, there were several statutory rate reductions in Brazil toward the
end of 1996. The big drop in the effective tax rate in 1994 again came from
Brazil where two things happened: 1) higher inflation resulted in higher tax
deductions for monetary correction (an accounting concept unique to Brazil)
and 2) the Company resolved favorably a tax dispute dating to 1991.
LIQUIDITY AND CAPITAL RESOURCES
Years ended in June ($000)
1996 1995 1994
Cash provided by operations $17,770 $18,008 $16,371
Cash used in investing activities (10,744) (11,322) (10,224)
Cash used in financing activities (8,187) (6,380) (6,462)
Effect of translation rate changes on cash (11) (95) (152)
Increase (decrease) in cash $(1,172) $ 211 $ (467)
Cash flows provided by operating activities decreased $0.2 million in 1996.
The increase in the cash from earnings was more than offset by the cash used
to finance increased inventory. The 1995 increase of $1.6 million was primarily
due to the increase in earnings.
The Company's investing activities consist mainly of expenditures for property,
plant and equipment and the investment of cash not immediately needed for
operations. Plant expenditures of $11.6, $9.8 and $6.6 million in 1996, 1995
and 1994 are typical and the Company anticipates similar levels of capital
expenditures in the near term.
Cash flows from financing activities are primarily the payment of dividends,
which tend to be quite steady from year to year. The Company requires little
debt to finance day to day operations and the proceeds from the sale of stock
under the various stock plans tend to be used to purchase treasury shares.
The Company maintains sufficient liquidity and has adequate resources to fund
its operations under current business conditions. The Company maintains two
lines of credit as discussed in the notes to the financial statements. These
lines have been used primarily to finance acquisitions in prior years. The
Company continues to maintain a strong financial position with a working
capital ratio of 4.8 to 1 as of June 29, 1996 and 5.0 to 1 as of June 24, 1995.
Cash not immediately required for working capital is invested in short-term
money market instruments with maturities generally less than one year (however,
see notes to financial statements regarding investments in Puerto Rico).
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.
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Item, as well as other portions of this document and the 1996 Annual
Report, including the Chairman's letter to stockholders, include forward-
looking statements about the Company's business, sales, expenditures, foreign
operations, debt service, liquidity and capital resources, and other operating
and capital requirements. In addition, forward-looking statements may be
included in future Company documents and in oral statements by Company
representatives to security analysts and investors. The Company is subject to
risks that could cause actual events to vary materially from such forward-
looking statements, including the following risk factors:
Risks Related to Foreign Operations: For the period ended June 29, 1996,
approximately 32% of the Company's sales were derived from foreign operations
and, as of June 29, 1996, approximately 32% of the Company's net assets were
located outside the United States. Foreign operations are subject to special
risks that can materially affect the sales, profits, cash flows, and financial
position of the Company, including taxes and other restrictions on
distributions and payments, currency exchange rate fluctuations, inflation,
minimum capital requirements, and exchange controls. In particular, the
Company's Brazilian operations, which constitute over half of the Company's
revenues from foreign operations, is a study in contrasts, very often changing
from year to year due primarily to their political situation and high inflation
economy. As a result, the future performance of the Brazilian operations is
inherently unpredictable.
Risks Related to Cyclical Nature of the Industry: The market for the Company's
products is subject to general economic conditions, including the level of
capital spending by industrial companies. As such, recessionary forces
decrease demand for the Company's products and adversely affect performance.
Risks Related to Competition: The Company's business is subject to direct and
indirect competition from both domestic and foreign firms. In particular, low-
wage foreign sources have created severe competitive pricing pressures. Under
certain circumstances, including significant changes in U.S. and foreign
currency relationships, such pricing pressures might reduce unit sales and/or
adversely affect the Company's margins.
Item 8 - Financial Statements and Supplementary Data
Contents: Page
Report of Independent Auditors 8
Consolidated Statements of Earnings and Cash Flows 9
Consolidated Balance Sheets 10
Consolidated Statements of Stockholders' Equity 11
Notes to Consolidated Financial Statements 12-19
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 29, 1996 and June 24, 1995, and
the related consolidated statements of earnings, cash flows and changes in
stockholders' equity for each of the three years in the period ended June 29,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements 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 29, 1996 and June 24, 1995, and the results of their operations and
their cash flows for each of the three years in the period ended June 29, 1996,
in conformity with generally accepted accounting principles.
S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 2, 1996
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)
1996 1995 1994
EARNINGS
Net sales $235,467 $214,215 $180,178
Cost of goods sold (161,238) (149,871) (129,485)
Selling, general and administrative expense (49,567) (43,480) (37,832)
Other income and expense 1,490 1,648 (2,007)
Earnings before income taxes 26,152 22,512 10,854
Income taxes 8,821 9,025 1,813
Net earnings $ 17,331 $ 13,487 $ 9,041
Earnings per share $ 2.45 $ 1.91 $ 1.28
CASH FLOWS
Cash flows from operating activities:
Net earnings $ 17,331 $ 13,487 $ 9,041
Noncash expenses:
Depreciation and amortization 9,268 9,098 8,681
Deferred taxes 10 1,130 (254)
Unrealized translation losses 99 596 5,476
Working capital changes:
Receivables 564 (10,367) (8,499)
Inventories (14,289) (2,554) (17)
Other current assets and liabilities 3,639 6,636 3,400
Prepaid pension and other 1,148 (18) (1,457)
Net cash from operating activities 17,770 18,008 16,371
Cash flows from investing activities:
Additions to plant and equipment (11,609) (9,795) (6,567)
Decrease(Increase)in short-term investment 865 (1,527) (3,657)
Net cash used in investing activities (10,744) (11,322) (10,224)
Cash flows from financing activities:
Debt repayments (1,600) (1,600) (2,600)
Common stock issued 3,130 3,175 2,678
Treasury shares purchased (4,656) (3,061) (1,735)
Dividends (5,061) (4,894) (4,805)
Net cash used in financing activities (8,187) (6,380) (6,462)
Effect of translation rate changes on cash (11) (95) (152)
Net increase (decrease) in cash (1,172) 211 (467)
Cash beginning of year 2,589 2,378 2,845
Cash end of year $ 1,417 $ 2,589 $ 2,378
Supplemental cash flow information:
Interest paid $ 870 $ 815 $ 662
Taxes paid $ 9,289 $ 5,200 $ 1,359
See Notes to Consolidated Financial Statements
THE L.S. STARRETT COMPANY
Consolidated Balance Sheets
(in thousands of dollars)
June 29 June 25
ASSETS 1996 1995
Current assets:
Cash $ 1,417 $ 2,589
Short-term investments 27,794 28,511
Accounts receivable (less allowance for doubtful
accounts of $1,284,000 and $1,071,000) 37,745 38,716
Inventories 70,296 56,197
Prepaid expenses and other current assets 4,746 4,625
Total current assets 141,998 130,638
Property, plant and equipment, at cost:
Land 1,946 2,156
Buildings (less accumulated depreciation of
$15,467,000 and $14,673,000) 21,206 21,460
Machinery and equipment (less accumulated
depreciation of $40,368,000 and $38,009,000) 36,450 34,519
Total property, plant and equipment 59,602 58,135
Cost in excess of net assets acquired (less accumu-
lated amortization of $3,117,000 and $2,766,000) 8,115 8,488
Prepaid pension cost 17,246 16,328
Other assets 351 351
$227,312 $213,940
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities $ 3,199 $ 600
Accounts payable and accrued expenses 14,432 12,803
Accrued salaries and wages 6,149 5,102
Taxes payable 5,545 6,005
Dividend payable 1,277
Employee deposits for stock purchase plan 528 378
Total current liabilities 29,853 26,165
Deferred income taxes 8,001 8,093
Long-term debt 7,100 8,700
Accumulated postretirement benefit obligation 15,073 14,153
Stockholders' equity:
Class A Common Stock $1 par (10,000,000 shrs. auth.) 5,051 4,951
Class B Common Stock $1 par (10,000,000 shrs. auth.) 2,004 2,166
Additional paid-in capital 36,650 34,610
Retained earnings reinvested and employed in
the business 128,272 119,506
Foreign currency translation adjustment (4,716) (4,147)
Other equity adjustments 24 (257)
Total stockholders' equity 167,285 156,829
$227,312 $213,940
See Notes to Consolidated Financial Statements
THE L.S. STARRETT COMPANY
Consolidated Statements of Stockholders' Equity
For the years ended in June, 1994 through 1996
(in thousands)
Common Addi- Equity Adjustments
Stock Out- tional Currency
standing Paid-in Retained Trans-
($1 Par) Capital Earnings lation Other Total
Balance, 6/26/93
(1,303,954 Class A
and 111,482 Class B
shares in treasury)$ 7,065 $30,023 $110,259 $(4,298) $(1,627) $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
shares in treasury) 7,107 32,272 113,147 (5,335) (543) 146,648
Net earnings 13,487 13,487
Dividends ($0.69) (4,894) (4,894)
Treasury shares:
Purchased (139) (688) (2,234) (3,061)
Issued 121 2,541 2,662
Options exercised 28 485 513
ESOP loan repayments 543 543
Short-term investments (257) (257)
Translation gain,net 1,188 1,188
Balance, 6/24/95
(883,556 Class A
and 155,628 Class B
shares in treasury) 7,117 34,610 119,506 (4,147) (257) 156,829
Net earnings 17,331 17,331
Dividends ($0.72) (5,061) (5,061)
Treasury shares:
Purchased (197) (955) (3,504) (4,656)
Issued 120 2,730 2,850
Options exercised 15 265 280
Short-term investments 281 281
Translation loss,net (569) (569)
Balance, 6/29/96
(895,516 Class A
and 220,572 Class B
shrs. in treasury) $ 7,055 $36,650 $128,272 $(4,716) $ 24 $167,285
See Notes to Consolidated Financial Statements
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, a manufacturer of
industrial, professional and consumer products. All subsidiaries are wholly-
owned and all significant intercompany items have been eliminated. The
Company's fiscal year ends on the last Saturday in June. Results for fiscal
1996 include 53 weeks compared to 52 weeks in 1995 and 1994. 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 inventories (see Inventories) and except short-
term investments, 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. The Company does not
purchase derivative financial instruments.
Short-term investments: Short-term investments consist primarily of marketable
securities, including treasury bills, certificates of deposit and municipal
securities. The Company considers all its investments available for sale.
As such, these investments are carried at market, which approximates cost,
with unrealized temporary gains and losses recorded as a component of
stockholders equity. Most investments have maturities of less than one year.
Included in investments at June 29, 1996 is $6.7 million of liquid AAA rated
Puerto Rico debt obligations. These investments were made for the purpose of
reducing repatriation taxes and have maturities of up to ten years.
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 $54,922,000 and $42,473,000
at the end of 1996 and 1995, respectively, such amounts being $25,852,000 and
$25,627,000 less than if determined on a FIFO basis. During 1994, 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).
Total inventories at year end are as follows (in thousands):
Goods in Pro-
cess and Raw Materials
Finished Goods Finished Parts and Supplies Total
1996 $27,692 $22,858 $19,746 $70,296
1995 22,698 18,928 14,571 56,197
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 $50,000,000 at June 1996) 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.
Long-lived assets: 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 40
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.
The Company adopted FAS 121 (Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of) in 1996. The effect on
the financial condition and results of operations was not significant.
Research and development: Research and development costs are $3,472,000 in
1996, $3,769,000 in 1995 and $2,718,000 in 1994.
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.
Use of accounting estimates: The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of sales and expenses during the reporting period. Amounts ultimately
realized could differ from those estimates.
OTHER INCOME AND EXPENSE
Other income and expense consists of the following (in thousands):
1996 1995 1994
Interest income $ 1,889 $ 2,037 $ 1,035
Interest expense and commitment fees (917) (813) (662)
Realized and unrealized translation gains
and losses (140) 192 (2,708)
Other 658 232 328
$ 1,490 $ 1,648 $(2,007)
INCOME TAXES
The provision for income taxes consists of the following (in thousands):
1996 1995 1994
Current:
Federal $ 5,058 $ 2,380 $ 863
Foreign 2,385 4,603 615
State 1,368 912 589
Deferred 10 1,130 (254)
$ 8,821 $ 9,025 $ 1,813
The resolution of a tax dispute in Brazil resulted in a reduction of foreign
tax expense of $350,000 in 1994. Pretax domestic income was $19,169,000,
$12,022,000 and $8,916,000 in 1996, 1995 and 1994, respectively.
A reconciliation of expected tax expense at the U.S. statutory rate to actual
tax expense is as follows (in thousands):
1996 1995 1994
Expected tax expense $ 9,153 $ 7,654 $ 3,690
Increase (decrease) from:
State and Puerto Rico taxes, net
of federal benefit 219 (425) (378)
Foreign taxes, net of federal credits (437) 1,815 (1,034)
Nontaxable investment income (151) (191) (158)
Other 37 172 (307)
Actual tax expense $ 8,821 $ 9,025 $ 1,813
Deferred income taxes at year end are attributable to the following (in
thousands):
1996 1995
Deferred assets:
Retiree medical benefits $(6,109) $(5,595)
Inventories (1,111) (886)
Foreign loss carryforwards (145) (474)
Other (1,169) (1,224)
(8,534) (8,179)
Deferred liabilities:
Prepaid pension 7,056 6,525
Other employee benefits 561 638
Depreciation 6,075 6,237
Other 1,004 942
14,696 14,342
Current portion 1,839 1,930
$ 8,001 $ 8,093
Foreign loss carryforwards begin expiring in 2001.
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 1996, 1995 and
1994, considering the combined projected benefits and funds of the ESOP as well
as the other plans, was $(87,000), $(152,000) and $(124,000), respectively.
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 1,100,000 shares of the Company's common
stock. The cost of these defined benefit plans, including the ESOP, consists
of the following components (in thousands):
1996 1995 1994
Cost of benefits earned during current year $ 2,238 $ 2,028 $ 1,876
Interest on projected benefit obligation 3,330 3,194 3,083
Actual return on assets (12,349) (8,943) (1,150)
Net amortization and deferral 5,830 2,853 (4,714)
$ (951) $ (868) $ (905)
The plans' funded status at year end is as follows (in thousands):
1996 1995
Vested accumulated benefit obligation $63,175 $61,065
Nonvested accumulated benefit obligation 65 1,929
Effect of future compensation increases 8,026 6,152
Projected benefit obligation 71,266 69,146
Plan assets at fair market value 112,779 102,314
Funded status 41,513 33,168
Unrecognized portion of net assets 24,267 16,840
Prepaid pension cost $17,246 $16,328
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 8.5% and 6.5% for the foreign plan. The assumed long-term
rate of return on plan assets is 7% for the domestic plan and 8.5% for the
foreign plan.
The Company provides certain medical and life insurance benefits for most
retired employees in the United States. The status of these plans at year end
is as follows (in thousands):
1996 1995
Accumulated postretirement benefit obligation:
Retirees $ 6,556 $ 6,526
Active plan participants 9,752 9,378
Unrecognized loss (1,235) (1,751)
Accumulated postretirement benefit obligation
accrued $15,073 $14,153
Postretirement benefit expense consists of the following (in thousands):
1996 1995 1994
Service cost $ 490 $ 425 $ 414
Interest cost 1,096 1,054 1,039
Amortization cost 27 38 53
$ 1,613 $ 1,517 $ 1,506
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.
LONG-TERM DEBT
At year end, long-term debt consists of the following (in thousands):
1996 1995
Industrial revenue bond $ 2,700 $ 3,300
Revolving credit agreement 5,000 6,000
7,700 9,300
Less current maturities 600 600
$ 7,100 $ 8,700
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 (5.1% at June 29, 1996).
The revolving credit agreement consists of a $10,000,000 line due March 30,
1996 under which there were no borrowings at June 29, 1996 and a $10,000,000
line due March 30, 2000. The credit agreement is with two banks and requires
commitment and other fees of .3%. Interest rates vary, but approximate LIBOR
plus .33% (5.8% as of June 29, 1996). All debt agreements contain financial
covenants, the most restrictive of which is that at June 29, 1996 the Company
must have tangible net worth of $134,000,000. Annual principal payments on
debt are required as follows: 1997-1999 $600,000; 2000 $5,600,000; 2001
$300,000.
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 1996, 1995 and 1994 was $19.45,
$18.90 and $20.33, respectively. Changes under the plans were as follows:
Shares
On Option Unoptioned
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) 15,259
Balance, June 25, 1994 61,556 738,444
Options granted 47,719 (47,719)
Options exercised ($17.75 and $19.24) (28,232)
Options canceled (21,132) 21,132
Balance, June 24, 1995 59,911 711,857
Options granted 32,793 (32,793)
Options exercised ($19.34 and $19.02) (14,548)
Options canceled (15,804) 15,804
Balance, June 29, 1996 62,352 694,868
The Company will be required to adopt FAS 123 (Accounting for Stock Based
Compensation) in 1997. This standard requires certain disclosure about the
value of stock options.
At June 29, 1996, a total of 757,220 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
November 7, 1996 22,077 $17.75
June 5, 1997 10,847 19.55
November 20, 1997 14,528 19.45
June 3, 1998 14,900 21.89
62,352
In addition, 87,765 shares of common stock are reserved for the Company's
401(k) plan at June 29, 1996. Since inception in 1986, 668,080 Class A and
44,155 Class B shares have been issued under this plan.
In fiscal 1996, 363,473 shares of Class A treasury stock were canceled and
returned to the status of authorized but unissued.
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
1996:
Sales $161,175 $ 74,292 $235,467
Intercompany transfers 2,076 8,320 $(10,396)
Revenues 163,251 82,612 (10,396) 235,467
Operating income 17,034 7,628 24,662
Identifiable assets 167,015 70,699 (10,402) 227,312
Net assets 120,227 53,745 (6,687) 167,285
1995:
Sales $143,817 $ 70,398 $214,215
Intercompany transfers 1,515 8,578 $(10,093)
Revenues 145,332 78,976 (10,093) 214,215
Operating income 10,284 10,580 20,864
Identifiable assets 159,389 63,306 (8,755) 213,940
Net assets 113,442 49,275 (5,888) 156,829
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
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 29, 1996. 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.
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:
1996 1995 1994
Scotland Brazil Scotland Brazil Scotland Brazil
Revenues 41% 59% 40% 60% 49% 51%
Operating income 69% 31% 45% 55% 66% 34%
Identifiable assets 46% 54% 48% 52% 50% 50%
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
September 1994 $47,316 $13,262 $ 3,316 $ 2,160 $ 0.30
December 1994 56,132 16,707 6,261 3,845 0.55
March 1995 52,720 14,867 4,570 2,819 0.40
June 1995 58,047 19,508 8,365 4,663 0.66
$214,215 $64,344 $22,512 $13,487 $ 1.91
September 1995 $ 52,000 $15,225 $ 3,947 $ 2,563 $ 0.36
December 1995 61,883 18,705 6,934 4,627 0.66
March 1996 53,042 16,179 4,626 3,330 0.47
June 1996 68,542 24,120 10,645 6,811 0.96
$235,467 $74,229 $26,152 $17,331 $ 2.45
The Company's Class A Common Stock is traded on the New York Stock Exchange.
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 4 in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on September 18, 1996, and is hereby
incorporated by reference.
Executive Officers of the Registrant
Held Present
Name Age Office Since Position
Douglas R. Starrett 76 1962 Chairman and CEO and
Director
Douglas A. Starrett 44 1985 President and Director
George B. Webber 75 1962 Vice President
Webber Gage Division
and Director
Charles H. Morrow 61 1976 Vice President Sales
Roger U. Wellington, Jr. 55 1984 Treasurer and Chief
Financial Officer and
Director
Peter MacDougall 58 1990 Clerk
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 R. Starrett was previously President of the Company. Douglas A.
Starrett (son of Douglas R. Starrett) was previously Executive Vice President
of 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
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 10 in the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on September 18, 1996 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 18, 1996, 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 18, 1996, and is hereby incorporated by reference.
(c) The Company knows of no arrangements that 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
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 29, 1996
Consolidated Balance Sheets at June 29, 1996 and June 24,1995
Consolidated Statements of Stockholders' Equity for the Three
Years in the Period Ended June 29, 1996
Notes to Consolidated Financial Statements
2. 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 22.
(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 22.
(d) Not applicable.
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 as amended September 21, 1994, filed with Form 10-K for the
year ended June 24, 1995, are hereby incorporated by reference.
(4a) Loan Agreement and related documents, relative to $7,500,000
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 Amended and Restated Credit Agreement dated as of March
31, 1996, among The L.S. Starrett Company, The First National Bank
of Boston and Wachovia Bank of Georgia, N.A. will be furnished to
the Commission upon request.
(11) Statement re: Calculation of Shares for Computation of
Consolidated Earnings Per Share. See page 23.
(21) Subsidiaries of the Registrant. See page 24.
(23) Independent Auditors' Consent. See page 25.
(27) Financial Data Schedule submitted herewith in electronic format.
Exhibit 11
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
CALCULATION OF SHARES FOR COMPUTATION
OF CONSOLIDATED EARNINGS PER SHARE
1996 1995 1994
PRIMARY EARNINGS PER SHARE
Average shares outstanding during
the year 7,057,675 7,070,032 7,062,926
Incremental shares computed on
the assumption that dilutive
stock options had been exercised,
with the proceeds used to
purchase treasury stock 11,444 8,171 8,210
Average common and common equiva-
lent shares outstanding 7,069,119 7,078,203 7,071,136
FULLY DILUTED EARNINGS PER SHARE
Average shares outstanding during
the year 7,057,675 7,070,032 7,062,926
Incremental shares computed on
the assumption that dilutive
stock options had been exercised,
with the proceeds used to purchase
treasury stock, using year-end
market prices where such prices
were in excess of average yearly
prices, to determine the amount
of treasury stock purchased 14,908 9,909 8,210
Average common and common equivalent
shares used to calculate fully
diluted earnings per share 7,072,583 7,079,941 7,071,136
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.
Exhibit 21
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
JUNE 29, 1996
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
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
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 August 2, 1996, appearing in the Annual Report on Form
10-K of The L.S. Starrett Company for the year ended June 29, 1996.
S/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 6, 1996
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 6, 1996
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. 6, 1996 Douglas A. Starrett, Sept. 6, 1996
Chairman and CEO President
S/ANDREW B. SIDES, JR. S/WILLIAM S. HURLEY
Andrew B. Sides, Jr., Sept. 6, 1996 William S. Hurley, Sept. 6, 1996
Director Director
S/RICHARD B. KENNEDY S/GEORGE B. WEBBER
Richard B. Kennedy, Sept. 6, 1996 George B. Webber, Sept. 6, 1996
Director Vice President Webber Gage Division
and Director
S/STEVEN G. THOMSON S/ROGER U. WELLINGTON, JR.
Steven G. Thomson, Sept. 6, 1996 Roger U. Wellington,Jr.,Sept. 6, 1996
Chief Accounting Officer Treasurer and Chief Financial Officer
and Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> JUN-29-1996
<CASH> 1,417
<SECURITIES> 27,794
<RECEIVABLES> 39,029
<ALLOWANCES> 1,284
<INVENTORY> 70,296
<CURRENT-ASSETS> 141,998
<PP&E> 115,437
<DEPRECIATION> 55,835
<TOTAL-ASSETS> 227,312
<CURRENT-LIABILITIES> 29,853
<BONDS> 7,100
0
0
<COMMON> 7,055
<OTHER-SE> 160,230
<TOTAL-LIABILITY-AND-EQUITY> 227,312
<SALES> 235,467
<TOTAL-REVENUES> 235,467
<CGS> 161,238
<TOTAL-COSTS> 161,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 917
<INCOME-PRETAX> 26,152
<INCOME-TAX> 8,821
<INCOME-CONTINUING> 17,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,331
<EPS-PRIMARY> 2.45
<EPS-DILUTED> 2.45
</TABLE>
