UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended | December 31, 2023 |
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| | | | | | | | | | | |
| For the transition period from | | to |
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| Commission file number | | 1-367 |
| | |
| THE L. S. STARRETT COMPANY |
| (Exact name of registrant as specified in its charter) |
| | | | | | | | |
| Massachusetts | | 04-1866480 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | | |
| 121 Crescent Street, Athol, Massachusetts | 01331-1915 |
| (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:
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Class A Common - $1.00 Per Share Par Value | SCX | New York Stock Exchange |
| Class B Common - $1.00 Per Share Par Value | Not applicable | 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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):
Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☒ Smaller Reporting Company ☒
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
| | | | | | | | | | | |
| Common Shares outstanding as of | | January 17, 2024 | |
| Class A Common Shares | | 6,954,519 | |
| Class B Common Shares | | 550,478 | |
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “should”, “target”, “will”, “would”, or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K and other filings with the Securities Exchange Commission (the “SEC”). You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results set forth under Item 1A. “Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended June 30, 2023.
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
THE L. S. STARRETT COMPANY
CONTENTS
THE L. S. STARRETT COMPANY
Condensed Consolidated Balance Sheets
(in thousands except share data)
(unaudited) | | | | | | | | | | | |
| 12/31/2023 | | 06/30/2023 |
| ASSETS | | | |
| Current assets: | | | |
| Cash | $ | 5,684 | | | $ | 10,454 | |
| Accounts receivable (less allowance for credit losses of $546 and $449, respectively) | 34,826 | | | 36,611 | |
| Inventories | 61,284 | | | 65,414 | |
| Prepaid expenses and other current assets | 10,950 | | | 9,723 | |
| Total current assets | 112,744 | | | 122,202 | |
| | | |
| Property, plant and equipment, net | 44,852 | | | 39,375 | |
| Right of use assets | 4,421 | | | 4,931 | |
| | | |
| Deferred tax assets, net | 15,667 | | | 17,056 | |
| Intangible assets, net | 4,829 | | | 4,672 | |
| Goodwill | 1,015 | | | 1,015 | |
| Other assets | 3,534 | | | 3,551 | |
| Total assets | $ | 187,062 | | | $ | 192,802 | |
| | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Current maturities of debt | $ | 4,403 | | | $ | 4,961 | |
| Current lease liability | 1,604 | | | 1,689 | |
| Accounts payable | 13,487 | | | 15,047 | |
| Accrued expenses | 12,162 | | | 11,579 | |
| Accrued compensation | 4,613 | | | 6,287 | |
| Total current liabilities | 36,269 | | | 39,563 | |
| | | |
| Other tax obligations | 2,899 | | | 2,884 | |
| Long-term lease liability | 2,966 | | | 3,423 | |
| Long-term debt, net of current portion and debt costs | 3,103 | | | 5,273 | |
| Postretirement benefit and pension obligations | 10,699 | | | 12,192 | |
| Total liabilities | 55,936 | | | 63,335 | |
| Contingencies (Note 12) | | | |
| Stockholders' equity: | | | |
| Class A Common stock $1 par 20,000,000 shares authorized; 8,361,535 issued, 6,953,641 outstanding at December 31, 2023 and 6,853,673 outstanding at June 30, 2023) | 6,954 | | | 6,854 | |
| Class B Common stock $1 par (10,000,000 shares authorized; 852,825 issued, 551,564 outstanding at December 31, 2023 and 576,396 outstanding at June 30, 2023 | 552 | | | 576 | |
| Additional paid-in capital | 58,050 | | | 57,825 | |
| Retained earnings | 113,672 | | | 112,147 | |
| Accumulated other comprehensive loss | (48,102) | | | (47,935) | |
| Total stockholders' equity | 131,126 | | | 129,467 | |
| Total liabilities and stockholders’ equity | $ | 187,062 | | | $ | 192,802 | |
| | | |
See Notes to unaudited Condensed Consolidated Financial Statements
THE L. S. STARRETT COMPANY
Condensed Consolidated Statements of Operations
(in thousands except per share data)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| 3 Months Ended | | 6 Months Ended |
| 12/31/2023 | | 12/31/2022 | | 12/31/2023 | | 12/31/2022 |
| | | | | | | |
| Net sales | $ | 62,076 | | | $ | 66,775 | | | $ | 122,712 | | | $ | 127,236 | |
| Cost of goods sold | 43,112 | | | 45,199 | | | 84,212 | | | 85,460 | |
| Gross profit | 18,964 | | | 21,576 | | | 38,500 | | | 41,776 | |
| % of Net sales | 30.5 | % | | 32.3 | % | | 31.4 | % | | 32.8 | % |
| | | | | | | |
| Restructuring charges | — | | | 54 | | | — | | | 244 | |
| Selling, general and administrative expenses | 16,470 | | | 15,561 | | | 33,548 | | | 31,855 | |
| | | | | | | |
| Operating income | 2,494 | | | 5,961 | | | 4,952 | | | 9,677 | |
| | | | | | | |
| Other (expense), net | (526) | | | (1,121) | | | (890) | | | (1,797) | |
| | | | | | | |
| Income before income taxes | 1,968 | | | 4,840 | | | 4,062 | | | 7,880 | |
| | | | | | | |
| Income tax expense | 2,362 | | | 1,709 | | | 2,537 | | | 2,693 | |
| | | | | | | |
| Net (loss) income | $ | (394) | | | $ | 3,131 | | | $ | 1,525 | | | $ | 5,187 | |
| | | | | | | |
| | | | | | | |
| Basic (loss) income per share | $ | (0.05) | | | $ | 0.42 | | | $ | 0.20 | | | $ | 0.71 | |
| Diluted (loss) income per share | $ | (0.05) | | | $ | 0.42 | | | $ | 0.20 | | | $ | 0.69 | |
| | | | | | | |
| Weighted average outstanding shares used in per share calculations: | | | | | | | |
| Basic | 7,501 | | | 7,405 | | | 7,469 | | | 7,354 | |
| Diluted | 7,501 | | | 7,541 | | | 7,623 | | | 7,511 | |
See Notes to unaudited Condensed Consolidated Financial Statements
THE L. S. STARRETT COMPANY
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| 3 Months Ended | | 6 Months Ended |
| 12/31/2023 | | 12/31/2022 | | 12/31/2023 | | 12/31/2022 |
| | | | | | | |
| Net (loss) income | $ | (394) | | | $ | 3,131 | | | $ | 1,525 | | | $ | 5,187 | |
| Other comprehensive income (loss): | | | | | | | |
| Currency translation gain (loss), net of tax | 2,308 | | | 2,716 | | | (97) | | | (90) | |
| Pension and postretirement plans, net of tax | (36) | | | (36) | | | (70) | | | (61) | |
| Other comprehensive income (loss) | 2,272 | | | 2,680 | | | (167) | | | (151) | |
| | | | | | | |
| Total comprehensive income | $ | 1,878 | | | $ | 5,811 | | | $ | 1,358 | | | $ | 5,036 | |
See Notes to unaudited Condensed Consolidated Financial Statements
THE L. S. STARRETT COMPANY
Condensed Consolidated Statements of Stockholders' Equity
(in thousands) (unaudited)
For the Three and Six-Month Period Ended December 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock
Outstanding | | Additional
Paid-in
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Total |
| Class A | | Class B | | | | |
| | | | | | | | | | | |
| Balance June 30, 2023 | $ | 6,854 | | | $ | 576 | | | $ | 57,825 | | | $ | 112,147 | | | $ | (47,935) | | | $ | 129,467 | |
| Total comprehensive income (loss) | — | | | — | | | — | | | 1,920 | | | (2,439) | | | (519) | |
| Repurchase of shares | — | | | (2) | | | (21) | | | — | | | — | | | (23) | |
| Stock-based compensation | 56 | | | — | | | 9 | | | — | | | — | | | 65 | |
| Conversion | 23 | | | (23) | | | — | | | — | | | — | | | — | |
| Balance September 30, 2023 | $ | 6,933 | | | $ | 551 | | | $ | 57,813 | | | $ | 114,067 | | | $ | (50,374) | | | $ | 128,990 | |
| | | | | | | | | | | |
| Total comprehensive (loss) income | — | | | — | | | — | | | (394) | | | 2,272 | | | 1,878 | |
| Repurchase of shares | — | | | — | | | (3) | | | — | | | — | | | (3) | |
| Issuance of stock | — | | | 5 | | | 35 | | | — | | | — | | | 40 | |
| Stock-based compensation | 17 | | | — | | | 205 | | | — | | | — | | | 222 | |
| Conversion | 4 | | | (4) | | | — | | | — | | | — | | | — | |
| Balance December 31, 2023 | $ | 6,954 | | | $ | 552 | | | $ | 58,050 | | | $ | 113,672 | | | $ | (48,102) | | | $ | 131,126 | |
| | | | | | | | | | | |
| Accumulated balance consists of: | | | | | | | | | | | |
| Translation loss | | | | | | | | | $ | (55,937) | | | |
| Pension and postretirement plans, net of taxes | | | | | | | | | 7,835 | | | |
| | | | | | | | | $ | (48,102) | | | |
For the Three and Six-Month Period Ended December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock
Outstanding | | Additional
Paid-in
Capital | | Retained
Earnings | | Accumulated
Other
Comprehensive
Loss | | Total |
| Class A | | Class B | | | | |
| | | | | | | | | | | |
| Balance June 30, 2022 | $ | 6,683 | | | $ | 610 | | | $ | 57,143 | | | $ | 89,059 | | | $ | (51,066) | | | $ | 102,429 | |
| Total comprehensive income (loss) | — | | | — | | | — | | | 2,056 | | | (2,831) | | | (775) | |
| Repurchase of shares | — | | | (1) | | | (5) | | | — | | | — | | | (6) | |
| Stock-based compensation | 76 | | | — | | | 109 | | | — | | | — | | | 185 | |
| Conversion | 12 | | | (12) | | | — | | | — | | | — | | | — | |
| Balance September 30, 2022 | $ | 6,771 | | | $ | 597 | | | $ | 57,247 | | | $ | 91,115 | | | $ | (53,897) | | | $ | 101,833 | |
| | | | | | | | | | | |
| Total comprehensive income | — | | | — | | | — | | | 3,131 | | | 2,680 | | | 5,811 | |
| Repurchase of shares | — | | | — | | | (3) | | | — | | | — | | | (3) | |
| Issuance of stock | — | | | 34 | | | 50 | | | — | | | — | | | 84 | |
| Stock-based compensation | 25 | | | — | | | 160 | | | — | | | — | | | 185 | |
| Conversion | 7 | | | (7) | | | — | | | — | | | — | | | — | |
| Balance December 31, 2022 | $ | 6,803 | | | $ | 624 | | | $ | 57,454 | | | $ | 94,246 | | | $ | (51,217) | | | $ | 107,910 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Accumulated balance consists of: | | | | | | | | | | | |
| Translation loss | | | | | | | | | $ | (60,166) | | | |
| Pension and postretirement plans, net of taxes | | | | | | | | | 8,949 | | | |
| | | | | | | | | $ | (51,217) | | | |
See Notes to unaudited Condensed Consolidated Financial Statements
THE L. S. STARRETT COMPANY
Condensed Consolidated Statements of Cash Flows
(in thousands) (unaudited) | | | | | | | | | | | |
| 6 Months Ended |
| 12/31/2023 | | 12/31/2022 |
| | | |
| Cash flows from operating activities: | | | |
| | | |
| Net income | $ | 1,525 | | | $ | 5,187 | |
| | | |
| Non-cash operating activities: | | | |
| Depreciation | 2,779 | | | 2,585 | |
| Amortization | 525 | | | 720 | |
| Stock-based compensation | 287 | | | 370 | |
| Net long-term tax obligations | 1 | | | 91 | |
| Deferred taxes | 1,374 | | | 977 | |
| Postretirement benefit and pension obligations | 295 | | | 314 | |
| Working capital changes: | | | |
| Accounts receivable | 1,962 | | | 4,530 | |
| Inventories | 4,158 | | | (3,307) | |
| Other current assets | (1,229) | | | (1,098) | |
| Other current liabilities | (2,842) | | | (4,818) | |
| Prepaid pension expense | (1,860) | | | (1,147) | |
| Other | 136 | | | 70 | |
| Net cash provided by operating activities | 7,111 | | | 4,474 | |
| | | |
| Cash flows from investing activities: | | | |
| Purchases of property, plant and equipment | (8,316) | | | (3,713) | |
| Software development | (683) | | | (477) | |
| Net cash (used in) investing activities | (8,999) | | | (4,190) | |
| | | |
| Cash flows from financing activities: | | | |
| Proceeds from borrowing | 6,000 | | | 1,575 | |
| Debt repayments | (8,781) | | | (7,508) | |
| Proceeds from common stock issued | 40 | | | 84 | |
| Shares repurchased | (26) | | | (9) | |
| Net cash (used in) financing activities | (2,767) | | | (5,858) | |
| | | |
| Effect of exchange rate changes on cash | (115) | | | 8 | |
| | | |
| Net (decrease) in cash | (4,770) | | | (5,566) | |
| Cash, beginning of period | 10,454 | | | 14,523 | |
| Cash, end of period | $ | 5,684 | | | $ | 8,957 | |
| | | |
| Supplemental cash flow information: | | | |
| Interest paid | 458 | | | 802 | |
| Income taxes paid, net | $ | 2,117 | | | $ | 3,360 | |
See Notes to unaudited Condensed Consolidated Financial Statements
THE L. S. STARRETT COMPANY
Notes to unaudited Condensed Consolidated Financial Statements
December 31, 2023
Note 1: Basis of Presentation and Summary of Significant Accounting Policies
The unaudited Condensed Consolidated Financial Statements as of and for the six months ended December 31, 2023 have been prepared by The L.S. Starrett Company (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These unaudited Consolidated Financial Statements, which, in the opinion of management, reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation, should be read in conjunction with the audited Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the year ended June 30, 2023. The balance sheet as of June 30, 2023 has been derived from the audited Condensed Consolidated Financial Statements as of and for the year ended June 30, 2023. Operating results are not necessarily indicative of the results that may be expected for any future interim period or for the entire fiscal year. The Company’s “fiscal year” begins July 1st and ends June 30th.
Accounts Receivable and Allowance for Credit Losses
Trade accounts receivable are recorded at invoiced amount and do not bear interest. The allowance for credit losses is the Company's estimate of current expected credit losses on its existing accounts receivable and determined based on historical customer assessments, current financial conditions and reasonable and supportable forecasts. Account balances are charged off against the allowance when the Company determines the receivable will not be recovered.
Fair Value Measurements
Certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of their short-term maturity. See Notes 10 and 11 to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for financial assets and liabilities held at carrying amount on the unaudited Condensed Consolidated Balance Sheet.
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect amounts reported in the unaudited Condensed Consolidated Financial Statements and accompanying notes. Note 1 within the notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q and Note 2 to the Company’s audited Condensed Consolidated Financial Statements included in the Annual Report on Form 10-K, as amended, for the year ended June 30, 2023 describes the significant accounting policies and methods used in the preparation of the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
Note 2: Segment Information
The segment information and the accounting policies of each segment are the same as those described in the notes to the audited Consolidated Financial Statements entitled “Financial Information by Segment” included in our Annual Report on Form 10-K, as amended, for the year ended June 30, 2023. The chief operating decision maker, who is the Company’s President and CEO, allocates resources and assesses performance based on three segments: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM".
Segment income is measured for internal reporting purposes by excluding corporate expenses, which are included in the unallocated column in the table below. Other income and expense, including interest income and expense, and income taxes are excluded entirely from the table below. There were no significant changes in the segment operations or in the segment assets
from the Annual Report on Form 10-K, as amended, for the year ended June 30, 2023. Financial results for each reportable segment are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NAI | | INI | | GTM | | Unallocated | | Total |
| Three Months ended December 31, 2023 | | | | | | | | | |
| | | | | | | | | |
Sales1 | $ | 19,814 | | | $ | 26,425 | | | $ | 15,837 | | | $ | — | | | $ | 62,076 | |
| | | | | | | | | |
| Operating Income (Loss) | $ | (185) | | | $ | 2,227 | | | $ | 2,520 | | | $ | (2,068) | | | $ | 2,494 | |
| | | | | | | | | |
| Three Months ended December 31, 2022 | | | | | | | | | |
| | | | | | | | | |
Sales2 | $ | 22,780 | | | $ | 26,051 | | | $ | 17,944 | | | $ | — | | | $ | 66,775 | |
| | | | | | | | | |
| Operating Income (Loss) | $ | 176 | | | $ | 3,796 | | | $ | 3,314 | | | $ | (1,325) | | | $ | 5,961 | |
1.Excludes $348 of NAI segment intercompany sales to the INI segment, $114 of GTM segment intercompany sales to the INI segment, $3,560 of INI segment intercompany sales to NAI and $279 of GTM intercompany sales to NAI.
2.Excludes $546 of NAI segment intercompany sales to the INI segment, $161 of GTM segment intercompany sales to the INI segment, $3,992 of INI segment intercompany sales to NAI and $258 of GTM intercompany sales to NAI.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| NAI | | INI | | GTM | | Unallocated | | Total |
| Six months ended December 31, 2023 | | | | | | | | | |
| | | | | | | | | |
Sales1 | $ | 39,284 | | | $ | 51,799 | | | $ | 31,629 | | | $ | — | | | $ | 122,712 | |
| Operating Income (Loss) | $ | (869) | | | $ | 4,987 | | | 4,892 | | | $ | (4,058) | | | $ | 4,952 | |
| | | | | | | | | |
| Six months ended December 31, 2022 | | | | | | | | | |
| | | | | | | | | |
Sales2 | $ | 45,151 | | 0 | $ | 49,350 | | | $ | 32,735 | | | $ | — | | | $ | 127,236 | |
| Operating Income (Loss) | $ | 876 | | | $ | 6,485 | | | $ | 5,592 | | | $ | (3,277) | | | $ | 9,677 | |
1.Excludes $681 of NAI segment intercompany sales to the INI segment, $192 of GTM segment intercompany sales to the INI segment, $7,036 of INI segment intercompany sales to NAI and $979 of GTM intercompany sales to NAI.
2.Excludes $1,198 of NAI segment intercompany sales to the INI segment, $436 of GTM segment intercompany sales to the INI segment, $8,617 of INI segment intercompany sales to NAI and $668 of GTM intercompany sales to NAI.
Note 3: Revenue from Contracts with Customers
Under ASC Topic 606, the Company is required to present a refund liability and a return asset within the unaudited Condensed Consolidated Balance Sheet. As of December 31, 2023 and June 30, 2023, the balance of the return asset was $0.2 million and $0.1 million, respectively, and the balance of the refund liability as of December 31, 2023 and June 30, 2023 was $0.3 million and $0.1 million, respectively. They are presented within prepaid expenses and other current assets and accrued expenses, respectively, on the unaudited Condensed Consolidated Balance Sheets.
The Company, in general, warrants its products against certain defects in material and workmanship when used as designed, for a period of up to one year. The Company does not sell extended warranties.
Contract Balances
Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts with customers. Contract assets are transferred to receivables when the rights become unconditional. Contract
liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been met, and therefore, revenue has not been recognized. The Company had no contract asset balances, but had contract liability balances of $0.3 million and $0.3 million at December 31, 2023 and June 30, 2023, respectively, located in Accounts Payable in the Condensed Consolidated Balance Sheets.
Disaggregation of Revenue
The Company operates in three reportable segments. ASC Topic 606 requires further disaggregation of an entity’s revenue. In the following table, the Company's net sales by shipping origin are disaggregated accordingly for the three and six months ended December 31, 2023 and 2022 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| 12/31/2023 | | 12/31/2022 | | 12/31/2023 | | 12/31/2022 |
| | | | | | | |
| United States | $ | 33,132 | | | $ | 37,620 | | | $ | 65,908 | | | $ | 71,892 | |
| Canada & Mexico | 1,792 | | | 2,067 | | | 3,550 | | | 4,278 | |
| Brazil | 20,209 | | | 20,057 | | | 39,639 | | | 37,305 | |
| United Kingdom | 3,095 | | | 3,294 | | | 6,630 | | | 6,494 | |
| China | 1,879 | | | 1,978 | | | 3,336 | | | 3,665 | |
| Australia & New Zealand | 1,969 | | | 1,759 | | | 3,649 | | | 3,601 | |
| | | | | | | |
| Total Sales | $ | 62,076 | | | $ | 66,775 | | | $ | 122,712 | | | $ | 127,236 | |
Note 4: Leases
Operating lease cost amounted to $0.5 million and $1.0 million for the three and six months ended December 31, 2023 and $0.8 million and $1.0 million for the three and six months ended December 31, 2022. As of December 31, 2023, the Company’s right-of-use assets "ROU", lease obligations and remaining cash commitment on these leases were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Right-of-Use
Assets | | Operating Lease
Obligations | | Remaining Cash
Commitment |
| Leases | $ | 4,421 | | | $ | 4,570 | | | $ | 5,235 | |
The Company has other operating lease agreements with commitments of less than one year or that are not significant. The Company elected the practical expedient option and as such, these lease payments are expensed as incurred. The Company’s weighted average discount rate and remaining term on lease liabilities is approximately 9.0% and 2.8 years. As of December 31, 2023, the Company’s financing leases are not material. The foreign exchange impact affecting the operating leases are, also, not material.
The Company entered into $0.1 million and $0.2 million, in new operating lease commitments in the three and six months ended December 31, 2023.
Note 5: Stock-based Compensation
Compensation expense related to all stock-based plans for the three and six months ended December 31, 2023 were $0.2 million and $0.3 million as compared to the prior year three and six months of $0.2 million and $0.3 million, respectively.
Note 6: Inventories
Inventories consist of the following (in thousands):
| | | | | | | | | | | |
| 12/31/2023 | | 06/30/2023 |
| Raw material and supplies | $ | 34,700 | | | $ | 36,402 | |
| Goods in process and finished parts | 19,940 | | | 20,978 | |
| Finished goods | 33,042 | | | 34,414 | |
| 87,682 | | | 91,794 | |
| LIFO Reserve | (26,398) | | | (26,380) | |
| $ | 61,284 | | | $ | 65,414 | |
Of the Company’s $61.3 million and $65.4 million total inventory at December 31, 2023 and June 30, 2023, respectively, the $26.4 million and $26.4 million LIFO reserves belong to the U.S. Precision Tools and Saws Manufacturing “Core U.S.” business. The Core U.S. business total inventory was $38.4 million on a FIFO basis and $12.0 million on a LIFO basis at December 31, 2023. The Core U.S. business had total inventory, on a FIFO basis, of $38.1 million and $11.7 million on a LIFO basis as of June 30, 2023. The use of LIFO, as compared to FIFO, resulted in, during the three months and six months ended December 31, 2023, a $0.1 million increase and no increase in cost of sales as compared to a $0.1 million increase and a $0.6 million decrease in the three and six months ended December 31, 2022.
Note 7: Goodwill and Intangible Assets
Amortizable intangible assets consist of the following (in thousands):
| | | | | | | | | | | |
| 12/31/2023 | | 6/30/2023 |
| Trademarks and trade names | $ | 2,070 | | | $ | 2,070 | |
| | | |
| Customer relationships | 630 | | | 630 | |
| Software development | 9,745 | | | 11,149 | |
| Other intangible assets | 106 | | | 105 | |
| | | |
| Gross intangible assets | 12,551 | | | 13,954 | |
| Accumulated amortization and impairment | (7,722) | | | (9,282) | |
| Net intangible assets | $ | 4,829 | | | $ | 4,672 | |
The estimated useful lives of the intangible assets subject to amortization range between 5 years for software development and 20 years for trademark and trade name assets.
The goodwill balance at December 31, 2023, gross $4.7 million and accumulated impairment of $3.7 million. There is no change in the six months ended December 31, 2023 to the net goodwill balance of $1.0 million.
Note 8: Accrued Expenses
The following table represents accrued expenses from the unaudited Condensed Consolidated Balance Sheets (in thousands)
| | | | | | | | | | | |
| 12/31/2023 | | 06/30/2023 |
| Sales related programs (commissions, rebates, distributor programs, warranty and related) | $ | 3,323 | | | $ | 2,590 | |
| Income taxes | 102 | | | 509 | |
| Professional fees | 1,860 | | | 2,237 | |
| Other | 1,214 | | | 1,499 | |
| Current portion pension cost | 2,205 | | | 2,216 | |
| Taxes other than income tax | 2,727 | | | 1,888 | |
| Workers compensation and employee deposits | 429 | | | 491 | |
| Freight | 302 | | | 149 | |
| Total | $ | 12,162 | | | $ | 11,579 | |
Note 9: Pension and Post-retirement Benefits
The Company has two defined benefit pension plans, one for U.S. employees which was frozen for new participants in 2016 and another for U.K. employees frozen for new participants in 2009. The Company has a postretirement medical insurance benefit plan for U.S. employees which remains open. The Company also has defined contribution plans.
Net periodic benefit costs for the Company's defined benefit pension plans are located in Other (expense) in the unaudited Condensed Consolidated Statements of Operations except for service cost. Service cost are in cost of sales and selling, general and administrative expenses allocated on headcount. Net periodic benefit costs consist of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| 12/31/2023 | | 12/31/2022 | | 12/31/2023 | | 12/31/2022 |
| Interest cost | 1,502 | | | 1,408 | | | 3,054 | | | 2,890 | |
| Expected return on plan assets | (1,049) | | | (960) | | | (2,147) | | | (1,992) | |
| Amortization of net loss | 10 | | | 10 | | | 20 | | | 20 | |
| Expected net cost total | $ | 463 | | | $ | 458 | | | $ | 927 | | | $ | 918 | |
Net periodic benefit costs (credits) for the Company's Postretirement Medical Plan consists of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| 12/31/2023 | | 12/31/2022 | | 12/31/2023 | | 12/31/2022 |
| Service cost | $ | 4 | | | $ | 5 | | | $ | 9 | | | $ | 11 | |
| Interest cost | 18 | | | 17 | | | 35 | | | 35 | |
| Amortization of prior service credit | (368) | | | (368) | | | (737) | | | (737) | |
| Amortization of net loss | 31 | | | 45 | | | 62 | | | 89 | |
| Total net (benefit) | $ | (315) | | | $ | (301) | | | $ | (631) | | | $ | (602) | |
For the three months and six months ended December 31, 2023, the Company contributed in the U.S. $0.6 million and $1.4 million. In the UK pension plans the Company contributed $0.2 million and $0.5 million for the same periods. Based upon the actuarial valuations performed on the Company’s defined benefit plans as of June 30, 2023, the contribution for fiscal 2024 for the U.S. plans would require a contribution of $3.0 million and the U.K. plan would require $1.0 million. However, as a result of the American Rescue Plan Act of 2021, the minimum required company contribution for the U.S. Plan was reduced. The Company believes that government regulation is only a small part of deciding the pension funding, and as a result, may contribute more than the federal requirement. The Company contributed $2.4 million in total during fiscal year 2023, with $1.5 million in the U.S. and $0.9 million in the U.K. The Company evaluates the U.S. future contribution on a quarterly basis. The Company currently believes contributions in fiscal year 2024 will be similar to the prior year or slightly higher.
The Company’s pension plans use fair value as the market-related value of plan assets and recognize net actuarial gains or losses in excess of ten percent (10%) of the greater of the market-related value of plan assets or of the plans’ projected benefit
obligation in net periodic (benefit) cost as of the plan measurement date. Net actuarial gains or losses that are less than 10% of the thresholds noted above are accounted for as part of accumulated other comprehensive loss.
Note 10: Debt
Debt is comprised of the following (in thousands):
| | | | | | | | | | | |
| 12/31/2023 | | 06/30/2023 |
| Short-term and current maturities | | | |
| | | |
| Loan and security agreement (term loan) | $ | 2,168 | | | $ | 1,495 | |
| Brazil loans | 2,235 | | | 3,466 | |
| 4,403 | | | 4,961 | |
Long-term debt (net of current portion) | | | |
| Loan and security agreement (term loan) | 2,910 | | | 1,957 | |
| Loan and security agreement (line of credit) | 397 | | | 2,897 | |
| Brazil loans | 151 | | | 827 | |
| Debt reacquisition cost, net | (355) | | | (408) | |
| 3,103 | | | 5,273 | |
| Total debt | $ | 7,506 | | | $ | 10,234 | |
On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a Loan and Security agreement (the "Loan and Security Agreement") with HSBC Bank USA ("the Lender"). The Company incurred debt re-acquisition cost of $0.5 million which are recorded net of debt and amortized over five years.
These credit facilities are comprised of a $30 million revolving Loan and Security Agreement Line of Credit ("Line of Credit") with a $10 million uncommitted accordion provision, a Loan and Security Agreement Term Loan ("the Term Loan") with original principal of $12.1 million and a $7.0 million Capital Expenditure draw down credit facility (collectively, the "Facilities"). The Facilities are secured by a valid first-priority security interest on substantially all existing and future assets of the Company and its domestic subsidiaries.
The interest rate on the Facilities is based on a grid which uses the percentage of the remaining availability of the revolving credit line to determine the floating margin to be added to the one month or three months Secured Overnight Financing Rate, "SOFR". The Facilities mature on April 29, 2027.
Availability under the revolving line of credit is secured by and subject to a borrowing base comprised of eligible inventory and accounts receivable. The percentage of receivables included in the borrowing base is 90% for domestic investment grade and foreign insured accounts, 85% for domestic accounts that are neither investment grade nor insured, and 75% of foreign uninsured accounts. The percentage of inventory included in the borrowing base is the lower of 65% of the value of eligible inventory at cost or 85% of the net orderly liquidation value of eligible inventory at cost. Receivables and inventory are reported monthly to HSBC and subject to an annual field exam and inventory appraisal by an independent auditor commissioned by the Bank. The Company believes that the agreement provides an initial borrowing base sufficient for current domestic working capital needs and flexibility to accommodate potential growth-related working capital needs.
Availability under the Line of Credit remains subject to a borrowing base comprised of Accounts Receivable, Inventory, and Real Estate. The Company believes that the borrowing base will consistently produce availability under the Line of Credit of $30.0 million. A 0.25% commitment fee is charged on the unused portion of the Line of Credit.
Availability under the Term Loan was comprised of 70% of the fair market value of the Borrower's eligible real estate, which included facilities located in Westlake, Ohio, and Waite Park, Minnesota and totaled $4.6 million; and 85% of the net orderly liquidation value of the Borrowers’ machinery and equipment, capped at $7.5 million. The real estate portion of the Term facility is subject to a 12.5 year straight line amortization paid quarterly, and the machinery and equipment portion of the facility is subject to a 6.67 year straight line amortization, also paid quarterly. The Term Loan is subject to equal quarterly installments of $373,650, payable on the last day of each fiscal quarter.
The capital expenditure drawn down facility was available for a period of 18 months after April 29, 2022, and its availability expired during the quarter ended December 31, 2023. During the six months ended December 31, 2023, $2.0 million was
drawn on the facility for the purpose of facilitating the expansion of production capacity at the Company's precision granite manufacturing facility in Waite Park, MN. Amounts outstanding under the facility are subject to a 3.75% amortization rate per quarter, with interest charged at the same rate as the Term Loan facility.
The Facilities contain financial covenants with respect to a minimum fixed charge coverage ratio of 1.00, measured on a trailing twelve-month basis, for both the U.S. borrowing companies tested quarterly and the Consolidated L.S. Starrett Company tested semi-annually. The Loan and Security agreement also contains the customary affirmative and negative covenants, including limitations on indebtedness, liens, acquisitions, asset dispositions, fundamental corporate changes, excess pension contributions, and certain customary events of default. Upon the occurrence or continuation of an event of default, the Lender may terminate all commitments and facilities, and require the immediate payment of the entire unpaid principal balances, accrued interest, and all other obligations. The Company is in compliance with its debt covenants.
In Brazil, affecting the need for borrowing, the Company historically had a build-up of ICMS (which translates to "Tax on Commerce and Services"). The Company has changed the methodology of charging and re-claiming ICMS on imports and domestic sales so that this credit is subsequently relieved and does not increase at that rate again. The ICMS balance as of June 30, 2023 was $4.9 million and $4.2 million as of December 31, 2023. The balance is located on the unaudited Condensed Consolidated Balance Sheets in prepaid expenses and other current assets.
The Company’s Brazilian subsidiary incurs short-term loans with local banks in order to support the Company’s strategic initiatives. The loans are backed by the entity’s US dollar denominated export receivables. Included in the table below are $0.4 million of financing on purchased fixed assets. The Company’s Brazilian subsidiary has the following loans as of December 31, 2023 (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Lending Institution | Interest Rate | | Beginning Date | | Ending Date | | Outstanding Balance |
| Itau | 4.52% | | October 2021 | | September 2024 | | $ | 1,714 | |
| Itau | 4.98% | | February 2022 | | February 2024 | | 305 | |
| Brasil | 4.95% | | August 2022 | | July 2025 | | 302 | |
| Brasil | 3.80% | | September 2022 | | August 2024 | | 65 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | $ | 2,386 | |
Total debt was reduced by $5.7 million and $2.7 million during the three and six months ended December 31, 2023, respectively, and the Brazilian loans were reduced by $0.9 million and $1.9 million in the three and six months ended December 31, 2023, respectively.
Note 11: Income Taxes
Tax expense for the three month period ended December 31, 2023 was $2.4 million on profit before tax of $2.0 million (an effective tax rate of 120%). During the three month period ended December 31, 2023, the Company recorded a discrete tax expense of $2.0 million, increasing its valuation allowance against its foreign tax credit carryforwards, due to IRS Notice 2023-80 released in December 2023, which modifies the temporary relief period from applying the final foreign tax credit regulations to tax years beginning on or after December 28, 2021 and ending before the date that notice or guidance withdrawing or modifying the temporary relief is issued. Other than this discrete tax expense recorded, the effective rate for the three months ended December 31, 2023 was lower than the U.S. statutory tax rate of 21% primarily due to the favorable impact that IRS Notice 2023-80 has on the Company current year GILTI inclusion and creditable foreign withholding taxes, offset by the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34% and foreign losses not benefitted.
Tax expense for the three month period ended December 31, 2022 was $1.7 million on profit before tax of $4.8 million (an effective tax rate of 35%). The effective tax rate for the three month period ended December 31, 2022 was higher than the U.S. statutory tax rate of 21% primarily due to the GILTI provisions, and the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, offset by tax credits and permanent deductions generated from research expenses.
Tax expense for the six month period ended December 31, 2023 was $2.5 million on profit before tax of $4.1 million (an effective tax rate of 62%). During the six month period ended December 31, 2023, the Company recorded a discrete tax expense of $1.3 million related to IRS Notice 2023-55 released in July 2023 which grants taxpayers temporary relief from applying these final foreign tax credit regulations for tax years beginning on or after December 28, 2021 and ending on or before December 31, 2023 and IRS Notice 2023-80 released in December 2023 which modifies the temporary relief period from applying the final foreign tax credit regulations to tax years beginning on or after December 28, 2021 and ending before the date that notice or guidance withdrawing or modifying the temporary relief is issued. Other than this discrete tax expense
recorded, the effective rate for the six months ended December 31, 2023 was higher than the U.S. statutory tax rate of 21% primarily due to the GILTI provisions, and the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, offset by tax credits and permanent deductions generated from research expenses.
Tax expense for the six month period ended December 31, 2022 was $2.7 million on profit before tax of $7.9 million (an effective tax rate of 34%). The effective tax rate for the six month period ended December 31, 2022 was higher than the U.S. statutory tax rate of 21% primarily due to the GILTI provisions, and the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, offset by discrete tax benefits recognized from excess stock compensation deductions, tax credits and permanent deductions generated from research expenses.
The Company has considered the positive and negative evidence to determine the need for a valuation allowance offsetting the deferred tax assets in the U.S. and has concluded that a partial valuation allowance is required against foreign tax credit carryforwards and certain state net operating loss carryforwards at December 31, 2023 and June 30, 2023. The Company had long term tax obligations related primarily to transfer pricing adjustments at December 31, 2023 and June 30, 2023.
Note 12: Contingencies
The Company is involved in certain legal matters, which arise, in the normal course of business. The Company does not believe it is reasonably possible that these matters will have a material adverse effect on the Company’s financial condition, results of operations or cash flows.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Use of Non- GAAP Financial Measures
In "Management's discussion and analysis on financial condition and results of operations" in this Quarterly Report on Form 10-Q, we discuss non-GAAP financial measures including currency-neutral sales, and adjusted operating income.
We present these non-GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. Such non- GAAP financial measures assist investors in understanding the ongoing operating performance of the Company by presenting financial results between periods on a more comparable basis. Such measures should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Currency-neutral sales are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations. Adjusted operating income adjusts for restructuring costs that are reflected in one period but not the other in order to show comparative operational performance. We include a reconciliation of currency-neutral sales and adjusted operating income to its comparable GAAP financial measures.
References to currency-neutral sales and adjusted operating income should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with GAAP and may not be comparable to similarly titled non- GAAP financial measures used by other companies. In evaluating these non-GAAP financial measures, investors should be aware that in the future we may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. Our presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.
Please see Note 2 within the notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q regarding segment results of operations. The Company’s business is aggregated into three reportable segments of operations: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM". Segment income is measured for internal reporting purposes by excluding corporate expenses, which are included in the unallocated column in the following tables as well as in Note 2 within the notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q. These tables are included to better explain our consolidated operational performance by showing more detail by business segment and reconciling GAAP operating income and adjusted operating income.
Results of Operations
The following table represents key results of operations on a consolidated basis for the three months and six months ended December 31, 2023 and December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| (Amounts in thousands) | 12/31/23 | 12/31/2022 | $ Change favorable (unfavorable) | % Change | | 12/31/2023 | 12/31/2022 | $ Change favorable (unfavorable) | % Change |
| Net sales | $ | 62,076 | | $ | 66,775 | | $ | (4,699) | | (7.0) | % | | $ | 122,712 | | $ | 127,236 | | (4,524) | | (3.6) | % |
| Gross profit | 18,964 | | 21,576 | | (2,612) | | (12.1) | % | | 38,500 | | 41,776 | | (3,276) | | (7.8) | % |
| % of net sales | 30.5 | % | 32.3 | % | | | | 31.4 | % | 32.8 | % | | |
| | | | | | | | | |
| Selling, general and administrative expenses | 16,470 | | 15,561 | | (909) | | (5.8) | % | | 33,548 | | 31,855 | | (1,693) | | (5.3) | % |
| % of net sales | 26.5 | % | 23.3 | % | | | | 27.3 | % | 25.0 | % | | |
| | | | | | | | | |
| Restructuring charges | — | | 54 | | 54 | | (100.0) | % | | — | | 244 | | 244 | | (100.0) | % |
| | | | | | | | | |
| | | | | | | | | |
| Operating income | 2,494 | | 5,961 | | (3,467) | | (58.2) | % | | 4,952 | | 9,677 | | (4,725) | | (48.8) | % |
| | | | | | | | | |
| Other (expense), net | (526) | | (1,121) | | 595 | | (53.1) | % | | (890) | | (1,797) | | 907 | | 50.5 | % |
| | | | | | | | | |
| Income before income taxes | 1,968 | | 4,840 | | (2,872) | | (59.3) | % | | 4,062 | | 7,880 | | (3,818) | | (48.4) | % |
| | | | | | | | | |
| Income tax expense (benefit) | 2,362 | | 1,709 | | (653) | | (38.2) | % | | 2,537 | | 2,693 | | 156 | | 5.8 | % |
| | | | | | | | | |
| Net (loss) income | $ | (394) | | $ | 3,131 | | (3,525) | | (112.6) | % | | $ | 1,525 | | $ | 5,187 | | (3,662) | | (70.6) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| GAAP to Non-GAAP reconciliation: | | | | | | | |
| Three Months Ended | | Six Months Ended |
| (Amounts in thousands) | 12/31/2023 | 12/31/2022 | $ Change favorable (unfavorable) | % Change | | 12/31/2023 | 12/31/2022 | $ Change favorable (unfavorable) | % Change |
| Operating income as reported | 2,494 | | 5,961 | | (3,467) | | (58.2) | % | | 4,952 | | 9,677 | | (4,725) | | (48.8) | % |
| Add back restructuring charges | — | | (54) | | (54) | | (100) | % | | — | | (244) | | (244) | | (100) | % |
| | | | | | | | | |
| Adjusted operating income | 2,494 | | 6,015 | | (3,521) | | (58.5) | % | | 4,952 | | 9,921 | | (4,969) | | (50.1) | % |
| % of net sales | 4.0 | % | 9.0 | % | | (500) basis points | | 4.0 | % | 7.8 | % | | (380) basis points |
The following table represents key results of operations for three months ended December 31, 2023 and 2022 based on our business aggregated into three reportable segments according to geography of operations: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM". Operations as reflected in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Key Results by Reporting Segment | | | | | | |
| Three Months Ended December 31, 2023 | | Three Months Ended December 31, 2022 |
| (Amounts in thousands) | NAI | INI | GTM | Corporate | Total | | NAI | INI | GTM | Corporate | Total |
| Net sales | $ | 19,814 | | $ | 26,425 | | $ | 15,837 | | $ | — | | $ | 62,076 | | | $ | 22,780 | | $ | 26,051 | | $ | 17,944 | | $ | — | | $ | 66,775 | |
| Gross profit | 4,204 | | 8,966 | | 5,794 | | — | | 18,964 | | | 4,599 | | 10,135 | | 6,842 | | — | | 21,576 | |
| % of net sales | 21.2 | % | 33.9 | % | 36.6 | % | | 30.5 | % | | 20.2 | % | 38.9 | % | 38.1 | % | | 32.3 | % |
| | | | | | | | | | | |
| Selling, general and administrative expenses | 4,389 | | 6,739 | | 3,274 | | 3,274 | | 16,470 | | | 4,423 | | 6,285 | | 3,528 | | 1,325 | | 15,561 | |
| % of net sales | 22.2 | % | 25.5 | % | 20.7 | % | | 26.5 | % | | 19.4 | % | 24.1 | % | 19.7 | % | | 23.3 | % |
| | | | | | | | | | | |
| Restructuring charges | — | | — | | — | | — | | — | | | — | | 54 | | — | | — | | 54 | |
| | | | | | | | | | | |
| Operating income (loss) | $ | (185) | | $ | 2,227 | | $ | 2,520 | | $ | (2,068) | | $ | 2,494 | | | $ | 176 | | $ | 3,796 | | $ | 3,314 | | $ | (1,325) | | $ | 5,961 | |
| % of net sales | (0.9) | % | 8.4 | % | 15.9 | % | | 4.0 | % | | 0.8 | % | 14.6 | % | 18.5 | % | | 8.9 | % |
| Add back restructuring charges | — | | — | | — | | — | | — | | | — | | (54) | | — | | — | | (54) | |
| | | | | | | | | | | |
| Adjusted operating income | (185) | | 2,227 | | 2,520 | | (2,068) | | $ | 2,494 | | | $ | 176 | | $ | 3,850 | | $ | 3,314 | | $ | (1,325) | | $ | 6,015 | |
| % of net sales | (0.9) | % | 8.4 | % | 15.9 | % | | 4.0 | % | | 0.8 | % | 14.8 | % | 18.5 | % | | 9.0 | % |
The following table represents key results of operations for six months ended December 31, 2023 and 2022 based on our business aggregated into three reportable segments of operations: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM".
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended December 31, 2023 | | Six Months Ended December 31, 2022 |
| (Amounts in thousands) | NAI | INI | GTM | Corporate | Total | | NAI | INI | GTM | Corporate | Total |
| Net sales | $ | 39,284 | | $ | 51,799 | | $ | 31,629 | | $ | — | | $ | 122,712 | | | $ | 45,151 | | $ | 49,350 | | $ | 32,735 | | $ | — | | $ | 127,236 | |
| Gross profit | 8,132 | | 18,742 | | 11,627 | | — | | 38,501 | | | 10,014 | | 19,087 | | 12,675 | | — | | 41,776 | |
| % of net sales | 20.7 | % | 36.2 | % | 36.8 | % | | 31.4 | % | | 22.2 | % | 38.7 | % | 38.7 | % | | 32.8 | % |
| | | | | | | | | | | |
| Selling, general and administrative expenses | 9,001 | | 13,755 | | 6,735 | | 4,057 | | 33,548 | | | 9,138 | | 12,358 | | 7,083 | | 3,277 | | 31,854 | |
| % of net sales | 22.9 | % | 26.6 | % | 21.3 | % | | 27.3 | % | | 20.2 | % | 25.0 | % | 21.6 | % | | 25.0 | % |
| | | | | | | | | | | |
| Restructuring charges | — | | — | | — | | — | | — | | | — | | 244 | | — | | — | | 244 | |
| | | | | | | | | | | |
| Operating income (loss) | $ | (869) | | $ | 4,987 | | $ | 4,892 | | $ | (4,058) | | $ | 4,952 | | | $ | 876 | | $ | 6,485 | | $ | 5,592 | | $ | (3,277) | | $ | 9,677 | |
| % of net sales | (2.2) | % | 9.6 | % | 15.5 | % | | 4.0 | % | | 1.9 | % | 13.1 | % | 17.1 | % | | 7.6 | % |
| Add back restructuring charges | — | — | — | — | — | | — | | (244) | | — | | — | | (244) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Adjusted operating income | (185) | | 2,227 | | 2,520 | | (2,068) | | 2,494 | | | $ | 876 | | $ | 6,729 | | $ | 5,592 | | $ | (3,277) | | $ | 9,922 | |
| % of net sales | (0.9) | % | 8.4 | % | 15.9 | % | | 4.0 | % | | 1.9 | % | 13.6 | % | 17.1 | % | | 7.8 | % |
Non-GAAP Measure Reconciliation: Fiscal 2023 Q2 "Currency Neutral" Net Sales
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended | | Six months ended |
| (Amounts in Thousands) | 12/31/2023 | 12/31/2022 | $ Change | % Change | | 12/31/2023 | 12/31/2022 | $ Change | % Change |
| Net Sales, as reported | $ | 62,076 | | $ | 66,775 | | (4,699) | | (7.0) | % | | $ | 122,712 | | $ | 127,236 | | (4,524) | | (3.6) | % |
| Currency neutralizing adjustment* | (1,412) | | — | | (1,412) | | (2.1) | % | | (2,986) | | — | | (2,986) | | (2.3) | % |
| Q2 FY24 currency neutral net sales | 60,664 | | 66,775 | | (6,111) | | (9.2) | % | | 119,726 | | 127,236 | | (7,510) | | (5.9) | % |
| NAI net sales, as reported | 19,814 | 22,780 | (2,966) | | (13.0) | % | | 39,284 | 45,151 | (5,867) | | (13.0) | % |
| Currency neutralizing adjustment* | (81) | | — | | (81) | | (0.4) | % | | (171) | | — | | (171) | | (0.4) | % |
| Q2FY24 currency neutral NAI net sales | 19,733 | | 22,780 | | (3,047) | | (13.4) | % | | 39,113 | | 45,151 | | (6,038) | | (13.4) | % |
| INI net sales, as reported | 26,425 | 26,051 | 374 | | 1.4 | % | | 51,799 | 49,350 | 2,449 | | 5.0 | % |
| Currency neutralizing adjustment* | (1,308) | | — | | (1,308) | | (5.0) | % | | (2,760) | | — | | (2,760) | | (5.6) | % |
| Q2FY24 Currency neutral INI net sales | 25,117 | | 26,051 | | (934) | | (3.6) | % | | 49,039 | | $ | 56,357 | | (7,318) | | (13.0) | % |
| GTM net sales, as reported | 15,837 | 17,944 | (2,107) | | (11.7) | % | | 31,629 | 32,735 | (1,106) | | (3.4) | % |
| Currency neutralizing adjustment* | (23) | | — | (23) | (0.1) | % | | (55) | — | (55) | (0.2) | % |
| Q2FY24 currency neutral GTM net sales | $ | 15,814 | | $ | 17,944 | | $(2,130) | (11.9) | % | | $ | 31,574 | | $ | 32,735 | | $(1,161) | (3.5) | % |
| *"Currency Neutralizing Adjustment" = Change when converting Q2FY24 sales in non USD functional currencies at the same exchange rates used in the comparison period |
Three-months and Six-months Ended December 31, 2023 and December 31, 2022
Overview
Through the first six months of Fiscal 2024 ended December 31, 2023 total order intake was 3.7% lower than the comparative period ended December 31, 2022. Our global industrial businesses saw a net 5.7% increase in order intake, while GTM order intake was 20.4% lower in the six months ended December 31, 2023 as compared to December 31, 2022 due to the nature of the larger orders at our precision granite business, which remains at full capacity, and lower order intake for our laser in-line measurement systems.
Net sales in the quarter ended December 31, 2023 were $62.1 million, a decrease of $4.7 million, or 7.0% compared to $66.8 million in the quarter ended December 31, 2022. Net Sales in the six months ended December 31, 2023 were $122.7 million, compared to $127.2 million for the same six-month period ended December 31, 2022, representing a reduction of $4.5 million, or 3.6%.
Foreign currency translation impact resulted in an increase of $3.0 million over the first six months of fiscal 2024 as the United States Dollar had weakened compared to other currencies in the first and second quarter of the fiscal year. Currency neutral net sales for the quarter ended December 31, 2023 were $60.7 million, a decrease of $6.1 million or 9.2% compared to $66.8 million in the quarter ended December 31, 2022. For the six months ended December 31, 2023, currency neutral net sales were $119.7 million, a decrease of $7.5 million or 5.9% as compared to $127.2 million, for the six months ended December 31, 2022.
Operating income in the quarter ended December 31, 2023 was $2.5 million or 4.0% of sales, reflecting a decrease of $3.5 million or 58.2% compared to operating income of $6.0 million reported for quarter ended December 31, 2022. This decline consisted of a decrease in gross profit of $2.6 million, and an increase in selling, general and administrative expenses of $0.9 million. Operating income for the six months ended December 31, 2023 decreased 58.5% by 4.7 million, to $5.0 million or 4.0% of sales versus $9.7 million or 7.6% of sales for the six months ended December 31, 2022. This six month decrease in operating income was comprised of a decline in gross profit of $3.3 million, an increase in selling, general and administrative expenses of $1.7 million, and a decrease in restructuring expenses of $0.3 million.
Net loss for the quarter ended December 31, 2023 was $0.4 million, which was $3.5 million or 112.6% lower than the net income reported for the quarter ended December 31, 2022 of $3.1 million. For the six-month period ended December 31, 2023, net income was $1.5 million compared to $5.2 million for the six month period ended December 31, 2022 representing a decrease of $3.7 million or 70.6%. Income tax expense in the quarter ended December 31, 2023 was increased by $2.0 million
in valuation allowance against its foreign tax credit carryforwards related to an IRS Notice released in December 2023. The ordering rules for the utilization of foreign tax credits require credits generated in the current year to be utilized first, followed by the earliest generated credit being carried forward. The increase in projected foreign tax credits generated have the impact of reducing the utilization of the foreign tax credit carryforward balance, increasing the anticipated expirations by $2.0 million.
Net Sales
The Company’s net sales for the quarter ended December 31, 2023 were $62.1 million which was $4.7 million or 7.0% lower versus $66.8 million for the quarter ended December 31, 2022, primarily driven by a 0.5% increase from price realization and a 2.1% increase due to currency translation, offset by a 9.6% decrease in volume. North America Industrial sales for the quarter ended December 31, 2023 were $19.8 million which was a decrease of $3.0 million or 13.0% versus $22.8 million in quarter ended December 31, 2022, primarily driven by a 2.5 % increase from price realization and an increase of 0.4% due to currency translation, offset by a 15.9% decrease in volume. NAI net sales were negatively impacted by labor shortages experienced by our precision measuring tools production. INI net sales for the quarter ended December 31, 2023 were $26.4 million which was $0.4 million or 1.4% more than the $26.1 million for the quarter ended December 31, 2022, primarily driven by a 2.2% decline in volume and 1.6% due to pricing impact, offset by a favorable impact of 5.0% from currency translation. GTM net sales for the quarter ended December 31, 2023 were $15.8 million, a decrease of $2.1 million or 11.7% from $17.9 million for the quarter ended December 31, 2022, primarily due to volume declines in our in-line laser measuring system sales, which have been impacted by reductions of capital expenditure in the automotive sector and the auto workers' strike in the first quarter of fiscal 2024.
During the six months ended December 31, 2023 as compared to 2022, NAI sales decreased $5.9 million or 13.0%, INI sales increased $2.4 million or 5.0%, and GTM sales declined by $1.1 million or 3.4%. NAI sales increased 3.3% due to pricing actions and 0.4% due to currency translation, but were offset by volume declines of 16.7%. INI sales increased $2.4 million or 5.0%, with 0.1 % attributed to volume increases and 5.6% due to currency translation, offset by 0.7% of pricing reduction. GTM net sales declined $1.1 million or 3.4% to $31.6 million during the six months ended December 31, 2023. Continued increases of sales of our precision granite measuring products have been offset by sales declines of our in-line laser measuring systems, which have been impacted by reductions of capital expenditure in the automotive sector and the auto workers' strike in the first quarter of fiscal 2024. Consolidated net sales in the six months ended December 31, 2023 were $122.7 million, compared to $127.2 million for the same six-month period ended December 31, 2022, representing a decline of $4.5 million, or 3.6%. Overall this was driven by increases due to pricing actions of 1.4% and currency translation of 2.3% offset by volume reductions of 7.3%.
Gross Profit
Consolidated gross profit decreased $2.6 million or 12.1% for the three months, and $3.3 million or 7.8% for the six months ended December 31, 2023 as compared to the year prior. Gross profit was $19.0 million and $38.5 million for the three months and six months ended December 31, 2023 compared to $21.6 million and $41.8 million for the three months and six months ended December 31, 2022. Gross margin decreased 1.8 percentage points for the three months, and 1.5 percentage points for the six months ended December 31, 2023 compared to the prior year. Gross margin has been impacted by lower volumes resulting in lower factory utilization, and overall company mix as high margin sales of our in-line laser measuring systems has declined in the comparative periods.
For the three months ended December 31, 2023, NAI gross profit declined $0.4 million or 8.6% to $4.2 million versus $4.6 million in the three months ended December 31, 2022. Gross margin improved 1.0 percentage points from 20.2% to 21.2% compared to the three-month period ended December 31, 2022. For the six-month period ended December 31, 2023, NAI gross margin declined from 22.2% to 20.7%, compared to the prior period, primarily due to lower factory utilization.
INI gross profit declined $1.2 million on $0.4 million higher sales in the three months ended December 31, 2023 as compared to 2022, and declined 0.3 million on $2.4 million higher sales for the six months ended December 31, 2023 as compared to 2022. INI gross margin decreased 5.0 percentage points from 38.9% of sales at the end of the three-month period ended December 31, 2022 to 33.9% for the three-month period ended December 31, 2023, and for the six month period from 38.7% to 36.2% from December 31, 2022 to December 31, 2023 respectively. INI gross margin was affected by a shift in selling mix in the current period with higher volume on lower margin products, lower factory utilization, and some targeted pricing reductions on certain products in European markets and in Brazil.
For the three months ended December 31, 2023, GTM gross profit decreased $1.0 million to $5.8 million from $6.8 million in the three months ended December 31, 2022. Gross margin measured as a percent of net sales declined 1.5 percentage points
from 38.1% in the three-months ended December 31, 2022 to 36.6% the three months ended December 31, 2023, and from 38.7% to 36.8% for the six month period ended December 31, 2023 compared to December 31, 2022. The GTM gross margin decline is due to mix as higher margin sales of in-line laser measuring systems has declined disproportionately during the comparative period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses including Corporate expense for the three months and six months ended December 31, 2023 were $16.5 million and $33.5 million, respectively versus $15.6 million and $31.9 million for the same periods ending December 31, 2022.
Selling, general and administrative expenses increased $0.9 million or 5.8% during the quarter ended December 31, 2023 compared to the quarter ended December 31, 2022. About one-third of this increase, or $0.3 million is due to foreign exchange translation as the United States Dollar has weakened compared to the Brazilian Real. The company continues to invest in new growth initiatives and has also incurred some one-time consulting costs. As a percentage of net sales, selling general and administrative expenses increased to 26.5% for the quarter ended December 31, 2023 compared to 23.3% in the prior year quarter ended December 31, 2022.
For the six months ended December 31, 2023, selling, general and administrative expenses increased $1.7 million or 5.3% compared to 2022, and as a percentage of net sales have increased from 25.0% for the six months ended December 31, 2022 to 27.3% for the six months ended December 31, 2023. This increase is partially due to the translation of foreign currencies into United States Dollars, explaining $0.7 million of the increase. In addition, the Company has invested in some sales growth initiatives during the current fiscal year, and incurred some one-time consulting costs.
Other Income (Expense)
For the three and six months ended December 31, 2023 other expense was $0.5 million and $0.9 million, respectively. For the three and six months ended December 31, 2022 other expense was $1.1 million and $1.8 million, respectively. The reductions in other expense were primarily due to lower interest costs as a result of debt reduction, and lower unrealized foreign exchange rate losses compared to the prior periods.
Income Taxes
In the three months ended December 31, 2023, the Company recognized income tax expense of $2.4 million on profit before tax of $2.0 million (an effective tax rate 120%) as compared to income tax expense of $1.7 million on profit before tax of $4.8 million (an effective tax rate of 35%), in the three months ended December 31, 2022.
In the six months ended December 31, 2023, the Company recognized income tax expense of $2.5 million on profit before tax of $4.1 million (an effective tax rate 62%) as compared to income tax expense of $2.7 million on profit before tax of $7.9 million (an effective tax rate of 34%), in the six months ended December 31, 2022.
The higher effective tax rate in the three and six months ended December 31, 2023, when compared with the three and six months ended December 31, 2022, respectively, was primarily due to a discrete tax expense of $2.0 million related to IRS Notice 2023-80 released in December 2023, which modifies the temporary relief period from applying the final foreign tax credit regulations to tax years beginning on or after December 28, 2021 and ending before the date that notice or guidance withdrawing or modifying the temporary relief is issued. The six months ended December 31, 2023 includes a discrete tax benefit of $0.7 million related to IRS Notice 2023-55 released in July 2023, which first granted taxpayers temporary relief from applying the final foreign tax credit regulations for tax years beginning on or after December 28, 2021 and ending on or before December 31, 2023.
LIQUIDITY AND CAPITAL RESOURCES
| | | | | | | | | | | |
| Cash flows (in thousands) | Six Months Ended |
| 12/31/2023 | | 12/31/2022 |
| | | |
| Cash provided by operating activities | 7,111 | | | 4,474 | |
| Cash (used in) investing activities | (8,999) | | | (4,190) | |
| Cash (used in) financing activities | (2,767) | | | (5,858) | |
| Effect of exchange rate changes on cash | (115) | | | 8 | |
| | | |
| Net (decrease) in cash | $ | (4,770) | | | $ | (5,566) | |
Net cash flows used in the six months ended December 31, 2023 was a decrease of $4.8 million compared to net decrease of $5.6 million for the six month period ended December 31, 2022. Cash provided by operations was $7.1 million for the six months ended December 31, 2023 compared to $4.5 million for the comparative period. The improvement in operating cash flow reflects the Company's continued efforts to reduce inventory levels after an increase in supply chain confidence. The Company invested $8.3 million in new equipment and production capacity, $4.7 million of which is at its precision granite manufacturing facility in Waite Park, MN. Debt repayments net of additional borrowings were $2.8 million in the six months ended December 31, 2023.
The Company believes it maintains sufficient liquidity and has the resources to fund its operations. The Company believes its existing cash and cash expected to be provided by future operating activities are adequate to satisfy working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months from the date of the financial statements included in this Quarterly Report on Form 10-Q.
On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a new Loan and Security agreement (the "Loan and Security Agreement") with HSBC Bank USA. These credit facilities ("the Facilities") replaced the Company’s previous TD Bank credit facilities and are comprised of a $30 million revolving line of credit with a $10 million uncommitted accordion provision, a $12.1 million term loan and a $7 million capital expenditure draw down credit facility. The Facilities are secured by a valid first-priority security interest on substantially all existing and future assets of the Company and its domestic subsidiaries. At December 31, 2023 the Company has excess availability on the revolving line of credit and the capital expenditure drawn down facility of $21.8 million.
The effective interest rate on the borrowings under the Loan and Security Agreement during the three months ended December 31, 2023 and 2022 was 8.4% and 8.9% respectively.
The Company does not have any material off-balance sheet arrangements as defined under the Securities and Exchange Commission rules.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
During the year ended June 30, 2023, in connection with evaluating the error in segment reporting, we identified a material weakness in our internal control over financial reporting. The Company has implemented certain changes in our internal controls to address the material weakness, which include a formal process each financial reporting period during which management reviews the reporting package provided to the chief operating decision maker “CODM” for consistency with the Company’s segmentation disclosure. As a result, management has concluded that, as of December 31, 2023, the material weakness has been remediated. Our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that the financial statements fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
All information required to be filed in this report was recorded, processed, summarized and reported within the time period required by the rules and regulations of the Securities and Exchange Commission, and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Except as disclosed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. We do not believe we are currently party to any pending legal action, arbitration proceeding or governmental proceeding, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business or operating results. We are not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.
ITEM 1A. RISK FACTORS
There have been no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K, as amended, for the year ended June 30, 2023.
ITEM 6. EXHIBITS
| | | | | |
Exhibit Number | Description of Exhibit |
| |
| 3a | Restated Articles of Organization as amended, filed with Form 10-K for the year ended June 30, 2012 filed September 12, 2012, is hereby incorporated by reference. |
| |
| 3b | Amended and Restated Bylaws, filed with Form 10-Q for the quarter ended December 31, 2012 filed February 7, 2013, is hereby incorporated by reference. |
| 4a | Rights Agreement dated as of November 2, 2010 between the Company and Mellon Investor Services LLC, as Rights Agent (together with exhibits, including the Form of Rights Certificate, and the Summary of Rights to Purchase Shares of Class A Common Stock), filed with Form 10-Q for the quarter ended September 25, 2010, filed November 4, 2010 is hereby incorporated by reference. |
| |
| |
| 31.1* | |
| |
| 31.2* | |
| |
| 32.1+ | |
| |
| 101 | The following materials from The L. S. Starrett Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2023 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (I) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statement of Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
+ Furnished, not filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | | | | |
| | | THE L. S. STARRETT COMPANY
(Registrant) |
| | | |
| | | |
| Date | February 16, 2024 | | /S/ Douglas A. Starrett |
| | | Douglas A. Starrett - President and CEO (Principal Executive Officer) |
| | | |
| Date | February 16, 2024 | | /S/ John C. Tripp |
| | | John C. Tripp - Treasurer and CFO (Principal Accounting Officer) |
