10-Q

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 September 30, 2022

OR

☐ 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	October 26, 2022
Class A Common Shares	6,787,025
Class B Common Shares	595,381

1

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 Form 10-K for the year ended June 30, 2022

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.

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THE L. S. STARRETT COMPANY

CONTENTS

			Page No.
Part I.	Financial Information:
	Item 1.	Financial Statements	4
		Consolidated Balance Sheets – September 30, 2022 (unaudited) and June 30, 2022	4
		Consolidated Statements of Operations (unaudited)– three months ended September 30, 2022 and September 30, 2021	5
		Consolidated Statements of Comprehensive Income (Loss) (unaudited) – three months ended September 30, 2022 and September 30, 2021	6
		Consolidated Statements of Stockholders' Equity (unaudited) – three  months ended September 30, 2022 and September 30, 2021	7
		Consolidated Statements of Cash Flows (unaudited) - three months ended September 30, 2022 and September 30, 2021	8
		Notes to Unaudited Consolidated Financial Statements	9-18
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
	Item 4.	Controls and Procedures	21
Part II.	Other Information:
	Item 1A.	Risk Factors	22
	Item 6.	Exhibits	23
SIGNATURES			24

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PART I.    FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

THE L. S. STARRETT COMPANY

Consolidated Balance Sheets

(in thousands except share data)

(unaudited)

	9/30/2022		6/30/2022
ASSETS
Current assets:
Cash	$	11,902	$	14,523
Accounts receivable (less allowance for credit losses of $770 and $796, respectively)	38,062		42,961
Inventories	70,085		66,900
Prepaid expenses and other current assets	10,142		8,669
Total current assets	130,191		133,053
Property, plant and equipment, net	36,178		37,116
Right of use assets	5,026		5,540
Deferred tax assets, net	14,351		14,924
Intangible assets, net	4,506		4,640
Goodwill	1,015		1,015
Other assets	3,162		3,266
Total assets	$	194,429	$	199,554
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt	$	5,384	$	6,547
Current lease liability	1,432		1,530
Accounts payable	15,748		14,624
Accrued expenses	10,429		11,776
Accrued compensation	5,521		6,703
Total current liabilities	38,514		41,180
Other tax obligations	2,839		2,936
Long-term lease liability	3,777		4,166
Long-term debt, net of current portion	24,007		24,905
Postretirement benefit and pension obligations	23,459		23,938
Total liabilities	92,596		97,125
Stockholders' equity:
Class A Common stock $1 par (20,000,000 shares authorized; 6,770,681 outstanding at September 30, 2022 and 6,682,521 outstanding at June 30, 2022)	6,771		6,683
Class B Common stock $1 par (10,000,000 shares authorized; 596,903 outstanding at September 30, 2022 and 610,087 outstanding at June 30, 2022	597		610
Additional paid-in capital	57,247		57,143
Retained earnings	91,115		89,059
Accumulated other comprehensive loss	(53,897)		(51,066)
Total stockholders' equity	101,833		102,429
Total liabilities and stockholders’ equity	$	194,429	$	199,554

See Notes to Unaudited Consolidated Financial Statements

4

THE L. S. STARRETT COMPANY

Consolidated Statements of Operations

(in thousands except per share data)

(unaudited)

	Three Months Ended
	9/30/2022			9/30/2021
Net sales	$	60,461		$	61,514
Cost of goods sold	40,261			41,369
Gross profit	20,200			20,145
% of Net sales	33.4		%	32.7		%
Restructuring charges	190			—
Selling, general and administrative expenses	16,294			16,012
Operating income	3,716			4,133
Other (expense) income	(676)			226
Income before income taxes	3,040			4,359
Income tax expense	984			1,127
Net income	$	2,056		$	3,232
Basic income per share	$	0.28		$	0.45
Diluted income per share	$	0.27		$	0.44
Weighted average outstanding shares used in per share calculations:
Basic	7,304			7,126
Diluted	7,505			7,396

See Notes to Unaudited Consolidated Financial Statements

5

THE L. S. STARRETT COMPANY

Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	Three Months Ended
	9/30/2022		9/30/2021
Net income	$	2,056	$	3,232
Other comprehensive (loss):
Currency translation (loss), net of tax	(2,806)		(3,611)
Pension and postretirement plans, net of tax	(25)		(66)
Other comprehensive (loss)	(2,831)		(3,677)
Total comprehensive (loss) income	$	(775)	$	(445)

See Notes to Unaudited Consolidated Financial Statements

6

THE L. S. STARRETT COMPANY

Consolidated Statements of Stockholders' Equity

(in thousands)

(unaudited)

For the Three Month Period Ended September 30, 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
Accumulated balance consists of:
Translation loss									$	(62,881)
Pension and postretirement plans, net of taxes									8,984
									$	(53,897)

For the Three Month Period Ended September 30, 2021:

	Common Stock Outstanding				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Class A		Class B
Balance June 30, 2021	$	6,475	$	634	$	56,507	$	74,181	$	(54,262)	$	83,535
Total comprehensive income (loss)	—		—		—		3,232		(3,677)		(445)
Repurchase of shares	—		(2)		(14)		—		—		(16)
Stock-based compensation	119		—		55		—		—		174
Conversion	25		(25)		—		—		—		—
Balance September 30, 2021	$	6,619	$	607	$	56,548	$	77,413	$	(57,939)	$	83,248
Accumulated balance consists of:
Translation loss									$	(59,657)
Pension and postretirement plans, net of taxes									1,718
									$	(57,939)

See Notes to Unaudited Consolidated Financial Statements

7

THE L. S. STARRETT COMPANY

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended
	9/30/2022		9/30/2021
Cash flows from operating activities:
Net income	$	2,056	$	3,232
Non-cash operating activities:
Depreciation	1,288		1,262
Amortization	363		335
Stock-based compensation	185		174
Net long-term tax obligations	18		38
Deferred taxes	356		193
Postretirement benefit and pension obligations	162		(353)
Working capital changes:
Accounts receivable	3,135		(5,797)
Inventories	(5,022)		(2,887)
Other current assets	(1,740)		(1,888)
Other current liabilities	31		104
Prepaid pension expense	(263)		(288)
Other	59		34
Net cash provided by (used in) operating activities	628		(5,841)
Cash flows from investing activities:
Purchases of property, plant and equipment	(960)		(2,334)
Software development	(202)		(290)
Net cash (used in) investing activities	(1,162)		(2,624)
Cash flows from financing activities:
Proceeds from borrowing	575		13,767
Debt repayments	(2,663)		(8,040)
Shares repurchased	(6)		(16)
Net cash provided (used in) by financing activities	(2,094)		5,711
Effect of exchange rate changes on cash	7		276
Net decrease in cash	(2,621)		(2,478)
Cash, beginning of period	14,523		9,105
Cash, end of period	$	11,902	$	6,627
Supplemental cash flow information:
Interest paid	$	374	$	224
Income taxes paid, net	2,244		1,116

See Notes to Unaudited Consolidated Financial Statements

8

THE L. S. STARRETT COMPANY

Notes to Unaudited Consolidated Financial Statements

September 30, 2022

Note 1:    Basis of Presentation and Summary of Significant Accounting Policies

The unaudited interim consolidated financial statements as of and for the three months ended September 30, 2022 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022. The balance sheet as of June 30, 2022 has been derived from the audited consolidated financial statements as of and for the year ended June 30, 2022.  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. Allowance for doubtful accounts 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 for financial assets and liabilities held at carrying amount on the 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 consolidated financial statements and accompanying notes.  Note 2 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended June 30, 2022 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

Note 2:    Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments -Credit Losses" (ASC 326) "Measurement of Credit Losses on Financial Instruments,” and subsequent amendment to the guidance, ASU 2018-19 in November 2018. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace historic incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. This pronouncement was extended for Small Reporting Companies and for the Company beginning July 1, 2022. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Note 3:    Segment Information

The segment information and the accounting policies of each segment are the same as those described in the notes to the consolidated financial statements entitled “Financial Information by Segment & Geographic Area” included in our Annual Report on Form 10-K for the year ended June 30, 2022. The Company’s business is aggregated into two reportable segments based on geography of operations: North American Operations and International Operations ("International"). Segment income

9

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. Financial results for each reportable segment are as follows (in thousands):

	North American Operations		International Operations		Unallocated		Total
Three Months Ended September 30, 2022
Sales1	$	36,484	$	23,977	$	—	$	60,461
Operating Income (Loss)	$	3,198	$	2,836	$	(2,318)	$	3,716
Three Months Ended September 30, 2021
Sales2	$	33,809	$	27,705	$	—	$	61,514
Operating Income (Loss)	$	2,501	$	3,583	$	(1,951)	$	4,133

1.Excludes $927 of North American segment intercompany sales to the International segment, and $5,035 of International segment intercompany sales to the North American segment.

2.Excludes $749 of North American segment intercompany sales to the International segment, and $5,336 of International segment intercompany sales to the North American segment.

Note 4:    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 Consolidated Balance Sheet. As of September 30, 2022, and June 30, 2022, the balance of the return asset was $0.1 million and $0.1 million, respectively, and the balance of the refund liability was $0.2 million and $0.2 million, respectively. They are presented within prepaid expenses and other current assets and accrued expenses, respectively, on the 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 $0.5 million and $0.9 million at September 30, 2022 and June 30, 2022, respectively, located in Accounts Payable in the Consolidated Balance Sheets.

Disaggregation of Revenue

The Company operates in two reportable segments: North America and International. 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 months ended September 30, 2022 and 2021 (in thousands):

10

	Three Months Ended
	9/30/2022		9/30/2021
North America
United States	$	34,272	$	32,020
Canada & Mexico	2,212		1,789
	36,484		33,809
International
Brazil	17,248		19,203
United Kingdom	3,201		4,968
China	1,686		1,618
Australia & New Zealand	1,842		1,916
	23,977		27,705
Total Sales	$	60,461	$	61,514

Note 5:    Leases

Operating lease cost amounted to $0.5 million and $0.7 million for three months period ended September 30, 2022 and 2021. As of September 30, 2022, the Company’s right-of-use "ROU" assets, lease obligations and remaining cash commitment on these leases (in thousands):

	Right-of-Use Assets	Operating Lease Obligations		Remaining Cash Commitment
Operating leases	5,026	$	5,209	$	6,637

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 3.9 years. As of September 30, 2022, the Company’s financing leases are de minimis. The foreign exchange impact affecting the operating leases are de minimis.

In September 2021, the Company entered into a six year lease in China for 100,682 square feet and recorded a right of use asset for $2.6 million.

In July 2021, Starrett UK leased space to another company for annual rent of $0.2 million and incremental applicable service charges. The lease is a 20 year agreement with a contract review in 2026. The fees are recorded in Other Income in the Company's Consolidated Statement of Operations.

Note 6:    Stock-based Compensation

Compensation expense related to all stock-based plans for the three-month periods ended September 30, 2022 and 2021 was $0.1 million, for both periods.

Note 7:    Inventories

Inventories consist of the following (in thousands):

11

	9/30/2022		6/30/2022
Raw material and supplies	$	36,668	$	35,752
Goods in process and finished parts	23,205		22,268
Finished goods	36,212		35,589
	96,085		93,609
LIFO Reserve	(26,000)		(26,709)
	$	70,085	$	66,900

Of the Company’s $70.1 million and $66.9 million total inventory at September 30, 2022 and June 30, 2022, respectively, the $26.0 million and $26.7 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 $41.6 million on a FIFO basis and $15.6 million on a LIFO basis at September 30, 2022. The Core U.S. business had total Inventory, on a FIFO basis, of $39.3 million and $12.6 million on a LIFO basis as of June 30, 2022. The use of LIFO, as compared to FIFO, resulted in a $0.7 million decrease in cost of sales for the goods sold in the period ended September 30, 2022 compared to $4.6 million decrease in fiscal 2022.

Note 8:    Goodwill and Intangible Assets

Amortizable intangible assets consist of the following (in thousands):

	9/30/2022		6/30/2022
Trademarks and trade names	2,070		2,070
Completed technology	—		—
Customer relationships	630		630
Software development	11,471		11,269
Gross intangible assets	14,171		13,969
Accumulated amortization and impairment	(9,665)		(9,329)
Net intangible assets	$	4,506	$	4,640

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 June 30, 2022, gross $4.7 million and accumulated impairment of $3.7 million. There was no change to goodwill in the three months ended September 30, 2022 and the balance is a net $1.0 million.

Note 9: Accrued Expenses (in thousands):

	09/30/2022		06/30/2022
Sales related programs (commissions, rebates, distributor programs, warranty and related)	$	2,868	$	2,733
Income taxes	614		2,420
Professional fees	1,669		1,758
Other	1,562		1,463
Current portion pension cost	1,297		1,289
Taxes other than income tax	1,058		1,243
Workers compensation and employee deposits	558		518
Freight	803		352
Total	$	10,429	$	11,776

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Note 10:     Pension and Post-retirement Benefits

The Company has two defined benefit pension plans, one for U.S. employees and another for U.K. employees.  The Company has a postretirement medical and insurance benefit plan for U.S. employees. The Company also has defined contribution plans.

The U.K. defined benefit plan was closed to new entrants in fiscal 2009.

On December 21, 2016, the Company amended the U.S. defined benefit pension plan to freeze benefit accruals effective December 31, 2016. Consequently, the Plan is closed to new participants and current participants will no longer earn additional benefits after December 31, 2016.

Net periodic benefit costs for the Company's defined benefit pension plans are located in Other (expense) in the Consolidated Statements of Operations except (in the table below) for service cost. Service cost are in cost of sales and selling, general and administrative expenses. Net periodic benefit costs consist of the following (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
Interest cost	1,482		1,033
Expected return on plan assets	(1,032)		(1,100)
Amortization of net loss	10		14
	$	460	$	(53)

Net periodic benefit costs for the Company's Postretirement Medical Plan consists of the following (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
Service cost	$	6	$	9
Interest cost	18		12
Amortization of prior service credit	(369)		(368)
Amortization of net loss	44		47
	$	(301)	$	(300)

For the three month period ended September 30, 2022, the Company contributed zero in the U.S. and $0.2 million in the UK pension plans. Based upon the actuarial valuations performed on the Company’s defined benefit plans as of September 30, 2022, the contribution for fiscal 2023 for the U.S. plans would require a contribution of $1.4 million and the U.K. plan would require one of $0.8 million However, as a result of the American Rescue Plan Act of 2021, the minimum required company contribution for the U.S. Plan in fiscal 2022 was reduced from $1.4 million to $0.6 million. 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 $2.5 million in total during fiscal year 2022, with $1.5 million in the U.S. and $1.0 million in the U.K.

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.

13

Note 11:     Debt

Debt is comprised of the following (in thousands):

	9/30/2022		6/30/2022
Short-term and current maturities
Loan and Security Agreement (Term loan)	1,495		1,495
Brazil Loans	3,889		5,052
	5,384		6,547
Long-term debt (net of current portion)
Loan and Security Agreement (Term Loan)	9,878		10,252
Loan and Security Agreement (Line of Credit)	11,397		11,397
Brazil Loans	3,220		3,771
Debt Reacquisition Cost	(488)		(515)
	24,007		24,905
Total Debt	$	29,391	$	31,452

On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a Loan and Security agreement with HSBC Bank USA (the "Loan and Security Agreement"). The Company incurred an increase in debt of $0.5 million as a result of debt reacquisition cost.

These new credit 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 (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 month Secured Overnight Financing Rate, ("SOFR)". The initial rate for the first three months of the Loan and Security Agreement is the one-month SOFR plus 1.60%. 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 Term Loan facility was comprised of 70% of the fair market value of the Borrowers’ 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 loan facility is available for the purchase of new machinery and equipment at 80% of the net invoice value of new machinery and equipment purchases, with a draw period of eighteen months past the closing date, with any amount outstanding under the facility subject to a 3.75% amortization rate per quarter.

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

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all commitments and facilities, and require the immediate payment of the entire unpaid principal balances, accrued interest, and all other obligations.

The TD Bank loan was retired in the quarter ended June 2022.. Prior to the Loan and Security Agreement with HSBC, the Company’s Amended and Restated Loan and Security Agreement of June 25, 2020, the “First Amendment” to this loan agreement was executed on September 17, 2020, which include, among other things, (i) pause testing of the Fixed Charge Coverage Ratio until September 30, 2021 and (ii) establishment of a new minimum cumulative EBITDA and minimum liquidity covenants in lieu thereof. 

Total debt decreased $2.1 million during the three months ended September 30, 2022 and $1.7 million of which was a decrease in Brazilian loans. This is a result of cash provided from operations of $0.6 million and the use of the credit balance of $0.6 million of the contingency gain, related to exclusion of ICMS.

In Brazil, the Company is actively mitigating this consequence of the build-up of ICMS (sales tax) credits by filing applications with the relevant tax authorities to change 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 this rate again. This new methodology is common for similar sized, export focused companies in Brazil. The ICMS balance as of June 30, 2022 was $5.4 million and as of September 30, 2022 was $4.9 million.

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 $25.0 million. A 0.25% commitment fee is charged on the unused portion of the Line of Credit.

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. The Company’s Brazilian subsidiary has the following loans of September 30, 2022 (in thousands):

Lending Institution	Interest Rate		Beginning Date	Ending Date	Outstanding Balance
Itau	4.52	%	October 2021	September 2024	$	4,000
Santander	2.71	%	December 2021	December 2022	275
Bradesco	2.52	%	January 2022	January 2023	443
Itau	4.98	%	February 2022	February 2024	1,828
Brasil	4.95	%	August 2022	July 2025	401
Brasil	3.80	%	September 2022	August 2024	115
Brasil	4.18	%	September 2022	September 2023	48
					$	7,110

Note 12:     Income Taxes

Tax expense for the three month period ended September 30, 2022 was $1.0 million on profit before tax of $3.0 million (an effective tax rate of 32%). Tax expense for the three month period ended September 30, 2021 was $1.1 million on profit before tax of $4.4 million (an effective tax rate of 26%). The effective tax rate for the three month periods ended September 30, 2022 and 2021 were 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. Tax expense for the three month period ended September 30, 2022 reflects the impact of final U.S. foreign tax credit regulations effective in fiscal 2023 that result in an increase in tax expense from the GILTI inclusion. In the period ended September 30, 2022 the GILTI impact resulted in a 7.27% rate as compared to the period ended September 30, 2021 resulting in a rate of 2.22%.

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 September 30, 2022 and June 30, 2022. The Company had long term tax obligations related primarily to transfer pricing adjustments at September 30, 2022 and June 30, 2022.

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Note 13:     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 impact on the Company’s results of operations or cash flows.

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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 related to currency-neutral sales, as well as 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 numbers 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 and the gain on the sale of assets in order to show comparative operational performance. We include a reconciliation of currency-neutral revenues 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 regarding segment results of operations. The Company’s business is aggregated into two reportable segments based on geography of operations: North American Operations and International Operations. 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 Note 2. These tables above 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.

Three months ended September 30, 2022 and September 30, 2021

The following table represents key results of operations on a consolidated basis for the three months ended September 30, 2022 and September 30, 2021:

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	Three Months Ended
(Amounts in thousands)	9/30/2022			09/30/2021			$ Change favorable (unfavorable)		% Change
Net sales	$	60,461		$	61,514		$	(1,053)	(1.7)	%
Gross profit	20,200			20,145			55		0.3	%
% of net sales	33.4		%	32.7		%
Restructuring charges	190			—			(190)		(100.0)	%
Selling, general and administrative expenses	16,294			16,012			(282)		(1.8)	%
% of net sales	26.9		%	26.0		%
Operating income	3,716			4,133			(417)		(10.1)	%
Other income (expense), net	(676)			226			(902)		(399.1)	%
Income before income taxes	3,040			4,359			(1,319)		(30.3)	%
Income tax expense (benefit)	984			1,127			143		12.7	%
Net income	$	2,056		$	3,232		(1,176)		(36.4)	%

Key Results by Reporting Segment

	Three Months Ended September 2022											Three Months Ended September 2021
(Amounts in thousands)	North America			International			Corporate		Total			North America			International			Corporate		Total
Net sales	$	36,484		$	23,977		$	—	$	60,461		$	33,809		$	27,705		$	—	$	61,514
Gross profit	10,932			9,268			—		20,200			9,535			10,610			—		20,145
% of net sales	30.0		%	38.7		%			33.4		%	28.2		%	38.3		%			32.7		%
Restructuring charges	—			190			—		190			—			—			—		—
Selling, general and administrative expenses	8,101			6,242			1,951		16,294			7,262			7,027			1,723		16,012
% of net sales	22.2		%	26.0		%			26.9		%	21.5		%	25.4		%			26.0		%
Operating income	2,831			2,836			(1,951)		3,716			2,273			3,583			(1,723)		4,133
% of net sales	7.8		%	11.8		%			6.1		%	6.7		%	12.9		%			6.7		%

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Non-GAAP Measure Reconciliation: Fiscal 2023 Q1 "Currency Neutral" Net Sales

	Three months ended
(Amounts in Thousands)	9/30/2022	9/30/2021	$ Change	% Change
Net Sales, as reported	60,461	61,514	(1,053)	(1.7)	%
Currency Neutralizing Adjustment*	923	—	923	1.5	%
Q1 FY23 Currency Neutral Net Sales	61,384	61,514	(130)	(0.2)	%
North America Net Sales, as reported	36,484	33,809	2,675	7.9	%
Currency Neutralizing Adjustment*	64	—	64	0.2	%
Q1FY23 Currency Neutral North America Net Sales	36,548	33,809	2,739	8.1	%
International Net Sales, as reported	23,977	27,705	(3,728)	(13.5)	%
Currency Neutralizing Adjustment*	859	—	859	3.1	%
Q1FY23 Currency Neutral International Net Sales	24,836	27,705	(2,869)	(10.4)	%
*"Currency Neutralizing Adjustment" = Change when converting Q1FY23 sales in non USD functional currencies at the same exchange rates used in the comparison period

Overview

New order intake remained stable in the North American precision hand tools business and in the precision granite market. However, order intake in our International operations, particularly in Europe, has softened due to the recession there and the on-going war in Ukraine. Although backlog remains very high and nearly 20% higher than on June 30, 2022, the company continues to anticipate a softening in demand for its products across the portfolio.

For the three months ended September 30, 2022 and September 30, 2021 sales were $60.5 million and $61.5 million, respectively, a reduction of $1.1 million or 1.7%. Consolidated gross profit improved $0.1 million versus prior year to $20.2 million in the three months ended September 30, 2022. Gross margin was 33.4% of sales in the three months ended September 30, 2022 versus 32.7% during the prior year. This continues to reflect the positive impact of our factory restructuring efforts completed in fiscal 2021. While the Company continues to experience supply chain challenges, raw material price increases, and an increase in wages related to labor shortages globally, it has been able to keep pace with selling price increases. Selling, General and Administrative expenses have increased overall by $0.3 million versus prior year to $16.3 million in the three months ended September 30, 2022 due in large part to increases in sales and marketing expenses. In the three months ended September 30, 2022 operating income was $3.7 million, a $0.4 million or a 10.1% reduction versus September 30, 2021 during which the company reported operating income of $4.1 million. During the three months ended September 30, 2022, the Company had $0.2 million in restructuring expenses related to the closure of its distribution and sales centers in Singapore and Japan as part of the March 2022 disclosed restructuring with a total expected projected cost $0.8 million. Project-to-date the total incurred as of September 30, 2022 was $0.5 million.

The United States Dollar has strengthened against the United Kingdom, New Zealand and Brazilian currencies versus the prior year. Currency neutral sales for the three months ended September 30, 2022 were $61.4 million bringing sales to the same level compared to net sales of the period ended September 30, 2021.

Net Sales

In the three months ended September 30, 2022 net sales were $60.5 million with North America net sales of $36.5 million and International of $24.0 million. In the three months ended September 30, 2022 North America net sales increased 7.9% by $2.7 million to $36.5 million and International net sales declined 13.5% to $24.0 million as compared to $27.7 million in the three months ended September 30, 2021. Currency neutral international net sales would have been $24.8 million in the three month ended September 30, 2022, as referenced in the table above.

Gross Profit

Gross profit of $20.2 million in the three months ended September 30, 2022 is an increase of $0.1 million or 0.3% over the three months ended September 30, 2021 at $20.1 million. In the three months ended September 30, 2022 compared to September 30, 2021, This equates to 33.4% gross margin in the three months ended September 30, 2022 compare to 32.7%, prior year. International gross profit decreased to $9.3 million, or 38.7% of sales, compared to $10.6 million, or 38.3% of sales

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in the three months ended September 30, 2021. In the three months ended September 30, 2022 North American gross profit improved to $10.9 million, or 30.0% of sales from $9.5 million, or 28.2% of sales in the three months ended September 30, 2021. Although the company continues to be challenged by macro pressures related to supply chain, raw material and labor cost increases in this inflationary environment, it has been able to keep pace with a series of selling price increases across the business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses of $16.3 million in the three months ended September 30, 2022 increased $0.3 million or 1.8% over the three months ended September 30, 2021 at $16.0 million. The increase in selling, general and administrative expenses is due primarily to some variable selling expenses related to sales and marketing. Overall, selling, general and administrative expenses as a percentage of sales increased to 26.9% in the three months ended September 30, 2022 from 26.0% in the three months ended September 30, 2021. North America increasing from 21.5% of sales to 22.2% of sales, International decreased expenses $0.8 million yet expenses increased as a percentage of sales to 26.0% from 25.4% of sales during the comparative period. Corporate expenses were $2.0 million in the three months ended September 30, 2022 compared to $1.7 million in the three months ended September 30, 2021.

Income Taxes

In the three months ended September 30, 2022, the Company recognized income tax expense of $1.0 million on profit before tax of $3.0 million (an effective tax rate 32%) as compared to income tax expense of $1.1 million on profit before tax of $4.4 million (an effective tax rate of 26%), in the three months ended September 30, 2021. The higher effective tax rate in the three months ended September 30, 2022, when compared with the three months ended September 30, 2021 is primarily due to final U.S. foreign tax credit regulations effective in fiscal 2023 that result in an increase in tax expense from the GILTI inclusion which are $0.2 million higher in the quarter ended September 30, 2022 as a result of this change.

Other Income and Net Income

Other expense in the three months ended September 30, 2022 was $0.7 million mainly related to exchange losses from Brazil, China and New Zealand of $0.4 million and interest expense of $0.4 million as SOFR is a variable rate. The effective interest rate on the borrowings under the Loan and Security Agreement during the three months ended September 30, 2022 and 2021 was 4.2% and 1.9% respectively. Other income in the three months ended September 30, 2021 was a $0.2 million mainly related to pension adjustments.

In the three months ended September 30, 2022 net income was $2.1 million, $1.2 million or 36.4% lower than net income of $3.2 million in the three months ended September 30, 2021

LIQUIDITY AND CAPITAL RESOURCES

Cash flows (in thousands)	Three Months Ended
	9/30/2022		9/30/2021
Cash provided by (used in) operating activities	$	628	$	(5,841)
Cash (used in) investing activities	(1,162)		(2,624)
Cash (used in) financing activities	(2,094)		5,711
Effect of exchange rate changes on cash	7		276
Net (decrease) in cash	$	(2,621)	$	(2,478)

Net cash flows used in the three months ended September 30, 2022 was $2.6 million. Cash provided by operations was $0.6 million resulting from net income of $2.1 million, decreases in accounts receivable of $3.1 million due to lower sales and the Company planned $5.0 million increase in inventories due to global supply chain issues. Cash used in investing activities was $1.2 million as a result of $1.0 million in capital expenditures and $0.2 million in software development while cash used in financing amounted to $2.1 million as the Company's borrowed $0.6 million and repaid $2.7 million.

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The Company believes it maintains sufficient liquidity and has the resources to fund its operations with existing cash and cash expected to be provided by future operating activities and are adequate to satisfy its working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months.

On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a new Loan and Security agreement with HSBC Bank USA. These new credit 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. As September 30, 2022 the Company has excess availability on the revolving line of credit and the term loan of $16.2 million.

The effective interest rate on the borrowings under the Loan and Security Agreement during the three months ended September 30, 2022 and 2021 was 4.2% and 1.9% 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

One 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 Form 10-K for the year ended June 30, 2022.

ITEM 4.    CONTROLS AND PROCEDURES

The Company's management, under the supervision and with the participation of the Company's President and Chief Executive Officer and Chief Financial Officer, has evaluated the Company's disclosure controls and procedures as of September 30, 2022, and they have concluded that our disclosure controls and procedures were effective as of such date. 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. Based on the evaluation of our disclosure controls and procedures as of September 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective. There have not been any changes in the Company’s internal control over financial reporting during the first quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

21

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

for the year ended June 30, 2022.

22

ITEM 6.    EXHIBITS

31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
31.2 *	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
32.2+	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from The L. S. Starrett Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 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 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.

23

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	November 3, 2022	/S/ Douglas A. Starrett
		Douglas A. Starrett - President and CEO (Principal Executive Officer)
Date	November 3, 2022	/S/ John C. Tripp
		John C. Tripp - CFO and Treasurer (Principal Accounting Officer)

24

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Douglas A. Starrett, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The L.S. Starrett Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial report; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 3, 2022	/S/	Douglas A. Starrett
		Douglas A. Starrett
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, John C. Tripp, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The L.S. Starrett Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial report; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

November 3, 2022	/S/	John C. Tripp
		John C. Tripp
		Chief Financial Officer

EX-32

EXHIBIT 32.1

CERTIFICATIONS

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of The L.S. Starrett Company, a Massachusetts corporation (the "Company"), does hereby certify, to such officer's knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 (the "Form 10-Q") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date	November 12, 2020	/S/ Douglas A. Starrett
		Douglas A. Starrett
		Chief Executive Officer
Date	November 12, 2020	/S/ John C. Tripp
		John C. Tripp
		Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of this written statement required by Section 906 has been provided to The L.S. Starrett Company and will be retained by The L.S. Starrett Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Cover page - shares	3 Months Ended
	Sep. 30, 2022	Oct. 26, 2022
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2022
Document Transition Report	false
Entity File Number	1-367
Entity Registrant Name	STARRETT L S CO
Entity Incorporation, State or Country Code	MA
Entity Tax Identification Number	04-1866480
Entity Address, Address Line One	121 Crescent Street
Entity Address, City or Town	Athol
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	01331-1915
City Area Code	978
Local Phone Number	249-3551
Title of 12(b) Security	Class A Common - $1.00 Per Share Par Value
Trading Symbol	SCX
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0000093676
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q1
Amendment Flag	false
Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		6,787,025
Class B
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		595,381

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Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Current assets:
Cash	$ 11,902	$ 14,523
Accounts receivable (less allowance for credit losses of $770 and $796, respectively)	38,062	42,961
Inventories	70,085	66,900
Prepaid expenses and other current assets	10,142	8,669
Total current assets	130,191	133,053
Property, plant and equipment, net	36,178	37,116
Right of use assets	5,026	5,540
Deferred tax assets, net	14,351	14,924
Intangible assets, net	4,506	4,640
Goodwill	1,015	1,015
Other assets	3,162	3,266
Total assets	194,429	199,554
Current liabilities:
Current maturities of debt	5,384	6,547
Current lease liability	1,432	1,530
Accounts payable	15,748	14,624
Accrued expenses	10,429	11,776
Accrued compensation	5,521	6,703
Total current liabilities	38,514	41,180
Other tax obligations	2,839	2,936
Long-term lease liability	3,777	4,166
Long-term debt, net of current portion	24,007	24,905
Postretirement benefit and pension obligations	23,459	23,938
Total liabilities	92,596	97,125
Stockholders' equity:
Additional paid-in capital	57,247	57,143
Retained earnings	91,115	89,059
Accumulated other comprehensive loss	(53,897)	(51,066)
Total stockholders' equity	101,833	102,429
Total liabilities and stockholders’ equity	194,429	199,554
Class A
Stockholders' equity:
Common stock	6,771	6,683
Common stock	6,771	6,683
Class B
Stockholders' equity:
Common stock	597	610
Common stock	$ 597	$ 610

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Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Allowance for doubtful accounts	$ 770	$ 796
Class A
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares, outstanding (in shares)	6,770,681	6,682,521
Class B
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, shares, outstanding (in shares)	596,903	610,087

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Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Income Statement [Abstract]
Net sales	$ 60,461	$ 61,514
Cost of goods sold	40,261	41,369
Gross profit	$ 20,200	$ 20,145
% of Net sales	33.40%	32.70%
Restructuring charges	$ 190	$ 0
Selling, general and administrative expenses	16,294	16,012
Operating income	3,716	4,133
Other (expense) income	(676)	226
Income before income taxes	3,040	4,359
Income tax expense	984	1,127
Net income	$ 2,056	$ 3,232
Basic income per share (in dollars per share)	$ 0.28	$ 0.45
Diluted income per share (in dollars per share)	$ 0.27	$ 0.44
Weighted average outstanding shares used in per share calculations:
Basic (in shares)	7,304	7,126
Diluted (in shares)	7,505	7,396

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Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Statement of Comprehensive Income [Abstract]
Net income	$ 2,056	$ 3,232
Other comprehensive (loss):
Currency translation (loss), net of tax	(2,806)	(3,611)
Pension and postretirement plans, net of tax	(25)	(66)
Other comprehensive (loss)	(2,831)	(3,677)
Total comprehensive (loss) income	$ (775)	$ (445)

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Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock Outstanding Class A	Common Stock Outstanding Class B	Additional Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Loss
Beginning balance at Jun. 30, 2021	$ 83,535	$ 6,475	$ 634	$ 56,507	$ 74,181	$ (54,262)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income (loss)	(445)				3,232	(3,677)
Repurchase of shares	(16)		(2)	(14)
Stock-based compensation	174	119		55
Conversion		25	(25)
Ending balance at Sep. 30, 2021	83,248	6,619	607	56,548	77,413	(57,939)
Accumulated balance consists of:
Translation loss						(59,657)
Pension and postretirement plans, net of taxes						1,718
Accumulated other comprehensive loss						(57,939)
Accumulated other comprehensive loss	(51,066)
Beginning balance at Jun. 30, 2022	102,429	6,683	610	57,143	89,059	(51,066)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Total comprehensive income (loss)	(775)				2,056	(2,831)
Repurchase of shares	(6)		(1)	(5)
Stock-based compensation	185	76		109
Conversion	0	12	(12)
Ending balance at Sep. 30, 2022	101,833	$ 6,771	$ 597	$ 57,247	$ 91,115	(53,897)
Accumulated balance consists of:
Translation loss						(62,881)
Pension and postretirement plans, net of taxes						8,984
Accumulated other comprehensive loss	$ (53,897)					$ (53,897)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net income	$ 2,056	$ 3,232
Non-cash operating activities:
Depreciation	1,288	1,262
Amortization	363	335
Stock-based compensation	185	174
Net long-term tax obligations	18	38
Deferred taxes	356	193
Postretirement benefit and pension obligations	162	(353)
Working capital changes:
Accounts receivable	3,135	(5,797)
Inventories	(5,022)	(2,887)
Other current assets	(1,740)	(1,888)
Other current liabilities	31	104
Prepaid pension expense	(263)	(288)
Other	59	34
Net cash provided by (used in) operating activities	628	(5,841)
Cash flows from investing activities:
Purchases of property, plant and equipment	(960)	(2,334)
Software development	(202)	(290)
Net cash (used in) investing activities	(1,162)	(2,624)
Cash flows from financing activities:
Proceeds from borrowing	575	13,767
Debt repayments	(2,663)	(8,040)
Shares repurchased	(6)	(16)
Net cash provided (used in) by financing activities	(2,094)	5,711
Effect of exchange rate changes on cash	7	276
Net decrease in cash	(2,621)	(2,478)
Cash, beginning of period	14,523	9,105
Cash, end of period	11,902	6,627
Supplemental cash flow information:
Interest paid	374	224
Income taxes paid, net	$ 2,244	$ 1,116

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Basis of Presentation and Summary of Significant Account Policies

3 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Account Policies

Basis of Presentation and Summary of Significant Accounting Policies

The unaudited interim consolidated financial statements as of and for the three months ended September 30, 2022 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022. The balance sheet as of June 30, 2022 has been derived from the audited consolidated financial statements as of and for the year ended June 30, 2022.  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. Allowance for doubtful accounts 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 for financial assets and liabilities held at carrying amount on the 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 consolidated financial statements and accompanying notes.  Note 2 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended June 30, 2022 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

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Recently Adopted Accounting Pronouncements	3 Months Ended
	Sep. 30, 2022
Accounting Standards Update and Change in Accounting Principle [Abstract]
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting PronouncementsIn June 2016, the FASB issued ASU 2016-13 "Financial Instruments -Credit Losses" (ASC 326) "Measurement of Credit Losses on Financial Instruments,” and subsequent amendment to the guidance, ASU 2018-19 in November 2018. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace historic incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. This pronouncement was extended for Small Reporting Companies and for the Company beginning July 1, 2022. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

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Segment Information

3 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Segment Information

Segment InformationThe segment information and the accounting policies of each segment are the same as those described in the notes to the consolidated financial statements entitled “Financial Information by Segment & Geographic Area” included in our Annual Report on Form 10-K for the year ended June 30, 2022. The Company’s business is aggregated into two reportable segments based on geography of operations: North American Operations and International Operations ("International"). 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. Financial results for each reportable segment are as follows (in thousands):

	North American Operations		International Operations		Unallocated		Total
Three Months Ended September 30, 2022
Sales1	$	36,484	$	23,977	$	—	$	60,461
Operating Income (Loss)	$	3,198	$	2,836	$	(2,318)	$	3,716
Three Months Ended September 30, 2021
Sales2	$	33,809	$	27,705	$	—	$	61,514
Operating Income (Loss)	$	2,501	$	3,583	$	(1,951)	$	4,133

1.Excludes $927 of North American segment intercompany sales to the International segment, and $5,035 of International segment intercompany sales to the North American segment.

2.Excludes $749 of North American segment intercompany sales to the International segment, and $5,336 of International segment intercompany sales to the North American segment.

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Revenue from Contracts with Customers

3 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customer

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 Consolidated Balance Sheet. As of September 30, 2022, and June 30, 2022, the balance of the return asset was $0.1 million and $0.1 million, respectively, and the balance of the refund liability was $0.2 million and $0.2 million, respectively. They are presented within prepaid expenses and other current assets and accrued expenses, respectively, on the 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 $0.5 million and $0.9 million at September 30, 2022 and June 30, 2022, respectively, located in Accounts Payable in the Consolidated Balance Sheets.

Disaggregation of Revenue

The Company operates in two reportable segments: North America and International. 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 months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
North America
United States	$	34,272	$	32,020
Canada & Mexico	2,212		1,789
	36,484		33,809
International
Brazil	17,248		19,203
United Kingdom	3,201		4,968
China	1,686		1,618
Australia & New Zealand	1,842		1,916
	23,977		27,705
Total Sales	$	60,461	$	61,514

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Leases

3 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Leases

Leases

Operating lease cost amounted to $0.5 million and $0.7 million for three months period ended September 30, 2022 and 2021. As of September 30, 2022, the Company’s right-of-use "ROU" assets, lease obligations and remaining cash commitment on these leases (in thousands):

	Right-of-Use Assets	Operating Lease Obligations		Remaining Cash Commitment
Operating leases	5,026	$	5,209	$	6,637

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 3.9 years. As of September 30, 2022, the Company’s financing leases are de minimis. The foreign exchange impact affecting the operating leases are de minimis.

In September 2021, the Company entered into a six year lease in China for 100,682 square feet and recorded a right of use asset for $2.6 million.

In July 2021, Starrett UK leased space to another company for annual rent of $0.2 million and incremental applicable service charges. The lease is a 20 year agreement with a contract review in 2026. The fees are recorded in Other Income in the Company's Consolidated Statement of Operations.

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Stock-based Compensation	3 Months Ended
	Sep. 30, 2022
Share-Based Payment Arrangement [Abstract]
Stock-based Compensation	Stock-based Compensation Compensation expense related to all stock-based plans for the three-month periods ended September 30, 2022 and 2021 was $0.1 million, for both periods.

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Inventories

3 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Inventories

InventoriesInventories consist of the following (in thousands):

	9/30/2022		6/30/2022
Raw material and supplies	$	36,668	$	35,752
Goods in process and finished parts	23,205		22,268
Finished goods	36,212		35,589
	96,085		93,609
LIFO Reserve	(26,000)		(26,709)
	$	70,085	$	66,900

Of the Company’s $70.1 million and $66.9 million total inventory at September 30, 2022 and June 30, 2022, respectively, the $26.0 million and $26.7 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 $41.6 million on a FIFO basis and $15.6 million on a LIFO basis at September 30, 2022. The Core U.S. business had total Inventory, on a FIFO basis, of $39.3 million and $12.6 million on a LIFO basis as of June 30, 2022. The use of LIFO, as compared to FIFO, resulted in a $0.7 million decrease in cost of sales for the goods sold in the period ended September 30, 2022 compared to $4.6 million decrease in fiscal 2022.

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Goodwill and Intangible Assets

3 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Amortizable intangible assets consist of the following (in thousands):

	9/30/2022		6/30/2022
Trademarks and trade names	2,070		2,070
Completed technology	—		—
Customer relationships	630		630
Software development	11,471		11,269
Gross intangible assets	14,171		13,969
Accumulated amortization and impairment	(9,665)		(9,329)
Net intangible assets	$	4,506	$	4,640

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 June 30, 2022, gross $4.7 million and accumulated impairment of $3.7 million. There was no change to goodwill in the three months ended September 30, 2022 and the balance is a net $1.0 million.

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Accrued Expenses

3 Months Ended

Sep. 30, 2022

Payables and Accruals [Abstract]

Accrued Expenses

Accrued Expenses (in thousands):

	09/30/2022		06/30/2022
Sales related programs (commissions, rebates, distributor programs, warranty and related)	$	2,868	$	2,733
Income taxes	614		2,420
Professional fees	1,669		1,758
Other	1,562		1,463
Current portion pension cost	1,297		1,289
Taxes other than income tax	1,058		1,243
Workers compensation and employee deposits	558		518
Freight	803		352
Total	$	10,429	$	11,776

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Pension and Post-retirement Benefits

3 Months Ended

Sep. 30, 2022

Retirement Benefits [Abstract]

Pension and Post-retirement Benefits

Pension and Post-retirement Benefits

The Company has two defined benefit pension plans, one for U.S. employees and another for U.K. employees.  The Company has a postretirement medical and insurance benefit plan for U.S. employees. The Company also has defined contribution plans.

The U.K. defined benefit plan was closed to new entrants in fiscal 2009.

On December 21, 2016, the Company amended the U.S. defined benefit pension plan to freeze benefit accruals effective December 31, 2016. Consequently, the Plan is closed to new participants and current participants will no longer earn additional benefits after December 31, 2016.

Net periodic benefit costs for the Company's defined benefit pension plans are located in Other (expense) in the Consolidated Statements of Operations except (in the table below) for service cost. Service cost are in cost of sales and selling, general and administrative expenses. Net periodic benefit costs consist of the following (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
Interest cost	1,482		1,033
Expected return on plan assets	(1,032)		(1,100)
Amortization of net loss	10		14
	$	460	$	(53)

Net periodic benefit costs for the Company's Postretirement Medical Plan consists of the following (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
Service cost	$	6	$	9
Interest cost	18		12
Amortization of prior service credit	(369)		(368)
Amortization of net loss	44		47
	$	(301)	$	(300)

For the three month period ended September 30, 2022, the Company contributed zero in the U.S. and $0.2 million in the UK pension plans. Based upon the actuarial valuations performed on the Company’s defined benefit plans as of September 30, 2022, the contribution for fiscal 2023 for the U.S. plans would require a contribution of $1.4 million and the U.K. plan would require one of $0.8 million However, as a result of the American Rescue Plan Act of 2021, the minimum required company contribution for the U.S. Plan in fiscal 2022 was reduced from $1.4 million to $0.6 million. 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 $2.5 million in total during fiscal year 2022, with $1.5 million in the U.S. and $1.0 million in the U.K.

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.

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Debt

3 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt

Debt

Debt is comprised of the following (in thousands):

	9/30/2022		6/30/2022
Short-term and current maturities
Loan and Security Agreement (Term loan)	1,495		1,495
Brazil Loans	3,889		5,052
	5,384		6,547
Long-term debt (net of current portion)
Loan and Security Agreement (Term Loan)	9,878		10,252
Loan and Security Agreement (Line of Credit)	11,397		11,397
Brazil Loans	3,220		3,771
Debt Reacquisition Cost	(488)		(515)
	24,007		24,905
Total Debt	$	29,391	$	31,452

On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a Loan and Security agreement with HSBC Bank USA (the "Loan and Security Agreement"). The Company incurred an increase in debt of $0.5 million as a result of debt reacquisition cost.

These new credit 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 (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 month Secured Overnight Financing Rate, ("SOFR)". The initial rate for the first three months of the Loan and Security Agreement is the one-month SOFR plus 1.60%. 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 Term Loan facility was comprised of 70% of the fair market value of the Borrowers’ 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 loan facility is available for the purchase of new machinery and equipment at 80% of the net invoice value of new machinery and equipment purchases, with a draw period of eighteen months past the closing date, with any amount outstanding under the facility subject to a 3.75% amortization rate per quarter.

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 TD Bank loan was retired in the quarter ended June 2022.. Prior to the Loan and Security Agreement with HSBC, the Company’s Amended and Restated Loan and Security Agreement of June 25, 2020, the “First Amendment” to this loan agreement was executed on September 17, 2020, which include, among other things, (i) pause testing of the Fixed Charge Coverage Ratio until September 30, 2021 and (ii) establishment of a new minimum cumulative EBITDA and minimum liquidity covenants in lieu thereof. 

Total debt decreased $2.1 million during the three months ended September 30, 2022 and $1.7 million of which was a decrease in Brazilian loans. This is a result of cash provided from operations of $0.6 million and the use of the credit balance of $0.6 million of the contingency gain, related to exclusion of ICMS.

In Brazil, the Company is actively mitigating this consequence of the build-up of ICMS (sales tax) credits by filing applications with the relevant tax authorities to change 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 this rate again. This new methodology is common for similar sized, export focused companies in Brazil. The ICMS balance as of June 30, 2022 was $5.4 million and as of September 30, 2022 was $4.9 million.

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 $25.0 million. A 0.25% commitment fee is charged on the unused portion of the Line of Credit.

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. The Company’s Brazilian subsidiary has the following loans of September 30, 2022 (in thousands):

Lending Institution	Interest Rate		Beginning Date	Ending Date	Outstanding Balance
Itau	4.52	%	October 2021	September 2024	$	4,000
Santander	2.71	%	December 2021	December 2022	275
Bradesco	2.52	%	January 2022	January 2023	443
Itau	4.98	%	February 2022	February 2024	1,828
Brasil	4.95	%	August 2022	July 2025	401
Brasil	3.80	%	September 2022	August 2024	115
Brasil	4.18	%	September 2022	September 2023	48
					$	7,110

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Income Taxes

3 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Tax expense for the three month period ended September 30, 2022 was $1.0 million on profit before tax of $3.0 million (an effective tax rate of 32%). Tax expense for the three month period ended September 30, 2021 was $1.1 million on profit before tax of $4.4 million (an effective tax rate of 26%). The effective tax rate for the three month periods ended September 30, 2022 and 2021 were 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. Tax expense for the three month period ended September 30, 2022 reflects the impact of final U.S. foreign tax credit regulations effective in fiscal 2023 that result in an increase in tax expense from the GILTI inclusion. In the period ended September 30, 2022 the GILTI impact resulted in a 7.27% rate as compared to the period ended September 30, 2021 resulting in a rate of 2.22%.

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 September 30, 2022 and June 30, 2022. The Company had long term tax obligations related primarily to transfer pricing adjustments at September 30, 2022 and June 30, 2022.

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Contingencies	3 Months Ended
	Sep. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Contingencies	ContingenciesThe 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 impact on the Company’s results of operations or cash flows.

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Basis of Presentation and Summary of Significant Account Policies (Policies)

3 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Basis of Accounting

The unaudited interim consolidated financial statements as of and for the three months ended September 30, 2022 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2022. The balance sheet as of June 30, 2022 has been derived from the audited consolidated financial statements as of and for the year ended June 30, 2022.  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. Allowance for doubtful accounts 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 for financial assets and liabilities held at carrying amount on the 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 consolidated financial statements and accompanying notes.  Note 2 to the Company’s consolidated financial statements included in the Annual Report on Form 10-K for the year ended June 30, 2022 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13 "Financial Instruments -Credit Losses" (ASC 326) "Measurement of Credit Losses on Financial Instruments,” and subsequent amendment to the guidance, ASU 2018-19 in November 2018. The standard significantly changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace historic incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The amendment will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. ASU 2018-19 clarifies that receivables arising from operating leases are accounted for using lease guidance and not as financial instruments. The amendments should be applied on either a prospective transition or modified-retrospective approach depending on the subtopic. This pronouncement was extended for Small Reporting Companies and for the Company beginning July 1, 2022. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

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Segment Information (Tables)

3 Months Ended

Sep. 30, 2022

Segment Reporting [Abstract]

Summary of financial results for reportable segments

Financial results for each reportable segment are as follows (in thousands):

	North American Operations		International Operations		Unallocated		Total
Three Months Ended September 30, 2022
Sales1	$	36,484	$	23,977	$	—	$	60,461
Operating Income (Loss)	$	3,198	$	2,836	$	(2,318)	$	3,716
Three Months Ended September 30, 2021
Sales2	$	33,809	$	27,705	$	—	$	61,514
Operating Income (Loss)	$	2,501	$	3,583	$	(1,951)	$	4,133

1.Excludes $927 of North American segment intercompany sales to the International segment, and $5,035 of International segment intercompany sales to the North American segment.

2.Excludes $749 of North American segment intercompany sales to the International segment, and $5,336 of International segment intercompany sales to the North American segment.

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Revenue from Contracts with Customers (Tables)

3 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Disaggregation of revenue

In the following table, the Company's net sales by shipping origin are disaggregated accordingly for the three months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
North America
United States	$	34,272	$	32,020
Canada & Mexico	2,212		1,789
	36,484		33,809
International
Brazil	17,248		19,203
United Kingdom	3,201		4,968
China	1,686		1,618
Australia & New Zealand	1,842		1,916
	23,977		27,705
Total Sales	$	60,461	$	61,514

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Leases (Tables)

3 Months Ended

Sep. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Summary of lease assets and liabilities

As of September 30, 2022, the Company’s right-of-use "ROU" assets, lease obligations and remaining cash commitment on these leases (in thousands):

	Right-of-Use Assets	Operating Lease Obligations		Remaining Cash Commitment
Operating leases	5,026	$	5,209	$	6,637

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Inventories (Tables)

3 Months Ended

Sep. 30, 2022

Inventory Disclosure [Abstract]

Schedule of inventories

Inventories consist of the following (in thousands):

	9/30/2022		6/30/2022
Raw material and supplies	$	36,668	$	35,752
Goods in process and finished parts	23,205		22,268
Finished goods	36,212		35,589
	96,085		93,609
LIFO Reserve	(26,000)		(26,709)
	$	70,085	$	66,900

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Sep. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Amortizable intangible assets

Amortizable intangible assets consist of the following (in thousands):

	9/30/2022		6/30/2022
Trademarks and trade names	2,070		2,070
Completed technology	—		—
Customer relationships	630		630
Software development	11,471		11,269
Gross intangible assets	14,171		13,969
Accumulated amortization and impairment	(9,665)		(9,329)
Net intangible assets	$	4,506	$	4,640

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Accrued Expenses (Tables)

3 Months Ended

Sep. 30, 2022

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

	09/30/2022		06/30/2022
Sales related programs (commissions, rebates, distributor programs, warranty and related)	$	2,868	$	2,733
Income taxes	614		2,420
Professional fees	1,669		1,758
Other	1,562		1,463
Current portion pension cost	1,297		1,289
Taxes other than income tax	1,058		1,243
Workers compensation and employee deposits	558		518
Freight	803		352
Total	$	10,429	$	11,776

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Pension and Post-retirement Benefits (Tables)

3 Months Ended

Sep. 30, 2022

Retirement Benefits [Abstract]

Schedule of Net Benefit Costs

Net periodic benefit costs consist of the following (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
Interest cost	1,482		1,033
Expected return on plan assets	(1,032)		(1,100)
Amortization of net loss	10		14
	$	460	$	(53)

Net periodic benefit costs for the Company's Postretirement Medical Plan consists of the following (in thousands):

	Three Months Ended
	9/30/2022		9/30/2021
Service cost	$	6	$	9
Interest cost	18		12
Amortization of prior service credit	(369)		(368)
Amortization of net loss	44		47
	$	(301)	$	(300)

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Debt (Tables)

3 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Debt schedule

Debt is comprised of the following (in thousands):

	9/30/2022		6/30/2022
Short-term and current maturities
Loan and Security Agreement (Term loan)	1,495		1,495
Brazil Loans	3,889		5,052
	5,384		6,547
Long-term debt (net of current portion)
Loan and Security Agreement (Term Loan)	9,878		10,252
Loan and Security Agreement (Line of Credit)	11,397		11,397
Brazil Loans	3,220		3,771
Debt Reacquisition Cost	(488)		(515)
	24,007		24,905
Total Debt	$	29,391	$	31,452

Schedule of short-term debt, Brazilian subsidiary

The Company’s Brazilian subsidiary has the following loans of September 30, 2022 (in thousands):

Lending Institution	Interest Rate		Beginning Date	Ending Date	Outstanding Balance
Itau	4.52	%	October 2021	September 2024	$	4,000
Santander	2.71	%	December 2021	December 2022	275
Bradesco	2.52	%	January 2022	January 2023	443
Itau	4.98	%	February 2022	February 2024	1,828
Brasil	4.95	%	August 2022	July 2025	401
Brasil	3.80	%	September 2022	August 2024	115
Brasil	4.18	%	September 2022	September 2023	48
					$	7,110

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Segment Information (Details)	3 Months Ended
	Sep. 30, 2022 segment
Segment Reporting [Abstract]
Number of reportable segments	2

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Segment Information - Summary of financial results for reportable segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Sales	$ 60,461	$ 61,514
Operating Income (Loss)	3,716	4,133
Unallocated
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Sales	0	0
Operating Income (Loss)	(2,318)	(1,951)
North American Operations
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Sales	36,484	33,809
North American Operations | Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Sales	36,484	33,809
Operating Income (Loss)	3,198	2,501
North American Operations | Intercompany sales
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Intercompany sales	927	749
International Operations | Operating Segments
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Sales	23,977	27,705
Operating Income (Loss)	2,836	3,583
International
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Sales	23,977	27,705
International | Intercompany sales
Segment Reporting, Reconciling Item for Operating Profit (Loss) from Segment to Consolidated [Line Items]
Intercompany sales	$ 5,035	$ 5,336

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Revenue from Contracts with Customers (Details) $ in Millions	3 Months Ended
	Sep. 30, 2022 USD ($) segment	Jun. 30, 2022 USD ($)
Revenue from Contract with Customer [Abstract]
Customer return asset	$ 0.1	$ 0.1
Customer refund liability	0.2	0.2
Contract asset	0.0
Contract liability	$ 0.5	$ 0.9
Number of reportable segments | segment	2

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Revenue from Contracts with Customers - Disaggregation of revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Disaggregation of Revenue [Line Items]
Net sales	$ 60,461	$ 61,514
North America
Disaggregation of Revenue [Line Items]
Net sales	36,484	33,809
International
Disaggregation of Revenue [Line Items]
Net sales	23,977	27,705
United States | North America
Disaggregation of Revenue [Line Items]
Net sales	34,272	32,020
Canada & Mexico | North America
Disaggregation of Revenue [Line Items]
Net sales	2,212	1,789
Brazil | International
Disaggregation of Revenue [Line Items]
Net sales	17,248	19,203
United Kingdom | International
Disaggregation of Revenue [Line Items]
Net sales	3,201	4,968
China | International
Disaggregation of Revenue [Line Items]
Net sales	1,686	1,618
Australia & New Zealand | International
Disaggregation of Revenue [Line Items]
Net sales	$ 1,842	$ 1,916

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Leases (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($) ft²	Jun. 30, 2022 USD ($)	Jul. 31, 2021 USD ($)
Lessee, Lease, Description [Line Items]
Operating lease cost	$ 500	$ 700
Weighted average discount rate	9.00%
Weighted average remaining lease term	3 years 10 months 24 days
Right of use assets	$ 5,026		$ 5,540
United Kingdom
Lessee, Lease, Description [Line Items]
Lease payments to be received				$ 200
Operating lease, term of contract (in years)				20 years
China
Lessee, Lease, Description [Line Items]
Term of lease (in years)		6 years
Square footage of area leased | ft²		100,682
Right of use assets		$ 2,600

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Leases - Summary of lease assets and liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Commitments and Contingencies Disclosure [Abstract]
Right of use assets	$ 5,026	$ 5,540
Operating Lease Obligations	5,209
Remaining Cash Commitment	$ 6,637

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Stock-based Compensation (Details) - USD ($) $ in Millions	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
The 2012 Stock Incentive Plan
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense related to stock based plans	$ 0.1	$ 0.1

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Inventories - Components of Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Inventory Disclosure [Abstract]
Raw material and supplies	$ 36,668	$ 35,752
Goods in process and finished parts	23,205	22,268
Finished goods	36,212	35,589
Total before LIFO reserve	96,085	93,609
LIFO Reserve	(26,000)	(26,709)
Total	$ 70,085	$ 66,900

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Inventories (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2022	Jun. 30, 2022
Inventory [Line Items]
Inventories	$ 70,085	$ 66,900
LIFO reserve	26,000	26,709
Inventory difference using FIFO basis	41,600	39,300
LIFO inventory amount	15,600	12,600
Cost of Sales
Inventory [Line Items]
Effect of LIFO Reserve on income	$ (700)	$ (4,600)

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Goodwill and Intangible Assets - Finite-lived Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	$ 14,171	$ 13,969
Accumulated amortization and impairment	(9,665)	(9,329)
Net intangible assets	4,506	4,640
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	2,070	2,070
Completed technology
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	0	0
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	630	630
Software development
Finite-Lived Intangible Assets [Line Items]
Gross intangible assets	$ 11,471	$ 11,269

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Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Sep. 30, 2022	Jun. 30, 2022
Finite-Lived Intangible Assets [Line Items]
Goodwill gross		$ 4,700
Goodwill impairment loss		3,700
Goodwill	$ 1,015	$ 1,015
Computer software
Finite-Lived Intangible Assets [Line Items]
Intangible asset useful life	5 years
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Intangible asset useful life	20 years

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Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Payables and Accruals [Abstract]
Sales related programs (commissions, rebates, distributor programs, warranty and related)	$ 2,868	$ 2,733
Income taxes	614	2,420
Professional fees	1,669	1,758
Other	1,562	1,463
Current portion pension cost	1,297	1,289
Taxes other than income tax	1,058	1,243
Workers compensation and employee deposits	558	518
Freight	803	352
Total	$ 10,429	$ 11,776

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Pension and Post-retirement Benefits - Net Periodic Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Interest cost	$ 1,482	$ 1,033
Expected return on plan assets	(1,032)	(1,100)
Amortization of net loss	10	14
Total	460	(53)
Post Retirement Medical Plan
Defined Benefit Plan Disclosure [Line Items]
Service cost	6	9
Interest cost	18	12
Amortization of prior service credit	(369)	(368)
Amortization of net loss	44	47
Total	$ (301)	$ (300)

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Pension and Post-retirement Benefits (Details) $ in Millions	3 Months Ended	12 Months Ended
	Sep. 30, 2022 USD ($) plan	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Number of defined benefit pension plans | plan	2
Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Contributions by employer		$ 2.5
Pension Plan | United States
Defined Benefit Plan Disclosure [Line Items]
Contributions by employer	$ 0.0	1.5
Expected future contributions for current fiscal year	1.4		$ 1.4
Expected future contributions for current fiscal year, after legislation		0.6
Pension Plan | Foreign Plan
Defined Benefit Plan Disclosure [Line Items]
Contributions by employer	0.2	$ 1.0
Expected future contributions for current fiscal year	$ 0.8

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Debt - Debt schedule (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022
Debt Instrument [Line Items]
Brazil Loans	$ 7,110
Short-term and current maturities	5,384	$ 6,547
Long-term debt (net of current portion)	24,007	24,905
Long-term debt	29,391	31,452
Loan and Security Agreement (Term loan)
Debt Instrument [Line Items]
Long-term debt (net of current portion)	9,878	10,252
Loan and Security Agreement (Line of Credit)
Debt Instrument [Line Items]
Long-term debt (net of current portion)	11,397	11,397
Brazil Loans
Debt Instrument [Line Items]
Long-term debt (net of current portion)	3,220	3,771
Debt Reacquisition Cost	(488)	(515)
Loan and Security Agreement (Term loan)
Debt Instrument [Line Items]
Loan and Security Agreement, current maturities	1,495	1,495
Brazil Loans
Debt Instrument [Line Items]
Brazil Loans	$ 3,889	$ 5,052

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Debt (Details) - USD ($)		3 Months Ended
	Apr. 29, 2022	Sep. 30, 2022	Sep. 30, 2021	Jun. 30, 2022
Debt Instrument [Line Items]
Credit limit on revolving loan facility		$ 25,000,000
Net cash provided from operations		628,000	$ (5,841,000)
Contingency gain		600,000
ICMS balance		$ 4,900,000		$ 5,400,000
Commitment fee percentage on line of credit		0.25%
HSBC Bank USA
Debt Instrument [Line Items]
Increase in debt	$ 500,000
Loan and Security Agreement | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate | Revolving Credit Facility
Debt Instrument [Line Items]
Variable interest rate	1.60%
All Debt
Debt Instrument [Line Items]
Decrease in debt		$ (2,100,000)
Brazil Debt
Debt Instrument [Line Items]
Decrease in debt		$ (1,700,000)
Capital Expenditure Draw Down Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Credit limit on revolving loan facility	$ 7,000,000
The Credit Facility | Revolving Credit Facility
Debt Instrument [Line Items]
Credit limit on revolving loan facility	30,000,000
Uncommitted accordion provision	10,000,000
Face value of term loan	$ 12,100,000
Line of Credit | Loan and Security Agreement
Debt Instrument [Line Items]
Minimum fixed charge coverage ratio	100.00%
Line of Credit | Loan and Security Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Percentage of receivables included in borrowing base, investment grade	90.00%
Percentage of receivables included in borrowing base, domestic investment grade and foreign insured	85.00%
Percentage of receivables included in borrowing base, foreign uninsured	75.00%
Percentage of eligible inventory included in borrowing base at cost	65.00%
Percentage of receivables included in borrowing base, domestic investment grade and foreign insured	85.00%
Line of Credit | Loan and Security Agreement | Term Loan
Debt Instrument [Line Items]
Percentage of the fair market value of eligible real estate	70.00%
Collateral amount	$ 4,600,000
Percentage of net orderly liquidation value of machinery and equipment	85.00%
Capped value of eligible machinery and equipment	$ 7,500,000
Amortization period for real estate portion	1250.00%
Amortization period for machinery and equipment portion	667.00%
Quarterly term loan payments	$ 373,650
Line of Credit | Loan and Security Agreement | Capital Expenditure Draw Down Credit Facility
Debt Instrument [Line Items]
Percentage of eligible new machinery and equipment	80.00%
Draw down period	18 months
Amortization rate for capital expenditure draw amounts outstanding	3.75%

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Debt - Short-term Debt (Details) $ in Thousands	Sep. 30, 2022 USD ($)
Statement [Line Items]
Brazil Loans	$ 7,110
Notes Payable to Banks | Itau Bank | 4.52% Short-Term Loan
Statement [Line Items]
Interest rate	4.52%
Brazil Loans	$ 4,000
Notes Payable to Banks | Itau Bank | 4.98% Short Term Loan
Statement [Line Items]
Interest rate	4.98%
Brazil Loans	$ 1,828
Notes Payable to Banks | Santander Bank | 2.71% Short-Term Loan
Statement [Line Items]
Interest rate	2.71%
Brazil Loans	$ 275
Notes Payable to Banks | Bradesco Bank | 2.52% Short-Term Loan
Statement [Line Items]
Interest rate	2.52%
Brazil Loans	$ 443
Notes Payable to Banks | Brasil Bank | 4.95% Short-Term Loan
Statement [Line Items]
Interest rate	4.95%
Brazil Loans	$ 401
Notes Payable to Banks | Brasil Bank | 3.80% Short Term Loan
Statement [Line Items]
Interest rate	3.80%
Brazil Loans	$ 115
Notes Payable to Banks | Brasil Bank | 4.18% Short-Term Loan
Statement [Line Items]
Interest rate	4.18%
Brazil Loans	$ 48

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Income Taxes (Details ) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Operating Loss Carryforwards [Line Items]
Income tax expense	$ 984	$ 1,127
Profit before tax	$ 3,040	$ 4,359
Effective income tax rate percentage	32.00%	26.00%
GILTI impact	7.27%	2.22%
Foreign Tax Authority | Secretariat of the Federal Revenue Bureau of Brazil
Operating Loss Carryforwards [Line Items]
Effective income tax rate percentage	34.00%