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 28, 1997 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 5,037,316 and 1,899,962 shares, respectively, of its $1.00
par value Class A and B common stock outstanding on July 25, 1997. On that
date, the aggregate market value of the common stock held by nonaffiliates was
approximately $210,000,000.
The exhibit index is located on page 23.
Documents incorporated by reference
Proxy Statement dated August 15, 1997 - 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, 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
and, in most cases, the Company does not rely on sole sources. In the event of
unavailability of purchased materials, the Company would be adversely
affected, as would its competitors. Similarly, the ability of the Company to
pass along raw material price increases is dependent on the competitive
situation and cannot be assured.
At June 28, 1997, the Company had 2,740 employees, approximately 75% of whom
are domestic. None of the Company's operations are subject to collective
bargaining agreements. In general, the Company considers its relations with
its employees to be excellent. Because of various stock ownership plans,
Company domestic personnel hold a large share of Company stock and this dual
role of owner-employee has been good for morale.
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 28, 1997, 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
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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 1997 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 $75,846,000 at June 28, 1997, and
$70,296,000 at June 29, 1996. 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 $24,790,000 and
$25,852,000 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 1997,
1996 and 1995 were approximately $3,073,000, $3,472,000 and $3,769,000,
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. Specifically, the Company has taken steps to reduce and
control water discharges and air emissions.
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 and Ground Flat Stock Division. This plant is subject to
a mortgage collateralizing a $2,100,000 Industrial Revenue Bond.
The Company's Advanced Technology Division, located in Gardner, Massachusetts,
occupies about 9,000 square feet of leased facilities.
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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 a 33,000 square foot building in Skipton, England, where its
wholly owned subsidiary manufactures optical measuring projectors. A
subsidiary in Mississauga, Canada occupies a 25,000 square foot building.
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 28, 1997.
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
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since that date. At July 25, 1997, there were 2,404 registered holders of
Class A common stock and 1,863 registered holders of Class B common stock.
Quarter ended Dividends High Low
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
September 1996 0.18 25.75 22.75
December 1996 0.18 29.00 23.75
March 1997 0.18 31.25 27.50
June 1997 0.18 32.00 28.13
Item 6 - Selected Financial Data
Years ended in June ($000 except per share data)
1997 1996 1995 1994 1993
Net sales $250,503 $235,467 $214,215 $180,178 $174,801
Net earnings 9,859 17,331 13,487 9,041 8,743
Earnings per share 2.84 2.45 1.91 1.28 1.25
Long-term debt 6,500 7,100 8,700 10,843 14,527
Total assets 238,746 227,312 213,940 198,032 194,436
Dividends per share 0.72 0.72 0.69 0.68 0.68
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
SALES
Sales increased 6% in 1997 following a 10% increase in 1996. Domestic sales
accounted for almost all of the increase in the current year because of
continued good economic conditions in our industry. Foreign sales were flat.
Our foreign operations in Brazil and Scotland operate in very competitive
marketing environments and continue to be faced with dealing with the
effects of exchange rate changes. The strong pound adversely affected export
business from Scotland and the weakening of Brazil's currency caused the
local currency sales increase to be reduced by eight percentage points after
conversion to U.S. dollars. The 1996 increase in total company sales also
came primarily from domestic operations, reflecting better U.S. economic
conditions as well as some added distribution channels. Foreign sales
increased only modestly last year as Brazil struggled with the effects of
high real interest rates.
EARNINGS BEFORE TAXES
Pretax earnings are up 15% for the year. This follows a 16% increase in
1996. Cost of sales was about 68% in 1997, 68.5% in 1996, and 70% in 1995.
The improvement in these rates is consistent with the manufacturing effi-
ciencies and increased overhead absorption realized because of increased
production levels, particularly in domestic operations where pretax earnings
are up 15% this year and were up 59% last year. On the foreign side,
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significant reductions in selling and general wages in Brazil enabled our
foreign pretax earnings to increase 14% despite level sales. In 1996, just
the opposite occurred when mandated wage increases in Brazil, during a
period when it was difficult to raise prices, caused a decline in our pretax
foreign profit despite a slight increase in sales volume.
INCOME TAXES
The effective tax rate is 34% in 1997 compared to 34% in 1996 and 40% in
1995. Tax-exempt interest on short-term investments in municipal bonds,
Puerto Rico tax incentives and, until 1996, dividends on shares of the
Company's stock owned by the ESOP have always contributed to an overall
effective tax rate that is slightly lower than the combined U.S. state and
federal statutory rate. However, as taxable income has increased in the past
several years, the effect of these items has diminished. In addition, the
overall effective rate has been favorably impacted by lower rates in Brazil
starting in 1996. The relatively high effective tax rate in 1995 came about
because of the monetary plan instituted in Brazil at that time that created
high local taxable income until pre-plan inventories were used up, which has
largely happened now. Although the statutory rate in Brazil is now
comparable to that in the U.S., nonrecurring permanent differences between
book and taxable income for dividends paid to the U.S. in 1997 and local
monetary correction adjustments in 1996 reduced their effective tax rate
substantially when reported in U.S. dollars.
NET EARNINGS
As a result of the above, net earnings were up 15% in fiscal 1997 when
compared to fiscal 1996 and 1996 net earnings were up 28% when compared to
1995.
FOREIGN CURRENCY MANAGEMENT
The Company does not engage in regular hedging activities to minimize the
impact of foreign currency fluctuations. Net monetary assets in Scotland and
Brazil are approximately $10 million and $4 million, respectively. Although
inflation in Brazil has decreased to 10% from over 2,000% in 1994 when their
current economic plan was initiated, the Brazilian economy continues to be
considered hyperinflationary for financial reporting purposes. The Company
anticipates that, if inflation continues at these relatively low levels in
1998, the economy may cease to be considered hyperinflationary.
LIQUIDITY AND CAPITAL RESOURCES
Years ended in June ($000)
1997 1996 1995
Cash provided by operations $23,516 $15,171 $18,991
Cash used in investing activities (13,310) (10,744) (11,322)
Cash used in financing activities (8,563) (5,588) (7,363)
Effect of translation rate changes on cash (7) (11) (95)
Increase (decrease) in cash $ 1,636 $(1,172) $ 211
Cash flows from operating activities increased $8.3 million in 1997 due
mainly to the increase in net earnings of $2.5 million, and changes in the
components of working capital of $7.5 million offset by increased levels of
prepaid pension costs of $1.8 million. The major increase in working capital
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resulted from increased inventories of $4.8 million to support increased
levels of sales. Although 1996 had a similar increase in net earnings, they
were largely offset by inventory increases resulting in a small decrease in
cash provided by operations.
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 $14.0, $11.6 and $9.8 million
in 1997, 1996 and 1995 are typical and the Company anticipates similar
levels of capital expenditures in the near term. 1997 additions were a
little higher than recent averages because of increases in plant square
footage at several locations.
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. Treasury share purchases were $7.1 million in 1997 compared to $4.7
million in 1996 and $3.1 million in 1995.
The Company maintains sufficient liquidity and has the 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. The
Company has not made significant borrowings under these lines during the
past three years. The lines were used primarily to finance acquisitions. The
Company continues to maintain a strong financial position with a working
capital ratio of 5.3 to 1 as of June 28, 1997 and 4.8 to 1 as of June 29,
1996. Cash not immediately required for working capital is invested in high
grade money market instruments with maturities generally less than one year
(however, see notes to financial statements regarding investments in Puerto
Rico). In certain cases, cash and short-term investment balances of foreign
subsidiaries may not be repatriated without adverse tax consequences and may
be subject to regulatory restriction.
NEW ACCOUNTING PRONOUNCEMENTS
The Company will be required to adopt two new accounting standards in 1998
as discussed in the notes to the financial statements.
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996
This Item, as well as other portions of this document and the 1997 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 28, 1997,
approximately 30% of the Company's sales were derived from foreign operations
and, as of June 28, 1997, approximately 31% 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
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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, can be very volatile, changing from year to
year due to the 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 9
Consolidated Statements of Earnings and Cash Flows 10
Consolidated Balance Sheets 11
Consolidated Statements of Stockholders' Equity 12
Notes to Consolidated Financial Statements 13-20
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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 28, 1997 and June 29, 1996, 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 28,
1997. 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 28, 1997 and June 29, 1996, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended June
28, 1997, in conformity with generally accepted accounting principles.
S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 1, 1997
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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)
1997 1996 1995
EARNINGS
Net sales $250,503 $235,467 $214,215
Cost of goods sold (170,035) (161,238) (149,871)
Selling, general and administrative expense (51,941) (49,567) (43,480)
Other income and expense 1,532 1,490 1,648
Earnings before income taxes 30,059 26,152 22,512
Income taxes 10,200 8,821 9,025
Net earnings $ 19,859 $ 17,331 $ 13,487
Earnings per share $ 2.84 $ 2.45 $ 1.91
CASH FLOWS
Cash flows from operating activities:
Net earnings $ 19,859 $ 17,331 $ 13,487
Noncash expenses:
Depreciation and amortization 9,799 9,268 9,098
Deferred taxes (439) 10 1,130
Unrealized translation losses 134 99 596
Working capital changes:
Receivables 1,619 564 (10,367)
Inventories (4,821) (14,289) (2,554)
Other current assets and liabilities (1,962) 1,040 7,619
Prepaid pension and other (673) 1,148 (18)
Net cash from operating activities 23,516 15,171 18,991
Cash flows from investing activities:
Additions to plant and equipment (13,999) (11,609) (9,795)
Decrease(Increase)in short-term investment 689 865 (1,527)
Net cash used in investing activities (13,310) (10,744) (11,322)
Cash flows from financing activities:
Short-term borrowing, net 411 2,599 (983)
Debt repayments (600) (1,600) (1,600)
Common stock issued 3,691 3,130 3,175
Treasury shares purchased (7,054) (4,656) (3,061)
Dividends (5,011) (5,061) (4,894)
Net cash used in financing activities (8,563) (5,588) (7,363)
Effect of translation rate changes on cash (7) (11) (95)
Net increase (decrease) in cash 1,636 (1,172) 211
Cash beginning of year 1,417 2,589 2,378
Cash end of year $ 3,053 $ 1,417 $ 2,589
Supplemental cash flow information:
Interest paid $ 839 $ 870 $ 815
Taxes paid $ 11,572 $ 9,289 $ 5,200
See Notes to Consolidated Financial Statements
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THE L.S. STARRETT COMPANY
Consolidated Balance Sheets
(in thousands of dollars)
June 28 June 29
ASSETS 1997 1996
Current assets:
Cash $ 3,053 $ 1,417
Short-term investments 27,389 27,794
Accounts receivable (less allowance for doubtful
accounts of $1,877,000 and $1,284,000) 36,625 37,745
Inventories 75,846 70,296
Prepaid expenses and other current assets 4,682 4,746
Total current assets 147,595 141,998
Property, plant and equipment, at cost:
Land 1,945 1,946
Buildings (less accumulated depreciation of
$16,447,000 and $15,467,000) 23,499 21,206
Machinery and equipment (less accumulated
depreciation of $44,328,000 and $40,368,000) 38,657 36,450
Total property, plant and equipment 64,101 59,602
Cost in excess of net assets acquired (less accumu-
lated amortization of $3,514,000 and $3,117,000) 7,772 8,115
Prepaid pension cost 18,928 17,246
Other assets 350 351
$238,746 $227,312
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities $ 3,610 $ 3,199
Accounts payable and accrued expenses 13,205 14,432
Accrued salaries and wages 6,628 6,149
Taxes payable 3,927 5,545
Employee deposits for stock purchase plan 434 528
Total current liabilities 27,804 29,853
Deferred income taxes 8,247 8,001
Long-term debt 6,500 7,100
Accumulated postretirement benefit obligation 15,730 15,073
Stockholders' equity:
Class A common stock $1 par (10,000,000 shrs. auth.;
5,038,013 outstanding in 1997, excluding
995,943 held in treasury; 5,051,215 outstanding
in 1996, excluding 895,516 held in treasury 5,038 5,051
Class B Common Stock $1 par (10,000,000 shrs. auth.;
1,905,606 outstanding in 1997, excluding
260,283 held in treasury; 2,004,174 outstanding
in 1996, excluding 220,572 held in treasury 1,906 2,004
Additional paid-in capital 38,730 36,650
Retained earnings reinvested and employed in
the business 137,788 128,272
Foreign currency translation adjustment (3,155) (4,716)
Other equity adjustments 158 24
Total stockholders' equity 180,465 167,285
$238,746 $227,312
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, 1995 through 1997
(in thousands)
Common Addi- Equity Adjustments
Stock Out- tional Currency
standing Paid-in Retained Trans-
($1 Par) Capital Earnings lation Other Total
Balance, 6/25/94 $ 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
Unrealized net losses on
short-term investments (257) (257)
Translation gain,net 1,188 1,188
Balance, 6/24/95 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
Unrealized net gains on
short-term investments 281 281
Translation loss,net (569) (569)
Balance, 6/29/96 7,055 36,650 128,272 (4,716) 24 167,285
Net earnings 19,859 19,859
Dividends ($0.72) (5,011) (5,011)
Treasury shares:
Purchased (255) (1,467) (5,332) (7,054)
Issued 116 3,057 3,173
Options exercised 28 490 518
Unrealized net gains on
short-term investments 134 134
Translation gain,net 1,561 1,561
Balance, 6/28/97 $ 6,944 $38,730 $137,788 $(3,155) $ 158 $180,465
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, a manu-
facturer 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
1997 and 1995. The fiscal years of the Company's subsidiaries in Scotland
and Brazil end in May. Brazil's fiscal year was changed this year from
April to May and consequently the current year includes 13 months of
operations. The extra week in fiscal 1996 and the extra month of Brazil's
operations in 1997 were not significant.
During June 1997 the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which will be applicable for the
Company in fiscal 1998. Management has not yet assessed the impact of
implementation.
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 28, 1997 is $7.8 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.
Long-lived assets: 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. Costs in excess of
net assets acquired are being amortized on a straight-line basis over 10 to
40 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 $58,358,000 and
$54,922,000 at the end of 1997 and 1996, respectively, such amounts being
- -13-
<PAGE>
$24,790,000 and $25,852,000 less than if determined on a FIFO basis. Total
inventories at year end are as follows (in thousands):
Goods in Pro-
cess and Raw Materials
Finished Goods Finished Parts and Supplies Total
1997 $32,374 $26,698 $16,774 $75,846
1996 27,692 22,858 19,746 70,296
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 1997) 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.
Research and development: Research and development costs were expensed as
follows: $3,073,000 in 1997, $3,472,000 in 1996 and $3,769,000 in 1995.
Earnings per share: Earnings per share are computed using the weighted
average number of shares and common stock equivalents (stock options) out-
standing during the year. Statement of Financial Accounting Standards No.
128, "Earnings Per Share," effective for the Company for fiscal 1998,
provides new standards for computing and presenting earnings per share
(EPS). It replaces primary EPS with basic EPS, and requires dual pre-
sentation of basic and diluted EPS. For the year ended June 28,1997, the
pro forma basic EPS and the pro forma diluted EPS would both be $2.84.
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.
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.
- -14-
<PAGE>
OTHER INCOME AND EXPENSE
Other income and expense consists of the following (in thousands):
1997 1996 1995
Interest income $ 2,118 $ 1,889 $ 2,037
Interest expense and commitment fees (784) (917) (813)
Realized and unrealized translation gains
and losses (225) (140) 192
Other 423 658 232
$ 1,532 $ 1,490 $ 1,648
INCOME TAXES
The provision for income taxes consists of the following (in thousands):
1997 1996 1995
Current:
Federal $ 6,146 $ 5,058 $ 2,380
Foreign 2,926 2,385 4,603
State 1,567 1,368 912
Deferred (439) 10 1,130
$10,200 $ 8,821 $ 9,025
Pretax domestic income was $22,096,000, $19,169,000 and $12,022,000 in 1997,
1996 and 1995, respectively.
A reconciliation of expected tax expense at the U.S. statutory rate to actual
tax expense is as follows (in thousands):
1997 1996 1995
Expected tax expense $10,520 $ 9,153 $ 7,654
Increase (decrease) from:
State and Puerto Rico taxes, net
of federal benefit 178 219 (425)
Foreign taxes, net of federal credits (476) (437) 1,815
Nontaxable investment income (115) (151) (191)
Other 93 37 172
Actual tax expense $10,200 $ 8,821 $ 9,025
Deferred income taxes at year end are attributable to the following (in
thousands):
1997 1996
Deferred assets:
Retiree medical benefits $(6,425) $(6,109)
Inventories (1,799) (1,111)
Foreign loss carryforwards (145)
Other (1,431) (1,169)
(9,655) (8,534)
Deferred liabilities:
Prepaid pension 7,771 7,056
Other employee benefits 511 561
Depreciation 6,164 6,075
Other 761 1,004
15,207 14,696
Current portion 2,695 1,839
$ 8,247 $ 8,001
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
- -15-
<PAGE>
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 1997, 1996 and
1995, considering the combined projected benefits and funds of the ESOP as
well as the other plans, was $(823,000), $(87,000) and $(152,000),
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 1,050,000 shares of the Company's common
stock. The cost of these defined benefit plans, including the ESOP, consists
of the following components (in thousands):
1997 1996 1995
Cost of benefits earned during current year $ 2,376 $ 2,238 $ 2,028
Interest on projected benefit obligation 5,425 3,330 3,194
Actual return on assets (17,834) (12,349) (8,943)
Net amortization and deferral 8,291 5,830 2,853
$(1,742) $ (951) $ (868)
The plans' funded status at year end is as follows (in thousands):
1997 1996
Vested accumulated benefit obligation $72,500 $63,175
Nonvested accumulated benefit obligation 164 65
Effect of future compensation increases 8,265 8,026
Projected benefit obligation 80,929 71,266
Plan assets at fair market value 129,292 112,779
Funded status 48,363 41,513
Unrecognized portion of net assets 29,435 24,267
Prepaid pension cost $18,928 $17,246
The assumed discount rate and rate of increase in compensation used in
determining the projected benefit obligation are 7.5% 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 7.5% for the domestic plan and
8.5% for the foreign plan. Less than 15% of the assets and obligations
reflected in the table above relate to 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):
1997 1996
Accumulated postretirement benefit obligation:
Retirees $ 6,506 $ 6,556
Active plan participants 9,614 9,752
Unrecognized loss (390) (1,235)
Accumulated postretirement benefit obligation
accrued $15,730 $15,073
- -16-
<PAGE>
Postretirement benefit expense consists of the following (in thousands):
1997 1996 1995
Service cost $ 494 $ 490 $ 425
Interest cost 1,126 1,096 1,054
Amortization cost 27 38
$ 1,620 $ 1,613 $ 1,517
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 7.5%
was used in determining the accumulated benefit obligation.
DEBT
At year end, long-term debt consists of the following (in thousands):
1997 1996
Industrial revenue bond $ 2,100 $ 2,700
Revolving credit agreement 5,000 5,000
7,100 7,700
Less current maturities 600 600
$ 6,500 $ 7,100
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 (5.2% at June 28, 1997).
The revolving credit agreement consists of a $10,000,000 line due March 30,
1998 under which there were no borrowings at June 28, 1997 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% (5.9% as of June 28, 1997). All debt agreements contain financial
covenants, the most restrictive of which is that at June 28, 1997 the Company
must have tangible net worth of $141,000,000. Annual principal payments on
debt are required as follows: 1998 - 1999 $600,000; 2000 $5,600,000; 2001
$300,000. Current notes payable carry interest at a rate of LIBOR plus 4%.
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.
The Company accounts for stock based compensation under the provisions of
Accounting Principles Board Opinion No. 25. 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
- -17-
<PAGE>
exercised. Options become exercisable exactly two years from the date of
grant and expire if not exercised. Therefore, no options are exercisable at
the end of 1997, 1996, or 1995. A summary of option activity is as follows:
Weighted
Average
Shares Exercise Shares
On Option Price Unoptioned
Balance, June 25, 1994 61,556 $20.33 738,444
Options granted 47,719 18.39 (47,719)
Options exercised ($17.75 and $19.24) (28,232) 18.19
Options canceled (21,132) 21,132
Balance, June 24, 1995 59,911 18.90 711,857
Options granted 32,793 20.56 (32,793)
Options exercised ($19.34 and $19.02) (14,548) 19.18
Options canceled (15,804) 15,804
Balance, June 29, 1996 62,352 19.45 694,868
Options granted 38,709 24.21 (38,709)
Options exercised ($17.75 and $19.55) (28,368) 18.29
Options canceled (19,359) 19,359
Balance, June 28, 1997 53,334 22.92 675,518
At June 28,1997, a total of 728,852 shares of common stock are reserved for
issuance under the plans. The following information relates to outstanding
options as of June 28,1997
Weighted Average Exercise Price $22.92
Weighted Average Remaining Life 1.2 years
Weighted Average fair value on grant date
of options granted in:
1995 $5.50
1996 6.00
1997 7.50
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes options pricing model with the following weighted average
assumptions: volatility - 14% to 17%, interest - 6%, and expected lives - 2
years. The pro forma effect of any compensation costs related to
implementation of and ongoing use of SFAS No. 123, "Accounting for Stock
Based Compensation," is not material.
In addition 720,612 shares of common stock are reserved for the Company's
401(k) plan at June 28, 1997. Since inception in 1986, 777,697 Class A and
44,155 Class B shares have been issued under this plan.
In fiscal 1995, 363,473 shares of Class A treasury stock were canceled and
returned to the status of authorized but unissued.
- -18-
<PAGE>
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
1997:
Sales $174,801 $ 75,702 $250,503
Intercompany transfers 2,439 8,862 $(11,301)
Revenues 177,240 84,564 (11,301) 250,503
Operating income 20,268 8,259 28,527
Identifiable assets 176,754 71,058 (9,066) 238,746
Net assets 128,739 57,804 (6,078) 180,465
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
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 28, 1997. Trade receivables are disbursed among a large number of
retailers, distributors and industrial accounts in many countries.
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:
1997 1996 1995
Scotland Brazil Scotland Brazil Scotland Brazil
Revenues 40% 60% 41% 59% 40% 60%
Operating income 62% 38% 69% 31% 45% 55%
Identifiable assets 51% 49% 46% 54% 48% 52%
- -19-
<PAGE>
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 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
September 1996 $58,636 $18,066 $ 6,185 $ 4,042 $ 0.57
December 1996 64,587 20,689 8,486 5,678 0.81
March 1997 60,489 18,439 6,328 4,251 0.61
June 1997 66,791 23,274 9,060 5,888 0.85
$250,503 $80,468 $30,059 $19,859 $ 2.84
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 17, 1997, and is hereby
incorporated by reference.
Executive Officers of the Registrant
Held Present
Name Age Office Since Position
Douglas R. Starrett 77 1962 Chairman and CEO and
Director
Douglas A. Starrett 45 1985 President and Director
George B. Webber 76 1962 Vice President
Webber Gage Division
and Director
James S. Carey 46 1997 Vice President Sales
Roger U. Wellington, Jr. 56 1984 Treasurer and Chief
Financial Officer and
Director
Peter MacDougall 59 1990 Clerk
- -20-
<PAGE>
George B. Webber 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.
James S. Carey was previously Midwest Sales Manager 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 9 in the Company's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held on September 17, 1997 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 4 of the Company's
definitive Proxy Statement for the Annual Meeting of Stockholders to be
held on September 17, 1997, 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 17, 1997, 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.
- -21-
<PAGE>
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 28, 1997
Consolidated Balance Sheets at June 28, 1997 and June 29,1996
Consolidated Statements of Stockholders' Equity for the Three
Years in the Period Ended June 28, 1997
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 23.
(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 23.
(d) Not applicable.
- -22-
<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 as amended September 21, 1994, filed with Form 10-K for the
year ended June 29, 1996, 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, 1995, 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 24.
(21) Subsidiaries of the Registrant. See page 25.
(23) Independent Auditors' Consent. See page 26.
(27) Financial Data Schedule submitted herewith in electronic format.
- -23-
<PAGE>
Exhibit 11
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
CALCULATION OF SHARES FOR COMPUTATION
OF CONSOLIDATED EARNINGS PER SHARE
1997 1996 1995
PRIMARY EARNINGS PER SHARE
Average shares outstanding during
the year 6,991,810 7,057,675 7,070,032
Incremental shares computed on
the assumption that dilutive
stock options had been exercised,
with the proceeds used to
purchase treasury stock 11,328 11,444 8,171
Average common and common equiva-
lent shares outstanding 7,003,138 7,069,119 7,078,203
FULLY DILUTED EARNINGS PER SHARE
Average shares outstanding during
the year 6,991,810 7,057,675 7,070,032
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 15,692 14,908 9,909
Average common and common equivalent
shares used to calculate fully
diluted earnings per share 7,007,502 7,072,583 7,079,941
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.
- -24-
<PAGE>
Exhibit 21
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
JUNE 28, 1997
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 May 31
Comercio Ltda. Brazil
Level Industries, Inc. Incorporated in Last Sat.
Massachusetts in June
- -25-
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
The L.S. Starrett Company
We consent to the incorporation by reference in the Registration Statements
No. 33-55623 and No. 333-12997 of The L.S. Starrett Company, both on Form S-8,
of our report dated August 1, 1997, appearing in the Annual Report on Form
10-K of The L.S. Starrett Company for the year ended June 28, 1997.
S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 5, 1997
- -26-
<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 5, 1997
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. 5, 1997 Douglas A. Starrett, Sept. 5, 1997
Chairman and CEO President
S/ANDREW B. SIDES, JR. S/WILLIAM S. HURLEY
Andrew B. Sides, Jr., Sept. 5, 1997 William S. Hurley, Sept. 5, 1997
Director Director
S/RICHARD B. KENNEDY S/GEORGE B. WEBBER
Richard B. Kennedy, Sept. 5, 1997 George B. Webber, Sept. 5, 1997
Director Vice President Webber Gage Division
and Director
S/STEVEN G. THOMSON S/ROGER U. WELLINGTON, JR.
Steven G. Thomson, Sept. 5, 1997 Roger U. Wellington,Jr.,Sept. 5, 1997
Chief Accounting Officer Treasurer and Chief Financial Officer
and Director
- -27-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-END> JUN-28-1997
<CASH> 3,053
<SECURITIES> 27,389
<RECEIVABLES> 38,502
<ALLOWANCES> 1,877
<INVENTORY> 75,846
<CURRENT-ASSETS> 147,595
<PP&E> 124,876
<DEPRECIATION> 60,775
<TOTAL-ASSETS> 238,746
<CURRENT-LIABILITIES> 27,804
<BONDS> 6,500
0
0
<COMMON> 6,944
<OTHER-SE> 173,521
<TOTAL-LIABILITY-AND-EQUITY> 238,746
<SALES> 250,503
<TOTAL-REVENUES> 250,503
<CGS> 170,035
<TOTAL-COSTS> 170,035
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 784
<INCOME-PRETAX> 30,059
<INCOME-TAX> 10,200
<INCOME-CONTINUING> 19,859
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,859
<EPS-PRIMARY> 2.84
<EPS-DILUTED> 2.84
</TABLE>
