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 ~~December~~March 31, ~~2023~~2024


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


			For the transition period from						to

			Commission file number						1-367


THE L. S. STARRETT COMPANY
(Exact name of registrant as specified in its charter)


Massachusetts						04-1866480
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


121 Crescent Street, Athol, Massachusetts			01331-1915
(Address of principal executive offices)			(Zip Code)


Registrant's telephone number, including area code			978-249-3551

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common - $1.00 Per Share Par Value	SCX	New York Stock Exchange
Class B Common - $1.00 Per Share Par Value	Not applicable	Not applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check One):

Large Accelerated Filer ☐ Accelerated Filer ☐ Non-Accelerated Filer ☒ ☐ Smaller Reporting Company ☒

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Common Shares outstanding as of						~~January~~April 1724, 2024
Class A Common Shares						67,~~954~~007,~~519~~717
Class B Common Shares						~~550~~505,~~478~~150

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “anticipate”, “believe”, “contemplate”, “continue”, “could”, “estimate”, “expect”, “forecast”, “goal”, “intend”, “may”, “plan”, “potential”, “predict”, “project”, “should”, “target”, “will”, “would”, or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed in our Annual Report on Form 10-K and other filings with the Securities Exchange Commission (the “SEC”). You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results set forth under Item 1A. “Risk Factors” in our Annual Report on Form 10-K, as amended, for the year ended June 30, 2023.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make or collaborations or strategic partnerships we may enter into. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

THE L. S. STARRETT COMPANY

CONTENTS

			Page No.
Part I.	Financial Information:
	Item 1.	Financial Statements	23
		Condensed Consolidated Balance Sheets (unaudited)– December 31, 2023 (unaudited) and June 30, 2023	4
		Condensed Consolidated Balance Sheets – March 31, 2024 (unaudited) and June 30, 2023	3
		Condensed Consolidated Statements of Operations (unaudited) – three and six months ended December 31, 2023 and December 31, 2022	6
		Condensed Consolidated Statements of Operations (unaudited)– three and nine months ended March 31, 2024 and March 31, 2023	4
		Condensed Consolidated Statements of Comprehensive Income (Loss), (unaudited) – three and six months ended December 31, 2023 and December 31, 2022	7
		Condensed Consolidated Statements of Comprehensive Income (unaudited) – three and nine months ended March 31, 2024 and March 31, 2023	5
		Condensed Consolidated Statements of Stockholders' Equity (unaudited) – three and six months ended December 31, 2023 and December 31, 2022	8
		Condensed Consolidated Statements of Stockholders' Equity (unaudited) – three and nine months ended March 31, 2024 and March 31, 2023	5-8
		Condensed Consolidated Statements of Cash Flows (unaudited) - six months ended December 31, 2023 and December 31, 2022	9
		Condensed Consolidated Statements of Cash Flows (unaudited) - nine months ended March 31, 2024 and March 31, 2023	8
		Notes to Unaudited Condensed Consolidated Financial Statements	10-18
		Notes to unaudited Condensed Consolidated Financial Statements	9-21
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1816
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2423
	Item 4.	Controls and Procedures	2423
Part II.	Other Information:
	Item 1A.	Risk Factors	26
	Item 1.	Legal Proceedings	24
	Item 1A.	Risk Factors	24
	Item 6.	Exhibits	27
SIGNATURES			28

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

THE L. S. STARRETT COMPANY

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

Condensed Consolidated Balance Sheets


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

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

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

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

Other tax obligations	2,779		2,884
Long-term lease liability	2,585		3,423
Long-term debt, net of current portion	5,768		5,273
Postretirement benefit and pension obligations	9,532		12,192
Total liabilities	$	56,525	$	63,335
Contingencies (Note 12)
Stockholders' equity:
Class A Common stock $1 par (20,000,000 shares authorized; 6,967,791 outstanding at March 31, 2024 and 6,853,673 outstanding at June 30, 2023)	$	6,968	$	6,854
Class B Common stock $1 par (10,000,000 shares authorized; 536,130 outstanding at March 31, 2024 and 576,396 outstanding at June 30, 2023)	536		576
Additional paid-in capital	58,241		57,825
Retained earnings	114,310		112,147
Accumulated other comprehensive loss	(49,951)		(47,935)
Total stockholders' equity	130,104		129,467
Total liabilities and stockholders’ equity	$	186,629	$	192,802

(in thousands except share data)

	12/31/2023		06/30/2023
ASSETS
Current assets:
Cash	$	5,684	$	10,454
Accounts receivable (less allowance for credit losses of $546 and $449, respectively)	34,826		36,611
Inventories	61,284		65,414
Prepaid expenses and other current assets	10,950		9,723
Total current assets	112,744		122,202
Property, plant and equipment, net	44,852		39,375
Right of use assets	4,421		4,931
Deferred tax assets, net	15,667		17,056
Intangible assets, net	4,829		4,672
Goodwill	1,015		1,015
Other assets	3,534		3,551
Total assets	$	187,062	$	192,802
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of debt	$	4,403	$	4,961
Current lease liability	1,604		1,689
Accounts payable	13,487		15,047
Accrued expenses	12,162		11,579
Accrued compensation	4,613		6,287
Total current liabilities	36,269		39,563
Other tax obligations	2,899		2,884
Long-term lease liability	2,966		3,423
Long-term debt, net of current portion and debt costs	3,103		5,273
Postretirement benefit and pension obligations	10,699		12,192
Total liabilities	55,936		63,335
Contingencies (Note 12)
Stockholders' equity:
Class A Common stock $1 par 20,000,000 shares authorized; 8,361,535 issued, 6,953,641 outstanding at December 31, 2023 and 6,853,673 outstanding at June 30, 2023)	6,954		6,854
Class B Common stock $1 par (10,000,000 shares authorized; 852,825 issued, 551,564 outstanding at December 31, 2023 and 576,396 outstanding at June 30, 2023	552		576
Additional paid-in capital	58,050		57,825
Retained earnings	113,672		112,147
Accumulated other comprehensive loss	(48,102)		(47,935)
Total stockholders' equity	131,126		129,467
Total liabilities and stockholders’ equity	$	187,062	$	192,802

See Notes to unaudited Condensed Consolidated Financial Statements

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Operations

(in thousands except per share data)

(unaudited)

	3 Months Ended						69 Months Ended
	12/31/2023			12/31/2022			12/31/2023			12/31/2022
	03/31/2024			03/31/2023			03/31/2024			03/31/2023
Net sales	$	6260,~~076~~767		$	6661,~~775~~678		$	~~122~~183,~~712~~479		$	~~127~~188,~~236~~914
Cost of goods sold	43,~~112~~187			4542,~~199~~455			84127,~~212~~399			85127,~~460~~916
Gross profit	1817,~~964~~580			2119,~~576~~223			3856,~~500~~080			4160,~~776~~998
% of Net sales	3028.59		%	3231.32		%	3130.46		%	32.83		%
Restructuring charges	—			54—			—			244
Selling, general and administrative expenses	16,~~470~~870			15,~~561~~109			3350,~~548~~417			3146,~~855~~962
Operating income	~~2,494~~710			54,~~961~~114			45,~~952~~663			913,~~677~~792
Other (expense), net	(526)			(1,121)			(890)			(1,797)
Other (expense) income, net	(17)			(602)			(908)			(2,399)
Income before income taxes	~~1,968~~693			43,~~840~~512			4,~~062~~755			711,~~880~~393
Income tax expense	2,362			1,709			2,537			2,693
Income tax expense (benefit)	55			(3,961)			2,592			(1,267)
Net (loss) income	$	(394)		$	3,131		$	1,525		$	5,187
Net income	$	638		$	7,473		$	2,163		$	12,660
Basic (loss) income per share	$	(0.05)		$	0.42		$	0.20		$	0.71
Basic income per share	$	0.09		$	1.01		$	0.29		$	1.72
Diluted (loss) income per share	$	(0.05)		$	0.42		$	0.20		$	0.69
Diluted income per share	$	0.08		$	0.99		$	0.28		$	1.68
Weighted average outstanding shares used in per share calculations:
Basic	7,~~501~~505			7,~~405~~427			7,~~469~~481			7,~~354~~379
Diluted	7,~~501~~657			7,~~541~~577			7,~~623~~638			7,~~511~~538

See Notes to unaudited Condensed Consolidated Financial Statements

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands)

(unaudited)

	3 Months Ended				69 Months Ended
	12/31/2023		12/31/2022		12/31/2023		12/31/2022
	03/31/2024		03/31/2023		03/31/2024		03/31/2023
Net (loss) income	$	(394)	$	3,131	$	1,525	$	5,187
Net income	$	638	$	7,473	$	2,163	$	12,660
Other comprehensive income (loss):
Other comprehensive (loss) income:
Currency translation gain (loss), net of tax	2,308		2,716		(97)		(90)
Currency translation (loss) gain, net of tax	(1,813)		1,545		(1,910)		1,455
Pension and postretirement plans, net of tax	(36)		(3644)		(70106)		(61105)
Other comprehensive income (loss)	2,272		2,680		(167)		(151)
Other comprehensive (loss) income	(1,849)		1,501		(2,016)		1,350
Total comprehensive income	$	1,878	$	5,811	$	1,358	$	5,036
Total comprehensive (loss) income	$	(1,211)	$	8,974	$	147	$	14,010

See Notes to unaudited Condensed Consolidated Financial Statements

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Stockholders' Equity

(in thousands) (unaudited)

For the Three and ~~Six~~Nine-Month Period Ended ~~December~~March 31, ~~2023~~2024:

	Common StockOutstanding				AdditionalPaid-inCapital		RetainedEarnings		AccumulatedOtherComprehensiveLoss		Total
	Class A		Class B
Balance June 30, 2023	$	6,854	$	576	$	57,825	$	112,147	$	(47,935)	$	129,467
Total comprehensive income (loss)	—		—		—		1,920		(2,439)		(519)
Repurchase of shares	—		(2)		(21)		—		—		(23)
Stock-based compensation	56		—		9		—		—		65
Conversion	23		(23)		—		—		—		—
Balance September 30, 2023	$	6,933	$	551	$	57,813	$	114,067	$	(50,374)	$	128,990
Total comprehensive (loss) income	—		—		—		(394)		2,272		1,878
Repurchase of shares	—		—		(3)		—		—		(3)
Issuance of stock	—		5		35		—		—		40
Stock-based compensation	17		—		205		—		—		222
Conversion	4		(4)		—		—		—		—
Balance December 31, 2023	$	6,954	$	552	$	58,050	$	113,672	$	(48,102)	$	131,126
Accumulated balance consists of:
Translation loss									$	(55,937)
Pension and postretirement plans, net of taxes									7,835
									$	(48,102)

For the Three and Six-Month Period Ended December 31, 2022:


	Common Stock Outstanding				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Class A		Class B

Balance June 30, 2023	$	6,854	$	576	$	57,825	$	112,147	$	(47,935)	$	129,467
Total comprehensive income (loss)	—		—		—		1,920		(2,439)		(519)
Repurchase of shares	—		(2)		(21)		—		—		(23)
Stock-based compensation	56		—		9		—		—		65
Conversion of class B to class A stock	23		(23)		—		—		—		—
Balance September 30, 2023	$	6,933	$	551	$	57,813	$	114,067	$	(50,374)	$	128,990

Total comprehensive (loss) income	—		—		—		(394)		2,272		1,878
Repurchase of shares	—		—		(3)		—		—		(3)
Issuance of stock	—		5		35		—		—		40
Stock-based compensation	17		—		205		—		—		222
Conversion of class B to class A stock	4		(4)		—		—		—		—
Balance December 31, 2023	$	6,954	$	552	$	58,050	$	113,672	$	(48,102)	$	131,126

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

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

	Common StockOutstanding				AdditionalPaid-inCapital		RetainedEarnings		AccumulatedOtherComprehensiveLoss		Total
	Class A		Class B
Balance June 30, 2022	$	6,683	$	610	$	57,143	$	89,059	$	(51,066)	$	102,429
Total comprehensive income (loss)	—		—		—		2,056		(2,831)		(775)
Repurchase of shares	—		(1)		(5)		—		—		(6)
Stock-based compensation	76		—		109		—		—		185
Conversion	12		(12)		—		—		—		—
Balance September 30, 2022	$	6,771	$	597	$	57,247	$	91,115	$	(53,897)	$	101,833
Total comprehensive income	—		—		—		3,131		2,680		5,811
Repurchase of shares	—		—		(3)		—		—		(3)
Issuance of stock	—		34		50		—		—		84
Stock-based compensation	25		—		160		—		—		185
Conversion	7		(7)		—		—		—		—
Balance December 31, 2022	$	6,803	$	624	$	57,454	$	94,246	$	(51,217)	$	107,910
Accumulated balance consists of:
Translation loss									$	(60,166)
Pension and postretirement plans, net of taxes									8,949
									$	(51,217)

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Stockholders' Equity

(in thousands) (unaudited)

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


	Common Stock Outstanding				Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Total
	Class A		Class B

Balance June 30, 2022	$	6,683	$	610	$	57,143	$	89,059	$	(51,066)	$	102,429
Total comprehensive income (loss)	—		—		—		2,056		(2,831)		(775)
Repurchase of shares	—		(1)		(5)		—		—		(6)
Stock-based compensation	76		—		109		—		—		185
Conversion of class B to class A stock	12		(12)		—		—		—		—
Balance September 30, 2022	$	6,771	$	597	$	57,247	$	91,115	$	(53,897)	$	101,833

Total comprehensive income	—		—		—		3,131		2,680		5,811
Repurchase of shares	—		—		(3)		—		—		(3)
Issuance of stock	—		34		50		—		—		84
Stock-based compensation	25		—		160		—		—		185
Conversion of class B to class A stock	7		(7)		—		—		—		—
Balance December 31, 2022	$	6,803	$	624	$	57,454	$	94,246	$	(51,217)	$	107,910

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


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

See Notes to unaudited Condensed Consolidated Financial Statements

THE L. S. STARRETT COMPANY

Condensed Consolidated Statements of Cash Flows

(in thousands) (unaudited)

	6 Months Ended
	9 Months Ended
	12/31/2023		12/31/2022
	03/31/2024		03/31/2023
Cash flows from operating activities:
Net income	$	12,~~525~~163	$	512,~~187~~660
Non-cash operating activities:
Depreciation	24,~~779~~246		23,~~585~~884
Amortization	~~525~~812		~~720~~998
Stock-based compensation	~~287~~494		~~370~~549
Net long-term tax obligations	1(75)		91(66)
Deferred taxes	~~1,374~~991		~~977~~(3,753)
Postretirement benefit and pension obligations	~~295~~442		~~314~~475
Working capital changes:
Changes in operating assets and liabilities:
Accounts receivable	~~1,962~~156		47,~~530~~148
Inventories	46,~~158~~060		(~~3,307~~72)
Other current assets	(~~1,229~~606)		(1,~~098~~275)
Other current liabilities	(~~2,842~~589)		(43,~~818~~255)
Prepaid pension expense	(13,~~860~~179)		(1,~~147~~574)
Other	~~136~~208		70178
Net cash provided by operating activities	711,~~111~~123		415,~~474~~897
Cash flows from investing activities:
Purchases of property, plant and equipment	(810,~~316~~681)		(34,~~713~~790)
Software development	(~~683~~1,036)		(~~477~~795)
Net cash (used in) investing activities	(8,999)		(4,190)
Intangibles-other	—		(54)
Net cash (used in) investing activities	(11,717)		(5,639)
Cash flows from financing activities:
Proceeds from borrowing	6,000		1,575
Proceeds from term loan borrowings	2,000		575
Debt repayments	(8,781)		(7,508)
Proceeds from line of credit borrowings	8,000		1,000
Term debt repayments	(5,719)		(8,352)
Line of credit repayments	(6,500)		(9,500)
Proceeds from common stock issued	40		84
Shares repurchased	(2644)		(916)
Net cash (used in) financing activities	(2,~~767~~223)		(516,~~858~~209)
Effect of exchange rate changes on cash	(~~115~~110)		823
Net (decrease) in cash	(4,770)		(5,566)
Net decrease in cash	(2,927)		(5,928)
Cash, beginning of period	10,454		14,523
Cash, end of period	$	57,~~684~~527	$	8,~~957~~595
Supplemental cash flow information:
Interest paid	~~458~~$	615	~~802~~$	1,200
Income taxes paid, net	$3,132	~~2,117~~	$4,395	~~3,360~~

See Notes to unaudited Condensed Consolidated Financial Statements

THE L. S. STARRETT COMPANY

Notes to unaudited Condensed Consolidated Financial Statements

~~December~~March 31, ~~2023~~2024

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

The unaudited Condensed Consolidated Financial Statements as of and for the ~~six~~nine months ended ~~December~~March 31, ~~2023~~2024 have been prepared by The L.S. Starrett Company (the “Company”) in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These unaudited Consolidated Financial Statements, which, in the opinion of management, reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation, should be read in conjunction with the ~~audited~~consolidated ~~Consolidated~~financial ~~Financial~~statements ~~Statements~~ and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, for the year ended June 30, 2023. The balance sheet as of June 30, 2023 has been derived from the audited ~~Condensed~~ Consolidated Financial Statements as of and for the year ended June 30, 2023. Operating results are not necessarily indicative of the results that may be expected for any future interim period or for the entire fiscal year. The Company’s “fiscal year” begins July 1st and ends June 30th.

Accounts Receivable and Allowance for Credit Losses

Trade accounts receivable are recorded at invoiced amount and do not bear interest. The allowance for credit losses is the Company's estimate of current expected credit losses on its existing accounts receivable and determined based on historical customer assessments, current financial conditions and reasonable and supportable forecasts. Account balances are charged off against the allowance when the Company determines the receivable will not be recovered.

Fair Value Measurements

Certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are carried at cost, which approximates their fair value because of their short-term maturity. See Notes 10 and 11 within the notes to the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for financial assets and liabilities held at carrying amount on the unaudited Condensed Consolidated Balance Sheet.

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect amounts reported in the ~~unaudited~~ Condensed Consolidated Financial Statements and accompanying notes. Note 1 within the notes to the ~~unaudited~~ Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q and Note 2 to the Company’s audited ~~Condensed~~ Consolidated Financial Statements included in the Annual Report on Form 10-K, as amended, for the year ended June 30, 2023 describes the significant accounting policies and methods used in the preparation of the unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

Note 2: Segment Information

The segment information and the accounting policies of each segment are the same as those described in the notes to the audited Consolidated Financial Statements entitled “Financial Information by Segment” included in our Annual Report on Form 10-K, as amended, for the year ended June 30, 2023. The chief operating decision maker, who is the Company’s President and CEO, allocates resources and assesses performance based on three segments: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM".

Segment income is measured for internal reporting purposes by excluding corporate expenses, which are included in the unallocated column in the table below. Other income and expense, including interest income and expense, and income taxes are excluded entirely from the table below. There were no significant changes in the segment operations or in the segment assets

from the Annual Report on Form 10-K, as amended, for the year ended June 30, 2023. Financial results for each reportable segment are as follows (in thousands):

	NAI		INI		GTM		Unallocated		Total
Three Months ended December 31, 2023
Three Months ended March 31, 2024
Sales1	$	1921,~~814~~806	$	2623,~~425~~820	$	15,~~837~~141	$	—	$	6260,~~076~~767
Operating Income (Loss)	$	(185)	$	2,227	$	2,520	$	(2,068)	$	2,494
Operating (Loss) Income	$	(916)	$	1,785	$	2,509	$	(2,668)	710
Three Months ended December 31, 2022
Three Months ended March 31, 2023
Sales2	$	22,~~780~~310	$	2623,~~051~~849	$	1715,~~944~~519	$	—	$	6661,~~775~~678
Operating Income (Loss)	$	~~176~~656	$	32,~~796~~416	$	32,~~314~~615	$	(1,~~325~~573)	$	54,~~961~~114

1.Excludes $~~348~~345 of NAI segment intercompany sales to the INI segment, $~~114~~83 of GTM segment intercompany sales to the INI segment, $32,~~560~~625 of INI segment intercompany sales to NAI and $~~279~~277 of GTM intercompany sales to NAI.

2. Excludes $~~546~~243 of NAI segment intercompany sales to the INI segment, $~~161~~83 of GTM segment intercompany sales to the INI segment, $3,~~992~~208 of INI segment intercompany sales to NAI and $~~258~~348 of GTM intercompany sales to NAI.

	NAI			INI		GTM		Unallocated		Total
Six months ended December 31, 2023
Nine Months ended March 31, 2024
Sales1	$	3961,~~284~~090		$	5175,~~799~~619	$	3146,~~629~~770	$	—	$	~~122~~183,~~712~~479
Operating Income (Loss)	$	(869)		$	4,987	4,892		$	(4,058)	$	4,952
Operating (Loss) Income	$	(1,784)		$	6,771	$	7,400	$	(6,724)	$	5,663
Six months ended December 31, 2022
Nine months ended March 31, 2023
Sales2	$	4567,~~151~~461	0	$	4973,~~350~~199	$	3248,~~735~~254	$	—	$	~~127~~188,~~236~~914
Operating Income (Loss)	$	~~876~~1,532		$	68,~~485~~902	$	58,~~592~~207	$	(34,~~277~~849)	$	913,~~677~~792

1.Excludes $~~681~~1,027 of NAI segment intercompany sales to the INI segment, $~~192~~274 of GTM segment intercompany sales to the INI segment, $79,~~036~~660 of INI segment intercompany sales to NAI and $~~979~~1,256 of GTM intercompany sales to NAI.

2. Excludes $1,~~198~~442 of NAI segment intercompany sales to the INI segment, $~~436~~519 of GTM segment intercompany sales to the INI segment, $811,~~617~~825 of INI segment intercompany sales to NAI and $~~668~~1,016 of GTM intercompany sales to NAI.

Note 3: Revenue from Contracts with Customers

Under ASC Topic 606, the Company is required to present a refund liability and a return asset within the unaudited Condensed Consolidated Balance Sheet. As of ~~December~~March 31, ~~2023~~2024 and June 30, 2023, the balance of the return asset was $0.2 million and $0.1 million, respectively, and the balance of the refund liability as of ~~December~~March 31, ~~2023~~2024 and June 30, 2023 ~~was~~were ~~$0.3 million~~both ~~and~~ $0.12 million~~, respectively~~. They are presented within prepaid expenses and other current assets and accrued expenses, respectively, on the ~~unaudited~~ Condensed Consolidated Balance Sheets.

The Company, in general, warrants its products against certain defects in material and workmanship when used as designed, for a period of up to one year. The Company does not sell extended warranties.

Contract Balances

Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts with customers. Contract assets are transferred to receivables when the rights become unconditional. Contract

119

liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been met, and therefore, revenue has not been recognized. The Company had no contract asset balances, but had contract liability balances of $0.3 million and $0.3 million at ~~December~~March 31, ~~2023~~2024 and June 30, 2023, respectively, ~~located~~recorded in Accounts Payable in the Condensed Consolidated Balance Sheets.

Disaggregation of Revenue

The Company operates in three reportable segments: NAI, INI and GTM. ASC Topic 606 requires further disaggregation of an entity’s revenue. In the following table, the Company's net sales by shipping origin are disaggregated accordingly for the three and ~~six~~nine months ended ~~December~~March 31, ~~2023~~2024 and ~~2022~~2023 (in thousands):

	Three Months Ended				~~Six~~Nine Months Ended
	12/31/2023		12/31/2022		12/31/2023		12/31/2022
	03/31/2024		03/31/2023		03/31/2024		03/31/2023
United States	$	33,132	$	37,620	$	65,908	$	71,892
North America
Canada & Mexico	1,792		2,067		3,550		4,278
United States	$	34,625	$	35,122	$	100,533	$	107,014
Brazil	20,209		20,057		39,639		37,305
Canada & Mexico	1,952		1,931		5,502		6,209
United Kingdom	3,095		3,294		6,630		6,494
	36,577		37,053		106,035		113,223
China	1,879		1,978		3,336		3,665
International
Australia & New Zealand	1,969		1,759		3,649		3,601
Brazil	17,891		18,160		57,530		55,465
Total Sales	$	62,076	$	66,775	$	122,712	$	127,236
United Kingdom	3,265		3,563		9,896		10,059
China	1,611		1,497		4,946		5,160
Australia & New Zealand	1,423		1,405		5,072		5,007
	24,190		24,625		77,444		75,691
Total Sales	$	60,767	$	61,678	$	183,479	$	188,914

Note 4: Leases

Operating lease expense amounted to $0.5 million and $1.5 million for the three and nine months period ended for March 31, 2024 and March 31, 2023. For the three and nine months period ended March 31, 2023 operating lease expense was $0.5 million and $1.5 million. As of March 31, 2024, the Company’s right-of-use assets "ROU", lease obligations and remaining cash commitment on these leases (in thousands):

Operating lease cost amounted to $0.5 million and $1.0 million for the three and six months ended December 31, 2023 and $0.8 million and $1.0 million for the three and six months ended December 31, 2022. As of December 31, 2023, the Company’s right-of-use assets "ROU", lease obligations and remaining cash commitment on these leases were as follows (in thousands):


	Right-of-Use Assets	Operating Lease Obligations	Remaining Cash Commitment
Total leases	$3,978	$4,132	$4,701

			Right-of-UseAssets						Operating LeaseObligations						Remaining CashCommitment
Leases			$	4,421					$	4,570					$	5,235

The Company has other operating lease agreements with commitments of less than one year or that are not material. The Company expenses lease payments as incurred. The Company’s weighted average discount rate and remaining term on lease liabilities is approximately 9.0% and 2.7 years. As of March 31, 2024, the Company’s financing leases are not material. The foreign exchange impact affecting the operating leases are, also, not material.

~~The~~In ~~Company has other operating lease agreements with commitments of less than one year or that are not significant. The Company elected~~ the ~~practical~~three ~~expedient~~months ~~option~~ and asnine ~~such,~~months ~~these~~ended ~~lease payments are expensed as incurred. The Company’s weighted average discount rate and remaining term on lease liabilities is approximately 9.0% and 2.8 years. As of December~~March 31, ~~2023,~~2024 the Company’s ~~financing~~entered ~~leases~~into ~~are~~no ~~not~~new ~~material. The foreign exchange impact affecting the operating~~ leases ~~are,~~and ~~also, not material~~$0.3 million.

~~The~~At ~~Company~~March 31, ~~entered~~2024, ~~into~~the ~~$0.1~~Company ~~million~~had ~~and~~the ~~$0.2~~following ~~million,~~fiscal inyear ~~new~~minimum operating lease commitments (in ~~the three and six months ended December 31, 2023.~~ thousands):


	Operating Lease Commitments
2024 (Remainder of year)	$	580
2025	1,782
2026	1,486
2027	742
2028	111
Thereafter	—
Subtotal	4,701
Imputed interest	(569)
Total	$	4,132

Note 5: Stock-based Compensation

Compensation expense related to all stock-based plans for the three and ~~six~~nine months ended ~~December~~March 31, ~~2023~~2024 were $0.2 million and $0.35 million as compared to the prior year three and ~~six~~nine months of $0.2 million and $0.35 million, respectively.

Note 6: Inventories

Inventories consist of the following (in thousands):


	03/31/2024		06/30/2023
Raw material and supplies	$	34,779	$	36,402
Goods in process and finished parts	21,298		20,978
Finished goods	32,534		34,414
	88,611		91,794
LIFO Reserve	(30,093)		(26,380)
	$	58,518	$	65,414

	12/31/2023		06/30/2023
Raw material and supplies	$	34,700	$	36,402
Goods in process and finished parts	19,940		20,978
Finished goods	33,042		34,414
	87,682		91,794
LIFO Reserve	(26,398)		(26,380)
	$	61,284	$	65,414

Of the Company’s $58.5 million and $65.4 million total inventory at March 31, 2024 and June 30, 2023, respectively, the $30.1 million and $26.4 million LIFO reserves belong to the U.S. Precision Tools and Saws Manufacturing “Precision Tools.” business. The Precision Tools business total inventory was $40.5 million on a FIFO basis and $10.4 million on a LIFO basis at March 31, 2024. The Precision Tools business had total Inventory, on a FIFO basis, of $38.1 million and $11.7 million on a LIFO basis as of June 30, 2023. The use of LIFO, as compared to FIFO, during the nine months ended March 31, 2024 resulted in a $3.8 million increase in the cost of goods sold in the nine months ended March 31, 2024 compared to a $0.4 million decrease in the nine months ended March 31, 2023.

Of the Company’s $61.3 million and $65.4 million total inventory at December 31, 2023 and June 30, 2023, respectively, the $26.4 million and $26.4 million LIFO reserves belong to the U.S. Precision Tools and Saws Manufacturing “Core U.S.” business. The Core U.S. business total inventory was $38.4 million on a FIFO basis and $12.0 million on a LIFO basis at December 31, 2023. The Core U.S. business had total inventory, on a FIFO basis, of $38.1 million and $11.7 million on a LIFO basis as of June 30, 2023. The use of LIFO, as compared to FIFO, resulted in, during the three months and six months ended December 31, 2023, a $0.1 million increase and no increase in cost of sales as compared to a $0.1 million increase and a $0.6 million decrease in the three and six months ended December 31, 2022.

Note 7: Goodwill and Intangible Assets

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

	12/31/2023		6/30/2023
	03/31/2024		6/30/2023
Trademarks and trade names	$	2,070	$	2,070
Customer relationships	630		630
Software development	910,~~745~~099		11,149
Other intangible assets	~~106~~105		105
Gross intangible assets	12,~~551~~904		13,954
Accumulated amortization and impairment	(78,~~722~~008)		(9,282)
Net intangible assets	$	4,~~829~~896	$	4,672

~~The estimated useful lives of the intangible assets subject to amortization range between 5 years for software development and 20 years for trademark and trade name assets.~~ 11

The ~~goodwill~~estimated ~~balance~~useful atlives ~~December 31,~~of ~~2023,~~the ~~gross~~intangible ~~$4.7 million~~assets ~~and~~subject ~~accumulated~~to ~~impairment~~amortization ofrange ~~$3.7 million.~~between ~~There~~5 isyears nofor ~~change~~software indevelopment and 20 years for trademark and trade name assets. For the ~~six~~periods ending three and nine months ended ~~December~~ March 31, ~~2023~~2024 to the ~~net~~amortization ~~goodwill~~expense ~~balance~~was of $10.3 million and $0.8 million, respectively.

The goodwill balance at March 31, 2024, was gross $4.7 million and accumulated impairment of $3.7 million. There is no change in the three and nine months ended March 31, 2024.

Note 8: Accrued Expenses

The following table represents accrued expenses from the ~~unaudited~~ Condensed Consolidated Balance Sheets (in thousands):


	03/31/2024		06/30/2023
Sales related programs (commissions, rebates, distributor programs, warranty and related)	$	2,796	$	2,590
Income taxes	46		509
Professional fees	1,575		2,237
Other	1,355		1,499
Current portion pension cost	2,225		2,216
Taxes other than income tax	3,123		1,888
Workers compensation and employee deposits	437		491
Freight	344		149
Total	$	11,901	$	11,579

	12/31/2023		06/30/2023
Sales related programs (commissions, rebates, distributor programs, warranty and related)	$	3,323	$	2,590
Income taxes	102		509
Professional fees	1,860		2,237
Other	1,214		1,499
Current portion pension cost	2,205		2,216
Taxes other than income tax	2,727		1,888
Workers compensation and employee deposits	429		491
Freight	302		149
Total	$	12,162	$	11,579

Note 9: Pension and Post-retirement Benefits

The Company has two defined benefit pension plans, one for U.S. employees which was frozen for new participants in 2016 and another for U.K. employees frozen for new participants in 2009. The Company has a postretirement medical insurance benefit plan for U.S. employees which remains open. The Company also has defined contribution plans.

Net periodic benefit costs for the Company's defined benefit pension plans are located in Other (expense), net in ~~the unaudited~~ Condensed 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, allocated on headcount. Net periodic benefit costs consist of the following (in thousands):

	Three Months Ended				~~Six~~Nine Months Ended
	12/31/2023		12/31/2022		12/31/2023		12/31/2022
	03/31/2024		03/31/2023		03/31/2024		03/31/2023
Interest cost	~~1,502~~$	1,537	~~1,408~~$	1,464	~~3,054~~$	4,591	~~2,890~~$	4,354
Expected return on plan assets	(1,~~049~~084)		(~~960~~1,015)		(23,~~147~~231)		(13,~~992~~007)
Amortization of net loss	10		10		2030		2030
Expected net cost total	$	463	$	458	$	927	$	918
Expected net cost (benefit) total	$	463	$	459	$	1,390	$	1,377

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

	Three Months Ended				~~Six~~Nine Months Ended
	12/31/2023		12/31/2022		12/31/2023		12/31/2022
	03/31/2024		03/31/2023		03/31/2024		03/31/2023
Service cost	$	45	$	56	$	914	$	1117
Interest cost	1817		1718		3552		3553
Amortization of prior service credit	(~~368~~369)		(~~368~~369)		(~~737~~1,106)		(~~737~~1,106)
Amortization of net loss	3130		4544		6292		89133
Total net (benefit)	$	(~~315~~317)	$	(301)	$	(~~631~~948)	$	(~~602~~903)

For the three months and ~~six~~nine months ended ~~December~~ March 31, ~~2023~~2024, the Company contributed in the U.S. $01.6 1 million and $12.4 million. In the UK pension plans the Company contributed $0.2 million and $0.5 7 million for the same periods. Based upon the actuarial valuations performed on the Company’s defined benefit plans as of June 30, 2023, the contribution for fiscal 2024 for the U.S. plans would require a contribution of $3.0 million and the U.K. plan would require $1.0 million. However, as a result of the American Rescue Plan Act of 2021, the minimum required company contribution for the U.S. Plan was reduced. The Company believes that government regulation is only a small part of deciding the pension funding, and as a result, may contribute more than the federal requirement. The Company contributed $2.4 million in total during fiscal year 2023, with $1.5 million in the U.S. and $0.9 million in the U.K. The Company evaluates the U.S. future contribution on a quarterly basis. The Company currently believes contributions in fiscal year 2024 will be similar to the prior year or slightly higher.

The Company’s pension plans use fair value as the market-related value of plan assets and recognize net actuarial gains or losses in excess of ten percent (10%) of the greater of the market-related value of plan assets or of the plans’ projected benefit 12

14The Company’s pension plans use fair value as the market-related value of plan assets and recognize net actuarial gains or losses in excess of ten percent (10%) of the greater of the market-related value of plan assets or of the plans’ projected benefit.

obligation in net periodic (benefit) cost as of the plan measurement date. Net actuarial gains or losses that are less than 10% of the thresholds noted above are accounted for as part of accumulated other comprehensive loss.

Note 10: Debt

Debt is comprised of the following (in thousands):

	12/31/2023		06/30/2023
	03/31/2024		06/30/2023
Short-term and current maturities
Loan and security agreement (term loan)	$	2,168	$	1,495
Loan and Security Agreement (Term Loan)	$	1,004	$	1,495
Brazil loans	2,235		3,466
Brazil Loans	1,322		3,466
	4,403		4,961
Subtotal short-term and current maturities	2,326		4,961
Long-term debt (net of current portion)
Loan and security agreement (term loan)	2,910		1,957
Loan and Security Agreement (Term Loan)	1,625		1,957
Loan and security agreement (line of credit)	397		2,897
Loan and Security Agreement (Line of Credit)	4,397		2,897
Brazil loans	151		827
Brazil Loans	74		827
Debt reacquisition cost, net	(355)		(408)
Debt reacquisition cost	(328)		(408)
	3,103		5,273
Subtotal long-term debt	5,768		5,273
Total debt	$	78,~~506~~094	$	10,234

On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a Loan and Security agreement (the "Loan and Security Agreement") with HSBC Bank USA ("the Lender"). The Company incurred debt re-acquisition cost of $0.5 million which are recorded net of debt and amortized over five years.

These new credit facilities replaced the Company’s previous TD Bank credit facilities and are comprised of a $30 million revolving Loan and Security Agreement Line of Credit ("Line of Credit") with a $10 million uncommitted accordion provision, a Loan and Security Agreement Term Loan ("the Term Loan") with original principal of $12.1 million and a $7.0 million Capital Expenditure draw down credit facility (collectively, the "Facilities"). The Facilities are secured by a valid first-priority security interest on substantially all existing and future assets of the Company and its domestic subsidiaries.

The interest rate on the Facilities is based on a grid which uses the percentage of the remaining availability of the revolving credit line to determine the floating margin to be added to the one month or three months Secured Overnight Financing Rate, "(SOFR"). The Facilities mature on April 29, 2027.

Availability under the revolving line of credit is secured by and subject to a borrowing base comprised of eligible inventory and accounts receivable. The percentage of receivables included in the borrowing base is 90% for domestic investment grade and foreign insured accounts, 85% for domestic accounts that are neither investment grade nor insured, and 75% of foreign uninsured accounts. The percentage of inventory included in the borrowing base is the lower of 65% of the value of eligible inventory at cost or 85% of the net orderly liquidation value of eligible inventory at cost. Receivables and inventory are reported monthly to HSBC and subject to an annual field exam and inventory appraisal by an independent auditor commissioned by the Bank. The Company believes that the agreement provides an initial borrowing base sufficient for current domestic working capital needs and flexibility to accommodate potential growth-related working capital needs.

Availability under the Line of Credit remains subject to a borrowing base comprised of ~~Accounts~~accounts ~~Receivable~~receivable, ~~Inventory~~inventory, and ~~Real~~real ~~Estate~~estate. The Company believes that the borrowing base will consistently produce availability under the Line of Credit of $30.0 million. A 0.25% commitment fee is charged on the unused portion of the Line of Credit.

Availability under the Term Loan was comprised of 70% of the fair market value of the Borrower's eligible real estate, which included facilities located in Westlake, Ohio, and Waite Park, Minnesota and totaled $4.6 million; and 85% of the net orderly liquidation value of the Borrowers’ machinery and equipment, capped at $7.5 million. The real estate portion of the Term facility is subject to a 12.5 year straight line amortization paid quarterly, and the machinery and equipment portion of the facility is subject to a 6.67 year straight line amortization, also paid quarterly. The Term Loan is subject to equal quarterly installments of $373,650, payable on the last day of each fiscal quarter.

The capital expenditure drawn down facility was available for a period of 18 months after April 29, 2022, and its availability expired during the quarter ended December 31, 2023. During the six months ended December 31, 2023, $2.0 million was 13

15The 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.

~~drawn~~The Facilities contain financial covenants with respect to a minimum fixed charge coverage ratio of 1.00, measured on ~~the~~a ~~facility~~trailing twelve-month basis, for both the ~~purpose~~U.S. ofborrowing ~~facilitating~~companies tested quarterly and the ~~expansion~~Condensed ofConsolidated ~~production~~L.S. ~~capacity~~Starrett atCompany tested semi-annually. The Loan and Security agreement also contains the ~~Company's~~customary ~~precision~~affirmative ~~granite~~and ~~manufacturing~~negative ~~facility~~covenants, inincluding ~~Waite~~limitations ~~Park~~on indebtedness, ~~MN.~~liens, ~~Amounts~~acquisitions, ~~outstanding~~asset ~~under~~dispositions, ~~the~~fundamental ~~facility~~corporate ~~are~~changes, ~~subject~~excess topension acontributions, 3and certain customary events of default.~~75%~~ ~~amortization~~Upon ~~rate~~the ~~per~~occurrence ~~quarter~~or continuation of an event of default, ~~with~~the ~~interest~~Lender ~~charged~~may atterminate all commitments and facilities, and require the ~~same~~immediate ~~rate~~payment asof the ~~Term~~entire ~~Loan~~unpaid ~~facility~~principal balances, accrued interest, and all other obligations.

The ~~Facilities~~Company’s ~~contain~~Brazilian ~~financial~~subsidiary ~~covenants~~incurs ~~with respect to a minimum fixed charge coverage ratio of 1.00, measured on a trailing twelve~~short-~~month~~term ~~basis,~~loans ~~for~~with ~~both~~local ~~the~~banks ~~U.S.~~in ~~borrowing~~order ~~companies~~to ~~tested~~support ~~quarterly and~~ the ~~Consolidated L.S. Starrett~~ Company’s ~~tested~~strategic ~~semi-annually~~initiatives. The ~~Loan~~loans ~~and~~are ~~Security~~backed ~~agreement~~by ~~also contains~~ the ~~customary~~entity’s ~~affirmative~~US ~~and~~dollar ~~negative~~denominated ~~covenants,~~export ~~including limitations on indebtedness, liens, acquisitions, asset dispositions, fundamental corporate changes, excess pension contributions, and certain customary events of default~~receivables. ~~Upon~~The ~~the~~Company’s ~~occurrence~~Brazilian orsubsidiary ~~continuation~~has ~~of an event of default,~~ the ~~Lender~~following ~~may~~loans ~~terminate all commitments and facilities, and require the immediate payment~~ of ~~the entire unpaid principal balances~~March 31, ~~accrued~~2024 ~~interest, and all other obligations. The Company is~~ (in ~~compliance with its debt covenants.~~thousands):

In Brazil, affecting the need for borrowing, the Company historically had a build-up of ICMS (which translates to "Tax on Commerce and Services"). The Company has changed the methodology of charging and re-claiming ICMS on imports and domestic sales so that this credit is subsequently relieved and does not increase at that rate again. The ICMS balance as of June 30, 2023 was $4.9 million and $4.2 million as of December 31, 2023. The balance is located on the unaudited Condensed Consolidated Balance Sheets in prepaid expenses and other current assets.

Lending Institution

Interest Rate

Beginning Date

Ending Date

Outstanding Balance

Itau

4.52%

October 2021

September 2024

1,143

Brasil

4.95%

August 2022

July 2025

221

Brasil

3.80%

September 2022

August 2024

Total Brazilian short-term loans

1,396

The Company’s Brazilian subsidiary incurs short-term loans with local banks in order to support the Company’s strategic initiatives. The loans are backed by the entity’s US dollar denominated export receivables. Included in the table below are $0.4 million of financing on purchased fixed assets. The Company’s Brazilian subsidiary has the following loans as of December 31, 2023 (in thousands):

Lending Institution

Interest Rate

Beginning Date

Ending Date

Outstanding Balance

Itau

4.52%

October 2021

September 2024

1,714

Itau

4.98%

February 2022

February 2024

305

Brasil

4.95%

August 2022

July 2025

302

Brasil

3.80%

September 2022

August 2024

2,386

Total debt was reduced by $5.7 million and $2.7 million during the three and six months ended December 31, 2023, respectively, and the Brazilian loans were reduced by $0.9 million and $1.9 million in the three and six months ended December 31, 2023, respectively.

Note 11: Income Taxes

Tax expense for the three month period ended ~~December~~March 31, ~~2023~~2024 was $20.41 million on profit before tax of $2.0.7 million (an effective tax rate of ~~120~~14%). ~~During~~The the three month period ended December 31, 2023, the Company recorded a discrete tax expense of $2.0 million, increasing its valuation allowance against its foreign tax credit carryforwards, due to IRS Notice 2023-80 released in December 2023, which modifies the temporary relief period from applying the final foreign tax credit regulations to tax years beginning on or after December 28, 2021 and ending before the date that notice or guidance withdrawing or modifying the temporary relief is issued. Other than this discrete tax expense recorded, the effective rate for the three months ended ~~December~~March 31, ~~2023~~2024 was lower than the U.S. statutory tax rate of 21% ~~primarily~~ due in part to a discrete tax benefit of $0.1 million related to the ~~favorable~~reversal ~~impact~~of ~~that~~uncertain ~~IRS~~tax ~~Notice~~positions ~~2023-80~~due ~~has~~to onthe lapse in the ~~Company~~statute ~~current~~of ~~year~~limitations ~~GILTI~~and ~~inclusion~~tax credits and ~~creditable~~permanent ~~foreign~~deductions ~~withholding~~generated ~~taxes~~from research expenses, offset by the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34% and foreign losses not ~~benefitted~~benefited.

~~Tax~~During ~~expense for~~ the three month period ended ~~December~~March 31, ~~2022~~2023 ~~was~~the ~~$1.7 million~~Company onrecorded ~~profit~~a ~~before~~discrete tax benefit of $45.80 million ~~(an~~related ~~effective~~to the Company’s partial release of its valuation allowance against its U.S. foreign tax ~~rate~~credits and state net operating losses carryforwards, which are expected to be utilized based on demonstrated profitability and current and future forecast income. Excluding the tax benefit related to the partial release of 35valuation allowance of 144%)., ~~The~~the effective tax rate for the three ~~month~~months ~~period~~ ended ~~December~~March 31, ~~2022~~2023 was higher than the U.S. statutory tax rate of 21% primarily due to the GILTI provisions, and the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, ~~offset by tax credits~~ and ~~permanent~~non-creditable ~~deductions~~foreign ~~generated~~withholding ~~from research expenses~~tax.

Tax expense for the ~~six~~nine month period ended ~~December~~March 31, ~~2023~~2024 was $2.56 million on profit before tax of $4.18 million (an effective tax rate of 6251%). During the ~~six~~nine month period ended ~~December~~March 31, ~~2023~~2024, the Company recorded a discrete tax expense of $1.3 million related to IRS Notice 2023-55 released in July 2023 which grants taxpayers temporary relief from applying these final foreign tax credit regulations for tax years beginning on or after December 28, 2021 and ending on or before December 31, 2023 and IRS Notice 2023-80 released in December 2023 which modifies the temporary relief period from applying the final foreign tax credit regulations to tax years beginning on or after December 28, 2021 and ending before the date that notice or guidance withdrawing or modifying the temporary relief is issued. Other than this discrete tax expense recorded, the effective rate for the nine months ended March 31, 2024 was higher than the U.S. statutory tax rate of 21% primarily due to the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, offset by tax credits and permanent deductions generated from research expenses.

16Tax expense for the nine months ended March 31, 2023 was a benefit of $1.3 million on profit before tax of $11.4 million (an effective tax rate of 11%). During the nine months ended March 31, 2023, the Company recorded a discrete tax benefit of $5.0 million related to the Company’s partial release of its valuation allowance against its U.S. foreign tax credits and state net operating losses carryforwards, which are expected to be utilized based on demonstrated profitability and current and future forecast income. In addition the Company used current forecasts of future taxable income. Excluding the tax benefit related to the partial release of valuation allowance of 44%, the effective tax rate for the nine months ended March 31, 2023 was higher than the U.S. statutory tax rate of 21% primarily due to the GILTI provisions and the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, and non-creditable foreign withholding tax.

recorded, the effective rate for the six months ended December 31, 2023 was higher than the U.S. statutory tax rate of 21% primarily due to the GILTI provisions, and the jurisdictional mix of earnings, particularly Brazil with a statutory rate of 34%, offset by tax credits and permanent deductions generated from research expenses.14

~~Tax~~The ~~expense~~Company ~~for~~has considered the ~~six~~positive ~~month~~and ~~period~~negative ~~ended~~evidence ~~December~~to ~~31,~~determine ~~2022~~the ~~was~~need ~~$2.7 million~~for ona ~~profit~~valuation ~~before~~allowance ~~tax~~offsetting ofthe ~~$7.9 million~~deferred ~~(an effective~~ tax ~~rate~~assets ofin ~~34%). The effective tax rate for~~ the ~~six~~U.S. ~~month~~and ~~period~~has ~~ended~~concluded ~~December~~that ~~31,~~a ~~2022~~partial ~~was~~valuation ~~higher~~allowance ~~than~~is ~~the~~required ~~U.S.~~against ~~statutory~~foreign tax ~~rate~~credit ofcarryforwards ~~21%~~and ~~primarily~~certain ~~due~~state tonet ~~the~~operating ~~GILTI~~loss ~~provisions,~~carryforwards ~~and~~at ~~the~~March ~~jurisdictional~~31, ~~mix~~2024 ofand ~~earnings~~June 30, ~~particularly~~2023. ~~Brazil~~The ~~with~~Company ahad ~~statutory~~long ~~rate~~term oftax ~~34%,~~obligations ~~offset~~related byprimarily ~~discrete~~to ~~tax~~transfer ~~benefits~~pricing ~~recognized~~adjustments ~~from~~at ~~excess~~March ~~stock compensation deductions~~31, ~~tax~~2024 ~~credits~~ and ~~permanent~~June ~~deductions~~30, ~~generated from research expenses~~2023.

The Company has considered the positive and negative evidence to determine the need for a valuation allowance offsetting the deferred tax assets in the U.S. and has concluded that a partial valuation allowance is required against foreign tax credit carryforwards and certain state net operating loss carryforwards at December 31, 2023 and June 30, 2023. The Company had long term tax obligations related primarily to transfer pricing adjustments at December 31, 2023 and June 30, 2023.

Note 12: Contingencies

The Company is involved in certain legal matters, which arise, in the normal course of business. Although ~~The~~the ~~Company~~outcomes ~~does~~of ~~not~~these ~~believe~~legal itmatters isare ~~reasonably~~inherently ~~possible~~difficult ~~that~~to predict, management does not expect the resolution of these legal matters ~~will~~to have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

1715

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Use of Non- GAAP Financial Measures

In "Management's discussion and analysis on financial condition and results of operations" in this Quarterly Report on Form 10-Q, we discuss non- GAAP financial measures ~~including~~related to currency-neutral sales, adjusted operating income, and adjusted ~~operating~~net income and earnings per share.

We present these non- GAAP financial measures because we believe they assist investors in comparing our performance across reporting periods on a consistent basis by eliminating items that we do not believe are indicative of our core operating performance. Such non- GAAP financial measures assist investors in understanding the ongoing operating performance of the Company by presenting financial results between periods on a more comparable basis. Such measures should be considered in addition to, and not in lieu of, the financial measures calculated and presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Currency-neutral sales are calculated using actual exchange rates in use during the comparative prior year period to enhance the visibility of the underlying business trends excluding the impact of translation arising from foreign currency exchange rate fluctuations. Adjusted operating income adjusts for restructuring costs ~~that~~and ~~are~~the ~~reflected~~merger intransaction ~~one~~costs ~~period but not the other~~ in order to show comparative operational performance. As disclosed on Form 8-K, nn March 8, 2024, the Company entered into an Agreement and Plan of Merger with Uhu Inc., a Delaware corporation and an affiliate of MiddleGround Capital. We include a reconciliation of currency-neutral sales and adjusted operating income to its comparable GAAP financial measures.

References to currency-neutral sales and adjusted operating income should not be considered in isolation or as a substitute for other financial measures calculated and presented in accordance with GAAP and may not be comparable to similarly titled non- GAAP financial measures used by other companies. In evaluating these non-GAAP financial measures, investors should be aware that in the future we may incur expenses or be involved in transactions that are the same as or similar to some of the adjustments in this presentation. Our presentation of non-GAAP financial measures should not be construed to imply that its future results will be unaffected by any such adjustments. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.

Please see Note 23 within the notes to the unaudited Condensed Consolidated Financial ~~Statements~~Statement in this Quarterly Report on Form 10-Q regarding segment results of operations. The Company’s business is aggregated into three reportable segments ~~of operations~~: North ~~America~~American Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM". Segment income is measured for internal reporting purposes by excluding corporate expenses, which are included in the unallocated column in the following tables as well as in Note 23. These ~~within~~tables ~~the~~provided ~~notes to the unaudited Condensed Consolidated Financial Statements~~ in ~~this~~Note ~~Quarterly~~3 ~~Report on Form 10-Q. These tables~~ are included to better explain our consolidated operational performance by showing more detail by business segment and reconciling GAAP operating income and adjusted operating income.

~~Results~~The following table represents key results of ~~Operations~~operations on a consolidated basis for the three months and nine months ended March 31, 2024 and March 31, 2023:

~~The following table represents key results of operations on a consolidated basis for the three months and six months ended December 31, 2023 and December 31, 2022:~~ 16


	Three Months Ended										Nine Months Ended
(Amounts in thousands)	03/31/24			03/31/23			$ Change favorable (unfavorable)		% Change		03/31/24			03/31/23			$ Change favorable (unfavorable)		% Change
Net sales	$	60,767		$	61,678		$	(911)	(1.5)	%	$	183,479		$	188,914		$	(5,435)	(2.9)	%
Gross margin	17,580			19,223			(1,643)		(8.5)	%	56,080			60,998			(4,918)		(8.1)	%
% of net sales	28.9		%	31.2		%					30.6		%	32.3		%

Selling, general and administrative expenses	16,070			15,109			(961)		(6.4)	%	50,417			46,962			(3,455)		(7.4)	%
% of net sales	27.8		%	24.5		%					27.5		%	24.9		%

Restructuring charges	—			—			—		—	%	—			244			244		(100.0)	%
Transaction merger expenses	800			—			(800)		(100.0)	%	—			—			—		—	%

Operating income	710			4,114			(3,404)		(82.7)	%	5,663			13,792			(8,129)		(58.9)	%

Other income, net	(17)			(602)			585		(97.2)	%	(908)			(2,399)			1,491		62.2	%

Income before income taxes	693			3,512			(2,819)		(80.3)	%	4,755			11,393			(6,638)		(58.3)	%

Income tax expense	55			(3,961)			(4,016)		101.4	%	2,592			(1,267)			(3,859)		304.6	%

Net income	$	638		$	7,473		(6,835)		(91.5)	%	$	2,163		$	12,660		(10,497)		(82.9)	%


GAAP to Non-GAAP reconciliation:
	Three Months Ended							Nine Months Ended
(Amounts in thousands)	03/31/24		03/31/23		$ Change favorable (unfavorable)	% Change		03/31/24		03/31/23		$ Change favorable (unfavorable)	% Change
Operating income as reported	710		4,114		(3,404)	(82.7)	%	5,663		13,792		(8,129)	(58.9)	%
Add back restructuring charges	—		—		—	—	%	—		244		(244)	(100.0)	%
Add back transaction charges	800		—		—	100.0	%	1,000		—		1,000	100.0	%
Non- GAAP adjusted operating income	1,510		4,114		(2,604)	(63.3)	%	6,663		14,036		(7,373)	(52.5)	%
% of net sales	2.5	%	6.7	%				3.6	%	7.4	%

The following table represents key results of operations for three months ending March 31, 2024 and 2023 based on our business aggregated into three reportable segments: North American Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM" as reflected in the table below:


	Three Months Ended March 31, 2024														Three Months Ended March 31, 2023
(Amounts in thousands)	NAI			INI			GTM			Corporate		Total			NAI			INI			GTM			Corporate			Total
Net sales	$	21,806		$	23,820		$	15,141		$	—	$	60,767		$	22,310		$	23,849		$	15,519		$	—		$	61,678
Gross margin	3,892			8,209			5,478			—		17,579			4,712			8,543			5,968			—			19,223
% of net sales	17.8		%	34.5		%	36.2		%	—		28.9		%	21.1		%	35.8		%	38.5		%	—		%	31.2		%

Selling, general and administrative expenses	4,809			6,424			2,969			1,868		16,070			4,056			6,127			3,353			1,573			15,109
% of net sales	22.1		%	27.0		%	19.6		%			26.4		%	18.2		%	25.7		%	21.6		%				24.5		%

Transaction Cost	—			—			—			800		800			—			—			—			—			—

Operating income (loss)	$	(917)		$	1,785		$	2,509		$	(2,668)	$	710		$	656		$	2,416		$	2,615		$	(1,573)		$	4,114
% of net sales	(4.2)		%	7.5		%	16.6		%			1.2		%	2.9		%	10.1		%	16.9		%				6.7		%
Add back restructuring expenses	—			—			—			—		—			—			—			—			—			—
Add back transaction expenses	—			—			—			800		800			—			—			—			—			—

Non-GAAP adjusted operating income	$	(917)		$	1,785		$	2,509		$	(1,868)	$	1,510		$	656		$	2,416		$	2,615		$	(1,573)		$	4,114
% of net sales	(4.2)		%	7.5		%	16.6		%			2.5		%	2.9		%	10.1		%	16.9		%				6.7		%

The following table represents key results of operations for nine months ending March 31, 2024 and 2023 based on our business aggregated into three reportable segments: North American Industrial "NAI", International Industrial "INI" and Global Test Measurement "GTM".


	Nine Months Ended March 31, 2024														Nine Months Ended March 31, 2023
(Amounts in thousands)	NAI			IAI			GTM			Corporate		Total			NAI			INI			GTM			Corporate		Total
Net sales	$	61,090		$	75,619		$	46,770		$	—	$	183,479		$	67,461		$	73,199		$	48,254		$	—	$	188,914
Gross profit	12,024			26,951			17,105			—		56,080			14,725			27,630			18,643			—		60,998
% gross margin	19.7		%	35.6		%	36.6		%			30.6		%	21.8		%	37.7		%	38.6		%			32.3		%

Selling, general and administrative expenses	13,808			20,180			9,705			5,724		49,417			13,193			18,484			10,436			4,849		46,962
% of net sales	22.6		%	26.7		%	20.8		%			26.9		%	19.6		%	25.3		%	21.6		%			24.9		%

Restructuring charges	—			—			—			—		—			—			244			—					244
Merger transaction expenses	—			—			—			1,000		1,000			—			—			—			—		—

Operating income (loss)	$	(1,784)		$	6,771		$	7,400		$	(6,724)	$	5,663		$	1,532		$	8,902		$	8,207		$	(4,849)	$	13,792
% of net sales	(2.9)		%	9.0		%	15.8		%			3.1		%	2.3		%	12.2		%	17.0		%			7.3		%
Add back restructuring charges	—			—			—			—		—			—			244			—			—		244
Add back transaction expenses	—			—			—			1,000		1,000			—			—			—			—		—

Non-GAAP adjusted operating income	$	(1,784)		$	6,771		$	7,400		$	(5,724)	$	6,663		$	1,532		$	9,146		$	8,207		$	(4,849)	$	14,036
% of net sales	(2.9)		%	9.0		%	15.8		%			3.6		%	2.3		%	12.5		%	17.0		%			7.4		%

	Three Months Ended												Six Months Ended
Non-GAAP Measure Reconciliation: Fiscal 2024 Q3 "Currency Neutral" Net Sales
(Amounts in thousands)	12/31/23			12/31/2022			$ Change favorable (unfavorable)		% Change				12/31/2023			12/31/2022			$ Change favorable (unfavorable)		% Change
	Fiscal Year			Comparison to three month ending 3/31/2024							Fiscal Year		Comparison to Nine month ending 3/31/2023
Net sales	$	62,076		$	66,775		$	(4,699)	(7.0)	%			$	122,712		$	127,236		(4,524)		(3.6)	%
(Amounts in Thousands)	03/31/2024			03/31/2023			$ Change		% Change		03/31/2024		03/31/2023			$ Change			% Change
Gross profit	18,964			21,576			(2,612)		(12.1)	%			38,500			41,776			(3,276)		(7.8)	%
Net sales, as reported	$	60,767		61,678			(911)		(1.5)	%	$	183,479	188,914			(5,435)			(2.9)	%
% of net sales	30.5		%	32.3		%							31.4		%	32.8		%
Currency neutralizing adjustment*	(923)			—			(923)		(1.5)	%	(3,909)		—			(3,909)			(2.1)	%
Selling, general and administrative expenses	16,470			15,561			(909)		(5.8)	%			33,548			31,855			(1,693)		(5.3)	%
Q3 FY24 currency neutral net sales	59,844			61,678			(1,834)		(3.0)	%	179,570		188,914			(9,344)			(4.9)	%
% of net sales	26.5		%	23.3		%							27.3		%	25.0		%
NAI net sales, as reported	$	21,806		$	22,310		(504)		(2.3)	%	$	61,090	$	67,461		(6,371)			(9.4)	%
Restructuring charges	—			54			54		(100.0)	%			—			244			244		(100.0)	%
Currency neutralizing adjustment*	(67)			—			(67)		(0.3)	%	(238)		—			(238)			(0.4)	%
Operating income	2,494			5,961			(3,467)		(58.2)	%			4,952			9,677			(4,725)		(48.8)	%
Q3FY24 currency neutral NAI net sales	21,739			22,310			(571)		(2.6)	%	60,852		67,461			(6,609)			(9.8)	%
Other (expense), net	(526)			(1,121)			595		(53.1)	%			(890)			(1,797)			907		50.5	%
INI net sales, as reported	$	23,820		$	23,849		(29)		(0.1)	%	$	75,619	80,548			(4,929)			(6.1)	%
Income before income taxes	1,968			4,840			(2,872)		(59.3)	%			4,062			7,880			(3,818)		(48.4)	%
Currency neutralizing adjustment*	(849)			—			(849)		(3.6)	%	(3,609)		—			(3,609)			(4.5)	%
Income tax expense (benefit)	2,362			1,709			(653)		(38.2)	%			2,537			2,693			156		5.8	%
Q3FY24 currency neutral INI net sales	22,971			23,849			(878)		(3.7)	%	72,010		$	73,199		(1,189)			(1.6)	%
Net (loss) income	$	(394)		$	3,131		(3,525)		(112.6)	%			$	1,525		$	5,187		(3,662)		(70.6)	%
GMT net sales as reported	$	15,141		$	15,519		(378)		(2.4)	%	$	46,770	$	48,254		(1,484)			(3.1)	%
Currency neutralizing adjustment*	(7)			—			(7)		(0.1)	%	(63)		—			(63)			(0.1)	%
Q3FY24 currency neutral GMT net sales	15,134			15,519			(385)		(2.5)	%	46,707		48,254			(1,547)			(3.2)	%
*"Currency Neutralizing Adjustment" = Change when converting Q3FY24 sales in non USD functional currencies at the same exchange rates used in the comparison period

GAAP to Non-GAAP reconciliation:
	Three Months Ended							Six Months Ended
(Amounts in thousands)	12/31/2023		12/31/2022		$ Change favorable (unfavorable)	% Change		12/31/2023		12/31/2022		$ Change favorable (unfavorable)	% Change
Operating income as reported	2,494		5,961		(3,467)	(58.2)	%	4,952		9,677		(4,725)	(48.8)	%
Add back restructuring charges	—		(54)		(54)	(100)	%	—		(244)		(244)	(100)	%
Adjusted operating income	2,494		6,015		(3,521)	(58.5)	%	4,952		9,921		(4,969)	(50.1)	%
% of net sales	4.0	%	9.0	%		(500) basis points		4.0	%	7.8	%		(380) basis points

U.S. GAAP to Non-GAAP Reconciliation: Net Income and Diluted EPS:

The following table represents key results of operations for three months ended December 31, 2023 and 2022 based on our business aggregated into three reportable segments according to geography of operations: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM". Operations as reflected in the table below:


	Three Months Ended				Nine Month Ended
	03/31/24		03/31/2023		03/31/24		03/31/2023
Net income	$	638	$	7,473	$	2,163	$	12,660
Add back restructuring expenses	—		—		—		244
Add back transaction expense	800		—		1,000		—
Non-GAAP adjusted Net Income	$	1,438	$	7,473	$	3,163	$	12,904


Shares diluted	7,577		7,492		7,538		7,480
Diluted EPS as reported	$	0.08	$	0.99	$	0.28	$	1.68
Non-GAAP adjusted diluted EPS	$	0.19	$	0.99	$	0.41	$	1.71

19Three-months and Nine-months Ended March 31, 2024 and March 31, 2023

Key Results by Reporting Segment
	Three Months Ended December 31, 2023														Three Months Ended December 31, 2022
(Amounts in thousands)	NAI			INI			GTM			Corporate		Total			NAI			INI			GTM			Corporate		Total
Net sales	$	19,814		$	26,425		$	15,837		$	—	$	62,076		$	22,780		$	26,051		$	17,944		$	—	$	66,775
Gross profit	4,204			8,966			5,794			—		18,964			4,599			10,135			6,842			—		21,576
% of net sales	21.2		%	33.9		%	36.6		%			30.5		%	20.2		%	38.9		%	38.1		%			32.3		%
Selling, general and administrative expenses	4,389			6,739			3,274			3,274		16,470			4,423			6,285			3,528			1,325		15,561
% of net sales	22.2		%	25.5		%	20.7		%			26.5		%	19.4		%	24.1		%	19.7		%			23.3		%
Restructuring charges	—			—			—			—		—			—			54			—			—		54
Operating income (loss)	$	(185)		$	2,227		$	2,520		$	(2,068)	$	2,494		$	176		$	3,796		$	3,314		$	(1,325)	$	5,961
% of net sales	(0.9)		%	8.4		%	15.9		%			4.0		%	0.8		%	14.6		%	18.5		%			8.9		%
Add back restructuring charges	—			—			—			—		—			—			(54)			—			—		(54)
Adjusted operating income	(185)			2,227			2,520			(2,068)		$	2,494		$	176		$	3,850		$	3,314		$	(1,325)	$	6,015
% of net sales	(0.9)		%	8.4		%	15.9		%			4.0		%	0.8		%	14.8		%	18.5		%			9.0		%

The following table represents key results of operations for six months ended December 31, 2023 and 2022 based on our business aggregated into three reportable segments of operations: North America Industrial "NAI", International Industrial "INI" and Global Test and Measurement "GTM".

	Six Months Ended December 31, 2023														Six Months Ended December 31, 2022
(Amounts in thousands)	NAI			INI			GTM			Corporate		Total			NAI			INI			GTM			Corporate		Total
Net sales	$	39,284		$	51,799		$	31,629		$	—	$	122,712		$	45,151		$	49,350		$	32,735		$	—	$	127,236
Gross profit	8,132			18,742			11,627			—		38,501			10,014			19,087			12,675			—		41,776
% of net sales	20.7		%	36.2		%	36.8		%			31.4		%	22.2		%	38.7		%	38.7		%			32.8		%
Selling, general and administrative expenses	9,001			13,755			6,735			4,057		33,548			9,138			12,358			7,083			3,277		31,854
% of net sales	22.9		%	26.6		%	21.3		%			27.3		%	20.2		%	25.0		%	21.6		%			25.0		%
Restructuring charges	—			—			—			—		—			—			244			—			—		244
Operating income (loss)	$	(869)		$	4,987		$	4,892		$	(4,058)	$	4,952		$	876		$	6,485		$	5,592		$	(3,277)	$	9,677
% of net sales	(2.2)		%	9.6		%	15.5		%			4.0		%	1.9		%	13.1		%	17.1		%			7.6		%
Add back restructuring charges	—			—			—			—		—			—			(244)			—			—		(244)
Adjusted operating income	(185)			2,227			2,520			(2,068)		2,494			$	876		$	6,729		$	5,592		$	(3,277)	$	9,922
% of net sales	(0.9)		%	8.4		%	15.9		%			4.0		%	1.9		%	13.6		%	17.1		%			7.8		%

Non-GAAP Measure Reconciliation: Fiscal 2023 Q2 "Currency Neutral" Net Sales

	Three months ended							Six months ended
(Amounts in Thousands)	12/31/2023		12/31/2022		$ Change	% Change		12/31/2023		12/31/2022		$ Change	% Change
Net Sales, as reported	$	62,076	$	66,775	(4,699)	(7.0)	%	$	122,712	$	127,236	(4,524)	(3.6)	%
Currency neutralizing adjustment*	(1,412)		—		(1,412)	(2.1)	%	(2,986)		—		(2,986)	(2.3)	%
Q2 FY24 currency neutral net sales	60,664		66,775		(6,111)	(9.2)	%	119,726		127,236		(7,510)	(5.9)	%
NAI net sales, as reported	19,814		22,780		(2,966)	(13.0)	%	39,284		45,151		(5,867)	(13.0)	%
Currency neutralizing adjustment*	(81)		—		(81)	(0.4)	%	(171)		—		(171)	(0.4)	%
Q2FY24 currency neutral NAI net sales	19,733		22,780		(3,047)	(13.4)	%	39,113		45,151		(6,038)	(13.4)	%
INI net sales, as reported	26,425		26,051		374	1.4	%	51,799		49,350		2,449	5.0	%
Currency neutralizing adjustment*	(1,308)		—		(1,308)	(5.0)	%	(2,760)		—		(2,760)	(5.6)	%
Q2FY24 Currency neutral INI net sales	25,117		26,051		(934)	(3.6)	%	49,039		$	56,357	(7,318)	(13.0)	%
GTM net sales, as reported	15,837		17,944		(2,107)	(11.7)	%	31,629		32,735		(1,106)	(3.4)	%
Currency neutralizing adjustment*	(23)		—		(23)	(0.1)	%	(55)		—		(55)	(0.2)	%
Q2FY24 currency neutral GTM net sales	$	15,814	$	17,944	$(2,130)	(11.9)	%	$	31,574	$	32,735	$(1,161)	(3.5)	%
*"Currency Neutralizing Adjustment" = Change when converting Q2FY24 sales in non USD functional currencies at the same exchange rates used in the comparison period

Three-months and Six-months Ended December 31, 2023 and December 31, 2022

Overview

Through the first ~~six~~nine months of Fiscal 2024 ended ~~December~~ March 31, ~~2023~~2024, total order intake was 31.79% ~~lower~~higher than the comparative period ended ~~December~~ March 31, ~~2022~~2023. Our global industrial businesses saw a net 51.75% increase in order intake, ~~while~~with international orders up 9.4% and North American orders down 7.1% compared to the prior year nine months ending March 31, 2023. GTM order intake was 203.4% ~~lower~~higher in the ~~six~~nine months ended ~~December~~ March 31, ~~2023~~2024 as compared to ~~December~~ March 31, ~~2022~~2023. ~~due~~Order tointake ~~the nature of the larger orders~~ at our precision granite business, ~~which~~whose ~~remains~~capacity atexpansion ~~full~~project ~~capacity~~was recently completed, ~~and~~is up 16.8%. This offsets lower order intake for our laser in-line measurement systems.

Net sales in the ~~quarter~~three months ended ~~December~~March 31, ~~2023~~2024 were $6260.18 million, a decrease of $40.79 million, or 71.05% compared to $6661.8 7 million in the ~~quarter~~three months ended ~~December~~March 31, ~~2022~~2023. Net ~~Sales~~sales in the ~~six~~nine months ended ~~December~~March 31, ~~2023~~2024 were $~~122~~183.~~7 million, compared to $127.2 million for the same six-month period ended December 31, 2022, representing a reduction of $4.~~5 ~~million, or 3.6%.~~

Foreign currency translation impact resulted in an increase of $3.0 million over the first six months of fiscal 2024 as the United States Dollar had weakened compared to other currencies in the first and second quarter of the fiscal year. Currency neutral net sales for the quarter ended December 31, 2023 were $60.7 million, a decrease of $6.1 million or 9.2% compared to $66.8 million in the quarter ended December 31, 2022. For the six months ended December 31, 2023, currency neutral net sales were $119.7 million, a decrease of $7.5 million or 5.9% as compared to $127.2 million, for the six months ended December 31, 2022.19

~~Operating income in the quarter ended December 31, 2023 was $2.5~~ million ~~or 4.0% of sales~~, ~~reflecting a decrease of $3.5 million or 58.2%~~ compared to ~~operating income of~~ $6188.~~0 million reported for quarter ended December 31, 2022. This decline consisted of a decrease in gross profit of $2.6 million, and an increase in selling, general and administrative expenses of $0.~~9 million. ~~Operating income~~ for the ~~six~~nine months ended ~~December~~March 31, 2023 ~~decreased 58.5% by 4.7 million~~, torepresenting ~~$5.0~~an ~~million~~decline ~~or 4.0%~~ of ~~sales versus~~ $95.7 4 million, or 72.69% ~~of sales for the six months ended December 31, 2022~~. This six month decrease in operating income was comprised of a decline in gross profit of $3.3 million, an increase in selling, general and administrative expenses of $1.7 million, and a decrease in restructuring expenses of $0.3 million.

~~Net~~Foreign ~~loss~~currency ~~for~~translation ~~the~~has ~~quarter~~had ~~ended~~a ~~December 31,~~positive ~~2023~~impact ~~was~~on sales of $03.4 9 million, ~~which~~over ~~was~~the ~~$3.5~~nine ~~million~~months orof ~~112.6%~~fiscal ~~lower~~2024 ~~than~~as the ~~net~~United ~~income~~States ~~reported~~Dollar ~~for~~had strengthened compared to other currencies in the first quarter ~~ended~~and ~~December 31,~~early ~~2022~~second quarter of ~~$3.1~~the ~~million.~~fiscal ~~For~~year but had begun to weaken during the ~~six-month~~latter ~~period~~part of the second and during the third quarters. Currency neutral net sales for the quarter ended ~~December~~March 31, ~~2023~~2024 were $59.8 million, ~~net~~a ~~income~~decrease ~~was~~of $1.5 8 million or 3.0% compared to $561.2 7 million ~~for~~in the ~~six~~quarter ~~month~~ended ~~period~~March 31, ~~ended~~2023. ~~December~~For the nine months ended March 31, ~~2022~~2024, ~~representing~~currency neutral net sales of $179.6 million were a decrease of $39.7 3 million or 704.69%~~. Income~~ ~~tax~~as ~~expense~~compared into $188.9 million, for the ~~quarter~~nine months ended ~~December~~March 31, 2023 ~~was increased by $2~~.~~0 million~~

21Operating income in the three months ended March 31, 2024 of $0.7 million or 1.2% of sales, was $3.4 million or 82.7% lower than the operating income reported for three months ended March 31, 2023. Operating income in the nine months ended March 31, 2024 of $5.7 million was $8.1 million or 58.9% as compared to the nine months ended March 31, 2023. There were no restructuring expenses in the three months ended March 31, 2024 as well as in the three months ended March 31, 2023, however, non-recurring transactions expenses of $0.8 million and in the nine months ended March 31, 2024 transaction cost were $1.0 million.

inFor ~~valuation~~the ~~allowance~~three ~~against~~and ~~its~~nine ~~foreign~~months ~~tax~~ended ~~credit~~March 31, ~~carryforwards~~2024 ~~related~~other toexpense anwas ~~IRS~~$0.0 ~~Notice~~million ~~released~~and in$0.9 ~~December~~million, ~~2023~~respectively. For ~~The ordering rules for~~ the ~~utilization~~three ofand ~~foreign~~nine ~~tax~~months ~~credits~~ended ~~require~~March 31, ~~credits~~2023 ~~generated~~other inexpense ~~the~~was ~~current~~$0.6 ~~year~~million toand be$2.4 ~~utilized~~million ~~first,~~with ~~followed by~~ the ~~earliest~~big ~~generated~~driver ~~credit~~ being ~~carried~~interest ~~forward.~~expense ~~The~~of ~~increase~~$0.4 inmillion ~~projected~~and ~~foreign~~$1.2 ~~tax~~million ~~credits~~in ~~generated have~~ the ~~impact~~three ofand ~~reducing~~nine ~~the~~months ~~utilization~~ended ofMarch ~~the foreign tax credit carryforward balance~~31, ~~increasing the anticipated expirations by $2~~2023.~~0 million.~~

Net income for the three months ended March 31, 2024 was $0.6 million, a decrease of $6.8 million or 91.5% compared to Net Income reported for the three months ended March 31, 2023 of $7.5 million. Net Income was $1.4 million adjusted for the non-gap add back $0.8 million for the transaction expense incurred in the three months ended March 31, 2024 and $1.0 million for the nine months ended March 31, 2024.

Net income for the nine months ended March 31, 2024 was $2.2 million as compared to $12.7 million for the nine months ended March 31, 2023 which included $0.2 million of restructuring expense. Diluted earnings per share "EPS" were $0.08 compared to $0.99 in the three months ended March 31, 2023 and $0.28 in the nine months ending March 31, 2024 versus $1.68 in the months ended March 31, 2023.

Net Sales

The Company’s net sales for the quarter ended ~~December~~ March 31, ~~2023~~2024 were $6260.18 million which was $40.79 million or 71.05% lower versus $6661.87 million for the quarter ended ~~December~~ March 31, ~~2022,~~2023. This decrease is primarily driven by aan 02.51% ~~increase~~decrease ~~from~~in ~~price~~volume ~~realization~~ and a 2.1.2% ~~increase~~decrease due to ~~currency translation, offset by a 9~~mix.6% ~~decrease in volume.~~ North America Industrial sales for the quarter ended ~~December~~ March 31, ~~2023~~2024 were $1921.8 million which was a decrease of $3.0.5 million or 132.03% versus $22.83 million in quarter ended ~~December~~ March 31, ~~2022~~2023, ~~primarily~~ driven by aan 27.5 7% ~~increase~~decrease ~~from~~in ~~price~~volume ~~realization~~partially ~~and~~offset by an increase of 05.45% due to ~~currency translation, offset by a 15~~price.9% ~~decrease in volume.~~ NAI net sales were negatively impacted by labor shortages experienced by our precision measuring tools production. INI net sales for the quarter ended ~~December~~ March 31, ~~2023~~2024 were $2623.48 million which was ~~$0.4~~flat ~~million~~compared orto ~~1.4% more than~~ the $2623.18 million for the quarter ended ~~December~~ March 31, ~~2022~~2023, primarily driven by a 2.2% decline in volume and 1.6% due to pricing impact, offset by a favorable impact of 5.0% from currency translation. GTM net sales for the quarter ended ~~December~~ March 31, ~~2023~~2024 were $15.8 1 million, a decrease of $20.14 million or 112.74% from $1715.9 5 million for the quarter ended ~~December~~ March 31, ~~2022~~2023, primarily due to volume declines in our in-line laser measuring system sales, which have been impacted by reductions of capital expenditure in the automotive sector and the auto workers' strike in the first quarter of fiscal 2024.

~~During~~Consolidated net sales in the ~~six~~nine months ended ~~December~~ March 31, 2024 were $183.5 million, a decline of $5.4 million, or 2.9% compared to $188.9 million for the same nine-month period ended March 31, 2023. Overall this was driven by increases due to pricing actions of 0.5% and currency translation of 2.1% offset by volume reductions of 5.5%. During the nine months ended March 31, 2024 as compared to ~~2022~~2023, NAI sales decreased $56.94 million or 139.04%, INI sales increased $2.4 million or 53.03%, and GTM sales declined by $1.15 million or 3.41%. NAI sales increased 34.30% due to pricing actions and 0.4% due to currency translation, but were offset by volume declines of 1613.78%. INI sales increased $2.4 million or 53.03%, with 0.1.8 % attributed to volume increases and 54.69% due to currency translation, offset by 03.74% of pricing reduction. GTM net sales declined $1.1 5 million or 3.41% to $3146.6 8 million during the ~~six~~nine months ended ~~December~~ March 31, ~~2023~~2024. Continued increases of sales of our precision granite measuring products have been offset by sales declines of our in-line laser measuring systems, which have been impacted by reductions of capital expenditure in the automotive sector and the auto workers' strike in the first quarter of fiscal 2024. Consolidated net sales in the six months ended December 31, 2023 were $122.7 million, compared to $127.2 million for the same six-month period ended December 31, 2022, representing a decline of $4.5 million, or 3.6%. Overall this was driven by increases due to pricing actions of 1.4% and currency translation of 2.3% offset by volume reductions of 7.3%.

Gross Profit

Consolidated gross profit decreased $21.6 million or 128.15% for the three months, and $34.39 million or 7.8.1% for the ~~six~~nine months ended ~~December~~ March 31, ~~2023~~2024 as compared to the year prior. Gross profit was $1917.06 million and $3856.51 million for the three months and ~~six~~nine months ended ~~December~~ March 31, ~~2023~~2024 compared to $2119.62 million and $4161.80 million for the three months and ~~six~~nine months ended December 31, 2022. Gross margin decreased 1.8 percentage points for the three months, and 1.5 percentage points for the six months ended December 31, 2023 compared to the prior year. Gross margin has been impacted by lower volumes resulting in lower factory utilization, and overall company mix as high margin sales of our in-line laser measuring systems has declined in the comparative periods.

For the three months ended December 31, 2023, NAI gross profit declined $0.4 million or 8.6% to $4.2 million versus $4.6 million in the three months ended December 31, 2022. Gross margin improved 1.0 percentage points from 20.2% to 21.2% compared to the three-month period ended December 31, 2022. For the six-month period ended December 31, 2023, NAI gross margin declined from 22.2% to 20.7%, compared to the prior period, primarily due to lower factory utilization.

~~INI~~March ~~gross profit declined $1.2 million on $0.4 million higher sales in the three months ended December~~ 31, 2023. asGross ~~compared~~margin todecreased ~~2022, and declined 0~~2.3 ~~million~~percentage onpoints ~~$2.4 million higher sales~~ for the ~~six~~three months ~~ended December 31~~, ~~2023~~and ~~as compared to 2022~~1. ~~INI~~7 ~~gross margin decreased 5.0~~ percentage points ~~from 38.9% of sales at the end of the three-month period ended December 31, 2022 to 33.9%~~ for the ~~three-month~~nine ~~period~~months ended ~~December~~ March 31, ~~2023,~~2024 ~~and~~compared ~~for~~to the ~~six~~prior ~~month period from 38~~year.7% toGross ~~36.2% from December 31, 2022 to December 31, 2023 respectively. INI gross~~ margin ~~was~~has ~~affected~~been impacted by alower ~~shift~~volumes inresulting ~~selling mix~~ in ~~the current period with higher volume on~~ lower ~~margin products, lower~~ factory utilization, and ~~some~~overall ~~targeted~~company ~~pricing~~mix ~~reductions~~as onhigh ~~certain~~margin ~~products~~sales of our in-line ~~European~~laser ~~markets~~measuring ~~and~~systems has declined in ~~Brazil~~the comparative periods.

For the three months ended ~~December~~ March 31, ~~2023~~2024, ~~GTM~~NAI gross profit ~~decreased~~declined $1.0 .8 million or 3.3% to $53.8 9 million ~~from~~versus $64.87 million in the three months ended ~~December~~ March 31, ~~2022~~2023. ~~Gross~~NAI gross margin ~~measured~~declined asfrom a21.1% ~~percent~~to of17.8% ~~net~~compared ~~sales~~to the three-month period ended March 31, 2023. For the nine-month period ended March 31, 2024, NAI gross margin declined 1from 21.58% ~~percentage~~to ~~points~~19.7%, compared to the prior period, primarily due to lower factory utilization.

22INI gross profit declined $0.3 million on flat sales in the three months ended March 31, 2024 as compared to 2023, and declined 0.7 million on $2.4 million higher sales for the nine months ended March 31, 2024 as compared to 2023. INI gross margin decreased 1.3 percentage points from 35.8% of sales at the end of the three-month period ended March 31, 2023 to 34.5% for the three-month period ended March 31, 2024, and for the nine month period from 37.7% to 35.6% from March 31, 2023 to March 31, 2024 respectively. INI gross margin was affected by a shift in selling mix in the current period with higher volume on lower margin products, lower factory utilization, and some targeted pricing reductions on certain products in European markets and in Brazil.

For the three months ended March 31, 2024, GTM gross profit decreased $0.5 million to $5.5 million from $6.0 million in the three months ended March 31, 2023. Gross margin measured as a percent of net sales declined 2.3 percentage points from 38.15% in the three-months ended ~~December~~ March 31, ~~2022~~2023 to 36.62% the three months ended ~~December~~ March 31, ~~2023~~2024, and from 38.76% to 36.86% for the ~~six~~nine month period ended ~~December~~March 31, ~~2023~~2024 compared to ~~December~~March 31, ~~2022~~2023. The GTM gross margin decline is due to mostly mix but also a decline in volume as higher margin sales of in-line laser measuring systems has declined disproportionately during the comparative period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses ~~including~~increased ~~Corporate~~$1.8 ~~expense~~million ~~for~~or 11.7% during the ~~three~~quarter ~~months~~ended ~~and~~March 31, ~~six~~2024 ~~months~~to $16.9 million compared to the quarter ended ~~December~~March 31, 2023, ~~were~~representing ~~$16~~27.58% ~~million~~of ~~and~~net ~~$33~~sales for the quarter ended March 31, 2024 compared to 24.5% ~~million,~~of ~~respectively~~net ~~versus~~sales at $15.61 million ~~and~~in $the prior year quarter ended March 31, 2023.9 Some of this increase, $0.2, million ~~for~~is due to foreign exchange translation as the ~~same~~United ~~periods~~States ~~ending~~Dollar ~~December~~has weakened compared to the Brazilian Real. The company continues to invest in new growth initiatives and has also incurred some one-time expenses related to the merger transaction. For the three months ended March 31, ~~2022~~2024 the transaction expenses in general and administrative cost were $0.8 million.

Selling, general and administrative expenses increased $03.95 million or 57.84% during ~~the~~nine ~~quarter~~months ended ~~December~~March 31, ~~2023~~2024 compared to 2023, from $47.0 million to $50.4 million. As a percentage of net sales it went from 24.9% for the ~~quarter~~nine months ended ~~December~~March 31, ~~2022~~2023 to 27. ~~About~~5% ~~one-third~~for ofthe ~~this~~nine ~~increase,~~months orended $0March 31, 2023.3 ~~million~~This increase is partially due to ~~foreign~~the ~~exchange~~ translation asof ~~the~~foreign currencies into United States ~~Dollar~~Dollars, ~~has~~explaining ~~weakened~~$0.9 ~~compared~~million toof the ~~Brazilian Real~~increase. ~~The~~In ~~company~~addition, ~~continues~~the toCompany ~~invest~~has invested in ~~new~~some sales growth initiatives ~~and~~during ~~has~~the ~~also~~current fiscal year, and incurred some one-time ~~consulting costs. As a percentage of net sales, selling general and administrative~~ expenses ~~increased~~related to 26the merger transaction.5% ~~for~~For the ~~quarter~~nine months ended ~~December~~March 31, ~~2023~~2024 ~~compared~~the tomerger ~~23.3%~~transaction expenses in ~~the~~general ~~prior~~and ~~year~~administrative ~~quarter~~cost ~~ended~~were ~~December 31,~~$1.0 ~~2022~~million.

~~For~~Other ~~the~~(Expense) six months ended December 31, 2023, selling, general and administrative expenses increased $1.7 million or 5.3% compared to 2022, and as a percentage of net sales have increased from 25.0% for the six months ended December 31, 2022 to 27.3% for the six months ended December 31, 2023. This increase is partially due to the translation of foreign currencies into United States Dollars, explaining $0.7 million of the increase. In addition, the Company has invested in some sales growth initiatives during the current fiscal year, and incurred some one-time consulting costs.Income

~~Other~~For ~~Income~~the ~~(Expense)~~three and nine months ended March 31, 2024 other expense was $0.0 million and $0.9 million, respectively. For the three and nine months ended March 31, 2023 other expense was $0.6 million and ,$2.4 million respectively. For the three and nine months ended March 31, 2024 interest income was $0.0 million and $0.4 million, interest expense was $0.1 million and $0.6 million, foreign exchange gain was $0.2 million and $0.1 million, pension cost were $0.1 million and $0.4 million and all other were a gain of $0.1 and a expense of $0.5 million.

For the three and six months ended December 31, 2023 other expense was $0.5 million and $0.9 million, respectively. For the three and six months ended December 31, 2022 other expense was $1.1 million and $1.8 million, respectively. The reductions in other expense were primarily due to lower interest costs as a result of debt reduction, and lower unrealized foreign exchange rate losses compared to the prior periods.

Income Taxes

In the three ~~months~~month period ended ~~December~~March 31, ~~2023~~2024, the Company recognized income tax expense of $20.41 million on profit before tax of $2.0.7 million (an effective tax rate ~~120~~14%) as compared to income tax ~~expense~~benefit of $14.70 million on profit before tax of $43.85 million (an effective tax rate of 35113%), in the three ~~months~~month period ended ~~December~~March 31, ~~2022~~2023. The lower effective tax rate in the three month period ended March 31, 2024, when compared with the three month period ended March 31, 2023 is primarily due to the discrete tax benefit of $5.0 million recognized for the three month period ended March 31, 2023 for the release of valuation allowance against a portion of its U.S. deferred tax assets. At the end of each reporting period management considers

In the six months ended December 31, 2023, the Company recognized income tax expense of $2.5 million on profit before tax of $4.1 million (an effective tax rate 62%) as compared to income tax expense of $2.7 million on profit before tax of $7.9 million (an effective tax rate of 34%), in the six months ended December 31, 2022.21

~~The~~all ~~higher~~evidence, ~~effective~~both ~~tax~~positive ~~rate in the three~~ and ~~six months ended December 31~~negative, ~~2023,~~that ~~when~~could ~~compared~~affect ~~with~~ the ~~three~~view ~~and~~of ~~six~~the ~~months~~future ~~ended~~realization ~~December~~of ~~31,~~deferred ~~2022, respectively, was primarily due to a discrete~~ tax ~~expense of $2~~assets.0 ~~million~~Based ~~related~~upon tocumulative ~~IRS~~profitability ~~Notice 2023-80 released~~ in ~~December 2023, which modifies~~ the ~~temporary~~US ~~relief~~and ~~period~~increases ~~from~~in ~~applying~~future ~~the~~taxable ~~final~~income ~~foreign tax credit regulations to tax years beginning on or after December 28~~projections, ~~2021~~management ~~and~~has ~~ending~~determined ~~before~~during the ~~date~~three ~~that~~month ~~notice~~period ~~or guidance withdrawing or modifying the temporary relief is issued. The six months~~ ended ~~December~~March 31, 2023, ~~includes~~there ais ~~discrete~~sufficient ~~tax~~positive ~~benefit~~evidence ~~of $0.7 million related~~ to ~~IRS~~release ~~Notice~~a ~~2023-55~~portion ~~released~~of invaluation ~~July~~allowance ~~2023,~~previously ~~which~~provided ~~first~~against ~~granted~~its ~~taxpayers temporary relief from applying the final~~ foreign tax ~~credit~~credits ~~regulations for tax years beginning on or after December 28, 2021~~ and ~~ending~~certain onstate ornet ~~before~~operating ~~December 31, 2023~~losses.

23In the nine month period ended March 31, 2024, the Company recognized income tax expense of $2.6 million on profit before tax of $4.8 million (an effective tax rate 51%) as compared to income tax benefit of $1.3 million on profit before tax of $11.4 million (an effective tax rate of 11%), in the nine month period ended March 31, 2023. The higher effective tax rate in the three month period ended March 31, 2024, when compared with the three month period ended March 31, 2023 was primarily due to a discrete tax expense of $1.3 million recognized in the nine month period ended March 31, 2024 related to IRS Notice 2023-55 released in July 2023 which grants taxpayers temporary relief from applying these final foreign tax credit regulations for tax years beginning on or after December 28, 2021 and ending on or before December 31, 2023 and IRS Notice 2023-80 released in December 2023 which modifies the temporary relief period from applying the final foreign tax credit regulations to tax years beginning on or after December 28, 2021 and ending before the date that notice or guidance withdrawing or modifying the temporary relief is issued, offset by a discrete tax benefit of $5.0 million recognized in the nine month period ended March 31, 2023 for the release of valuation allowance against a portion of its U.S. deferred tax assets.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows (in thousands)	~~Six~~Nine Months Ended
	12/31/2023		12/31/2022
	03/31/2024		03/31/2023
Cash provided by operating activities	~~7,111~~$	11,123	~~4,474~~$	15,897
Cash (used in) investing activities	(811,~~999~~717)		(45,~~190~~639)
Cash (used in) financing activities	(2,~~767~~223)		(516,~~858~~209)
Effect of exchange rate changes on cash	(~~115~~110)		823
Net (decrease) in cash	$	(42,~~770~~927)	$	(5,~~566~~928)

Net cash flows ~~used~~for in the ~~six~~nine months ended ~~December~~March 31, ~~2023~~2024 ~~was~~provided a decrease in cash of $42.89 million compared to ~~net~~a decrease in cash of $5.69 million for the ~~six~~nine ~~month~~months ~~period~~ ended ~~December~~March 31, ~~2022~~2023. ~~Cash~~The Company paid down $2.2 million in debt and cash provided by operations was $711.1 million. The ~~for~~Company reduced inventory levels in the ~~six~~three months ended ~~December~~March 31, ~~2023~~2024 ~~compared~~by to $42.5 8 million ~~for~~and ~~the~~decreased ~~comparative period~~$6.9 ~~The~~million ~~improvement~~during ~~in operating cash flow reflects~~ the ~~Company's~~nine ~~continued~~months ~~efforts~~ended toMarch ~~reduce~~31, ~~inventory~~2024. ~~levels~~Net ~~after~~income anin ~~increase~~the inthree ~~supply~~months ~~chain~~ended ~~confidence.~~March ~~The~~31, ~~Company~~2024 ~~invested~~of $82.32 million, inaccounts ~~new~~receivable ~~equipment~~change ~~and~~of ~~production capacity,~~ $40.72 million ofand ~~which~~inventory ischange atmentioned ~~its~~above ~~precision~~were ~~granite~~partially ~~manufacturing~~offset ~~facility~~by inall ~~Waite~~other ~~Park,~~working ~~MN.~~capital ~~Debt~~requirements ~~repayments~~of ~~net~~$4.2 million, of ~~additional~~which ~~borrowings were~~ $23.82 million inwere ~~the~~prepaid ~~six~~pension ~~months~~expense ~~ended~~while ~~December 31,~~other ~~2023~~non-cash operating activities totaled $6.9 million.

The Company believes it maintains sufficient liquidity and has the resources to fund its operations~~. The~~ ~~Company believes its existing cash~~ and cash expected to be provided by future operating activities are adequate to satisfy working capital, capital expenditure requirements and other contractual obligations for at least the next 12 months from the date of the financial statements included in this Quarterly Report on Form 10-Q.

On April 29, 2022, the Company and certain of the Company’s domestic subsidiaries entered into a new Loan and Security agreement (the "Loan and Security Agreement") with HSBC Bank USA. These new credit facilities ("the ~~Facilities~~facilities") replaced the Company’s previous TD Bank credit facilities and are comprised of a $30 million revolving line of credit with a $10 million uncommitted accordion provision, a $12.1 million term loan and a $7 million capital expenditure draw down credit facility. The Facilities are secured by a valid first-priority security interest on substantially all existing and future assets of the Company and its domestic subsidiaries. At ~~December~~March 31, ~~2023~~2024 the Company has excess availability on the revolving line of credit and the capital expenditure drawn down facility of $2127.83 million.

The ~~effective~~Company ~~interest~~has ~~rate~~approved ona $5 million dollar expansion at our precision granite manufacturing facility in Waite Park, MN in order to meet continued high demand for its products anticipated over the ~~borrowings~~next ~~under~~several years. The project is expected to continue throughout fiscal 2023 and into the ~~Loan~~first quarter of fiscal 2024, and ~~Security~~will ~~Agreement~~be ~~during~~financed by use of the ~~three~~$7 ~~months~~million ~~ended~~capital ~~December 31,~~expenditure ~~2023~~draw down facility which remains unused, and ~~2022~~a ~~was~~combination ~~8.4%~~of the revolving line of credit and ~~8.9%~~current ~~respectively~~cash availability.

The effective interest rate on the borrowings under the Loan and Security Agreement during the nine months ended March 31, 2024 and 2023 was 8.4% and 5.5% 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

WeOne ~~are~~should acarefully ~~smaller~~review ~~reporting~~and ~~company~~consider asthe ~~defined~~information byregarding ~~Rule~~certain ~~12b-2~~factors ofwhich ~~the~~could ~~Securities~~materially ~~Exchange~~affect ~~Act~~our ~~of 1934~~business, asfinancial ~~amended~~condition ~~(the~~or future results set forth under Item 1A. “~~Exchange~~Risk ~~Act~~Factors”), ~~and~~in ~~are~~our ~~not~~Form ~~required~~10-K tofor ~~provide~~ the ~~information~~year ~~under~~ended ~~this~~June 30, ~~item~~2023.

ITEM 4. CONTROLS AND PROCEDURES

~~During~~The ~~the~~Company's ~~year~~management, ~~ended~~under ~~June~~the ~~30,~~supervision ~~2023,~~and inwith ~~connection~~the ~~with~~participation ~~evaluating~~of the ~~error~~Company's inPresident ~~segment~~and ~~reporting,~~Chief weExecutive ~~identified~~Officer ~~a material~~and ~~weakness in~~Chief ~~our~~Financial ~~internal~~Officer ~~control~~and ~~over~~Treasurer, ~~financial~~has ~~reporting.~~evaluated ~~The~~the Company's ~~has~~disclosure ~~implemented~~controls ~~certain~~and ~~changes~~procedures inas ~~our~~of ~~internal~~March 31, ~~controls~~2024, toand ~~address~~they ~~the~~have ~~material~~concluded ~~weakness,~~that ~~which~~our ~~include~~disclosure acontrols ~~formal~~and ~~process~~procedures ~~each~~were ~~financial~~effective ~~reporting~~as ~~period~~of ~~during~~such ~~which~~date. ~~management~~All ~~reviews~~information ~~the~~required ~~reporting~~to ~~package~~be ~~provided~~filed toin ~~the~~this ~~chief~~report ~~operating~~was ~~decision~~recorded, ~~maker~~processed, ~~“CODM”~~summarized ~~for~~and ~~consistency~~reported ~~with~~within the ~~Company’s~~time ~~segmentation~~period ~~disclosure. As~~required aby ~~result,~~the ~~management~~rules ~~has~~and ~~concluded~~regulations ~~that,~~of asthe ofSecurities ~~December~~and ~~31,~~Exchange ~~2023~~Commission, ~~the~~and ~~material~~such ~~weakness~~information ~~has~~is ~~been~~accumulated ~~remediated. Our~~and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, ~~has~~as ~~concluded~~appropriate, ~~that~~to ~~the~~allow ~~financial~~timely ~~statements~~decisions ~~fairly~~regarding ~~present,~~required indisclosure. ~~all~~Management ~~material~~recognizes ~~respects~~that any controls and procedures, ~~our~~no ~~financial~~matter ~~condition~~how well designed and operated, ~~results~~can provide only reasonable assurance of ~~operations~~achieving their objectives and ~~cash~~management ~~flows~~necessarily ~~for~~applies its judgment in evaluating the ~~periods~~cost-benefit ~~presented~~relationship inof ~~conformity~~possible ~~with~~controls ~~U.S.~~and ~~GAAP~~procedures.

24No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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.23

Except as disclosed above, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the ordinary course of business, we are from time to time involved in lawsuits, claims, investigations, proceedings, and threats of litigation relating to intellectual property, commercial arrangements and other matters. We do not believe we are currently party to any pending legal action, arbitration proceeding or governmental proceeding, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business or operating results. We are not a party to any material proceedings in which any director, member of senior management or affiliate of ours is either a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors set forth in the Company’s Annual Report on Form 10-K, ~~as amended, for the year ended June 30, 2023.~~

for the year ended June 30, 2023 other than what is set forth below;

We are subject to environmental regulation and environmental risks.

We are subject to national, state, provincial and/or local environmental laws and regulations that impose limitations and prohibitions on the discharge and emission of, and establish standards for the use, disposal and management of, certain materials and waste. These environmental laws and regulations also impose liability for the costs of investigating and cleaning up sites, and certain damages resulting from present and past spills, disposals, or other releases of hazardous substances or materials. Environmental laws and regulations can be complex and may change often. Capital and operating expenses required to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties. The costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future could have a material adverse effect on our financial condition or results of operations. For example, governmental authorities in the U.S. and in other jurisdictions are increasingly focused on contamination resulting from per- and polyfluoroalkyl substances (“PFAS”). PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. In April 2024, the U.S. Environmental Protection Agency finalized a rule establishing enforceable drinking water standards for certain PFAS chemicals. The rule could result in new obligations for investigations and remediation efforts. We do not manufacture PFAS. If PFAS were used in the manufacture of some of the products we sell and are ubiquitous in the environment the costs of complying with environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have a material adverse effect on our business, financial condition and or results of operations.

Risk Related to the Proposed Merger

Failure to consummate our go-private transaction with MiddleGround Capital could negatively impact the price of our Class A Common stock and our future business and financial results.

On March 8, 2024, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Uhu Inc., a Delaware corporation (“Parent”) and an affiliate of MiddleGround Capital, and Unicornfish Corp., a Massachusetts corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, among other things, upon the terms and subject to the conditions set forth therein, Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving as a subsidiary of Parent. At the effective time of the Merger (the “Effective Time”), each share of Class A Common stock and each share of Class B Common stock issued and outstanding immediately prior to the Effective Time, subject to certain exceptions, will be converted into the right to receive $16.19, payable to the holder thereof in cash, without interest (the “Merger Consideration), and as of the Effective Time, all such shares of Class A Common stock and Class B Common stock will no longer be outstanding and will automatically be cancelled.

The consummation of the Merger occur later than we expect, may be consummated on terms different than those contemplated by the Merger Agreement, or may not be consummated at all. Failure to consummate the Merger would prevent our shareholders from realizing the anticipated benefits of the Merger. In addition, the Merger Consideration offered by Parent reflects a valuation of the Company significantly in excess of the price at which our Class A Common stock was trading prior to the public announcement of our entry into the Merger Agreement. The current market price of our Class A Common stock may reflect a market assumption that the Merger will occur, and a failure to consummate the Merger could result in a significant decline in the market price of our Class A Common stock and a negative perception of us generally.

The timing of the completion of the Merger is not certain, and is subject to certain conditions, some of which we cannot control, which could result in the Merger not being consummated or being consummated later than we expect, which could negatively impact the share price and future business and operating results of the Company.

Completion of the Merger is subject to several conditions, not all of which we control and include, among other things, (i) receipt by us of the Company Stockholder Approval (as defined in the Merger Agreement), (ii) that there is no law, order, injunction, or decree by any governmental body prohibiting or making illegal the consummation of the Merger, (iii) the accuracy of the representations and warranties contained in the Merger Agreement (subject to specified materiality qualifiers), (iv) compliance with the covenants and obligations under the Merger Agreement in all material respects, (v) the absence of a material adverse effect with respect to the Company and (vi) the delivery of an executed copy of a customary payoff letter for the Loan and Security Agreement from or on behalf of the lenders with respect thereto. Accordingly, if any of the conditions to completing the Merger are not satisfied or waived in a timely manner, the Merger could be consummated later than we expect or, if the conditions are not satisfied or waived at all, the Merger may not occur, which could adversely affect the price of our Class A Common stock and the results of our operations.

The Merger Agreement contains provisions that restrict our ability to pursue alternatives to the Merger and, in specified circumstances, could require us to pay Parent a termination fee.

The Merger Agreement includes a covenant requiring us not to initiate, solicit, knowingly encourage or knowingly facilitate any acquisition proposal, and subject to certain exceptions, not to enter into or participate or engage in any discussions or negotiations with any person with respect an acquisition proposal, provide any non-public information, or afford access to our business, properties, assets, book or records to any person in connection with any acquisition proposal or enter into any letter of intent, acquisition agreement or other similar agreement relating to an acquisition proposal. Further, the Company’s Board of Directors may not withhold, withdraw, amend, qualify or modify (or publicly propose to do any of the foregoing) its recommendation in favor of the Merger, fail to reaffirm its recommendation within five business days of receiving a written request from Parent to provide such reaffirmation following receipt of a publicly announced acquisition proposal, or fail to recommend against acceptance of a tender or exchange offer for shares of our common stock within ten business days of the commencement thereof. Notwithstanding these restrictions, at any time prior to obtaining the Company Stockholder Approval, if we have received an unsolicited written acquisition proposal that does not, directly or indirectly, result from a material breach of the terms and conditions relating to an acquisition proposal as set forth in the Merger Agreement, and the Company’s Board of Directors or a committee thereof determines in good faith, after consultation with outside counsel and a financial advisor, that such acquisition proposal constitutes or is reasonably likely to lead to or result in a a superior proposal, and the failure to engage in negotiations or discussions with such person would be inconsistent with its fiduciary duties, then we may, subject to certain conditions, furnish information with respect to us and our Subsidiaries to the person making such acquisition proposal and its representatives, and participate in discussions or negotiations with such person and its representatives regarding such acquisition proposal pursuant to an acceptable confidentiality agreement. Further, at any time prior to obtaining the Company Stockholder Approval, if we receive an acquisition proposal that did not directly or indirectly result from a material breach of the provisions of the Merger Agreement related to acquisition proposals and that the Company’s Board of Directors or a committee thereof determines in good faith, after consultation with outside counsel (and, with respect to a Change of Board Recommendation (as defined in the Merger Agreement), after consultation with our financial advisor) constitutes a superior proposal and that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, the Company’s Board of Directors may, subject to compliance with certain conditions, (i) change its recommendation or (ii) cause us to terminate the Merger Agreement in compliance with the terms of the Merger Agreement in order to enter into a binding written definitive agreement providing for such superior proposal. Additionally, the Company’s Board of Directors or a committee thereof may make a Change of Board Recommendation in response to an Intervening Event (defined in the Merger Agreement).

The Merger Agreement contains certain termination rights for each of us and Parent. Upon termination of the Merger Agreement in accordance with its terms, under certain specified circumstances, we will be required to pay Parent a termination fee in an amount equal to $4.35 million, including if we materially breach covenants relating to our non-solicitation obligations, the Merger Agreement is terminated due to the Company accepting an unsolicited superior proposal or due to the Company’s Board of Directors changing its recommendation to the Company’s shareholders to vote to approve the Merger Agreement.

While the Merger is pending, we are subject to customary contractual restrictions which could adversely affect our business.

We have agreed to customary covenants regarding the operation of our business and the business of our subsidiaries prior to the Effective Time. The Merger Agreement restricts us from entering into certain corporate transactions, entering into certain material contracts, making certain changes to our capital budget, incurring certain indebtedness and taking other specified actions without the consent of Parent, and generally requires us to continue our operations in the ordinary course of business during the pendency of the Merger. These restrictions may prevent us from pursuing attractive business opportunities or adjusting our capital plan prior to the completion of the Merger.

We have and continue to incur substantial transaction-related costs in connection with the Merger. If the Merger does not occur, we will not benefit from these costs.

We may incur a number of non-recurring costs associated with the completion of the Merger, which could be substantial. Nonrecurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors. If the Merger does not occur in a timely manner or at all, we will not benefit from these costs.

ITEM 6. EXHIBITS

Exhibit Number			Description of Exhibit
2.1			Agreement and Plan of Merger, dated as of March 8, 2024, between the Company, Uhu Inc. and Unicornfish Corp., filed with the Current Report on Form 8-K filed March 11, 2024, is hereby incorporated by reference
3a			Restated Articles of Organization as amended, filed with Form 10-K for the year ended June 30, 2012 filed September 12, 2012, is hereby incorporated by reference.
3b			Amended and Restated Bylaws, filed with Form 10-Q for the quarter ended December 31, 2012 filed February 7, 2013, is hereby incorporated by reference.
4a			Amended and Restated Rights Agreement dated as of ~~November~~October 230, ~~2010~~2020 between the Company and ~~Mellon~~Computershare ~~Investor Services LLC~~Inc, as Rights Agent (together with exhibits, including the Form of Rights Certificate, and the Summary of Rights to Purchase Shares of Class A Common Stock), filed with Form 10-Q for the quarter ended September 2530, ~~2010~~2020, filed November 412, ~~2010~~2020 is hereby incorporated by reference.
4b			Amendment No. 1 to Amended and Restated Rights Agreement dated as of March 8, 2024 by and between the Company and Computershare Inc, filed with the Current Report on Form 8-K filed March 11, 2024 is hereby incorporated by reference.
10.1			Amended and Restated Change in Control Agreement, dated as of March 8, 2024, by and between the Company and Douglas A. Starrett, filed with the Current Report on Form 8-K filed March 11, 2024, is hereby incorporated by reference.
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.
32.1+			Certifications of the Principal Executive Officer and the Principal Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, 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 ~~December~~March 31, ~~2023~~2024 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (I) the Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iv) the Condensed Consolidated Statement of Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

+ Furnished, not filed.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		THE L. S. STARRETT COMPANY(Registrant)
Date	~~February~~May 1613, 2024	/S/R. Douglas A. Starrett
		Douglas A. Starrett - President and CEO (Principal Executive Officer)
Date	~~February~~May 1613, 2024	/S/R. John C. Tripp
		John C. Tripp - Treasurer and CFO (Principal Accounting Officer)

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