-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SCYSFfl1dVEgwWpclahP0fEUKMzpKLIutPWVJCC8V7AZDcMLc5PKPSUkit7R0+Bb A7Xiu5UyWXoeE0kap5kjlQ== 0000950123-96-007083.txt : 19961203 0000950123-96-007083.hdr.sgml : 19961203 ACCESSION NUMBER: 0000950123-96-007083 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19961202 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARRETT CORP /NY/ CENTRAL INDEX KEY: 0000093675 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 135411123 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-06736 FILM NUMBER: 96674646 BUSINESS ADDRESS: STREET 1: 909 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127513100 MAIL ADDRESS: STREET 1: 909 THIRD AVENUE CITY: NEW YORK STATE: NY FORMER COMPANY: FORMER CONFORMED NAME: STARRETT HOUSING CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: STARRETT BROTHERS & EKEN INC DATE OF NAME CHANGE: 19710614 10-K/A 1 AMENDMENT #3 TO FORM 10-K DATED 12-31-95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A-3 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] Amendment to Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the fiscal year ended December 31, 1995 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from _______ to _______ Commission file number 1-6736. STARRETT CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 13-5411123 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 909 Third Avenue, New York, New York 10022 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 751-3100 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, par value $1.00 per share American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. 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 the filing requirements for the past 90 days. YES X NO . --- --- 2 TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE Independent Auditors' Report................................................................... 19 Statements of Consolidated Financial Position at December 31, 1995 and 1994.................... 20 Statements of Consolidated Operations for the Years Ended December 31, 1995, 1994 and 1993................................................................................. 21 Statements of Consolidated Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993............................................................... 22 Statements of Consolidated Cash Flows for the Years Ended December 31, 1995, 1994 and 1993................................................................................. 23 Notes to Consolidated Financial Statements..................................................... 24-38 Financial Statement Schedule of Condensed Financial Information of Registrant at December 31, 1995 and 1994 and for the Years Ended December 31, 1995, 1994 and 1993................................................................................. 39-40
Financial Statement Schedules, other than that listed above, are omitted because of the absence of the conditions under which they are required, or because the information required therein is set forth in the financial statements or the notes thereto. 18 3 INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of Starrett Corporation New York, New York We have audited the consolidated financial statements and the related financial statement schedule of Starrett Corporation and consolidated subsidiaries, listed in the foregoing table of contents. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule 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 consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 its consolidated subsidiaries at December 31, 1995 and 1994 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Deloitte & Touche LLP March 18, 1996 New York, New York 19 4 STARRETT CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED FINANCIAL POSITION December 31, 1995 and 1994 (In Thousands)
1995 1994 ---- ---- ASSETS: Cash and Cash Equivalents ................................................ $ 10,762 $ 16,816 Receivables ........................................................ 32,590 25,918 Inventory of Real Estate.................................................. 59,052 52,332 Investments in Joint Ventures............................................. 6,527 6,701 Property and Equipment-Net................................................ 3,622 3,251 Land Held for Investment.................................................. 1,734 1,997 Other Assets ............................................................. 12,058 9,252 -------- -------- Total................................................................ $126,345 $116,267 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY: Liabilities: Payable Within One Year: Accounts payable........................................................ $ 11,332 $ 10,874 Current portion of long-term obligations ............................... 7,387 4,526 Accrued liabilities..................................................... 13,326 11,268 -------- -------- Total Liabilities Payable Within One Year............................ 32,045 26,668 Deferred Income Taxes .................................................... 6,377 4,565 Other Liabilities ....................................................... 1,326 1,851 Long-Term Obligations .................................................... 34,459 36,066 -------- --------- Total................................................................ 74,207 69,150 -------- --------- Commitments and Contingencies Stockholders' Equity: Common stock-par value, $1.00; authorized, 18,000 shares.......................................................... 6,566 6,566 Capital in excess of par value.......................................... 23,933 23,933 Retained earnings....................................................... 24,822 19,022 Pension liability adjustment............................................ (1,593) (814) Shares held in treasury-at cost......................................... (1,590) (1,590) --------- --------- Stockholders' Equity...................................................... 52,138 47,117 -------- --------- Total................................................................ $126,345 $ 116,267 ======== =========
See Notes to Consolidated Financial Statements 20 5 STARRETT CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED OPERATIONS For the Years Ended December 31, 1995, 1994 and 1993 (In Thousands Except Per Share Data)
1995 1994 1993 -------- -------- -------- Revenues .............................. $138,332 $141,335 $122,182 -------- -------- -------- Construction Costs .................... 73,090 82,859 73,015 -------- -------- -------- Income from Construction Contracts and Related Revenues ..................... 65,242 58,476 49,167 -------- -------- -------- Expenses: General and Administrative ........... 28,212 25,329 23,951 Security Service Labor and Other Costs 12,232 10,909 9,438 Selling .............................. 6,050 5,853 5,725 Mortgage and Closing Costs ........... 5,920 5,419 4,039 Interest ............................. 451 660 880 Loss from Rental Operations-Net ...... 546 -------- -------- -------- Total ............................ 52,865 48,170 44,579 -------- -------- -------- Income before Income Taxes ............ 12,377 10,306 4,588 Income Taxes .......................... 5,012 4,147 2,448 -------- -------- -------- Net Income ............................ $ 7,365 $ 6,159 $ 2,140 ======== ======== ======== Earnings per Common Share: Net Income ............................ $ 1.18 $ .98 $ .34 ======== ======== ======== Weighted Average Number of Shares ..... 6,261 6,261 6,356 ======== ======== ======== Cash Dividends per Share .............. $ .25 $ .125 None ======== ======== ========
See Notes to Consolidated Financial Statements 21 6 STARRETT CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY For the Years Ended December 31, 1995, 1994 and 1993 (In Thousands Except Share Data)
CAPITAL IN PENSION SHARES STOCK- COMMON EXCESS OF RETAINED LIABILITY HELD IN HOLDERS' STOCK PAR VALUE EARNINGS ADJUSTMENT TREASURY EQUITY ------ ---------- -------- ---------- -------- -------- Balance, December 31, 1992 (6,566,402 common shares issued and 167,227 shares in Treasury)............................... $6,566 $23,933 $11,506 $(866) $41,139 Net Income.................................. 2,140 2,140 Pension Liability Adjustment................................. $(736) (736) Purchase of Treasury Shares................. (724) (724) ------ ------- ------- ------- ------- ------- Balance, December 31, 1993 (6,566,402 common shares issued and 305,427 shares in Treasury)............................... 6,566 23,933 13,646 (736) (1,590) 41,819 Net Income.................................. 6,159 6,159 Dividends to common stockholders ($.125 per share)............. (783) (783) Pension Liability Adjustment................................. (78) (78) ------ ------- ------- ------- ------- ------- Balance, December 31, 1994 (6,566,402 common shares issued and 305,427 shares in Treasury)............................... 6,566 23,933 19,022 (814) (1,590) 47,117 Net Income.................................. 7,365 7,365 Dividends to common stockholders ($.25 per share).............. (1,565) (1,565) Pension Liability Adjustment................................. (779) (779) ------ ------- ------- ----- ------- ------- Balance, December 31, 1995 (6,566,402 common shares issued and 305,442 shares in Treasury)............................... $6,566 $23,933 $24,822 $(1,593) $(1,590) $52,138 ====== ======= ======= ======= ======= =======
See Notes to Consolidated Financial Statements 22 7 STARRETT CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS For the Years Ended December 31, 1995, 1994 and 1993 (In Thousands)
1995 1994 1993 ------- ------- ------ OPERATING ACTIVITIES: Net Income ....................................................... $ 7,365 $ 6,159 $ 2,140 Adjustments to Reconcile Net Income to Net Cash (Used In) Provided by Operating Activities: Depreciation and Amortization ................................. 3,086 2,978 3,013 Deferred Income Taxes ......................................... 1,812 519 (1,087) Equity in (Earnings) Losses in Joint Ventures ................. (4,032) (1,736) 595 Changes in Operating Assets and Liabilities: Receivables ................................................. (6,672) (3,194) 5,088 Inventories ................................................. (6,457) 8,536 2,444 Accounts Payable ............................................ 458 (1,979) 1,290 Other Assets ................................................ (6,451) (1,702) (854) Accrued Liabilities ......................................... 1,279 (299) 955 Deferred Revenue ............................................ (506) (409) (708) -------- -------- -------- Net Cash (Used in) Provided by Operating Activities .............. (10,118) 8,873 12,876 -------- -------- -------- INVESTING ACTIVITIES: Investment in Joint Ventures ..................................... (2,740) (6,466) (1,828) Distributions from Joint Ventures ................................ 6,946 3,517 22 Purchase of Property and Equipment ............................... (1,389) (853) (1,002) Proceeds and Payments Relating to Sale of Rental and Property and Equipment, Net ..................................... 1,559 6 4,260 -------- -------- -------- Net Cash (Used in) Provided by Investing Activities .............. 4,376 (3,796) 1,452 -------- -------- -------- FINANCING ACTIVITIES: Repayment of Long-Term Obligations ............................... (18,310) (16,460) (22,099) Proceeds from Long-Term Obligations .............................. 19,563 9,523 3,769 Payment of Cash Dividend to Common Stockholders .................. (1,565) (391) Purchase of Treasury Shares ...................................... (724) -------- -------- -------- Net Cash Used In Financing Activities ............................ (312) (7,328) (19,054) -------- -------- -------- Net (Decrease) in Cash and Cash Equivalents ...................... (6,054) (2,251) (4,726) Cash and Cash Equivalents Beginning of Year ...................... 16,816 19,067 23,793 -------- -------- -------- Cash and Cash Equivalents End of Year ............................ $ 10,762 $ 16,816 $ 19,067 ======== ======== ========
See Notes to Consolidated Financial Statements 23 8 STARRETT CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company: The Company's operations consist of (i) the development, management and ownership of real estate properties principally in the New York City Metropolitan area; (ii) the single-family home and garden apartment business conducted through its Levitt subsidiary in Florida and Puerto Rico; and (iii) the supplying of construction services through its HRH subsidiary principally in the New York City Metropolitan area. Principles of Consolidation: The consolidated financial statements include the accounts of Starrett Corporation and subsidiaries (the "Company"). Intercompany accounts and transactions have been eliminated in the consolidated financial statements. Recognition of Income: The Company follows the percentage-of-completion method of recording revenues and related costs from construction contracts using the cost-to-cost method and provides currently for estimated losses on uncompleted contracts. Profits relating to sales of limited partnership interests and development fees are recognized on the percentage-of-completion method and full accrual method as appropriate. Revenues from house sales and all related costs and expenses are recognized upon passage of title to the buyer and receipt of an adequate down payment. Mortgage operations include loan origination and other fees received for the processing and closing of mortgage loans. Revenues from mortgage operations are primarily for houses constructed and sold by the Company and are recorded when the transfer of the corresponding mortgages to third parties has been consummated. Revenues from cost-plus fee contracts are recognized on the basis of costs incurred during the period plus the fee earned. Use of Estimates: The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 24 9 Fair Value of Financial Instruments: Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of the fair value of financial instruments, both assets and liabilities, recognized and not recognized in the consolidated statement of financial position of the Company, for which it is practicable to estimate fair value. The estimated fair values of financial instruments which are presented herein have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of amounts the Company could realize in a current market exchange. The following methods and assumptions were used to estimate fair value: - The carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value due to their short term nature. - The carrying amounts of notes and mortgages payable approximate fair value as the terms of the credit facilities generally require periodic market adjustment of interest rates. Inventory of Real Estate: Inventory of real estate is stated at the lower of cost or estimated net realizable value. Cost includes direct acquisition, development and construction costs, interest and other indirect construction costs. Estimated net realizable value is defined as an estimate of sales proceeds less all estimated costs of carrying, completing and disposing of the property. Interest is capitalized at the effective interest rates paid on borrowings for interest costs incurred on real estate inventory components during the preconstruction and planning stage and the periods that projects are under development. Capitalization of interest is discontinued if development ceases at a project. Land and land development, are accumulated by specific area and allocated proportionately to homes within the respective area. Construction costs are charged to individual homesites based on specific identification. Land Held for Investment: Land parcels for which the Company has no formal plans to develop or sell are classified as land held for investment. Land purchased for investment is carried at cost. Land parcels previously included in inventory of real estate and reclassified to land held for investment are carried at the lower of acquisition cost or fair value at the time of transfer. The carrying value of land held for investment is evaluated for other than temporary declines in value. For the years 1995, 1994 and 1993, no adjustments for other than temporary declines were recorded. 25 10 Property and Equipment: Property and equipment are carried at cost less accumulated depreciation and are depreciated using the straight-line method over the estimated useful lives of the assets which range from three to five years. Expenditures for maintenance and repairs are charged to expense as incurred. Costs of major renewals and betterments which extend useful lives are capitalized. Capitalized Costs: Interest incurred, real estate taxes, and sales costs incurred in connection with certain properties are capitalized in order to achieve better matching of costs with revenues. Interest incurred on loans was $3,778,000 in 1995, $3,435,000 in 1994 and $3,893,000 in 1993, of which $3,327,000 in 1995, $2,775,000 in 1994 and $2,959,000 in 1993 was capitalized. Amortization of capitalized interest of $3,789,000 in 1995, $4,941,000 in 1994 and $5,802,000 in 1993 was charged to construction costs. Costs related to predevelopment activities associated with the Company's various development projects, such as architect and engineering fees, legal costs, etc., are capitalized to the extent that management believes such costs are recoverable from the estimated earnings of the project. Certain costs incurred that are used directly throughout the selling period to aid in the sale of units, such as model furnishings and decorations, sales office furnishings and facilities, exhibits, displays and signage, are capitalized as deferred selling costs and amortized over the number of units to be delivered. Costs incurred during the initial and due diligence phases of a project, such as land deposits and studies, are capitalized as preacquisition costs. The unrecovered preacquisition costs are written off in the period the Company ceases development of the project. Investments in Partnerships and Joint Ventures: Investments in partnerships and joint ventures in which the Company does not have a controlling interest are accounted for at cost and investments in partnerships in which the Company does have a controlling interest are accounted for on the equity method. Under the equity method, the Company's initial investment is recorded at cost and is subsequently adjusted to recognize its share of the earnings or losses. Distributions received reduce the carrying amount of the investment. Cash and Cash Equivalents: The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. 26 11 Income Taxes: As required by Statement of Financial Accounting Standard No. 109, "Accounting for Income Taxes", deferred taxes are provided for the temporary differences between the tax bases of the assets and liabilities and the amounts reported in the financial statements. Recently Issued Accounting Pronouncement: In March 1995, The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", (SFAS 121), which is effective January 1, 1996. This standard specifies when assets should be reviewed for impairment, how to determine if an asset is impaired, how to measure an impairment loss, and what disclosures are necessary in the financial statements. SFAS No. 121 will apply to the Company for the year ended December 31, 1996. The Company does not believe that this statement would have had a material effect on its financial position or the results of its operations had it been applied in 1995. Reclassifications: Certain prior year amounts have been reclassified in the financial statements and segment information to conform with the 1995 presentation. 2. RECEIVABLES Receivables are summarized as follows:
1995 1994 -------- ------ (Dollars in Thousands) Accounts............................................. $ 18,011 $12,787 Mortgage notes....................................... 11,392 9,893 Notes................................................ 3,663 3,714 --------- -------- Total........................................... 33,066 26,394 Less allowance for doubtful accounts............................................ 476 476 --------- --------- Net............................................. $ 32,590 $25,918 ======== =======
It is expected that the receivables at December 31, 1995 as set forth above will be realized as follows: $24,957,000 in 1996, $2,978,000 in 1997, $37,000 in 1998, $41,000 in 1999, $46,000 in 2000 and $4,531,000 thereafter. At December 31, 1995, approximately $1,600,000 ($1,700,000 at December 31, 1994) of these mortgage notes receivable have been pooled into GNMA certificates, which have been guaranteed by the United States Government. The Company has pledged these mortgage notes as collateral to borrow funds from institutions at interest rates lower than those earned on the mortgage notes receivable and as collateral for GNMA matched payment serial 27 12 notes (Note 8). The remaining mortgage notes receivable have been originated by the Company under firm commitments for sale to various third parties. The Company receives certain fees for the origination and processing of these mortgages. The mortgage notes receivable, which result primarily from sales of homes in Puerto Rico, are payable in monthly installments and earned interest at stated interest rates which ranged from 6.75% to 9.88% in 1995 and 1994. 3. INVENTORY OF REAL ESTATE Inventory of real estate is summarized as follows:
1995 1994 -------- ------ (Dollars in Thousands) Land and land development costs...................... $43,815 $41,508 Construction costs - houses.......................... 15,237 10,824 ------- -------- Total............................................. $59,052 $52,332 ======= =======
4. INVESTMENTS IN JOINT VENTURES The Company owns investments in joint ventures that are engaged in homebuilding and development of residential rental apartments. Condensed financial information is as follows: Combined Balance Sheets
1995 1994 -------- ------- (Dollars in Thousands) Combined Assets Current Assets ...................................... $ 4,104 $ 1,247 Inventory of real estate ............................ 32,815 29,281 Other assets ........................................ 1,590 1,574 ------- ------- $38,509 $32,102 ======= ======= Combined Liabilities and Partner's Capital Current liabilities ................................ $ 2,709 $ 2,607 Customer deposits on house sales ................... 4,794 3,097 Mortgage notes payable ............................. 20,593 19,070 Partners' capital accounts ......................... 10,413 7,328 ------- ------- $38,509 $32,102 ======= =======
During 1995 and 1994, in accordance with the partnership agreements, the Company made capital contributions to the joint ventures in excess of its proportionate ownership interests. The Partnership agreements provide for the Company to receive preferential income and cash distributions until the Company's invested capital is proportionate to its ownership interests. 28 13 Combined Statements of Operations
1995 1994 -------- ------- (Dollars in Thousands) Revenues House sales ......................................... $51,748 Sale of rental apartment property 15,205 $14,650 Other Income ........................................ 1,153 425 ------- ------- 68,106 15,075 Cost and Expenses Cost of house sales ................................. 42,871 Cost of sale of rental apartment property ............................................ 12,570 10,822 Other expenses ...................................... 5,048 808 ------- ------- 60,489 11,630 ------- ------- Net Income ........................................... $ 7,617 $ 3,445 ======= =======
The Company's equity in earnings of joint ventures is included in Revenues in the Statements of Consolidated Operations. During 1994, the Company's homebuilding joint ventures acquired land, commenced land development and home construction activity. Through December 31, 1994, no homes were delivered and, accordingly, no revenues from house sales were recognized. In addition, the Company had an ownership interest in a joint venture that owns a self-storage warehouse in New York. The joint venture had $8,943,000 and $9,138,000 in assets with $8,183,000 and $8,627,000 in liabilities at December 31, 1995 and 1994, respectively. The Company sold the warehouse on March 15, 1996. The loss on sale of the warehouse is included in the Statement of Operations for the year ended December 31, 1995. 5. PROPERTY AND EQUIPMENT Property and equipment are summarized as follows:
1995 1994 -------- ------ (Dollars in Thousands) Machinery and equipment............................. $2,103 1,905 Furniture, fixtures and leasehold improvements........................................ 9,347 8,586 ------- ------- Total........................................... 11,450 10,491 Less accumulated depreciation....................... 7,828 7,240 ------- ------- Net............................................. $3,622 $3,251 ====== ======
29 14 6. OTHER ASSETS Other assets are summarized as follows:
1995 1994 ------- ------- (Dollars in Thousands) Investments in and advances to partnerships ........................... $ 52 $ 1,287 Prepaid development costs .............. 4,938 2,704 Deferred selling costs ................. 1,738 2,208 Preacquisition costs ................... 1,751 407 Other .................................. 3,579 2,646 ------- ------- Total ............................... $12,058 $ 9,252 ======= =======
On December 14, 1995, a limited partnership in which the Company is a general partner owning a HUD financed housing project on the upper West Side of Manhattan refinanced the project. At the closing, the Company received approximately $3,000,000 most of which represents fees, with the remainder attributable to repayment of sums owed, return of capital, and partnership distributive share of refinancing proceeds. 7. INCOME TAXES The Company and its domestic subsidiaries file a consolidated federal income tax return. The provision for income taxes consists of the following:
1995 1994 1993 ------ ------ ----- (Dollars in Thousands) Federal taxes: Current ............... $ 108 Deferred .............. 2,272 $ 161 $(1,302) State and foreign taxes: Current ............... 2,568 3,628 3,535 Deferred .............. 64 358 215 ------- ------- ------- Total ............... $ 5,012 $ 4,147 $ 2,448 ======= ======= =======
At December 31, 1995 the Company had a net tax operating loss carryforward, which can be utilized against future taxable income, of approximately $8,937,000 expiring in 2005 through 2009. There is no net operating loss carryforward for financial statement reporting purposes. Cash payments for income taxes during the years ended December 31, 1995, 1994 and 1993 were $2,630,000, $5,195,000 and $2,251,000, respectively. 30 15 The effective tax rate was different from the statutory Federal tax rate for the following reasons:
1995 1994 1993 ------ ------ ------ Statutory Federal tax rate ....... 34.0% 34.0% 34.0% Increase in taxes resulting from state and foreign taxes, net of Federal tax benefit....... 6.5 6.2 19.3 ------ ------ ------ Effective tax rate ............... 40.5% 40.2% 53.3% ====== ====== ======
Deferred income taxes result from temporary differences in the recognition of revenue and expense for tax and financial reporting purposes. The tax effect of each type of temporary difference that gave rise to the Company's net deferred tax liability is as follows:
December 31 December 31 1995 1994 ------- ------ Asset (Liability) (In Thousands) Investments in and sales of limited partnership interests ............ $(11,576) $(10,043) Net tax operating loss carryforward 3,107 5,337 Capitalized interest and overhead . (838) (802) Alternative minimum tax and other miscellaneous Federal tax credits 2,712 2,558 Deferred selling costs ............ (831) (1,063) Pension liability adjustment ...... 1,073 548 Other ............................. (24) (1,100) -------- -------- Net deferred income tax liability . $ (6,377) $ (4,565) ======== ========
Total deferred tax assets and liabilities were $10,288,000 and $16,665,000, respectively, at December 31, 1995 and $11,942,000 and $16,507,000, respectively, at December 31, 1994. No valuation allowance was required for deferred tax assets. 31 16 8. DEBT Notes, mortgages payable and long-term obligations are summarized as follows:
1995 1994 ------- ------ (Dollars in Thousands) Subordinated promissory notes, at a rate of 15% per annum, payable 1996 through 1997 (A) ............................ $ 2,934 $ 4,400 Note payable under credit facility agreement, 1.3/4% over LIBOR (interest rate of 7.5% at December 31, 1995) (B) ........... 14,400 16,400 Notes payable under credit facility agreement, interest rate that approximates 1% under prime, (interest rate of 7.67% at December 31, 1995)(C) ....................... 10,000 14,550 GNMA matched payments serial notes at rates between 9% and 10% with remaining maturities up to 20 years (D) ................................... 1,571 1,732 Mortgage notes payable, interest rate of 1% over prime (interest rate of 9.5% at December 31, 1995) (E) ...................... 6,000 Mortgage notes payable, interest rate of 1% over prime (interest rate of 9.5% at December 31, 1995) (F) ...................... 3,516 2,212 Note payable under credit facility agreement, interest rate that approximates 1% under prime (interest rate of 7.67% at December 31, 1995) (G) ...................... 2,500 Other mortgage notes payable at interest rates between 6.75% and 9.5% due in installments through April, 1997 ......................... 925 1,298 ------- ------- Total ..................................... $41,846 $40,592 ======= ======= Classified in statements of consolidated financial position as: Current portion of long-term obligations ................................ $ 7,387 $ 4,526 Long-term obligations ....................... 34,459 36,066 ------- ------- Total ..................................... $41,846 $40,592 ======= =======
(A) On December 31, 1990, the Company redeemed all of its $5.81 cumulative convertible preferred stock and issued to the preferred shareholders six equal subordinated promissory notes in the aggregate principal amount of $8,800,000, maturing 1992 through 1997. The notes bear simple interest at the rate 32 17 of 15% per annum. In January 1996 the fifth promissory note in the amount of $1,466,667 was paid. (B) In January 1996, a subsidiary of the Company repaid this note from proceeds of a $10,000,000 unsecured term note and from working capital. The unsecured term note requires semi-annual principal payments of $1,000,000 and $1,500,000 in July and January, respectively, through January 2000. The term note credit agreement requires the Company to maintain certain financial covenants during the term of the loan. (C) In March 1996 the Company renewed its unsecured revolving credit agreement through March 31, 1997 to finance its Puerto Rico homebuilding operations. The credit agreement provides for available loans up to $15,000,000. The credit agreement requires the Company's Puerto Rico subsidiary to maintain certain financial covenants during the term of the agreement. As of December 31, 1995 and 1994, $10,000,000 and $13,000,000 respectively, were outstanding under this facility. In June 1994, the previous credit agreement was amended to provide for an additional short-term $7,000,000 secured facility. This facility was secured by certain developed and undeveloped lots. The Company has drawn and repaid $5,000,000 under this facility through December 31, 1995. As of December 31, 1994, $1,550,000 was outstanding under this facility. The facility expires in March 1996. (D) On December 31, 1995, the Company had loans totaling $1,600,000 (secured by a pledge of GNMA certificates in the same amount) through the issuance of long-term debentures by a subsidiary of a non-profit community development corporation in Puerto Rico. Both the short-term loans and debentures, which are secured by mortgage notes receivable pooled into GNMA certificates, bear interest at rates lower than the interest rates on such mortgage receivables. (E) During 1995, the Company entered into a loan agreement to provide financing for the acquisition and site improvement of property and financing for construction of residential units. The loan agreement provides for advances on a revolving loan basis up to a maximum outstanding balance of $11,250,000 and is secured by a mortgage on the property including all improvements. Principal payments are required as homes are delivered. The loan matures in September 1998. (F) During 1994, the Company entered into a loan agreement to provide financing for the acquisition and site improvement of property and financing for construction of residential units. The loan agreement provides for advances on a revolving loan basis up to a maximum outstanding balance of $6,300,000 and is secured by a mortgage on the property including all improvements. Principal payments are required as homes are delivered. The loan matures in April 1998. (G) During 1995, the Company entered into a credit agreement to provide an unsecured revolving line of credit of $3,000,000 to finance its Puerto Rico mortgage operations. The credit agreement requires the Company's Puerto Rico subsidiary to maintain certain financial ratios and provides other restrictions. The loan matures in October 1997. Notes and mortgages payable were collateralized by real estate and mortgage notes receivable with net carrying values aggregating $33,851,000 and $23,240,000 at December 31, 1995 and 1994, respectively. 33 18 Certain of the debt instruments associated with joint ventures require guarantees of the related indebtedness by the Company. At December 31, 1995 and 1994, the Company's guarantees on outstanding joint venture indebtedness were $2,405,000 and $300,000, respectively. Debt obligations are scheduled to mature as follows: $7,387,000 in 1996, $16,942,000 in 1997, $12,057,000 in 1998, $2,546,000 in 1999, $1,550,000 in 2000 and $1,364,000 thereafter. Certain mortgage notes contain provisions for reducing the principal as individual homes are sold by the Company. Interest paid for the years ended December 31, 1995, 1994 and 1993 was $3,722,000, $3,402,000 and $4,321,000, respectively. The weighted average interest rate on the Company's debt was 9.22% and 7.93% for the years ended December 31, 1995 and 1994, respectively. As of December 31, 1995, the Company had outstanding letters of credit totalling approximately $140,000 on which there are service charges ranging from 0.5% to 1% on the outstanding balances. The Company in the normal course of business obtains payment and performance bonds and financial security bonds in connection with its construction and development activities. 9. PENSION PLAN The Company and certain of its subsidiaries have a noncontributory defined benefit pension plan (the "Plan") covering employees not represented by a union. The benefits are based on years of service and the employees' compensation over the last five years. Effective July 31, 1992, the Board of Directors amended the Plan to freeze accrued benefits for all participants. The Company will continue to fund the Plan as required, including any interest at the assumed average rate of return on Plan assets. As of December 31, 1995, the Plan held equity securities, fixed income securities, life insurance policies and short-term investments. Assumed average future rate of return on Plan assets was 8.75% for the years ended December 31, 1995 and 1994, respectively, and the projected benefit obligation was based on 7.25% and 8.75% assumed discount rates at December 31, 1995 and 1994, respectively. The net periodic pension benefit was $2,000 for the year ended December 31, 1993. The components of net periodic pension cost for the years ended December 31, 1995 and 1994 are as follows:
Cost component: 1995 1994 --------- ------- Interest cost ............... $ 548,000 $ 601,000 Actual return on plan assets (714,000) 124,000 Net amortization and deferral 270,000 (584,000) --------- --------- Net periodic pension cost ... $ 104,000 $ 141,000 ========= =========
34 19 The following table sets forth the Plan's funded status as of December 31, 1995 and 1994:
1995 1994 --------- ------- Actuarial present value accumulated benefit obligation: Vested ............................ $ 8,204,000 $ 6,376,000 Nonvested ......................... 16,000 46,000 ----------- ----------- Total .......................... $ 8,220,000 $ 6,422,000 =========== =========== Projected benefit obligation for service rendered to date .......................... $ 8,220,000 $ 6,422,000 Plan assets at fair value .................. 6,197,000 5,250,000 ----------- ----------- Projected benefit obligation in excess of plan assets ............................ 2,023,000 1,172,000 Unrecognized net loss ...................... (2,833,000) (1,573,000) Unrecognized net asset at date of transition 167,000 211,000 Additional minimum liability ............... 2,666,000 1,362,000 ----------- ----------- Accrued pension cost ....................... $ 2,023,000 $ 1,172,000 =========== ===========
In accordance with Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions," an additional minimum pension liability, representing the excess of accumulated benefits over plan assets and accrued pension costs, was recognized at December 31, 1995 and 1994. A corresponding amount, net of income tax benefit of $548,000 and $525,000 was recorded as a separate reduction to stockholders' equity in 1995 and 1994, respectively. The significant increase in accrued pension cost is directly attributable to the use of a lower discount rate in calculating the projected benefit obligation due to the dramatic drop in interest rates during 1995. The Plan made significant lump sum distributions during 1994 resulting in a settlement of the Plan as defined by Statement of Financial Accounting Standards No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination of Benefits". As a result, the Company recorded an additional expense of $451,000 for the year ended December 31, 1994. The Company does not provide postretirement or postemployment benefits other than pensions to employees. Therefore, SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and SFAS No. 112, "Employers' Accounting for Postemployment Benefits" have no impact on the Company's financial statements. 10. SEGMENT INFORMATION 35 20 The Company's operations consist of (i) the development, management and ownership of real estate properties; (ii) the single-family home and garden apartment business conducted through its Levitt subsidiary; and (iii) the supplying of construction services through its HRH subsidiary. The Company groups its business into these three segments. The following table sets forth the Company's revenues and operating profit attributable to the respective segments of its operations for each of the years 1993 through 1995, and the identifiable assets attributable to the respective segments as at the end of each of those years:
DEVELOPMENT HRH MANAGEMENT AND LEVITT CONSTRUCTION OWNERSHIP CORPORATION CORPORATION CONSOLIDATED -------------- ----------- ------------ ------------ (Dollars in Thousands) 1995 Revenues .................... $ 26,647 $102,768 $ 8,917 $138,332 ======== ======== ======== ======== Operating profit (1) ........ $ 1,533 $ 10,823 $ 3,241 $ 15,597 ======== ======== ======== ======== General corporate expenses... 3,220 -------- Income from operations before income taxes ........ $ 12,377 ======== Identifiable assets ......... $ 17,373 $ 95,631 $ 13,341 $126,345 ======== ======== ======== ======== 1994 Revenues .................... $ 25,635 $111,422 $ 4,278 $141,335 ======== ======== ======== ======== Operating profit (1) ........ $ 2,575 $ 10,085 $ 309 $ 12,969 ======== ======== ======== ======== General corporate expenses... 2,663 -------- Income from operations before income taxes ........ $ 10,306 ======== Identifiable assets ......... $ 20,539 $ 85,423 $ 10,305 $116,267 ======== ======== ======== ======== 1993 Revenues .................... $ 24,504 $ 93,678 $ 4,000 $122,182 ======== ======== ======== ======== Operating profit (loss) (1).. $ 2,600 $ 4,257 $ (372) $ 6,485 ======== ======== ======== ======== General corporate expenses... 1,897 -------- Income from operations before income taxes ........ $ 4,588 ======== Identifiable assets ......... $ 25,797 $ 86,300 $ 8,187 $120,284 ======== ======== ======== ========
(1) Operating profit is comprised of revenues less operating expenses. In computing operating profit, general corporate expenses and income taxes have not been deducted. 36 21 (2) There were no customers from which the Company derived more than 10% of its revenues in 1995, 1994 or 1993. 11. COMMITMENTS AND CONTINGENCIES Roosevelt Island Associates ("RIA"), a partnership in which a Company subsidiary is one of several partners, has provided guaranteed payments to the investor partner. The Company's share of such guarantees is approximately $100,000 each year until 2005, which will be paid by the Company if project cash flow is insufficient to cover these amounts. In connection with this project, the Company also provided cash flow guarantees from which it will be released if the project achieves a certain cash flow level over a specified period of time. The Company believes it has adequately provided for any future obligations under this guarantee. The Company's Levitt subsidiary provides for estimated warranty costs when homes are sold and continuously monitors its warranty exposure and service program. Rent expense for the years ended December 31, 1995, 1994 and 1993 was $1,336,000, $1,133,000 and $1,004,000, respectively. At December 31, 1995 the Company and its subsidiaries are committed under long-term leases expiring at various dates through 2000. The minimum rentals are $1,280,000 in 1996, $637,000 in 1997, $557,000 in 1998, $401,000 in 1999, and $210,000 in 2000, or an aggregate of $3,085,000. The Company is involved in litigation and claims incident to the normal conduct of its business. Management believes that such litigation and claims will not have a materially adverse effect on the Company's consolidated financial position or results of operations. 37 22 12. QUARTERLY FINANCIAL DATA (Unaudited) The quarterly financial data are set forth below (dollars in thousands, except per share amounts):
1995 1995 1995 1995 Annual March 31 June 30 Sept. 30 Dec. 31 Amount --------- -------- --------- -------- ------- Revenues .......................... $ 30,281 $ 23,401 $ 32,805 $ 51,845 $138,332 Income from construction contracts and related revenues.............. 13,379 13,356 15,751 22,756 65,242 Income before income taxes ............................ 1,735 1,955 3,017 5,670 12,377 Net income ........................ 989 1,114 1,796 3,466 7,365 Earnings per common and common equivalent share - Net income ........................... $ .16 $ .18 $ .28 $ .56 $ 1.18
1994 1994 1994 1994 Annual March 31 June 30 Sept. 30 Dec. 31 Amount --------- -------- --------- -------- ------- Revenues .......................... $ 27,395 $ 28,042 $ 32,868 $ 53,030 $141,335 Income from construction contracts and related revenues.............. 11,980 13,436 14,382 18,678 58,476 Income before income taxes ............................ 1,300 1,906 2,481 4,619 10,306 Net income ........................ 695 1,031 1,488 2,945 6,159 Earnings per common and common equivalent share - Net income ........................... $ .11 $ .17 $ .23 $ .47 $ .98
Certain quarterly amounts have been reclassified to conform with the annual presentation. 38 23 SCHEDULE III STARRETT CORPORATION (Parent Company Only) CONDENSED STATEMENTS OF FINANCIAL POSITION December 31, 1995 and 1994 (In Thousands)
1995 1994 ------- ------ Assets: Cash and cash equivalents ......... $ 2,162 $ 6,137 Investments in subsidiaries, at equity in underlying net assets .. 84,800 77,592 Other assets ...................... 8,689 8,097 ------- ------- TOTAL ...................... $95,651 $91,826 ======= ======= Liabilities and Stockholders' Equity: Liabilities payable within one year... $ 3,682 $ 6,403 Advances from subsidiaries ........... 31,539 30,276 Deferred income taxes ................ 5,499 3,246 Other liabilities .................... 1,326 1,851 Long-term obligations ................ 1,467 2,933 Stockholders' equity ................. 52,138 47,117 ------- ------- TOTAL ........................ $95,651 $91,826 ======= =======
STARRETT CORPORATION (Parent Company Only) CONDENSED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1995, 1994 and 1993 (In Thousands)
1995 1994 1993 ------- ------- ------ Revenues ............................. $ 1,053 $ 1,046 $ 2,035 General and administrative expenses... (3,220) (2,663) (1,897) Other costs .......................... (899) (33) (104) Interest ............................. (451) (660) (880) Income taxes ......................... 1,455 1,111 132 ------- ------- ------- Loss before equity in earnings of subsidiaries ..................... (2,062) (1,199) (714) Equity in earnings of subsidiaries.... 9,427 7,358 2,854 ------- ------- ------- Net Income ................. $ 7,365 $ 6,159 $ 2,140 ======= ======= =======
39 24 SCHEDULE III STARRETT CORPORATION (Parent Company Only) CONDENSED STATEMENTS OF CASH FLOWS (In Thousands)
1995 1994 1993 ---- ---- ---- OPERATING ACTIVITIES: Net Income ................................. $ 7,365 $ 6,159 $ 2,140 Adjustments to Reconcile Net Income to Net Cash (Used In) Provided by Operating Activities: Changes not affecting cash ................ (8,340) (7,488) (2,484) Changes in Operating Assets and Liabilities: Liabilities payable within one year ....... (2,333) 228 (995) Advances from subsidiaries ................ 1,263 (1,242) 2,176 Other assets .............................. (592) 106 314 Other liabilities ......................... (525) (1,089) (709) -------- -------- -------- Net Cash (Used In) Provided by Operating Activities ...................... (3,162) (3,326) 442 -------- -------- -------- FINANCING ACTIVITIES: Payment of Promissory Notes ................ (1,466) (1,467) (5,846) Payment of Cash Dividend to Common Stockholders .............................. (1,565) (391) Distributions from subsidiaries ............ 2,218 540 Purchase of Treasury Stock ................. (724) -------- -------- -------- Net Cash used in Financing Activities ...... (813) (1,858) (6,030) -------- -------- -------- Net (Decrease) in Cash and Cash Equivalents .......................... (3,975) (5,184) (5,588) Cash and Cash Equivalents Beginning of Year .......................... 6,137 11,321 16,909 -------- -------- -------- Cash and Cash Equivalents End of Year ...... $ 2,162 $ 6,137 $ 11,321 ======== ======== ========
40 25 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities and Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned,thereunto duly authorized. STARRETT CORPORATION By /s/ Lewis A. Weinfeld ---------------------------------------- Lewis A. Weinfeld, Executive Vice President, Chief Financial Officer and Secretary November 27, 1996 ---------------------------------------- Date -----END PRIVACY-ENHANCED MESSAGE-----