scx-20240331

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


			For the quarterly period ended			March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


			For the transition period from						to

			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						April 24, 2024
Class A Common Shares						7,007,717
Class B Common Shares						505,150

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


			Page No.

Part I.	Financial Information:

	Item 1.	Financial Statements	3

		Condensed Consolidated Balance Sheets – March 31, 2024 (unaudited) and June 30, 2023	3

		Condensed Consolidated Statements of Operations (unaudited)– three and nine months ended March 31, 2024 and March 31, 2023	4

		Condensed Consolidated Statements of Comprehensive Income (unaudited) – three and nine months ended March 31, 2024 and March 31, 2023	5

		Condensed Consolidated Statements of Stockholders' Equity (unaudited) – three and nine months ended March 31, 2024 and March 31, 2023	5-8

		Condensed Consolidated Statements of Cash Flows (unaudited) - nine months ended March 31, 2024 and March 31, 2023	8

		Notes to unaudited Condensed Consolidated Financial Statements	9-21

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

	Item 4.	Controls and Procedures	23

Part II.	Other Information:

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 6.	Exhibits	27

SIGNATURES			28

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE L. S. STARRETT COMPANY

Condensed Consolidated Balance Sheets (in thousands except share data) unaudited)


	03/31/2024		06/30/2023
ASSETS
Current assets:
Cash and cash equivalents	$	7,527	$	10,454
Accounts receivable (less allowance for credit losses of $515 and $449, respectively)	35,873		36,611
Inventories	58,518		65,414
Prepaid expenses and other current assets	10,192		9,723
Total current assets	112,110		122,202

Property, plant and equipment, net	45,252		39,375
Right of use assets	3,978		4,931

Deferred tax assets, net	15,953		17,056
Intangible assets, net	4,896		4,672
Goodwill	1,015		1,015
Other assets	3,425		3,551
Total assets	$	186,629	$	192,802

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,750	$	15,047
Accrued expenses	11,901		11,579
Current maturities of debt	2,326		4,961
Accrued compensation	5,337		6,287
Current lease liability	1,547		1,689
Total current liabilities	35,861		39,563

Other tax obligations	2,779		2,884
Long-term lease liability	2,585		3,423
Long-term debt, net of current portion	5,768		5,273
Postretirement benefit and pension obligations	9,532		12,192
Total liabilities	$	56,525	$	63,335
Contingencies (Note 12)
Stockholders' equity:
Class A Common stock $1 par (20,000,000 shares authorized; 6,967,791 outstanding at March 31, 2024 and 6,853,673 outstanding at June 30, 2023)	$	6,968	$	6,854
Class B Common stock $1 par (10,000,000 shares authorized; 536,130 outstanding at March 31, 2024 and 576,396 outstanding at June 30, 2023)	536		576
Additional paid-in capital	58,241		57,825
Retained earnings	114,310		112,147
Accumulated other comprehensive loss	(49,951)		(47,935)
Total stockholders' equity	130,104		129,467
Total liabilities and stockholders’ equity	$	186,629	$	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						9 Months Ended
	03/31/2024			03/31/2023			03/31/2024			03/31/2023

Net sales	$	60,767		$	61,678		$	183,479		$	188,914
Cost of goods sold	43,187			42,455			127,399			127,916
Gross profit	17,580			19,223			56,080			60,998
% of Net sales	28.9		%	31.2		%	30.6		%	32.3		%

Restructuring charges	—			—			—			244
Selling, general and administrative expenses	16,870			15,109			50,417			46,962

Operating income	710			4,114			5,663			13,792

Other (expense) income, net	(17)			(602)			(908)			(2,399)

Income before income taxes	693			3,512			4,755			11,393

Income tax expense (benefit)	55			(3,961)			2,592			(1,267)

Net income	$	638		$	7,473		$	2,163		$	12,660


Basic income per share	$	0.09		$	1.01		$	0.29		$	1.72
Diluted income per share	$	0.08		$	0.99		$	0.28		$	1.68

Weighted average outstanding shares used in per share calculations:
Basic	7,505			7,427			7,481			7,379
Diluted	7,657			7,577			7,638			7,538

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				9 Months Ended
	03/31/2024		03/31/2023		03/31/2024		03/31/2023

Net income	$	638	$	7,473	$	2,163	$	12,660
Other comprehensive (loss) income:
Currency translation (loss) gain, net of tax	(1,813)		1,545		(1,910)		1,455
Pension and postretirement plans, net of tax	(36)		(44)		(106)		(105)
Other comprehensive (loss) income	(1,849)		1,501		(2,016)		1,350

Total comprehensive (loss) income	$	(1,211)	$	8,974	$	147	$	14,010

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 Nine-Month Period Ended March 31, 2024:


	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 of class B to class A stock	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 of class B to class A stock	4		(4)		—		—		—		—
Balance December 31, 2023	$	6,954	$	552	$	58,050	$	113,672	$	(48,102)	$	131,126

Total comprehensive income (loss)	—		—		—		638		(1,849)		(1,211)
Repurchase of shares	—		(2)		(16)		—		—		(18)
Stock-based compensation	—				207		—		—		207
Conversion of class B to class A stock	14		(14)		—		—		—		—
Balance March 31, 2024	$	6,968	$	536	$	58,241	$	114,310	$	(49,951)	$	130,104

Balance of accumulated other comprehensive (loss) consists of:
Translation loss									$	(57,750)
Pension and postretirement plans, net of taxes									7,799
									$	(49,951)

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Stockholders' Equity

(in thousands) (unaudited)

For the Three and Nine-Month Period Ended March 31, 2023:


	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 of class B to class A stock	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 of class B to class A stock	7		(7)		—		—		—		—
Balance December 31, 2022	$	6,803	$	624	$	57,454	$	94,246	$	(51,217)	$	107,910

Total comprehensive income	—		—		—		7,473		1,501		8,974
Repurchase of shares	—		(1)		(6)		—		—		(7)
Stock-based compensation	—		—		179		—		—		179
Conversion of class B to class A stock	15		(15)		—		—		—		—
Balance March 31, 2023	$	6,818	$	608	$	57,627	$	101,719	$	(49,716)	$	117,056


Balance of accumulated other comprehensive (loss) consists of:
Translation loss									$	(58,621)
Pension and postretirement plans, net of taxes									8,905
									$	(49,716)

See Notes to unaudited Condensed Consolidated Financial Statements

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Cash Flows

(in thousands) (unaudited)


	9 Months Ended
	03/31/2024		03/31/2023

Cash flows from operating activities:

Net income	$	2,163	$	12,660

Non-cash operating activities:
Depreciation	4,246		3,884
Amortization	812		998
Stock-based compensation	494		549
Net long-term tax obligations	(75)		(66)
Deferred taxes	991		(3,753)
Postretirement benefit and pension obligations	442		475
Changes in operating assets and liabilities:
Accounts receivable	156		7,148
Inventories	6,060		(72)
Other current assets	(606)		(1,275)
Other current liabilities	(589)		(3,255)
Prepaid pension expense	(3,179)		(1,574)
Other	208		178
Net cash provided by operating activities	11,123		15,897

Cash flows from investing activities:
Purchases of property, plant and equipment	(10,681)		(4,790)
Software development	(1,036)		(795)
Intangibles-other	—		(54)
Net cash (used in) investing activities	(11,717)		(5,639)

Cash flows from financing activities:
Proceeds from term loan borrowings	2,000		575
Proceeds from line of credit borrowings	8,000		1,000
Term debt repayments	(5,719)		(8,352)
Line of credit repayments	(6,500)		(9,500)
Proceeds from common stock issued	40		84
Shares repurchased	(44)		(16)

SEC Form 10-Q filed by L.S. Starrett Company