Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
Mar. 31, 2016 | Apr. 21, 2016 | |
Common Class B [Member] | ||
Entity Common Stock, Shares Outstanding (in shares) | 771,825 | |
Common Class A [Member] | ||
Entity Common Stock, Shares Outstanding (in shares) | 6,242,838 | |
Entity Registrant Name | STARRETT L S CO | |
Entity Central Index Key | 93,676 | |
Trading Symbol | scx | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Accelerated Filer | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Consolidated Balance Sheets (Cu
Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Common Class A [Member] | ||
Stockholders' equity: | ||
Common stock | $ 6,237 | $ 6,224 |
Common Class B [Member] | ||
Stockholders' equity: | ||
Common stock | 773 | 789 |
Cash | $ 22,231 | 11,108 |
Short-term investments | 7,855 | |
Accounts receivable (less allowance for doubtful accounts of $746 and $612, respectively) | $ 31,738 | 40,311 |
Inventories | 57,663 | 63,003 |
Current deferred income tax assets | 4,274 | 4,554 |
Prepaid expenses and other current assets | 5,897 | 6,582 |
Total current assets | 121,803 | 133,413 |
Property, plant and equipment, net | 42,555 | 44,413 |
Income taxes receivable | 2,730 | 3,383 |
Deferred income tax assets, net of current portion | 18,573 | 18,803 |
Intangible assets, net | 6,647 | 7,125 |
Goodwill | 3,034 | 3,034 |
Other assets | 2,185 | 2,101 |
Total assets | 197,527 | 212,272 |
Notes payable and current maturities of long-term debt | 1,531 | 1,552 |
Accounts payable | 10,415 | 9,471 |
Accrued expenses | 5,347 | 7,011 |
Accrued compensation | 4,022 | 5,565 |
Total current liabilities | 21,315 | 23,599 |
Long-term debt, net of current portion | 17,500 | 18,552 |
Other income tax obligations | 4,615 | 4,607 |
Deferred income tax liabilities | 1,441 | 1,548 |
Postretirement benefit and pension obligations | 46,081 | 49,536 |
Total liabilities | 90,952 | 97,842 |
Additional paid-in capital | 55,020 | 54,869 |
Retained earnings | 96,933 | 98,164 |
Accumulated other comprehensive loss | (52,388) | (45,616) |
Total stockholders' equity | 106,575 | 114,430 |
Total liabilities and stockholders’ equity | $ 197,527 | $ 212,272 |
Consolidated Balance Sheets (C3
Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Common Class A [Member] | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, Authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, Outstanding (in shares) | 6,236,900 | 6,223,558 |
Common Class B [Member] | ||
Common stock, par value (in dollars per share) | $ 1 | $ 1 |
Common stock, Authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, Outstanding (in shares) | 772,500 | 789,069 |
Allowance for doubtful accounts | $ 746 | $ 612 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Net sales | $ 50,329 | $ 56,116 | $ 155,038 | $ 180,109 |
Cost of goods sold | 35,596 | 37,422 | 108,454 | 120,108 |
Gross margin | $ 14,733 | $ 18,694 | $ 46,584 | $ 60,001 |
% of Net sales | 29.30% | 33.30% | 30.00% | 33.30% |
Selling, general and administrative expenses | $ 13,819 | $ 15,574 | $ 44,288 | $ 52,112 |
Operating income | 914 | 3,120 | 2,296 | 7,889 |
Other income | 285 | 388 | 377 | 1,683 |
Income before income taxes | 1,199 | 3,508 | 2,673 | 9,572 |
Income tax expense | 602 | 1,071 | 1,796 | 3,765 |
Net income | $ 597 | $ 2,437 | $ 877 | $ 5,807 |
Basic income per share (in dollars per share) | $ 0.09 | $ 0.35 | $ 0.13 | $ 0.83 |
Diluted income per share (in dollars per share) | $ 0.08 | $ 0.35 | $ 0.12 | $ 0.83 |
Weighted average outstanding shares used in per share calculations: | ||||
Basic (in shares) | 7,013 | 6,992 | 7,016 | 6,977 |
Diluted (in shares) | 7,031 | 7,045 | 7,045 | 7,024 |
Dividends per share declared (in dollars per share) | $ 0.10 | $ 0.10 | $ 0.30 | $ 0.30 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Net income | $ 597 | $ 2,437 | $ 877 | $ 5,807 |
Other comprehensive income (loss): | ||||
Translation gain (loss) | $ 2,906 | $ (8,952) | $ (6,772) | (20,720) |
Pension and postretirement plans, net of tax of $0,$0,$0 and $22 respectively | (22) | |||
Other comprehensive income (loss) | $ 2,906 | $ (8,952) | $ (6,772) | (20,742) |
Total comprehensive income (loss) | $ 3,503 | $ (6,515) | $ (5,895) | $ (14,935) |
Consolidated Statements of Com6
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parentheticals) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Pension and postretirement plans, tax | $ 0 | $ 0 | $ 0 | $ 22,000 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($) $ in Thousands | Common Stock [Member]Common Class A [Member] | Common Stock [Member]Common Class B [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | AOCI Attributable to Parent [Member] | Total |
Accumulated balance consists of: | ||||||
$ (45,616) | ||||||
Balance at Jun. 30, 2015 | $ 6,224 | $ 789 | $ 54,869 | $ 98,164 | $ (45,616) | 114,430 |
Total comprehensive income (loss) | 877 | $ (6,772) | (5,895) | |||
Dividends ($0.30 per share) | $ (2,108) | (2,108) | ||||
Repurchase of shares | $ (37) | $ (3) | $ (406) | (446) | ||
Issuance of stock | $ 28 | $ 9 | 397 | 434 | ||
Stock-based compensation | $ 160 | $ 160 | ||||
Conversion | $ 22 | $ (22) | ||||
Balance at Mar. 31, 2016 | $ 6,237 | $ 773 | $ 55,020 | $ 96,933 | $ (52,388) | $ 106,575 |
Accumulated balance consists of: | ||||||
Translation loss | (44,072) | |||||
Pension and postretirement plans, net of taxes | (8,316) | |||||
$ (52,388) | $ (52,388) |
Consolidated Statements of Sto8
Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals) | 9 Months Ended |
Mar. 31, 2016$ / shares | |
Retained Earnings [Member] | |
Dividends per share declared (in dollars per share) | $ 0.20 |
Dividends per share declared (in dollars per share) | $ 0.30 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net income | $ 877 | $ 5,807 |
Non-cash operating activities: | ||
Depreciation | 4,385 | 5,817 |
Amortization | 1,036 | 951 |
Stock-based compensation | 315 | 287 |
Net long-term tax obligations | 627 | 2,893 |
Deferred taxes | 57 | 821 |
Unrealized transaction gain | 66 | (2) |
Income on equity method investment | (89) | (170) |
Working capital changes: | ||
Accounts receivable | 4,744 | 5,669 |
Inventories | 1,425 | (10,607) |
Other current assets | 190 | (1,399) |
Other current liabilities | 441 | 499 |
Postretirement benefit and pension obligations | (2,481) | (4,184) |
Other | 60 | 480 |
Net cash provided by operating activities | 11,653 | 6,862 |
Cash flows from investing activities: | ||
Additions to property, plant and equipment | (4,048) | (4,048) |
Software development | $ (557) | (440) |
Purchase of investments | (45) | |
Proceeds from sale of investments | $ 7,621 | 201 |
Net cash provided by (used in) investing activities | $ 3,016 | (4,332) |
Cash flows from financing activities: | ||
Proceeds from short-term borrowings | $ 922 | |
Proceeds from long-term borrowings | $ 750 | |
Long-term debt repayments | (1,822) | $ (1,159) |
Proceeds from common stock issued | 280 | 325 |
Shares repurchased | (446) | (64) |
Dividends paid | (2,108) | (2,095) |
Net cash used in financing activities | (3,346) | (2,071) |
Effect of exchange rate changes on cash | (200) | (3,046) |
Net increase (decrease) in cash | 11,123 | (2,587) |
Cash, beginning of period | 11,108 | 16,233 |
Cash, end of period | 22,231 | 13,646 |
Supplemental cash flow information: | ||
Interest paid | 487 | 547 |
Income taxes paid, net | $ 732 | $ 1,238 |
Note 1 - Basis of Presentation
Note 1 - Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Basis of Presentation and Significant Accounting Policies [Text Block] | Note 1: Basis of Presentation and Summary of Significant Account Policies The balance sheet as of June 30, 2015, which has been derived from audited financial statements, and the unaudited interim financial statements as of and for the three and nine months ended March 31, 2016 and March 31, 2015, 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 reporting. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These unaudited 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 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2015. 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 preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect amounts reported in the consolidated financial statements and accompanying notes. Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended June 30, 2015 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. |
Note 2 - Recent Accounting Pron
Note 2 - Recent Accounting Pronouncements | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Note 2: Recent A ccounting Pronouncements In May 2014, the FASB issued a new standard related to the “Revenue from Contracts with Customers” which amends the existing accounting standards for revenue recognition. The standard requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. This standard is applicable for fiscal years beginning after December 15, 2017 and for interim periods within those years. Earlier application will be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.. The Company expects to adopt this standard on July 1, 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. Accounting Standards Update (ASU) 2015-11, "Inventory - Simplifying the Measurement of Inventory" requires companies to measure most inventory at the lower of cost or net realizable value, thereby simplifying the current guidance under which a company must measure inventory at the lower of cost or market. This Update eliminates the need to determine replacement cost and evaluate whether said cost is within a quantitative range. This Update also further aligns U.S. GAAP and international accounting standards. For public companies, the guidance in ASU 2015-11 is effective for annual periods beginning after December 15, 2016, and interim periods thereafter. Early adoption is permitted. Management does not expect ASU 2015-11 to have a material impact on the Company's financial statements and disclosures. Accounting Standards Update 2015-17, “Balance Sheet Classification of Deferred Taxes” requires that companies classify all deferred taxes as non-current assets or liabilities. This change is applicable for fiscal years beginning after December 15, 2016 and for interim periods within those years. There is no impact to earnings as a result of this change; however, current assets will be reduced by the amount of the current deferred tax asset as that amount will be included with the long term deferred tax asset upon adoption of this ASU. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) |
Note 3 - Stock-based Compensati
Note 3 - Stock-based Compensation | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | Note 3: Stock-based Compensation On September 5, 2012, the Board of Directors adopted The L.S. Starrett Company 2012 Long Term Incentive Plan (the “2012 Stock Plan”). The 2012 stock plan was approved by shareholders on October 17, 2012. The 2012 Stock Plan permits the granting of the following types of awards to officers, other employees and non-employee directors: stock options; restricted stock awards; unrestricted stock awards; stock appreciation rights; stock units including restricted stock units; performance awards; cash-based awards; and awards other than previously described that are convertible or otherwise based on stock. The 2012 Stock Plan provides for the issuance of up to 500,000 shares of common stock. Options granted vest in periods ranging from one year to three years and expire ten years after the grant date. Restricted stock units (“RSU”) granted generally vest from one year to three years. Vested restricted stock units will be settled in shares of common stock. As of March 31, 2016, there were 20,000 stock options and 73,367 restricted stock units outstanding. In addition, there were 391,600 shares available for grant under the 2012 Stock Plan as of March 31, 2016. For stock option grants the fair value of each grant is estimated at the date of grant using the Binomial Options pricing model. The Binomial Options pricing model utilizes assumptions related to stock volatility, the risk-free interest rate, the dividend yield, and employee exercise behavior. Expected volatilities utilized in the model are based on the historic volatility of the Company’s stock price. The risk free interest rate is derived from the U.S. Treasury Yield curve in effect at the time of the grant. The expected life is determined using the average of the vesting period and contractual term of the options (Simplified Method). No stock options were granted during the nine months ended March 31, 2016 and 2015. The weighted average contractual term for stock options outstanding as of March 31, 2016 was 6.75 years. The aggregate intrinsic value of stock options outstanding as of March 31, 2016 was $0.1 million. Stock options exercisable as of March 31, 2016 were 20,000. The Company accounts for stock options and RSU awards by recognizing the expense of the grant date fair value ratably over vesting periods generally ranging from one year to three years. The related expense is included in selling, general and administrative expenses. There were 40,200 RSU awards with a fair value of $15.11 per RSU granted during the nine months ended March 31, 2016. There were 9,067 RSUs settled during the nine months ended March 31, 2016. The aggregate intrinsic value of RSU awards outstanding as of March 31, 2016 was $0.8 million. As of March 31, 2016 all vested awards had been issued and settled. On February 5, 2013, the Board of Directors adopted The L.S. Starrett Company 2013 Employee Stock Ownership Plan (the “2013 ESOP”). The purpose of the plan is to supplement existing Company programs through an employer funded individual account plan dedicated to investment in common stock of the Company, thereby encouraging increased ownership of the Company while providing an additional source of retirement income. The plan is intended as an employee stock ownership plan within the meaning of Section 4975 (e) (7) of the Internal Revenue Code of 1986, as amended. U.S. employees who have completed a year of service are eligible to participate. Compensation expense related to all stock based plans for the nine month periods ended March 31, 2016 and 2015 was $0.3 million and $0.2 million, respectively. As of March 31, 2016, there was $1.1 million of total unrecognized compensation costs related to outstanding stock-based compensation arrangements. Of this cost $0.7 million relates to performance based RSU grants that are not expected to be awarded. The remaining $0.4 million is expected to be recognized over a weighted average period of 2.0 years. |
Note 4 - Inventories
Note 4 - Inventories | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Inventory Disclosure [Text Block] | Note 4: Inventories Inventories consist of the following (in thousands): 3/31/2016 6/30/2015 (Unaudited) Raw material and supplies $ 30,632 $ 32,784 Goods in process and finished parts 16,493 18,569 Finished goods 38,885 39,689 86,010 91,042 LIFO Reserve (28,347 ) (28,039 ) Inventories $ 57,663 $ 63,003 LIFO inventories were $10.7 million and $14.6 million at March 31, 2016 and June 30, 2015, respectively, such amounts being approximately $28.3 million and $28.0 million, respectively, less than if determined on a FIFO basis. The use of LIFO, as compared to FIFO, resulted in a $0.3 million increase in cost of sales for the nine months ended March 31, 2016 compared to a $0.2 million increase for the nine months ended March 31, 2015. |
Note 5 - Goodwill and Intangibl
Note 5 - Goodwill and Intangible Assets | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Goodwill and Intangible Assets Disclosure [Text Block] | Note 5: Goodwill and Intangible Assets The Company’s acquisition of Bytewise in 2011 gave rise to a goodwill asset balance. The Company performed a qualitative analysis in accordance with ASU 2011-08 for its October 1, 2015 annual assessment of goodwill (commonly referred to as “Step Zero”). From a qualitative perspective, in evaluating whether it is more likely than not that the fair value of the reporting unit exceeds its respective carrying amount, relevant events and circumstances were taken into account, with greater weight assigned to events and circumstances that most affect the fair value or the carrying amounts of its assets. Items that were considered included, but were not limited to, the following: macroeconomic conditions, industry and market conditions, cost factors, overall financial performance and changes in management or key personnel. After assessing these and other factors the Company determined that it was more likely than not that the fair value of the reporting unit exceeded its carrying amount as of October 1, 2015. Amortizable intangible assets consist of the following (in thousands): 3/31/2016 6/30/2015 (Unaudited) Non-compete agreement $ 600 $ 600 Trademarks and trade names 1,480 1,480 Completed technology 2,358 2,358 Customer relationships 4,950 4,950 Software development 2,213 1,655 Other intangible assets 325 325 Total 11,926 11,368 Accumulated amortization (5,279 ) (4,243 ) Total net balance $ 6,647 $ 7,125 Amortizable intangible assets are being amortized on a straight-line basis over the period of expected economic benefit. The estimated useful lives of the intangible assets subject to amortization are 14 years for trademarks and trade names, 8 years for non-compete agreements, 10 years for completed technology, 8 years for customer relationships and 5 years for software development. The estimated aggregate amortization expense for the remainder of fiscal 2016 and for each of the next five years and thereafter, is as follows (in thousands): 2016 (Remainder of year) $ 386 2017 1,543 2018 1,475 2019 1,397 2020 873 2021 430 Thereafter 543 |
Note 6 - Pension and Post-retir
Note 6 - Pension and Post-retirement Benefits | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Pension and Other Postretirement Benefits Disclosure [Text Block] | Note 6: Pension and Post-retirement Benefits Net periodic benefit costs for the Company's defined benefit pension plans consist of the following (in thousands): Three Months Ended Nine Months Ended 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) Service cost $ 714 $ 694 $ 2,143 $ 2,081 Interest cost 1,732 1,673 5,259 5,085 Expected return on plan assets (1,560 ) (1,724 ) (4,739 ) (5,236 ) Amortization of net loss 13 7 39 23 $ 899 $ 650 $ 2,702 $ 1,953 Net periodic benefit costs for the Company's Postretirement Medical Plan consists of the following (in thousands): Three Months Ended Nine Months Ended 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) Service cost $ 26 $ 29 $ 79 $ 85 Interest cost 71 61 215 183 Amortization of prior service credit (195 ) (200 ) (586 ) (599 ) Amortization of net loss 4 - 11 - $ (94 ) $ (110 ) $ (281 ) $ (331 ) The Company’s pension plans use fair value as the market-related value of plan assets and recognize net actuarial gains or losses in excess of ten percent (10%) of the greater of the market-related value of plan assets or of the plans’ projected benefit obligation in net periodic (benefit) cost as of the plan measurement date, which is the same as the fiscal year end of the Company. Net actuarial gains or losses that are less than 10% of the thresholds noted above are accounted for as part of the accumulated other comprehensive loss. Effective March 31, 2015, the Company terminated the eligibility of employees ages 55 - 64 years old to enter into the Post-retirement Medical Plan. |
Note 7 - Debt
Note 7 - Debt | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Debt Disclosure [Text Block] | Note 7: Debt Debt, including capitalized lease obligations, is comprised of the following (in thousands): 3/31/2016 (Unaudited) 6/30/2015 Notes payable and current maturities of long term debt Loan and Security Agreement $ 1,525 $ 1,474 Capitalized leases 6 78 1,531 1,552 Long-term debt Loan and Security Agreement 17,500 18,552 $ 19,031 $ 20,104 The Company amended its Loan and Security Agreement, which includes a Line of Credit and a Term Loan, in January 2015 with changes that took effect on April 25, 2015. Borrowings under the Line of Credit may not exceed $23.0 million. The agreement expires on April 30, 2018 and has an interest rate of LIBOR plus 1.5%. As of March 31, 2016, $9.4 million was outstanding on the Line of Credit. The financial covenants of the amended Loan and Security Agreement are: 1) funded debt to EBITDA, excluding non-cash and retirement benefit expenses (“maximum leverage”), not to exceed 2.25 to 1.0 2) annual capital expenditures not to exceed $15.0 million, 3) maintain a Debt Service Coverage Rate of a minimum of 1.25 to 1.0 and 4) maintain consolidated cash plus liquid investments of not less than $10.0 million at any time. The Company was in compliance with all debt covenants as of March 31, 2016. On November 22, 2011, in conjunction with the Bytewise acquisition, the Company entered into a $15.5 million term loan (the “Term Loan”) under the existing Loan and Security Agreement with TD Bank N.A. The Term Loan is a ten year loan bearing a fixed interest rate of 4.5% and is payable in fixed monthly payments of principal and interest of $160,640. The Term Loan, which had a balance of $9.6 million at March 31, 2016, is subject to the same financial covenants contained in the Loan and Security Agreement. The effective interest rate on the Line of Credit under the Loan and Security Agreement for the nine months ended March 31, 2016 and 2015 was 2.2% and 2.0%, respectively. |
Note 8 - Income Taxes
Note 8 - Income Taxes | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Income Tax Disclosure [Text Block] | Note 8: Income Taxes The Company is subject to U.S. federal income tax and various state, local and foreign income taxes in numerous jurisdictions. The Company’s domestic and foreign tax liabilities are subject to the allocation of revenues and expenses in different jurisdictions and the timing of recognizing revenues and expenses. Additionally, the amount of income taxes paid is subject to the Company’s interpretation of applicable tax laws in the jurisdictions in which it files. The Company provides for income taxes on an interim basis based on an estimate of the effective tax rate for the year. This estimate is reassessed on a quarterly basis. Discrete tax items are accounted for in the quarterly period in which they occur. The effective tax rate for the third quarter of fiscal 2016 was 50.2% and the effective tax rate for the third quarter of fiscal 2015 was 30.5%. For the first nine months of fiscal 2016, the effective tax rate was 67.2% and for the first nine months of fiscal 2015, it was 39.3%. The tax rate is higher than the U.S. statutory rate for the year to date results in part due to losses in some foreign jurisdictions for which no tax benefit is recognized. In the third quarter of fiscal 2016, there was a benefit of $140,000 to reflect the reversal of the valuation allowance to recognize the benefit of foreign subsidiary tax loss carryforwards. In the first nine months of fiscal 2016, there were additional discrete reductions of tax expense of $216,000 for tax return to provision adjustments. In addition, there were discrete increases of $70,000 for interest on audit exposures. In the first nine months of fiscal 2015, there were discrete reductions to tax expense of $66,000 related to use of tax loss carryforwards, $42,000 for reduction in audit exposure due to the expiration of the statute of limitations and $332,000 related to return to provision adjustments; the last item was fully booked in the third quarter which is the primary reason for the tax rate in this quarter being lower than the U.S. statutory rate. U.S. Federal tax returns through fiscal 2012 are generally no longer subject to review by tax authorities; however, tax loss carryforwards from years before fiscal 2013 are still subject to adjustment. As of March 31, 2016, the Company has substantially resolved all open income tax audits and there were no other local or federal income tax audits in progress. In international jurisdictions including Australia, Brazil, Canada, China, Germany, Mexico, New Zealand, Singapore and the UK, which comprise a significant portion of the Company’s operations, the years that may be examined vary by country. The Company’s most significant foreign subsidiary in Brazil is subject to audit for the years 2010 – 2015. The Company has identified no new uncertain tax positions during the nine month period ended March 31, 2016 for which it is currently likely that the total amount of unrecognized tax benefits will significantly increase or decrease within the next twelve months. Accounting for income taxes requires estimates of future benefits and tax liabilities. Due to the temporary differences in the timing of recognition of items included in income for accounting and tax purposes, deferred tax assets or liabilities are recorded to reflect the impact arising from these differences on future tax payments. With respect to recorded tax assets, the Company assesses the likelihood that the asset will be realized by addressing the positive and negative evidence to determine whether realization is more likely than not to occur. If realization is in doubt because of uncertainty regarding future profitability, the Company provides a valuation allowance related to the asset to the extent that it is more likely than not that the deferred tax asset will not be realized. Should any significant changes in the tax law or the estimate of the necessary valuation allowance occur, the Company would record the impact of the change, which could have a material effect on the Company’s financial position. No valuation allowance has been recorded for the Company’s domestic federal net operating loss (NOL) carry forwards. The Company continues to believe that due to forecasted future taxable income and certain tax planning strategies available, it is more likely than not that it will be able to utilize the U.S. federal NOL carryforwards. In certain other countries where Company operations are in a loss position, the deferred tax assets for tax loss carryforwards and other temporary differences are fully offset by a valuation allowance. |
Note 9 - Contingencies
Note 9 - Contingencies | 9 Months Ended |
Mar. 31, 2016 | |
Notes to Financial Statements | |
Commitments and Contingencies Disclosure [Text Block] | Note 9: Contingencies The Company is involved in certain legal matters which arise in the normal course of business. These matters are not expected to have a material impact on the Company’s financial condition, results of operations or cash flows. |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Basis of Accounting, Policy [Policy Text Block] | The balance sheet as of June 30, 2015, which has been derived from audited financial statements, and the unaudited interim financial statements as of and for the three and nine months ended March 31, 2016 and March 31, 2015, 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 reporting. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. These unaudited 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 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2015. 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 preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect amounts reported in the consolidated financial statements and accompanying notes. Note 2 to the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended June 30, 2015 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. |
New Accounting Pronouncements, Policy [Policy Text Block] | In May 2014, the FASB issued a new standard related to the “Revenue from Contracts with Customers” which amends the existing accounting standards for revenue recognition. The standard requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services. This standard is applicable for fiscal years beginning after December 15, 2017 and for interim periods within those years. Earlier application will be permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.. The Company expects to adopt this standard on July 1, 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. Accounting Standards Update (ASU) 2015-11, "Inventory - Simplifying the Measurement of Inventory" requires companies to measure most inventory at the lower of cost or net realizable value, thereby simplifying the current guidance under which a company must measure inventory at the lower of cost or market. This Update eliminates the need to determine replacement cost and evaluate whether said cost is within a quantitative range. This Update also further aligns U.S. GAAP and international accounting standards. For public companies, the guidance in ASU 2015-11 is effective for annual periods beginning after December 15, 2016, and interim periods thereafter. Early adoption is permitted. Management does not expect ASU 2015-11 to have a material impact on the Company's financial statements and disclosures. Accounting Standards Update 2015-17, “Balance Sheet Classification of Deferred Taxes” requires that companies classify all deferred taxes as non-current assets or liabilities. This change is applicable for fiscal years beginning after December 15, 2016 and for interim periods within those years. There is no impact to earnings as a result of this change; however, current assets will be reduced by the amount of the current deferred tax asset as that amount will be included with the long term deferred tax asset upon adoption of this ASU. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) |
Note 4 - Inventories (Tables)
Note 4 - Inventories (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Notes Tables | |
Schedule of Inventory, Current [Table Text Block] | 3/31/2016 6/30/2015 (Unaudited) Raw material and supplies $ 30,632 $ 32,784 Goods in process and finished parts 16,493 18,569 Finished goods 38,885 39,689 86,010 91,042 LIFO Reserve (28,347 ) (28,039 ) Inventories $ 57,663 $ 63,003 |
Note 5 - Goodwill and Intangi21
Note 5 - Goodwill and Intangible Assets (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Notes Tables | |
Schedule of Finite-Lived Intangible Assets [Table Text Block] | 3/31/2016 6/30/2015 (Unaudited) Non-compete agreement $ 600 $ 600 Trademarks and trade names 1,480 1,480 Completed technology 2,358 2,358 Customer relationships 4,950 4,950 Software development 2,213 1,655 Other intangible assets 325 325 Total 11,926 11,368 Accumulated amortization (5,279 ) (4,243 ) Total net balance $ 6,647 $ 7,125 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block] | 2016 (Remainder of year) $ 386 2017 1,543 2018 1,475 2019 1,397 2020 873 2021 430 Thereafter 543 |
Note 6 - Pension and Post-ret22
Note 6 - Pension and Post-retirement Benefits (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Post Retirement Medical and Life Insurance Plan [Member] | |
Notes Tables | |
Schedule of Net Benefit Costs [Table Text Block] | Three Months Ended Nine Months Ended 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) Service cost $ 26 $ 29 $ 79 $ 85 Interest cost 71 61 215 183 Amortization of prior service credit (195 ) (200 ) (586 ) (599 ) Amortization of net loss 4 - 11 - $ (94 ) $ (110 ) $ (281 ) $ (331 ) |
Schedule of Net Benefit Costs [Table Text Block] | Three Months Ended Nine Months Ended 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) 3/31/2016 (Unaudited) 3/31/2015 (Unaudited) Service cost $ 714 $ 694 $ 2,143 $ 2,081 Interest cost 1,732 1,673 5,259 5,085 Expected return on plan assets (1,560 ) (1,724 ) (4,739 ) (5,236 ) Amortization of net loss 13 7 39 23 $ 899 $ 650 $ 2,702 $ 1,953 |
Note 7 - Debt (Tables)
Note 7 - Debt (Tables) | 9 Months Ended |
Mar. 31, 2016 | |
Notes Tables | |
Schedule of Debt [Table Text Block] | 3/31/2016 (Unaudited) 6/30/2015 Notes payable and current maturities of long term debt Loan and Security Agreement $ 1,525 $ 1,474 Capitalized leases 6 78 1,531 1,552 Long-term debt Loan and Security Agreement 17,500 18,552 $ 19,031 $ 20,104 |
Note 3 - Stock-based Compensa24
Note 3 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Millions | 9 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Minimum [Member] | Employee Stock Option [Member] | The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 1 year | |
Minimum [Member] | Restricted Stock Units (RSUs) [Member] | The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 1 year | |
Maximum [Member] | Employee Stock Option [Member] | The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 3 years | |
Maximum [Member] | Restricted Stock Units (RSUs) [Member] | The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period | 3 years | |
Employee Stock Option [Member] | The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period | 10 years | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 20,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term | 6 years 273 days | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value | $ 0.1 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number | 20,000 | |
Restricted Stock Units (RSUs) [Member] | The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding, Number | 73,367 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | 40,200 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value | $ 15.11 | |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period | 9,067 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value | $ 0.8 | |
The 2012 Stock Incentive Plan [Member] | Total Unrecognized Compensation Including Portion Relating to Grants Not Expected to Be Awarded [Member] | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | 1.1 | |
The 2012 Stock Incentive Plan [Member] | Portion Relating to RSU Grants Not Expected to be Awarded [Member] | ||
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 0.7 | |
The 2012 Stock Incentive Plan [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | 391,600 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized | $ 0.4 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 2 years | |
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 500,000 | |
Allocated Share-based Compensation Expense | $ 0.3 | $ 0.2 |
Note 4 - Inventories (Details T
Note 4 - Inventories (Details Textual) - USD ($) $ in Millions | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Jun. 30, 2015 | |
Cost of Sales [Member] | |||
Inventory, LIFO Reserve, Effect on Income, Net | $ 0.3 | $ 0.2 | |
LIFO Inventory Amount | 10.7 | $ 14.6 | |
Inventory Difference Using FIFO Basis | $ 28.3 | $ 28 |
Note 4 - Inventory (Details)
Note 4 - Inventory (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Raw material and supplies | $ 30,632 | $ 32,784 |
Goods in process and finished parts | 16,493 | 18,569 |
Finished goods | 38,885 | 39,689 |
86,010 | 91,042 | |
LIFO Reserve | (28,347) | (28,039) |
Inventories | $ 57,663 | $ 63,003 |
Note 5 - Goodwill and Intangi27
Note 5 - Goodwill and Intangible Assets (Details Textual) | 9 Months Ended |
Mar. 31, 2016 | |
Trademarks and Trade Names [Member] | |
Finite-Lived Intangible Asset, Useful Life | 14 years |
Noncompete Agreements [Member] | |
Finite-Lived Intangible Asset, Useful Life | 8 years |
Completed Technology [Member] | |
Finite-Lived Intangible Asset, Useful Life | 10 years |
Customer Relationships [Member] | |
Finite-Lived Intangible Asset, Useful Life | 8 years |
Software Developement [Member] | |
Finite-Lived Intangible Asset, Useful Life | 5 years |
Note 5 - Finite-lived Intangibl
Note 5 - Finite-lived Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Noncompete Agreements [Member] | ||
Intangible assets, gross | $ 600 | $ 600 |
Trademarks and Trade Names [Member] | ||
Intangible assets, gross | 1,480 | 1,480 |
Completed Technology [Member] | ||
Intangible assets, gross | 2,358 | 2,358 |
Customer Relationships [Member] | ||
Intangible assets, gross | 4,950 | 4,950 |
Software Developement [Member] | ||
Intangible assets, gross | 2,213 | 1,655 |
Other Intangible Assets [Member] | ||
Intangible assets, gross | 325 | 325 |
Intangible assets, gross | 11,926 | 11,368 |
Accumulated amortization | (5,279) | (4,243) |
Total net balance | $ 6,647 | $ 7,125 |
Note 5 - Estimated Aggregate Am
Note 5 - Estimated Aggregate Amortization Expense (Details) $ in Thousands | Mar. 31, 2016USD ($) |
2016 (Remainder of year) | $ 386 |
2,017 | 1,543 |
2,018 | 1,475 |
2,019 | 1,397 |
2,020 | 873 |
2,021 | 430 |
Thereafter | $ 543 |
Note 6 - Net Periodic Costs (De
Note 6 - Net Periodic Costs (Details) - Pension Plan [Member] - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Service cost | $ 714 | $ 694 | $ 2,143 | $ 2,081 |
Interest cost | 1,732 | 1,673 | 5,259 | 5,085 |
Expected return on plan assets | (1,560) | (1,724) | (4,739) | (5,236) |
Amortization of net loss | 13 | 7 | 39 | 23 |
$ 899 | $ 650 | $ 2,702 | $ 1,953 |
Note 6 - Net Periodic Benefit C
Note 6 - Net Periodic Benefit Costs for Postretirement Medical Plan (Details) - Post Retirement Medical and Life Insurance Plan [Member] - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Service cost | $ 26 | $ 29 | $ 79 | $ 85 |
Interest cost | 71 | 61 | 215 | 183 |
Amortization of prior service credit | (195) | $ (200) | (586) | $ (599) |
Amortization of net loss | 4 | 11 | ||
$ (94) | $ (110) | $ (281) | $ (331) |
Note 7 - Debt (Details Textual)
Note 7 - Debt (Details Textual) | Nov. 22, 2011USD ($)Rate | Mar. 31, 2016USD ($) | Mar. 31, 2015 |
London Interbank Offered Rate (LIBOR) [Member] | |||
Debt Instrument, Basis Spread on Variable Rate | 1.50% | ||
Maximum [Member] | Amended Agreement [Member] | |||
Current Funded Debt to EBITDA Ratio | 2.25 | ||
Maximum [Member] | |||
Annual Capital Expenditures | $ 15,000,000 | ||
Minimum [Member] | |||
Debt Service Coverage Rate | 1.25 | ||
Term Loan [Member] | |||
Long-term Line of Credit | $ 9.60 | ||
Debt Instrument, Face Amount | $ 15,500,000 | ||
Debt Instrument, Term | 10 years | ||
Debt Instrument, Interest Rate, Stated Percentage | Rate | 4.50% | ||
Line of Credit Facility, Periodic Payment | $ 160,640 | ||
Line of Credit Facility, Maximum Borrowing Capacity | 23,000,000 | ||
Long-term Line of Credit | 9,400,000 | ||
Minimum Consolidated Cash and Liquid Investments Pursuant to New Loan and Security Agreement | $ 10,000,000 | ||
Line of Credit Facility, Interest Rate During Period | 2.20% | 2.00% |
Note 7 - Debt Schedule (Details
Note 7 - Debt Schedule (Details) - USD ($) $ in Thousands | Mar. 31, 2016 | Jun. 30, 2015 |
Notes payable and current maturities of long term debt | ||
Loan and Security Agreement | $ 1,525 | $ 1,474 |
Capitalized leases | 6 | 78 |
1,531 | 1,552 | |
Long-term debt | ||
Loan and Security Agreement | 17,500 | 18,552 |
$ 19,031 | $ 20,104 |
Note 8 - Income Taxes (Details
Note 8 - Income Taxes (Details Textual) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | |
Effective Income Tax Rate Reconciliation, Percent | 50.20% | 30.50% | 67.20% | 39.30% |
Other Tax Expense (Benefit) | $ (140,000) | |||
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount, Return to Provision Adjustment | $ (216,000) | $ (332,000) | ||
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount, Expiration of Statute of Limitations | 70,000 | (42,000) | ||
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount, Use of Tax Loss Carryforwards | $ (66,000) | |||
Deferred Tax Assets, Valuation Allowance | $ 0 | $ 0 |