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 26, 1999 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 978-249-3551
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 5,115,250 and 1,590,025 shares, respectively, of its $1.00
par value Class A and B common stock outstanding on July 23, 1999. On that
date, the aggregate market value of the common stock held by nonaffiliates was
approximately $194,000,000.
The exhibit index is located on page 23.
Documents incorporated by reference
Proxy Statement dated August 13, 1999 - 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-your-selfers and tradesmen such as builders, carpenters, plumbers and
electricians. One retailer, Sears, accounts for approximately 11% of the
Company's sales.
Most of the Company's products are made from steel purchased from steel mills.
Forgings, castings, and a few small finished parts are purchased from other
manufacturers. Raw materials have always been readily available to the Company
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 26, 1999, the Company had 2,741 employees, approximately 70% 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 over the years.
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 26, 1999, 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.
The operations of the Company's foreign subsidiaries are consolidated in its
financial statements. The subsidiaries located in Brazil, Scotland, and China
are actively engaged in the manufacture of hacksaw and band saw blades and a
limited line of precision tools and measuring tapes. A newly established
subsidiary in Australia is engaged in distribution of the Company's products.
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 1999 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.
Sales order backlog of the Company at any point in time is negligible. Total
inventories amounted to approximately $78,041,000 at June 26, 1999, and
$73,777,000 at June 27, 1998. 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 $23,521,000 and
$23,998,000 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 1999,
1998 and 1997 were approximately $2,860,000, $3,406,000 and $3,073,000,
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. An additional 9,000 square feet of leased space
in Gardner, Massachusetts is considered part of this plant.
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
320,000 square feet, including 64,000 square feet added in fiscal 1999. 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
$900,000 Industrial Revenue Bond.
The Company's Evans Rule Division, located in North Charleston, South
Carolina, owns and occupies a 166,000 square foot building. In addition, this
division leases 45,000 square feet of manufacturing space 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 owns and occupies several buildings totaling
209,000 square feet. The Company's Scotland subsidiary owns and 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 second wholly owned subsidiary located in Skipton
performs calibration services and leases about 4,000 square feet. A wholly
owned subsidiary in the People's Republic of China leases approximately
40,000 square feet.
In addition, the Company operates warehouses/sales-support offices in
Glendale, Arizona; Elmhurst, Illinois; Atlanta, Georgia; Mississauga, Canada;
and Sydney, Australia.
In the Company's opinion, all of its 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 26, 1999.
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 23, 1999, there were 2,253 registered holders of
Class A common stock and 1,743 registered holders of Class B common stock.
Quarter ended Dividends High Low
September 1997 0.19 $ 36.56 $ 30.25
December 1997 0.19 39.94 36.00
March 1998 0.19 40.13 32.56
June 1998 0.20 40.81 37.06
September 1998 0.20 39.06 34.25
December 1998 0.20 37.75 29.81
March 1999 0.20 34.25 25.75
June 1999 0.20 30.69 25.13
Item 6 - Selected Financial Data
Years ended in June ($000 except per share data)
1999 1998 1997 1996 1995
Net sales $232,385 $262,340 $250,503 $235,467 $214,215
Net earnings 16,696 23,009 19,859 17,331 13,487
Basic earnings per share 2.44 3.34 2.84 2.45 1.91
Diluted earnings per share 2.44 3.33 2.84 2.45 1.91
Long-term debt 3,300 3,900 6,500 7,100 8,700
Total assets 245,728 250,263 238,746 227,312 213,940
Dividends per share 0.80 0.77 0.72 0.72 0.69
Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
SALES
Sales decreased 11% in fiscal 1999 following a 5% increase in fiscal 1998.
Domestic sales were down 9% in the current year, reflecting a downturn in the
industrial manufacturing sector, and foreign sales were down 15%. The foreign
decrease was due mostly to the 40% devaluation of Brazil's currency in January
1999. In terms of local currency, foreign sales were down only 3%. Domestic
sales accounted for most of the increase in the prior year as a result of
continued good economic conditions in our industry through the end of fiscal
1998. For the past two years, the strong British pound has been adversely
affecting Scotland's business both in terms of export pricing and domestic
import competition; and, in Brazil, high real interest rates and a
recessionary economy have held sales back. The weakening of Brazil's currency
in 1998 and the devaluation in 1999 had the effect of reducing the local
currency year to year sales change by 10 percentage points in 1998 and 20
percentage points in 1999, after conversion to U.S. dollars.
EARNINGS BEFORE TAXES
Pretax earnings are down 31% for the year. This follows a 14% increase in
1998. Cost of sales was 69.3% in 1999, 67.3% in 1998 and 67.9% in 1997. The
changes in these rates are consistent with the manufacturing efficiencies that
are gained or lost as a result of increased or decreased production levels,
particularly in domestic operations where pretax earnings were up 26% last
year but are down 34% this year. On the foreign side, the strong pound
mentioned above has had a significant negative effect on margins for the past
two years. In Brazil, although the currency devaluation has reduced the
absolute amount of pretax profits, its effect on importers with whom we
compete has allowed our operation to improve margins in the current year.
INCOME TAXES
The effective tax rate is 29% in 1999 compared to 33% in 1998 and 34% in
1997. Tax-exempt interest on short-term investments in municipal bonds, Puerto
Rico tax incentives and somewhat lower foreign income tax rates all contribute
to an overall effective tax rate that is slightly lower than the combined U.S.
state and federal statutory rate. Nonrecurring permanent differences between
book and taxable income for dividends paid from Brazil to the U.S. in 1998 and
particularly in 1999 have reduced their effective tax rate substantially when
reported in U.S. dollars.
NET EARNINGS
As a result of the above, net earnings were down 27% in fiscal 1999 when
compared to 1998 and 1998 net earnings were up 16% when compared to 1997.
MARKET RISK
Market risk is the potential change in a financial instrument's value caused
by fluctuations in interest and currency exchange rates and equity and
commodity prices. The Company's operating activities expose it to many risks
that are continually monitored, evaluated, and managed. Proper management of
these risks helps reduce the likelihood of earnings volatility. At June 1998
and 1999, the Company was not a party to any derivative arrangement and the
Company does not engage in trading, market-making or other speculative
activities in the derivatives markets.
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 $5 million and $4 million, respectively. Inflation in
Brazil has decreased to less than 10% today from over 2000% in 1994 when their
current economic plan was initiated. As a consequence, their economy ceased to
be considered hyperinflationary as of January 1998.
A 10% change in interest rates would not have a significant impact on the
aggregate net fair value of the Company's interest rate sensitive financial
instruments (primarily variable rate investments of $10,000,000 and debt of
$6,900,000 at June 26, 1999) or the cash flows or future earnings associated
with those financial instruments. A 10% change in interest rates would impact
the fair value of the Company's fixed rate investments of approximately
$6,800,000 by $300,000.
YEAR 2000
The Company does not currently anticipate any material disruption of its
operations as a result of failure by the Company to be year 2000 compliant.
If, however, the Company, its customers or its suppliers are unable to achieve
year 2000 compliance, the potential exists for the Company's business and
results of operations to be adversely affected.
Worldwide, the Company has four major computer systems that are used in the
areas of manufacturing, sales and accounting. Two use third party packages
that the Company believes are or, through vendor upgrades, will be year 2000
compliant. The other two systems are in the process of being converted to
third party packages that the Company believes are already compliant. The
Company expects to complete the reasonably necessary remediation of its
significant systems by the end of calendar 1999 and has not incurred, and
does not expect to incur, significant additional separately identifiable
costs in order to make its computer systems year 2000 compliant. If it
begins to appear that the Company's planned upgrades and modifications might
fail to bring any of these major systems into year 2000 compliance or fail
to do so in a timely manner, the Company will have to adopt, and for one
system has actually adopted, contingency plans to deal with any resulting
disruptions in its business.
The Company employs certain manufacturing processes that utilize computer
controlled manufacturing equipment. The Company believes such equipment is
year 2000 compliant to the extent reasonably necessary but has not completed
its testing of such equipment. In the event the Company determines that such
equipment cannot readily be made year 2000 compliant, it believes it can
revert to the manual processes previously employed or outsource such work. The
Company is also in the process of investigating the status of other systems
with respect to year 2000 compliance such as phone, fax, heating/air
conditioning, and electricity and believes they will be year 2000 compliant to
the extent reasonably necessary before the end of 1999. The Company is
utilizing internal resources for this purpose and does not expect to incur
significant separately identifiable costs.
In addition to reviewing its own systems, the Company has polled or is in the
process of polling its significant customers and vendors to get assurance that
they are year 2000 compliant and to attempt to identify potential issues. To
the extent such assurance is not received, appropriate contingency plans will
be developed and implemented. At this time, the Company is not aware of
significant problems. If the Company's customers and vendors do not achieve
year 2000 compliance before the end of 1999, the Company could experience a
variety of problems that might have a material adverse effect on the Company's
business and results of operations. For example, customers might lose EDI
capability or vendors might fail to deliver, but most foreseeable problems can
be overcome by reverting to phone, fax, mail and other manual procedures. It
should be noted that the Company outsources very little other than raw steel
and is not dependent on single source suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Years ended In June ($000)
1999 1998 1997
Cash provided by operations $16,309 $28,713 $23,516
Cash used in investing activities (10,278) (15,838) (13,310)
Cash used in financing activities (9,389) (12,203) (8,563)
Effect of translation rate
changes on cash (76) (20) (7)
Increase (decrease) in cash $(3,434) $ 652 $ 1,636
Cash flows from operating activities decreased $12 million in 1999 primarily
due to the decrease in net earnings of $6 million, and increases in inventory
levels offset somewhat by a decrease in receivables, both of which are
consistent with reduced sales volume. Just the opposite effect was experienced
in 1998.
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 $20 million in 1999 are ahead of
the $16 million and $14 million experienced in 1998 and 1997, which are more
typical years, because of a major building expansion and continued investment
in system software and hardware changes.
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 $9.9 million in 1999 compared to $5.3
million in 1998 and $7.1 million in 1997.
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 5.7 to 1 as of June 26, 1999 and 5.9 to 1 as of June 27,
1998. Cash not immediately required for working capital is invested in high
grade money market instruments with maturities generally less than one year
(however, see the notes to the financial statements regarding investments in
Puerto Rico). Certain cash and investment balances of foreign subsidiaries
may not be repatriated without adverse tax consequences and in certain cases
may be subject to regulatory restriction.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 provides
guidance for accounting for all derivative instruments, as defined. This
standard requires all derivatives and any hedging assets or liabilities to
be accounted for at fair value and will be required to be implemented during
fiscal 2000. The Company is currently analyzing the impact of adopting SFAS
No. 133.
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996
This document and the 1999 Annual Report, including the Chairman's letter to
stockholders, include forward-looking statements about the Company's business,
sales, expenditures, Year 2000 compliance, environmental regulatory
compliance, foreign operations, interest rate sensitivity, 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 Year 2000 Issues: The Company continues to explore whether
and to what extent its computer and other systems will be disrupted at the
turn of the century as a result of the widely-publicized dating system flaw
inherent in many computer systems. While the Company is in the process of
upgrading and modifying its systems in order to address the Year 2000 issue,
there can be no assurance that the Company's existing systems will be upgraded
or modified in time to remedy the Year 2000 issue or that the Company's
computer systems will not be disrupted upon the turn of the century. Any
disruption of the Company's business due to the Year 2000 issue, whether
caused by the Company's systems or those of any of its suppliers, customers,
banks, lenders, or insurers, could have a material adverse effect on the
Company's financial condition or results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Year
2000."
Risks Related to Technology: Although the Company's strategy includes
significant investment in research and development of new and innovative
products to meet technology advances, there can be no assurance that the
Company will be successful in competing against new technologies developed by
competitors.
Risks Related to Adoption of the Euro: The new European currency (the Euro)
began being used by the eleven participating European countries January 1,
1999. Although the United Kingdom is not currently a Euro country, the
Company's Scottish subsidiary does a significant amount of business with Euro
countries. Management believes it has the necessary systems and business
processes to deal with what is, in effect, one more foreign currency, but
there can be no assurance that there will not be unforeseen economic effects
of this change that might affect the Company's sales or margins on business
done with Euro countries.
Risks Related to Foreign Operations: For the period ended June 26, 1999,
approximately 30% of the Company's sales were derived from foreign operations
and, as of June 26, 1999, approximately 30% 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, political and
economic instability, 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
economy. As a result, the future performance of the Brazilian operations is
inherently unpredictable. See Management's Discussion (SALES) regarding the
recent devaluation of the Brazilian currency.
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 10
Consolidated Statements of Earnings and Cash Flows 11
Consolidated Balance Sheets 12
Consolidated Statements of Stockholders' Equity 13
Notes to Consolidated Financial Statements 14-20
INDEPENDENT AUDITORS' REPORT
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 26, 1999 and June 27, 1998, 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 26,
1999. 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 26, 1999 and June 27, 1998, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended June
26, 1999, in conformity with generally accepted accounting principles.
S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 30, 1999
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)
1999 1998 1997
EARNINGS
Net sales $232,385 $262,340 $250,503
Cost of goods sold (160,984) (176,591) (170,035)
Selling, general and administrative expense (49,393) (53,433) (51,941)
Other income and expense 1,618 1,806 1,532
Earnings before income taxes 23,626 34,122 30,059
Income taxes 6,930 11,113 10,200
Net earnings $ 16,696 $ 23,009 $ 19,859
Basic earnings per share, based on
average outstanding shares of
6,840,283, 6,888,854 and 6,991,810 $ 2.44 $ 3.34 $ 2.84
Diluted earnings per share, based on
average outstanding shares of
6,846,406, 6,902,950 and 7,003,138 $ 2.44 $ 3.33 $ 2.84
CASH FLOWS
Cash flows from operating activities:
Net earnings $ 16,696 $ 23,009 $ 19,859
Noncash expenses:
Depreciation and amortization 11,207 10,727 9,799
Deferred taxes 2,058 1,945 (439)
Unrealized translation losses 154 134
Working capital changes:
Receivables 2,809 (4,506) 1,619
Inventories (9,110) 1,518 (4,821)
Other current assets and liabilities (2,824) (1,016) (1,962)
Prepaid pension and other (4,527) (3,118) (673)
Net cash from operating activities 16,309 28,713 23,516
Cash flows from investing activities:
Additions to plant and equipment (20,319) (16,148) (13,999)
Decrease in investments 10,041 310 689
Net cash used in investing activities (10,278) (15,838) (13,310)
Cash flows from financing activities:
Short-term borrowing, net 2,599 (2,609) 411
Debt repayments, net (600) (2,600) (600)
Common stock issued 3,968 3,590 3,691
Treasury shares purchased (9,894) (5,286) (7,054)
Dividends (5,462) (5,298) (5,011)
Net cash used in financing activities (9,389) (12,203) (8,563)
Effect of translation rate changes on cash (76) (20) (7)
Net increase (decrease) in cash (3,434) 652 1,636
Cash beginning of year 3,705 3,053 1,417
Cash end of year $ 271 $ 3,705 $ 3,053
Supplemental cash flow information:
Interest paid $ 577 $ 684 $ 839
Taxes paid $ 5,822 $ 12,519 $ 11,572
See Notes to Consolidated Financial Statements
THE L.S. STARRETT COMPANY
Consolidated Balance Sheets
(in thousands of dollars)
June 26 June 27
ASSETS 1999 1998
Current assets:
Cash $ 271 $ 3,705
Investments 16,933 27,115
Accounts receivable (less allowance for doubtful
accounts of $2,361,000 and $2,450,000) 36,004 40,764
Inventories 78,041 73,777
Prepaid expenses and other current assets 6,173 5,335
Total current assets 137,422 150,696
Property, plant and equipment, at cost:
Land 1,775 1,862
Buildings (less accumulated depreciation of
$16,496,000 and $17,014,000) 25,131 24,314
Machinery and equipment (less accumulated
depreciation of $53,148,000 and $49,178,000) 46,948 42,642
Total property, plant and equipment 73,854 68,818
Cost in excess of net assets acquired (less accumu-
lated amortization of $4,266,000 and $3,896,000) 7,094 7,484
Prepaid pension cost 26,212 22,035
Other assets 1,146 1,230
$245,728 $250,263
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities $ 3,600 $ 1,001
Accounts payable and accrued expenses 13,783 14,371
Accrued salaries and wages 6,026 8,059
Taxes payable 484 1,475
Employee deposits for stock purchase plan 429 528
Total current liabilities 24,322 25,434
Deferred income taxes 11,919 9,367
Long-term debt 3,300 3,900
Accumulated postretirement benefit obligation 16,151 16,268
Stockholders' equity:
Class A common stock $1 par (20,000,000 shrs. auth.;
5,109,173 outstanding in 1999, excluding
1,243,158 held in treasury; 5,193,904 outstanding
in 1998, excluding 1,045,731 held in treasury) 5,109 5,194
Class B Common Stock $1 par (10,000,000 shrs. auth.;
1,596,748 outstanding in 1999, excluding
288,642 held in treasury; 1,703,434 outstanding
in 1998, excluding 274,283 held in treasury) 1,597 1,703
Additional paid-in capital 42,730 41,263
Retained earnings reinvested and employed in
the business 155,349 151,317
Accumulated other comprehensive income (14,749) (4,183)
Total stockholders' equity 190,036 195,294
$245,728 $250,263
See Notes to Consolidated Financial Statements
THE L.S. STARRETT COMPANY
Consolidated Statements of Stockholders' Equity
For the years ended in June, 1997 through 1999
(in thousands)
Common Addi- Accumulated
Stock Out- tional Other Com-
standing Paid-in Retained prehensive
($1 Par) Capital Earnings Income Total
Balance, June 29, 1996 $ 7,055 $ 36,650 $128,272 $ (4,692) $167,285
Comprehensive income:
Net earnings 19,859 19,859
Unrealized net gains
on investments 134 134
Translation gain, net 1,561 1,561
Total comprehensive income 21,554
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
Balance, June 28, 1997 6,944 38,730 137,788 (2,997) 180,465
Comprehensive income:
Net earnings 23,009 23,009
Unrealized net gains
on investments 138 138
Translation loss, net (1,324) (1,324)
Total comprehensive income 21,823
Dividends ($0.77) (5,298) (5,298)
Treasury shares:
Purchased (152) (952) (4,182) (5,286)
Issued 88 3,144 3,232
Options exercised 17 341 358
Balance, June 27, 1998 6,897 41,263 151,317 (4,183) 195,294
Comprehensive income:
Net earnings 16,696 16,696
Unrealized net loss
on investments (123) (123)
Translation loss, net (10,443) (10,443)
Total comprehensive income 6,130
Dividends ($0.80) (5,462) (5,462)
Treasury shares:
Purchased (329) (2,363) (7,202) (9,894)
Issued 118 3,368 3,486
Options exercised 20 462 482
Balance, June 26, 1999 $ 6,706 $ 42,730 $155,349 $(14,749) $190,036
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 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. The fiscal years of the Company's foreign subsidiaries end in May.
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 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.
Investments: 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.
Included in investments at June 26, 1999 is $6.8 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. Most other investments have maturities of less than one year.
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 5 to
40 years.
Inventories: Inventories are stated at the lower of cost or market. For
approximately 70% 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 $47,858,000 and
$44,397,000 at the end of 1999 and 1998, respectively, such amounts being
$23,521,000 and $23,998,000 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
1999 $31,964 $31,589 $14,488 $78,041
1998 30,199 25,825 17,753 73,777
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 $40,000,000 at June 1999) 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: $2,860,000 in 1999, $3,406,000 in 1998 and $3,073,000 in 1997.
Earnings per share (EPS): Basic EPS excludes dilution and is computed by di-
viding earnings available to common shareholders by the weighted average num-
ber of common shares outstanding for the period. Diluted EPS reflects the
potential dilution by securities that could share in the earnings. The
Company had 6,123, 14,096 and 11,328 of additional potential common shares
in 1999, 1998 and 1997 resulting from shares issuable under its stock
option plan.
Translation of foreign currencies: Assets and liabilities 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 "accumulated other comprehensive income" account included as part
of stockholders' equity. Prior to January 1, 1998, the translation method
used by the Company's subsidiary in Brazil, which until then had been
considered a hyperinflationary country, was the same except that inventories
and plant and the related charges to cost of sales and depreciation expense
were translated at rates in effect at the time the assets were purchased,
and the resulting translation gains and losses were 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.
OTHER INCOME AND EXPENSE
Other income and expense consists of the following (in thousands):
1999 1998 1997
Interest income $ 1,831 $ 2,747 $ 2,118
Interest expense and commitment fees (465) (820) (784)
Realized and unrealized translation gains
and losses 112 (339) (225)
Other 140 218 423
$ 1,618 $ 1,806 $ 1,532
INCOME TAXES
The provision for income taxes consists of the following (in thousands):
1999 1998 1997
Current:
Federal $ 2,851 $ 5,780 $ 6,146
Foreign 1,337 2,454 2,926
State 684 934 1,567
Deferred 2,058 1,945 (439)
$ 6,930 $11,113 $10,200
Pretax domestic income was $25,809,000, $26,876,000 and $22,096,000 in 1999,
1998 and 1997, respectively.
A reconciliation of expected tax expense at the U.S. statutory rate to actual
tax expense is as follows (in thousands):
1999 1998 1997
Expected tax expense $ 8,269 $11,943 $10,520
Increase (decrease) from:
State and Puerto Rico taxes, net
of federal benefit (32) 108 178
Foreign taxes, net of federal credits (1,161) (604) (476)
Nontaxable investment income (111) (120) (115)
Other (35) (214) 93
Actual tax expense $ 6,930 $11,113 $10,200
Deferred income taxes at year end are attributable to the following (in
thousands):
1999 1998
Deferred assets:
Retiree medical benefits $(6,595) $(6,643)
Inventories (1,242) (1,296)
Other (1,247) (1,366)
(9,084) (9,305)
Deferred liabilities:
Prepaid pension 10,778 9,059
Other employee benefits 251 659
Depreciation 6,846 6,087
Other 892 884
18,767 16,689
Current portion 2,236 1,983
Long-term portion $11,919 $ 9,367
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 1999, 1998 and
1997, considering the combined projected benefits and funds of the ESOP as
well as the other plans, was $(2,567,000), $(1,588,000) and $(405,000),
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 1,000,000 shares of the Company's common
stock. The status of these defined benefit plans, including the ESOP, is as
follows (in thousands):
1999 1998 1997
Change in benefit obligation:
Benefit obligation at beginning of year $ 87,242 $ 80,929 $ 71,307
Service cost 2,672 2,389 2,376
Interest cost 6,185 5,771 5,425
Plan amendments 481
Exchange rate changes (826) (91) 931
Benefits paid (3,048) (2,901) (2,677)
Actuarial (gain) or loss (4,618) 1,145 3,567
Benefit obligation at end of year $ 88,088 $ 87,242 $ 80,929
Change in plan assets:
Fair value of plan assets at beginning
of year $148,861 $129,292 $112,832
Actual return on plan assets (7,549) 22,364 17,558
Employer contributions 103
Participant contributions 286 239 224
Benefits paid (3,048) (2,901) (2,677)
Exchange rate changes (972) (133) 1,252
Fair value of plan assets at end of year $137,578 $148,861 $129,292
Reconciliation of funded status:
Funded status $ 49,490 $ 61,619 $ 48,363
Unrecognized actuarial gain (22,861) (38,143) (27,400)
Unrecognized transition asset (5,774) (6,737) (7,701)
Unrecognized prior service cost 5,357 5,296 5,666
Prepaid benefit $ 26,212 $ 22,035 $ 18,928
Components of net periodic benefit cost:
Service cost $ 2,672 $ 2,389 $ 2,376
Interest cost 6,185 5,771 5,425
Expected return on plan assets (11,241) (9,694) (8,398)
Amortization of prior service cost 414 376 372
Amortization of transition asset (963) (964) (960)
Recognized actuarial gain (1,250) (977) (557)
Net periodoc benefit cost $ (4,183) $ (3,099) $ (1,742)
Weighted average assumptions:
Discount rate 7.0% 7.0% 7.5%
Expected long-term rate of return 7.5% 7.5% 7.5%
Rate of compensation increase 5.0% 5.0% 5.0%
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):
1999 1998 1997
Change in benefit obligation:
Benefit obligation at beginning of year $ 17,707 $ 16,269 $ 16,308
Service cost 427 498 494
Interest cost 911 1,170 1,126
Plan amendments (4,732)
Benefits paid (1,135) (1,129) (963)
Actuarial (gain) or loss 490 899 (696)
Benefit obligation at end of year $ 13,668 $ 17,707 $ 16,269
Reconciliation of funded status:
Funded status $ 13,668 $ 17,707 $ 16,269
Unrecognized actuarial loss (1,896) (1,439) (539)
Unrecognized prior service cost 4,379
Accrued benefit $ 16,151 $ 16,268 $ 15,730
Components of net periodic benefit cost:
Service cost $ 427 $ 498 $ 494
Interest cost 911 1,170 1,126
Amortization of prior service cost (353)
Recognized actuarial gain 32
Net periodic benefit cost $ 1,017 $ 1,668 $ 1,620
Weighted average assumptions:
Discount rate 7.0% 7.0% 7.5%
Rate of compensation increase 5.0% 5.0% 5.0%
For measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5.0% for 2005 and remain at that level
thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one percentage point change in assumed
health care cost trend rates would have the following effects:
1% 1%
Increase Decrease
Effect on total of service and interest cost $ 166 $ (136)
Effect on postretirement benefit obligation 1,413 (1,188)
DEBT
At year end, long-term debt consists of the following (in thousands):
1999 1998
Industrial revenue bond $ 900 $ 1,500
Revolving credit agreement 3,000 3,000
3,900 4,500
Less current maturities 600 600
$ 3,300 $ 3,900
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 (4.3% at June 26, 1999).
The revolving credit agreement consists of a $10,000,000 line due March 30,
2000 under which there were no borrowings at June 26, 1999 and a $10,000,000
line due March 30, 2001. The credit agreement is with two banks and requires
commitment and other fees of .3%. Interest rates vary, but approximate LIBOR
plus .33% (5.2% as of June 26, 1999). All debt agreements contain financial
covenants, the most restrictive of which is that at June 26, 1999 the Company
must have tangible net worth of $161,000,000. Annual principal payments on
debt are required as follows: 2000, $600,000; 2001, $3,300,000. 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
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 1999, 1998, or 1997. A summary of option activity is as follows:
Weighted
Average
Exercise Shares
Shares Price Available
On Option At Grant For Grant
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
Options authorized 800,000
Options granted 26,457 32.14 (26,457)
Options exercised ($19.45 and ($21.89)(17,507) 20.49
Options canceled (16,484) (670,715)
Balance, June 27, 1998 45,800 27.96 778,346
Options granted 55,474 24.97 (55,474)
Options exercised ($23.17 and $25.03) (20,369) 23.70
Options canceled (29,102) 25,325
Balance, June 26, 1999 51,803 $24.63 748,117
At June 26, 1999, a total of 800,000 shares of common stock are reserved for
issuance under the plans. The following information relates to outstanding
options as of June 26, 1999:
Weighted Average Exercise Price $24.63
Weighted Average Remaining Life 1.6 years
Weighted Average fair value on grant date
of options granted in:
1997 $7.50
1998 9.50
1999 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 - 15% to 21%, interest - 4.3% to 6.2%, and expected
lives - 2 years. The pro forma, after tax effect of any compensation costs
related to use of SFAS No. 123, "Accounting for Stock Based Compensation,"
is as follows: 1999 $250,000, 1998 $150,000 and 1997 $125,000, or
approximately $.04, $.02, and $.02 per share.
In addition 519,916 shares of common stock are reserved for the Company's
401(k) plan at June 26, 1999. Since inception in 1986, 978,393 Class A and
44,155 Class B shares have been issued under this plan.
OPERATING DATA
The Company believes it has no significant concentration of credit risk as
of June 26, 1999. Trade receivables are dispersed among a large number of
retailers, distributors and industrial accounts in many countries. One
customer accounted for approximately 11% of sales in 1999.
The Company is engaged in the single business segment of producing and
marketing industrial, professional and consumer products. It manufactures
over 5,000 items, including precision measuring tools, tape measures, gages
and saw blades. Operating segments are identified as components of an
enterprise about which separate discrete financial information is used by
the chief operating decision maker in how to allocate assets and assess
performance of the Company.
The Company's operations are primarily in North America, Brazil, and the
United Kingdom. Geographic information about the Company's sales and long-
lived assets are as follows:
1999 1998 1997
Sales:
North America $ 171,176 $ 187,925 $ 177,240
United Kingdom 33,249 35,642 35,653
Brazil 40,104 50,923 48,911
Eliminations and other (12,144) (12,150) (11,301)
Total $ 232,385 $ 262,340 $ 250,503
Long-lived assets:
North America $ 90,379 $ 79,612
United Kingdom 8,433 7,292
Brazil 7,661 11,563
Other 1,833 1,100
Total $ 108,306 $ 99,567
QUARTERLY FINANCIAL DATA (UNAUDITED)(in thousands except per share data)
Earnings Basic
Before Earnings
Net Gross Income Net Per
Quarter Ended Sales Profit Taxes Earnings Share
September 1997 $65,213 $20,734 $ 8,400 $ 5,413 $ 0.78
December 1997 68,637 23,266 9,432 6,392 0.93
March 1998 61,195 19,878 7,437 4,994 0.72
June 1998 67,295 21,871 8,853 6,210 0.91
$262,340 $85,749 $34,122 $23,009 $ 3.34
September 1998 $58,364 $17,143 $ 5,761 $ 3,916 $ 0.57
December 1998 60,890 18,695 6,556 4,513 0.65
March 1999 57,073 16,705 5,226 3,586 0.53
June 1999 56,058 18,858 6,083 4,681 0.69
$232,385 $71,401 $23,626 $16,696 $ 2.44
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 15, 1999, and is hereby
incorporated by reference.
Executive Officers of the Registrant
Held Present
Name Age Office Since Position
Douglas R. Starrett 79 1995 Chairman and CEO and
Director
Douglas A. Starrett 47 1995 President and Director
George B. Webber 78 1962 Vice President
Webber Gage Division
and Director
James S. Carey 48 1997 Vice President Sales
Roger U. Wellington, Jr. 58 1984 Treasurer and Chief
Financial Officer and
Director
Steven A. Wilcox 44 1998 Clerk
Douglas R. Starrett, Douglas A. Starrett (son of Douglas R. Starrett), George
B. Webber and Roger U. Wellington, Jr. have served in the same capacities as
listed above for at least the past five years. James S. Carey was previously
Midwest Sales Manager of the Company. Except in the case of Steven Wilcox, the
positions listed above represent their principal occupations and employment
during the last five years. Steven Wilcox, elected clerk in 1997, 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 15, 1999 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 15, 1999, 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 15, 1999, 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 26, 1999
Consolidated Balance Sheets at June 26, 1999 and June 27, 1998
Consolidated Statements of Stockholders' Equity for the Three
Years in the Period Ended June 26, 1999
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.
(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.
(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 16, 1998, filed with Form 10-Q for the
quarter ended September 26, 1998, 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, is 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.
(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 21
THE L.S. STARRETT COMPANY AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
JUNE 26, 1999
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
Starrett Tools (Suzhou) Co., Ltd. Incorporated in Dec. 31
China
The L.S. Starrett Company of Incorporated in June 30
Australia Pty. Ltd. Australia
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 July 30, 1999, appearing in the Annual Report on Form 10-K
of The L.S. Starrett Company for the year ended June 26, 1999.
S/DELOITTE & TOUCHE LLP
Boston, Massachusetts
September 13, 1999
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 13, 1999
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. 13, 1999 Douglas A. Starrett, Sept. 13, 1999
Chairman and CEO and Director President and Director
S/ANDREW B. SIDES, JR. S/WILLIAM S. HURLEY
Andrew B. Sides, Jr., Sept. 13, 1999 William S. Hurley, Sept. 13, 1999
Director Director
S/RICHARD B. KENNEDY S/GEORGE B. WEBBER
Richard B. Kennedy, Sept. 13, 1999 George B. Webber, Sept. 13, 1999
Director Vice President Webber Gage Division
and Director
S/STEVEN G. THOMSON S/ROGER U. WELLINGTON, JR.
Steven G. Thomson, Sept. 13, 1999 Roger U. Wellington,Jr.,Sept.13, 1999
Chief Accounting Officer Treasurer and Chief Financial Officer
and Director
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<FISCAL-YEAR-END> JUN-26-1999
<PERIOD-END> JUN-26-1999
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0
0
<COMMON> 6,706
<OTHER-SE> 183,330
<TOTAL-LIABILITY-AND-EQUITY> 245,728
<SALES> 232,385
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<INTEREST-EXPENSE> 465
<INCOME-PRETAX> 23,626
<INCOME-TAX> 6,930
<INCOME-CONTINUING> 16,696
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,696
<EPS-BASIC> 2.44
<EPS-DILUTED> 2.44
</TABLE>
