10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	March 31, 2017
OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-367

THE L. S. STARRETT COMPANY

(Exact name of registrant as specified in its charter)

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

121 CRESCENT STREET, ATHOL, MASSACHUSETTS	01331-1915
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code	978-249-3551
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). 

YES ☒     NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐    (Do not check if a smaller reporting company)
		Smaller reporting company	☐
		Emerging growth company	☐

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

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

YES ☐    NO ☒

Common Shares outstanding as of	April 27, 2017
Class A Common Shares	6,296,769
Class B Common Shares	761,630

1

 THE L. S. STARRETT COMPANY

CONTENTS

				Page No.
Part I.		Financial Information:
		Item 1.	Financial Statements
			Consolidated Balance Sheets – March 31, 2017 (unaudited) and June 30, 2016	3
			Consolidated Statements of Operations – three and nine months ended March 31, 2017 and March 31, 2016 (unaudited)	4
			Consolidated Statements of Comprehensive Income (Loss) – three and nine months ended March 31, 2017 and March 31, 2016 (unaudited)	5
			Consolidated Statements of Stockholders' Equity – nine months ended March 31, 2017 (unaudited)	6
			Consolidated Statements of Cash Flows - nine months ended March 31, 2017 and March 31, 2016 (unaudited)	7
			Notes to Unaudited Consolidated Financial Statements	8-15
		Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15-18
		Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
		Item 4.	Controls and Procedures	18
Part II.	Other Information:
	Item 1A.		Risk Factors	18
	Item 6.		Exhibits	19
SIGNATURES				20

2

PART I.               FINANCIAL INFORMATION

ITEM 1.               FINANCIAL STATEMENTS

THE L. S. STARRETT COMPANY

Consolidated Balance Sheets

(in thousands except share data)

	March 31, 2017 (unaudited)			June 30, 2016
ASSETS
Current assets:
Cash	$	17,061		$	19,794
Accounts receivable (less allowance for doubtful accounts of $773 and $887, respectively)		28,006			34,367
Inventories		58,225			56,321
Current deferred income tax assets		-			4,518
Prepaid expenses and other current assets		7,381			5,911
Total current assets		110,673			120,911
Property, plant and equipment, net		39,963			41,010
Income taxes receivable		2,547			2,655
Deferred income tax assets, net of current portion		24,198			25,284
Intangible assets, net		8,370			6,490
Goodwill		5,652			3,034
Other assets		2			2,214
Total assets	$	191,405		$	201,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and current maturities of long-term debt	$	1,596		$	1,543
Accounts payable		8,278			8,981
Accrued expenses		5,016			6,372
Accrued compensation		4,441			4,922
Total current liabilities		19,331			21,818
Long-term debt, net of current portion		15,904			17,109
Other income tax obligations		3,773			3,813
Deferred income tax liabilities		-			187
Postretirement benefit and pension obligations		53,804			67,158
Other non-current liabilities		1,569			-
Total liabilities		94,381			110,085
Stockholders' equity:
Class A Common stock $1 par (20,000,000 shares authorized; 6,296,769 outstanding at March 31, 2017 and 6,249,563 outstanding at June 30, 2016)		6,297			6,250
Class B Common stock $1 par (10,000,000 shares authorized; 761,630 outstanding at March 31, 2017 and 772,742 outstanding at June 30, 2016)		762			773
Additional paid-in capital		55,702			55,227
Retained earnings		80,151			81,228
Accumulated other comprehensive loss		(45,888	)		(51,965	)
Total stockholders' equity		97,024			91,513
Total liabilities and stockholders’ equity	$	191,405		$	201,598

See Notes to Unaudited Consolidated Financial Statements

3

THE L. S. STARRETT COMPANY

Consolidated Statements of Operations

(in thousands except per share data) (unaudited)

	3 Months Ended						9 Months Ended
	3/31/2017			3/31/2016			3/31/2017			3/31/2016
Net sales	$	50,670		$	50,329		$	152,770		$	155,038
Cost of goods sold		36,191			35,596			107,555			108,454
Gross margin		14,479			14,733			45,215			46,584
% of Net sales		28.6	%		29.3	%		29.6	%		30.0	%
Selling, general and administrative expenses		15,326			13,819			45,689			44,288
Restructuring charges		6			-			400			-
Operating income (loss)		(853	)		914			(874	)		2,296
Other income (expense)		(391	)		285			(466	)		377
Gain on sale of building		-			-			3,089			-
Income (loss) before income taxes		(1,244	)		1,199			1,749			2,673
Income tax expense (benefit)		(458	)		602			713			1,796
Net income (loss)	$	(786	)	$	597		$	1,036		$	877
Basic income (loss) per share	$	(0.11	)	$	.09		$	0.15		$	0.13
Diluted income (loss) per share	$	(0.11	)	$	.08		$	0.15		$	0.12
Weighted average outstanding shares used in per share calculations:
Basic		7,058			7,013			7,046			7,016
Diluted		7,058			7,031			7,078			7,045
Dividends per share	$	0.10		$	0.10		$	0.30		$	0.30

See Notes to Unaudited Consolidated Financial Statements

4

THE L. S. STARRETT COMPANY

Consolidated Statements of Comprehensive Income (Loss)

 (in thousands) (unaudited)

	3 Months Ended					9 Months Ended
	3/31/2017			3/31/2016		3/31/2017			3/31/2016
Net income (loss)	$	(786	)	$	597	$	1,036		$	877
Other comprehensive income (loss):
Translation gain (loss)		1,456			2,906		(300	)		(6,772	)
Pension and postretirement plans, net of tax of $0,$0,$3,958 and $0 respectively		(45	)		-		6,377			-
Other comprehensive income (loss)		1,411			2,906		6,077			(6,772	)
Total comprehensive income (loss)	$	625		$	3,503	$	7,113		$	(5,895	)

See Notes to Unaudited Consolidated Financial Statements

5

THE L. S. STARRETT COMPANY

Consolidated Statements of Stockholders' Equity

For the Nine Months Ended March 31, 2017

(in thousands except per share data) (unaudited)

	Common Stock Outstanding					Addi- tional Paid-in			Retained			Accumulated Other Com-prehensive
	Class A		Class B			Capital			Earnings			Loss			Total
Balance June 30, 2016	$	6,250	$	773		$	55,227		$	81,228		$	(51,965	)	$	91,513
Total comprehensive income		-		-			-			1,036			6,077			7,113
Dividends ($0.30 per share)		-		-			-			(2,113	)		-			(2,113	)
Repurchase of shares		-		(5	)		(46	)		-			-			(51	)
Issuance of stock		18		7			217			-			-			242
Stock-based compensation		16		-			304			-			-			320
Conversion		13		(13	)		-			-			-			-
Balance March 31, 2017	$	6,297	$	762		$	55,702		$	80,151		$	(45,888	)	$	97,024
Accumulated balance consists of:
Translation loss												$	(42,186	)
Pension and postretirement plans, net of taxes													(3,702	)
												$	(45,888	)

See Notes to Unaudited Consolidated Financial Statements

6

THE L. S. STARRETT COMPANY

Consolidated Statements of Cash Flows

(in thousands of dollars) (unaudited)

	9 Months Ended
	3/31/2017			3/31/2016
Cash flows from operating activities:
Net income	$	1,036		$	877
Non-cash operating activities:
Gain on sale of building		(3,089	)		-
Depreciation		4,020			4,385
Amortization		1,280			1,036
Stock-based compensation		320			315
Net long-term tax obligations		(31	)		627
Deferred taxes		702			57
Postretirement benefit and pension obligations		1,916			2,342
(Income) loss from equity method investment		223			(89	)
Working capital changes, net of effects of business acquisition:
Accounts receivable		6,200			4,744
Inventories		(2,184	)		1,425
Other current assets		(1,501	)		190
Other current liabilities		(1,790	)		507
Prepaid pension expense		(4,303	)		(4,823	)
Other		222			60
Net cash provided by operating activities		3,021			11,653
Cash flows from investing activities:
Business acquisition, net of cash acquired and long-term liability		(1,324	)		-
Additions to property, plant and equipment		(3,478	)		(4,048	)
Software development		(750	)		(557	)
Proceeds from sale of investments		-			7,621
Proceeds from sale of building		3,321			-
Net cash provided by (used in) investing activities		(2,231	)		3,016
Cash flows from financing activities:
Proceeds from long-term borrowings		-			750
Long-term debt repayments		(1,151	)		(1,822	)
Proceeds from common stock issued		242			280
Shares repurchased		(51	)		(446	)
Dividends paid		(2,113	)		(2,108	)
Net cash used in financing activities		(3,073	)		(3,346	)
Effect of exchange rate changes on cash		(450	)		(200	)
Net increase (decrease) in cash		(2,733	)		11,123
Cash, beginning of period		19,794			11,108
Cash, end of period	$	17,061		$	22,231
Supplemental cash flow information:
Interest paid	$	474		$	487
Income taxes paid, net		(213	)		732

See Notes to Unaudited Consolidated Financial Statements

7

THE L. S. STARRETT COMPANY

Notes to Unaudited Consolidated Financial Statements

March 31, 2017

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

The unaudited interim financial statements as of and for the three and nine months ended March 31, 2017 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, 2016.  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, 2016 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

Note 2:   Recent Accounting Pronouncements

In May 2014, the FASB issued a new standard related to “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 for its fiscal year beginning July 1, 2018. The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. 

In July 2015, the FASB issued ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory." Previous to the issuance of this ASU, ASC 330 required that an entity measure inventory at the lower of cost or market. ASU 2015-11 specifies that “market” is defined as “net realizable value,” or the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016. Application is to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU No. 2015-11 will not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)”.  The ASU requires that organizations that lease assets recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases.  The ASU will affect the presentation of lease related expenses on the income statement and statement of cash flows and will increase the required disclosures related to leases.  This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted.  The Company is currently evaluating the impact of ASU No. 2016-02 on its consolidated financial statements.  It is expected that a key change upon adoption will be the balance sheet recognition of leased assets and liabilities and that any changes in income statement recognition will not be material.

In October 2016, the FASB issued ASU No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory," which is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This update removes the current exception in GAAP prohibiting entities from recognizing current and deferred income tax expenses or benefits related to transfer of assets, other than inventory, within the consolidated entity. The current exception to defer the recognition of any tax impact on the transfer of inventory within the consolidated entity until it is sold to a third party remains unaffected. The amendments in this update are effective for public entities for annual reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently assessing the impact of the future adoption of this update on its consolidated financial statements.

8

In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805) - Clarifying the Definition of a Business," with the objective to assist entities with evaluating whether transactions should be accounted for as acquisitions ( or disposals) of assets versus businesses. The amendments in ASU 2017-01 provide a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired ( or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen is expected to reduce the number of transactions that need to be further evaluated. If the screen is not met, the amendments in ASU 2017-01 (i) require that to be considered a business, a set of assets and liabilities acquired must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output; and (ii) remove the evaluation of whether a market participant could replace missing elements. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively. Early adoption is permitted for transactions for which the acquisition date occurs before the issuance date of ASU 2017-01, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently assessing the impact of the adoption of this update on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." Under the new guidance, if a reporting unit's carrying value amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates today's requirement to calculate goodwill impairment using Step 2, which calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The standard does not change the guidance on completing Step 1 of the goodwill impairment test. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2019 and should be applied prospectively for annual and any interim goodwill impairment tests. Early adoption is permitted for entities for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact of the update on our consolidated financial statements.

9

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, 2017, there were 20,000 stock options and 105,634 restricted stock units outstanding. In addition, there were 346,600 shares available for grant under the 2012 Stock Plan as of March 31, 2017.

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, 2017 and 2016.

The weighted average contractual term for stock options outstanding as of March 31, 2017 was 5.75 years.  The aggregate intrinsic value of stock options outstanding as of March 31, 2017 was negligible. Stock options exercisable as of March 31, 2017 were 20,000. In recognizing stock compensation expense for the 2012 Stock Incentive Plan management has estimated that there will be no forfeitures of options.

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 45,000 RSU awards with a fair value of $10.86 per RSU granted during the nine months ended March 31, 2017. There were 12,733 RSUs settled during the nine months ended March 31, 2017.  The aggregate intrinsic value of RSU awards outstanding as of March 31, 2017 was $1.1 million. As of March 31, 2017 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, 2017 and 2016 was $0.3 million and $0.3 million, respectively.  As of March 31, 2017, there was $1.3 million of total unrecognized compensation costs related to outstanding stock-based compensation arrangements. Of this cost $1.1 million relates to performance based RSU grants that are not expected to be awarded. The remaining $0.2 million is expected to be recognized over a weighted average period of 1.4 years.

Note 4:   Inventories

Inventories consist of the following (in thousands):

	3/31/2017			6/30/2016
Raw material and supplies	$	26,919		$	29,209
Goods in process and finished parts		17,356			16,459
Finished goods		41,220			39,449
		85,495			85,117
LIFO Reserve		(27,270	)		(28,796	)
Inventories	$	58,225		$	56,321

10

LIFO inventories were $7.2 million and $10.5 million at March 31, 2017 and June 30, 2016, respectively, such amounts being approximately $27.3 million and $28.8 million, respectively, less than if determined on a FIFO basis.  The use of LIFO, as compared to FIFO, resulted in a $1.5 million decrease in cost of sales for the nine months ended March 31, 2017 compared to a $0.3 million increase for the nine months ended March 31, 2016.

Note 5:   Business Acquisition

In fiscal 2010, the Company entered into an agreement with a private software company to invest $1.5 million in exchange for a 36% equity interest therein. In the third quarter of fiscal 2017, the Company entered into a new agreement to invest an additional $3.6 million for an additional 63% of equity in the company. The Company paid $1.8 million in cash at closing and is obligated to pay an additional $1.8 million in cash three years subsequent to closing (discounted to $1.6 million on the purchase date). In addition, the agreement provides for the former owners to receive a 30% share of operating profits of the business over the next three years so long as they remain employed by the Company.

The acquisition has been accounted for as a business combination and the financial results of the company have been included in our consolidated financial statements as of the date of acquisition. Under the acquisition method of accounting, the purchase price was allocated to net tangible and intangible assets based upon their estimated fair values as of the acquisition date. The Company expects to finalize the valuation in the fourth quarter of 2017.

The table below presents the preliminary allocation of the purchase price to the acquired net assets (in thousands):

Cash	$	509
Accounts receivable		273
Inventories		243
Other current assets		18
Deferred software development costs		2,397
Fixed assets		47
Goodwill		2,618
Deferred tax liability		(647	)
Accounts payable & current liabilities		(80	)
Purchase Price (1)	$	5,378

(1) $1,833 + 1,555 ($1.8 million discounted at 5%) = $3,388 purchase price divided by 63% = $5.378 million

Pro-forma financial information has not been presented for this acquisition because it is not considered material to the Company’s financial position or results of operations.

Note 6:   Goodwill and Intangible Assets

The following represents the change in the carrying amount of goodwill for the nine months ended March 31, 2017 (in thousands):

Balance at June 30, 2016	$	3,034
Acquisition of software company		2,618
Balance at March 31, 2017	$	5,652

The Company’s acquisition of Bytewise in 2011 gave rise to goodwill of $3,034. The Company performed a qualitative analysis in accordance with ASU 2011-08 for its October 1, 2016 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, 2016.

11

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

	3/31/2017			6/30/2016
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		5,548			2,402
Other intangible assets		325			325
Total		15,261			12,115
Accumulated amortization		(6,891	)		(5,625	)
Total net balance	$	8,370		$	6,490

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 2017 and for each of the next five years and thereafter, is as follows (in thousands):

2017 (Remainder of year)	$	653
2018		2,421
2019		2,186
2020		1,480
2021		872
2022		400
Thereafter		358

Note 7:   Pension and Post-retirement Benefits

The Company has two defined benefit pension plans, one for U.S. employees and another for U.K. employees.   The U.K. plan was closed to new entrants in fiscal 2009.  The Company has a postretirement medical and life insurance benefit plan for U.S. employees. The Company also has defined contribution plans.  

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

The amendment of the defined benefit pension plan triggered a pension curtailment which required a remeasurement of the Plan's obligation as of December 31, 2016. The remeasurement resulted in a decrease in the benefit obligation of approximately $6.9 million primarily due to an increase in the discount rate from 3.77% to 4.31%, with an additional $4.2 million decrease resulting from the impact of the curtailment. These reductions in the Plan’s benefit obligation were recorded as other comprehensive income, net of taxes.

Net periodic benefit costs for all of the Company's defined benefit pension plans consist of the following (in thousands):

	Three Months Ended						Nine Months Ended
	3/31/2017 (Unaudited)			3/31/2016 (Unaudited)			3/31/2017 (Unaudited)			3/31/2016 (Unaudited)
Service cost	$	-		$	714		$	1,405		$	2,143
Interest cost		1,574			1,732			4,659			5,259
Expected return on plan assets		(1,284	)		(1,560	)		(3,878	)		(4,739	)
Amortization of net loss		6			13			102			39
	$	296		$	899		$	2,288		$	2,702

12

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

	Three Months Ended						Nine Months Ended
	3/31/2017 (Unaudited)			3/31/2016 (Unaudited)			3/31/2017 (Unaudited)			3/31/2016 (Unaudited)
Service cost	$	23		$	26		$	70		$	79
Interest cost		67			71			203			215
Amortization of prior service credit		(168	)		(195	)		(505	)		(586	)
Amortization of net loss		30			4			90			11
	$	(48	)	$	(94	)	$	(142	)	$	(281	)

For the nine-month period ended March 31, 2017, the Company contributed $3.5 million to the U.S. and $0.8 to the UK pension plans. The Company estimates that it will contribute an additional $1.1 million for the remainder of fiscal 2017.

The Company’s pension plans use fair value as the market-related value of plan assets and recognize net actuarial gains or losses in excess of ten percent (10%) of the greater of the market-related value of plan assets or of the plans’ projected benefit obligation in net periodic (benefit) cost as of the plan measurement date. Net actuarial gains or losses that are less than 10% of the thresholds noted above are accounted for as part of the accumulated other comprehensive loss.

Note 8:   Debt

Debt is comprised of the following (in thousands):

	3/31/2017		6/30/2016
Notes payable and current maturities of long term debt
Loan and Security Agreement	$	1,596	$	1,543
Long-term debt
Loan and Security Agreement		15,904		17,109
	$	17,500	$	18,652

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 Line of Credit expires on April 30, 2018 and has an interest rate of LIBOR plus 1.5%.  The effective interest rate on the Line of Credit under the Loan and Security Agreement for the nine months ended March 31, 2017 and 2016 was 2.5% and 2.2%, respectively. Based upon its three year term, the Line of Credit has been classified as long term. As of March 31, 2017, $9.4 million was outstanding on the Line of Credit.

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 then existing Loan and Security Agreement.  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 $160.6 thousand.  The Term Loan had a balance of $8.1 million at March 31, 2017.

The material 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 1.2) annual capital expenditures not to exceed $15.0 million, 3) maintain a Debt Service Coverage Rate of a minimum of 1.25 to 1 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, 2017.

Note 9:   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.

13

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 2017 was 36.8% and for the third quarter of fiscal 2016, it was 50.2%. For the first nine months of fiscal 2017, the effective tax rate was 40.8% and for the first nine months of fiscal 2016, it was 67.2%. The tax rate in fiscal 2017 is higher than the U.S. statutory rate since the benefit of earnings in foreign jurisdictions with lower effective tax rates was more than offset by discrete tax charges including the impact of a tax rate change in the U.K. applied to deferred tax assets which increased tax expense by $298,000 in the first quarter. In fiscal 2016, the tax rate is higher than the U.S. statutory rate primarily due to losses in foreign jurisdictions for which no tax benefit is recognized which was partially offset by discrete reductions to tax expense primarily as a result of return to provision adjustments of $216,000.

U.S. Federal tax returns through fiscal 2013 are generally no longer subject to review by tax authorities; however, tax loss carryforwards from years before fiscal 2014 are still subject to adjustment. As of March 31, 2017, the Company has no 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 calendar years 2011 – 2016. During the next twelve months, it is possible that there will be a reduction in the Company’s long term tax obligations for prior year exposures of $931,000.

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 deferred tax assets related to temporary differences in items included in taxable income. 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 tax benefit provided by those differences. In the U.S., there is a valuation allowance against foreign tax credits to the extent they are limited. 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.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17 ("ASU 2015-17") regarding ASC Topic 740 "Income Taxes: Balance Sheet Classification of Deferred Taxes." The amendments in ASU 2015-17 eliminate the requirement to bifurcate Deferred Taxes between current and non-current on the balance sheet and requires that all deferred tax liabilities and assets be classified as noncurrent on the balance sheet. The amendments for ASU-2015-17 can be applied retrospectively or prospectively and early adoption is permitted. The Company has adopted the new guidance prospectively in the first quarter of fiscal 2017. Prior periods were not retrospectively adjusted.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting." The ASU affects the accounting for employee share-based payment transactions as it relates to accounting for income taxes, accounting for forfeitures, and statutory tax withholding requirements. This ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those periods with early adoption permitted. The Company has adopted the new guidance prospectively in the first quarter of fiscal 2017.

Note 10: 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.

14

Note 11. Segment Information

The segment information and the accounting policies of each segment are the same as those described in the notes to the consolidated financial statements entitled “Financial Information by Segment & Geographic Area” included in our Annual Report on Form 10-K for the year ended June 30, 2016. Our business is aggregated into two reportable segments based on geography of operations: North American Operations and International Operations. Segment income is measured for internal reporting purposes by excluding corporate expenses which are included in unallocated in the table below. Other income and expense, including interest income and expense, the gain on the sale of a building and income taxes are excluded entirely from the table below. There were no significant changes in the segment operations or in the segment assets from the Annual Report. Financial results for each reportable segment are as follows (in thousands):

	North American Operations		International Operations			Unallocated			Total
Three Months ended March 31, 2017
Sales1	$	31,791	$	18,879		$			$	50,670
Operating Income (Loss)	$	1,563	$	(693	)	$	(1,723	)	$	(853	)
Three Months ended March 31, 2016
Sales2	$	32,473	$	17,856		$			$	50,329
Operating Income (Loss)	$	2,542	$	(112	)	$	(1,515	)	$	914

1. Excludes $1,493 of North American segment sales to the International segment and $2,536 of International segment sales to the North American segment.

2. Excludes $2,238 of North American segment sales to the International segment and $2,120 of International segment sales to the North American segment.

	North American Operations		International Operations			Unallocated			Total
Nine Months ended March 31, 2017
Sales3	$	92,345	$	60,425		$			$	152,770
Operating Income (Loss)	$	4,520	$	(143	)	$	(5,251	)	$	(874	)
Nine Months ended March 31, 2016
Sales4	$	99,188	$	55,850		$			$	155,038
Operating Income (Loss)	$	8,172	$	(1,583	)	$	(4,292	)	$	2,296

3. Excludes $6,189 of North American segment sales to the International segment and $8,585 of International segment sales to the North American segment.

4. Excludes $6,480 of North American segment sales to the International segment and $6,799 of International segment sales to the North American segment.

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three months Ended March 31, 2017 and March 31, 2016

Overview

The Company continued to experience moderate declines in the domestic market and improvement in the International sector during the quarter posting flat revenue and lower profits. The North American market encountered a softening in the industrial distribution market and a modest recovery in the high-end metrology sector while a weakening US dollar resulted in higher International revenue, especially in Brazil.

Net sales increased $0.4 million or 1% from $50.3 million in fiscal 2016 to $50.7 million in fiscal 2017 with North America declining $0.7 million and International growing $1.1 million. Operating income declined $1.8 million from a profit of $0.9 million in fiscal 2016 to a loss of $0.9 million in fiscal 2017 due to a $0.3 million decline in gross margin coupled with a $1.5 million increase in operating expenses.

15

Net Sales

North American sales decreased $0.7 million or 2% from $32.5 million in fiscal 2016 to $31.8 million in fiscal 2017 due to a decline in metrology tools sold thru the industrial distribution channel.

International sales increased $1.1 million or 6% from $17.8 million in fiscal 2016 to $18.9 million in fiscal 2017 due to 20% improvement of the Brazilian Real to the US dollar and improvement in the European sector.

Gross Margin

Gross margin decreased $0.3 million or 2% from 29.3% of sales in fiscal 2016 to 28.6% of sales in fiscal 2017.

North American gross margins decreased $0.4 million from $9.3 million or 29% of sales in fiscal 2016 to $8.9 million or 28% of sales in fiscal 2017 due to lower sales and higher cost in the industrial distribution channel.

International gross margins increased $0.1 million from $5.5 million in fiscal 2016 to $5.6 million in fiscal 2017 based upon an improved International performance with higher margins in Europe and China.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1.5 million or 11% from $13.8 million in fiscal 2016 to $15.3 million in fiscal 2017. 

North American expenses increased $0.6 million from $6.7 million in fiscal 2016 to $7.3 million in fiscal 2017 as a result of increased sales and marketing expenses in the high-end metrology business.

International expenses increased $0.8 million or 14% due principally to the weakening of the US dollar to the Brazilian Real.

Corporate expenses increased $0.1 million from $1.5 million in fiscal 2016 to $1.7 million in fiscal 2017 due to higher professional fees.

Other Income (Expense)

Other expense increased $0.7 million from income of $0.3 million in fiscal 2016 to a $0.4 million loss in fiscal 2017 due to a $0.3 million cumulative loss related to an investment in a software development company and lower foreign exchange translation gains.

Income Taxes

The effective tax rates for the third quarter of fiscal 2017 and 2016 were 37% and 50%, respectively. The quarterly tax rate is lower than a normalized combined federal and state rate of approximately 40% due to profits in some foreign subsidiaries with lower effective tax rates. The tax rate includes negligible discrete items in fiscal 2017 and a discrete tax benefit of $0.1 million in fiscal 2016.

Net Income

The Company recorded net loss of $0.8 million or $0.11 per share in the third quarter of fiscal 2017 compared to net income of $0.6 million or $0.09 per share in fiscal 2016 principally due to lower Operating Income and a one-time investment write-off.

Nine Months Ended March 31, 2017 and March 31, 2016

Overview 

Net sales declined $2.3 million or 1% from $155.0 million in fiscal 2016 to $152.7 million in fiscal 2017. Operating income decreased $3.2 million in fiscal 2017 from $2.3 million profit in fiscal 2016 compared to $0.9 million loss in fiscal 2017 due to lower sales and related gross margins and higher selling, general and administrative expenses.

16

Net Sales

North American sales decreased $6.9 million or 7% from $99.2 million in fiscal 2016 to $92.3 million in fiscal 2017 due to lower metrology tool sales through the industrial distribution channel and decreases in high-end metrology sales to end-user customers.

International sales increased $4.6 million or 8% from $55.8 million in fiscal 2016 to $60.4 million in fiscal 2017 with strong organic growth in Europe and a strengthening Brazilian Real relative to the US dollar.

Gross Margin

Gross margin decreased $1.3 million or 3% and also declined as a % of sales from 30.0% in fiscal 2016 to 29.6% in fiscal 2017.

North American gross margins decreased $3.9 million or 13% from $29.4 million in fiscal 2016 compared to $25.5 million in fiscal 2016 due to lower precision tool sales as well as lower sales of higher margin capital equipment products.

International gross margins increased $2.6 million with volume and margin improvement representing $1.4 and $1.2 million, respectively. The stronger Brazilian Real contributed an incremental $1.6 million while the weakening British Pound resulted in a $0.9 million decrement to the gross margin gain.

Selling, General and Administrative Expenses

Selling, general and administrative expense increased $1.4 million or 3% from $44.3 million in fiscal 2016 to $45.7 million in fiscal 2017.

North American expenses decreased $0.3 million or 2% due to lower commissions and travel expenses.

International expenses increased $1.1 million or 6% principally due to the strengthening Brazilian Reals versus the US dollar.

Corporate expenses increased $0.6 million or 13% principally due to higher professional fees.

Other income (expense)

Other income declined $0.8 million due to foreign exchange translation losses and a $0.3 million cumulative loss related to an investment in a software development company. The $3.1 million gain on sale of a building is net profit realized on the sale of the Canadian distribution center in the first quarter of fiscal 2017.

Income Taxes

The effective tax rates for the first three quarters of fiscal 2017 and 2016 was 41% and 67%, respectively. The effective tax rate is higher than the U.S. statutory rate since the benefit of earnings in foreign jurisdictions with lower effective tax rates was more than offset by discrete tax charges including the impact of a tax rate change in the U.K. applied to deferred tax assets which increased tax expense by $298,000 in the first quarter.. The effective rate in fiscal 2016 is higher due to losses in some foreign subsidiaries for which no tax benefit is recognized in consolidation.

Net Income

The Company recorded net income of $1.0 million or $0.15 per share in the first three quarters of fiscal 2017 compared to net income of $0.9 million or $0.13 per share in fiscal 2016 principally due to the gain on the sale of the Canadian distribution facility and a lower effective tax rate offsetting lower operating income.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows (in thousands)	Nine Months Ended
	3/31/2017			3/31/2016
Cash provided by operating activities	$	3,021		$	11,653
Cash provided by (used in) investing activities		(2,231	)		3,016
Cash used in financing activities		(3,073	)		(3,346	)
Effect of exchange rate changes on cash		(450	)		(200	)
Net increase (decrease) in cash	$	(2,733	)	$	11,123

17

Fiscal 2017 net cash for the nine months ended March 31, 2017 decreased $2.7 million as cash provided from operations of $3.0 million was offset by investments of $2.2 million and debt and dividend payments of $3.1 million. In addition, exchange rates negatively impacted cash in US dollars by $0.5 million.

Liquidity and Credit Arrangements

The Company believes it maintains sufficient liquidity and has the resources to fund its operations.  In addition to its cash, the Company maintains a $23 million line of credit in connection with its Loan and Security Agreement, of which, $9.4 million was outstanding as of March 31, 2017.  Availability under the agreement is further reduced by open letters of credit totaling $0.9 million. The Loan and Security Agreement was renewed in January of 2015.  The Loan and Security Agreement contains financial covenants with respect to leverage, tangible net worth, and interest coverage, and also contains customary affirmative and negative covenants, including limitations on indebtedness, liens, acquisitions, asset dispositions and fundamental corporate changes, and certain customary events of default.  As of March 31, 2017, the Company was in compliance with all debt covenants related to its Loan and Security Agreement. The Loan and Security Agreement expires on April 30, 2018 and the Company plans to negotiate an extension to the agreement.

The effective interest rate on the borrowings under the Loan and Security Agreement during the nine months ended March 31, 2017 and 2016 was 2.5% and 2.2% respectively.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

ITEM 3.               QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in qualitative and quantitative disclosures about market risk from what was reported in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016.

ITEM 4.               CONTROLS AND PROCEDURES

The Company's management, under the supervision and with the participation of the Company's President and Chief Executive Officer and Chief Financial Officer, has evaluated the Company's disclosure controls and procedures as of March 31, 2017, and they have concluded that our disclosure controls and procedures were effective as of such date. All information required to be filed in this report was recorded, processed, summarized and reported within the time period required by the rules and regulations of the Securities and Exchange Commission, and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2017, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

There have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the quarter ended March 31, 2017.

PART II.             OTHER INFORMATION

ITEM 1A.           RISK FACTORS

SAFE HARBOR STATEMENT

UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Quarterly Report on Form 10-Q contains forward-looking statements about the Company’s business, competition, sales, expenditures, foreign operations, plans for reorganization, interest rate sensitivity, debt service, liquidity and capital resources, and other operating and capital requirements. In addition, forward-looking statements may be included in future Company documents and in oral statements by Company representatives to securities analysts and investors.  The Company is subject to risks that could cause actual events to vary materially from such forward-looking statements.  You should carefully review and consider the information regarding certain factors which could materially affect our business, financial condition or future results set forth under Item 1A. “Risk Factors” in our Form 10-K for the year ended June 30, 2016. There have been no material changes from the factors disclosed in our Form 10-K for the year ended June 30, 2016.

18

ITEM 6.               EXHIBITS

31a Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31b Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32 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.

10.1 The L.S. Starrett Company 2012 Long-Term Incentive Plan (incorporated by reference to Exhibit 4.2 to The L.S. Starrett Company’s Registration Statement on Form S-8 (File No. 333-184934) filed November 14, 2012).

101 The following materials from The L. S. Starrett Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 are furnished herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statement of Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.

19

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	April 28, 2017	/S/R. Douglas A. Starrett
		Douglas A. Starrett - President and CEO (Principal Executive Officer)
Date	April 28, 2017	/S/R. Francis J. O’Brien
		Francis J. O’Brien - Treasurer and CFO (Principal Accounting Officer)

20

EX-31.A

EXHIBIT 31.a

CERTIFICATIONS

I, Douglas A. Starrett, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: April 28, 2017	/S/	Douglas A. Starrett
		Douglas A. Starrett Chief Executive Officer

EX-31.B

EXHIBIT 31.b

CERTIFICATIONS

I, Francis J. O’Brien, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date: April 28, 2017	/S/	Francis J. O’Brien
		Francis J. O’Brien Chief Financial Officer

EX-32

EXHIBIT 32

CERTIFICATIONS

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

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

The Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (the "Form 10-Q") of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date	April 28, 2017	/S/ Douglas A. Starrett
		Douglas A. Starrett Chief Executive Officer
Date	April 28, 2017	/S/ Francis J. O’Brien
		Francis J. O’Brien Chief Financial Officer

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

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

XML

Document And Entity Information - shares	9 Months Ended
	Mar. 31, 2017	Apr. 27, 2017
Document Information [Line Items]
Entity Registrant Name	STARRETT L S CO
Entity Central Index Key	0000093676
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, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false
Common Class A [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		6,296,769
Common Class B [Member]
Document Information [Line Items]
Entity Common Stock, Shares Outstanding (in shares)		761,630

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Jun. 30, 2016
ASSETS
Cash	$ 17,061	$ 19,794
Accounts receivable (less allowance for doubtful accounts of $773 and $887, respectively)	28,006	34,367
Inventories	58,225	56,321
Current deferred income tax assets		4,518
Prepaid expenses and other current assets	7,381	5,911
Total current assets	110,673	120,911
Property, plant and equipment, net	39,963	41,010
Income taxes receivable	2,547	2,655
Deferred income tax assets, net of current portion	24,198	25,284
Intangible assets, net	8,370	6,490
Goodwill	5,652	3,034
Other assets	2	2,214
Total assets	191,405	201,598
LIABILITIES AND STOCKHOLDERS’ EQUITY
Notes payable and current maturities of long-term debt	1,596	1,543
Accounts payable	8,278	8,981
Accrued expenses	5,016	6,372
Accrued compensation	4,441	4,922
Total current liabilities	19,331	21,818
Long-term debt, net of current portion	15,904	17,109
Other income tax obligations	3,773	3,813
Deferred income tax liabilities		187
Postretirement benefit and pension obligations	53,804	67,158
Other non-current liabilities	1,569
Total liabilities	94,381	110,085
Stockholders' equity:
Additional paid-in capital	55,702	55,227
Retained earnings	80,151	81,228
Accumulated other comprehensive loss	(45,888)	(51,965)
Total stockholders' equity	97,024	91,513
Total liabilities and stockholders’ equity	191,405	201,598
Common Class A [Member]
Stockholders' equity:
Common stock	6,297	6,250
Common Class B [Member]
Stockholders' equity:
Common stock	$ 762	$ 773

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2017	Jun. 30, 2016
Allowance for doubtful accounts	$ 773	$ 887
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)	6,296,769	6,249,563
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)	761,630	772,742

XML

Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended				9 Months Ended
	Mar. 31, 2017		Mar. 31, 2016		Mar. 31, 2017		Mar. 31, 2016
Net sales	$ 50,670	[1]	$ 50,329	[2]	$ 152,770	[3]	$ 155,038	[4]
Cost of goods sold	36,191		35,596		107,555		108,454
Gross margin	$ 14,479		$ 14,733		$ 45,215		$ 46,584
% of Net sales	28.60%		29.30%		29.60%		30.00%
Selling, general and administrative expenses	$ 15,326		$ 13,819		$ 45,689		$ 44,288
Restructuring charges	6				400
Operating income (loss)	(853)		914		(874)		2,296
Other income (expense)	(391)		285		(466)		377
Gain on sale of building					3,089
Income (loss) before income taxes	(1,244)		1,199		1,749		2,673
Income tax expense (benefit)	(458)		602		713		1,796
Net income (loss)	$ (786)		$ 597		$ 1,036		$ 877
Basic income (loss) per share (in dollars per share)	$ (0.11)		$ 0.09		$ 0.15		$ 0.13
Diluted income (loss) per share (in dollars per share)	$ (0.11)		$ 0.08		$ 0.15		$ 0.12
Weighted average outstanding shares used in per share calculations:
Basic (in shares)	7,058		7,013		7,046		7,016
Diluted (in shares)	7,058		7,031		7,078		7,045
Dividends (in dollars per share)	$ 0.10		$ 0.10		$ 0.30		$ 0.30

[1] Excludes $1,493 of North American segment sales to the International segment and $2,536 of International segment sales to the North American segment.

[2] Excludes $2,238 of North American segment sales to the International segment and $2,120 of International segment sales to the North American segment.

[3] Excludes $6,189 of North American segment sales to the International segment and $8,585 of International segment sales to the North American segment.

[4] Excludes $6,480 of North American segment sales to the International segment and $6,799 of International segment sales to the North American segment.

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Net income	$ (786)	$ 597	$ 1,036	$ 877
Other comprehensive income (loss):
Translation gain (loss)	1,456	2,906	(300)	(6,772)
Pension and postretirement plans, net of tax of $0,$0,$3,958 and $0 respectively	(45)		6,377
Other comprehensive income (loss)	1,411	2,906	6,077	(6,772)
Total comprehensive income (loss)	$ 625	$ 3,503	$ 7,113	$ (5,895)

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (Parentheticals) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Pension and postretirement plans, tax	$ 0	$ 0	$ 3,958	$ 0

XML

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:
						$ (51,965)
Balance at Jun. 30, 2016	$ 6,250	$ 773	$ 55,227	$ 81,228	$ (51,965)	91,513
Total comprehensive income				1,036	6,077	7,113
Dividends ($0.30 per share)				(2,113)		(2,113)
Repurchase of shares		(5)	(46)			(51)
Issuance of stock	18	7	217			242
Stock-based compensation	16		304			320
Conversion	13	(13)
Balance at Mar. 31, 2017	$ 6,297	$ 762	$ 55,702	$ 80,151	(45,888)	97,024
Accumulated balance consists of:
Translation loss					(42,186)
Pension and postretirement plans, net of taxes					(3,702)
					$ (45,888)	$ (45,888)

XML

Consolidated Statements of Stockholders' Equity (Unaudited) (Parentheticals)	9 Months Ended
	Mar. 31, 2017 $ / shares
Retained Earnings [Member]
Dividends (in dollars per share)	$ 0.30
Dividends (in dollars per share)	$ 0.30

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash flows from operating activities:
Net income	$ 1,036	$ 877
Non-cash operating activities:
Gain on sale of building	(3,089)
Depreciation	4,020	4,385
Amortization	1,280	1,036
Stock-based compensation	320	315
Net long-term tax obligations	(31)	627
Deferred taxes	702	57
Postretirement benefit and pension obligations	1,916	2,342
(Income) loss from equity method investment	223	(89)
Working capital changes, net of effects of business acquisition:
Accounts receivable	6,200	4,744
Inventories	(2,184)	1,425
Other current assets	(1,501)	190
Other current liabilities	(1,790)	507
Prepaid pension expense	(4,303)	(4,823)
Other	222	60
Net cash provided by operating activities	3,021	11,653
Cash flows from investing activities:
Business acquisition, net of cash acquired and long-term liability	(1,324)
Additions to property, plant and equipment	(3,478)	(4,048)
Software development	(750)	(557)
Proceeds from sale of investments		7,621
Proceeds from sale of building	3,321
Net cash provided by (used in) investing activities	(2,231)	3,016
Cash flows from financing activities:
Proceeds from long-term borrowings		750
Long-term debt repayments	(1,151)	(1,822)
Proceeds from common stock issued	242	280
Shares repurchased	(51)	(446)
Dividends paid	(2,113)	(2,108)
Net cash used in financing activities	(3,073)	(3,346)
Effect of exchange rate changes on cash	(450)	(200)
Net increase (decrease) in cash	(2,733)	11,123
Cash, beginning of period	19,794	11,108
Cash, end of period	17,061	22,231
Supplemental cash flow information:
Interest paid	474	487
Income taxes paid, net	$ (213)	$ 732

XML

Note 1 - Basis of Presentation and Summary of Significant Account Policies

9 Months Ended

Mar. 31, 2017

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 unaudited interim financial statements as of and for the

three

and

nine

months ended

March

31,

2017

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,

2016.

  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,

2016

describes the significant accounting policies and methods used in the preparation of the consolidated financial statements.

XML

Note 2 - Recent Accounting Pronouncements

9 Months Ended

Mar. 31, 2017

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 “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 for its fiscal year beginning

July

 

1,

2018.

The Company is currently evaluating the impact of the adoption of this standard on its consolidated financial statements. 

In

July

2015,

the FASB issued ASU No.

2015

-

11,

"Inventory (Topic

330):

Simplifying the Measurement of Inventory." Previous to the issuance of this ASU, ASC

330

required that an entity measure inventory at the lower of cost or market. ASU

2015

-

11

specifies that “market” is defined as “net realizable value,” or the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years, and for interim periods within those fiscal years, beginning after

December

15,

2016.

Application is to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU No.

2015

-

11

will not have a material impact on our consolidated financial statements.

In

February

2016,

the FASB issued ASU No.

2016

-

02,

“Leases (Topic

842)”.

  The ASU requires that organizations that lease assets recognize assets and liabilities on the balance sheet for the rights and obligations created by those leases.  The ASU will affect the presentation of lease related expenses on the income statement and statement of cash flows and will increase the required disclosures related to leases.  This ASU is effective for fiscal years beginning after

December

15,

2018,

including interim periods within those fiscal years, with early adoption permitted.  The Company is currently evaluating the impact of ASU No.

2016

-

02

on its consolidated financial statements.  It is expected that a key change upon adoption will be the balance sheet recognition of leased assets and liabilities and that any changes in income statement recognition will not be material.

In

October

2016,

the FASB issued ASU No.

2016

-

16,

"Income Taxes (Topic

740):

Intra-Entity Transfers of Assets Other Than Inventory," which is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. This update removes the current exception in GAAP prohibiting entities from recognizing current and deferred income tax expenses or benefits related to transfer of assets, other than inventory,

within the consolidated entity. The current exception to defer the recognition of any tax impact on the transfer of inventory within the consolidated entity until it is sold to a

third

party remains unaffected. The amendments in this update are effective for public entities for annual reporting periods beginning after

December

15,

2017.

Early adoption is permitted. The Company is currently assessing the impact of the future adoption of this update on its consolidated financial statements.

In

January

2017,

the FASB issued ASU No.

2017

-

01,

"Business Combinations (Topic

805)

- Clarifying the Definition of a Business," with the objective to assist entities with evaluating whether transactions should be accounted for as acquisitions ( or disposals) of assets versus businesses. The amendments in ASU

2017

-

01

provide a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired ( or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen is expected to reduce the number of transactions that need to be further evaluated. If

the screen is not met, the amendments in ASU

2017

-

01

(i) require that to be considered a business, a set of assets and liabilities acquired must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output; and (ii) remove the evaluation of whether a market participant could replace missing elements. The amendments in this ASU are effective for annual and interim periods beginning after

December

15,

2017

and should be applied prospectively. Early adoption is permitted for transactions for which the acquisition date occurs before the issuance date of ASU

2017

-

01,

only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently assessing the impact of the adoption of this update on its consolidated financial statements.

In

January

2017,

the FASB issued ASU No.

2017

-

04,

"Intangibles-Goodwill and Other (Topic

350):

Simplifying the Test for Goodwill Impairment." Under the new guidance, if a reporting unit's carrying value amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates today's requirement to calculate goodwill impairment using Step

2,

which calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount. The standard does not change the guidance on completing Step

1

of the goodwill impairment test. The amendments in this ASU are effective for annual and interim periods beginning after

December

15,

2019

and should be applied prospectively for annual and any interim goodwill impairment tests. Early adoption is permitted for entities for interim or annual goodwill impairment tests performed on testing dates after

January

1,

2017.

The Company is currently evaluating the impact of the update on our consolidated financial statements.

XML

Note 3 - Stock-based Compensation

9 Months Ended

Mar. 31, 2017

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,

2017,

there were

20,000

stock options and

105,634

restricted stock units outstanding. In addition, there were

346,600

shares available for grant under the

2012

Stock Plan as of

March

31,

2017.

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,

2017

and

2016.

The weighted average contractual term for stock options outstanding as of

March

31,

2017

was

5.75

years.  The aggregate intrinsic value of stock options outstanding as of

March

31,

2017

was negligible. Stock options exercisable as of

March

31,

2017

were

20,000.

In recognizing stock compensation expense for the

2012

Stock Incentive Plan management has estimated that there will be no forfeitures of options.

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

45,000

RSU awards with a fair value of

$10.86

per RSU granted during the

nine

months ended

March

31,

2017.

There were

12,733

RSUs settled during the

nine

months ended

March

31,

2017.

  The aggregate intrinsic value of RSU awards outstanding as of

March

31,

2017

was

$1.1

million. As of

March

31,

2017

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,

2017

and

2016

was

$0.3

million and

$0.3

million, respectively.  As of

March

31,

2017,

there was

$1.3

million of total unrecognized compensation costs related to outstanding stock-based compensation arrangements. Of this cost

$1.1

million relates to performance based RSU grants that are not expected to be awarded. The remaining

$0.2

million is expected to be recognized over a weighted average period of

1.4

years.

XML

Note 4 - Inventories

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Inventory Disclosure [Text Block]

Note

4:

   Inventories

Inventories consist of the following (in thousands):

	3/31/2017			6/30/2016
Raw material and supplies	$	26,919		$	29,209
Goods in process and finished parts		17,356			16,459
Finished goods		41,220			39,449
		85,495			85,117
LIFO Reserve		(27,270	)		(28,796	)
Inventories	$	58,225		$	56,321

LIFO inventories were

$7.2

million and

$10.5

million at

March

31,

2017

and

June

30,

2016,

respectively, such amounts being approximately

$27.3

million and

$28.8

million, respectively, less than if determined on a FIFO basis.  The use of LIFO, as compared to FIFO, resulted in a

$1.5

million decrease in cost of sales for the

nine

months ended

March

31,

2017

compared to a

$0.3

million increase for the

nine

months ended

March

31,

2016.

XML

Note 5 - Business Acquisition

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Business Combination Disclosure [Text Block]

Note

5:

   Business Acquisition

In fiscal

2010,

the Company entered into an agreement with a private software company to invest

$1.5

million in exchange for a

36%

equity interest therein. In the

third

quarter of fiscal

2017,

the Company entered into a new agreement to invest an additional

$3.6

million for an additional

63%

of equity in the company. The Company paid

$1.8

million in cash at closing and is obligated to pay an additional

$1.8

million in cash

three

years subsequent to closing (discounted to

$1.6

million on the purchase date). In addition, the agreement provides for the former owners to receive a

30%

share of operating profits of the business over the next

three

years so long as they remain employed by the Company.

The acquisition has been accounted for as a business combination and the financial results of the company have been included in our consolidated financial statements as of the date of acquisition. Under the acquisition method of accounting, the purchase price was allocated to net tangible and intangible assets based upon their estimated fair values as of the acquisition date. The Company expects to finalize the valuation in the

fourth

quarter of

2017

.

The table below presents the preliminary allocation of the purchase price to the acquired net assets (in thousands):

Cash	$	509
Accounts receivable		273
Inventories		243
Other current assets		18
Deferred software development costs		2,397
Fixed assets		47
Goodwill		2,618
Deferred tax liability		(647	)
Accounts payable & current liabilities		(80	)
Purchase Price (1)	$	5,378

(1) $1,833 + 1,555 ($1.8 million discounted at 5%) = $3,388 purchase price divided by 63% = $5.378 million

Pro-forma financial information has not been presented for this acquisition because it is not considered material to the Company’s financial position or results of operations.

XML

Note 6 - Goodwill and Intangible Assets

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

Note

6:

   Goodwill and Intangible Assets

The following represents the change in the carrying amount of goodwill for the

nine

months ended

March

31,

2017

(in thousands):

Balance at June 30, 2016	$	3,034
Acquisition of software company		2,618
Balance at March 31, 2017	$	5,652

The Company’s acquisition of Bytewise in

2011

gave rise to goodwill of

$3,034.

The Company performed a qualitative analysis in accordance with ASU

2011

-

08

for its

October

 

1,

2016

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,

2016.

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

	3/31/2017			6/30/2016
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		5,548			2,402
Other intangible assets		325			325
Total		15,261			12,115
Accumulated amortization		(6,891	)		(5,625	)
Total net balance	$	8,370		$	6,490

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

2017

and for each of the next

five

years and thereafter, is as follows (in thousands):

2017 (Remainder of year)	$	653
2018		2,421
2019		2,186
2020		1,480
2021		872
2022		400
Thereafter		358

XML

Note 7 - Pension and Post-retirement Benefits

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note

7:

   Pension and Post-retirement Benefits

The Company has

two

defined benefit pension plans,

one

for U.S. employees and another for U.K. employees.   The U.K. plan was closed to new entrants in fiscal

2009.

  The Company has a postretirement medical and life insurance benefit plan for U.S. employees. The Company also has defined contribution plans.  

On

December

21,

2016,

the Company amended the U.S. defined benefit pension plan to freeze benefit accruals effective

December

31,

2016.

Consequently, the Plan will be closed to new participants and current participants will no longer earn additional benefits after

December

31,

2016.

The amendment of the defined benefit pension plan triggered a pension curtailment which required a remeasurement of the Plan's obligation as of

December

31,

2016.

The remeasurement resulted in a decrease in the benefit obligation of approximately

$6.9

million primarily due to an increase in the discount rate from

3.77%

to

4.31%,

with an additional

$4.2

million decrease resulting from the impact of the curtailment. These reductions in the Plan’s benefit obligation were recorded as other comprehensive income, net of taxes.

Net periodic benefit costs for all of the Company's defined benefit pension plans consist of the following (in thousands):

	Three Months Ended						Nine Months Ended
	3/31/2017 (Unaudited)			3/31/2016 (Unaudited)			3/31/2017 (Unaudited)			3/31/2016 (Unaudited)
Service cost	$	-		$	714		$	1,405		$	2,143
Interest cost		1,574			1,732			4,659			5,259
Expected return on plan assets		(1,284	)		(1,560	)		(3,878	)		(4,739	)
Amortization of net loss		6			13			102			39
	$	296		$	899		$	2,288		$	2,702

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

	Three Months Ended						Nine Months Ended
	3/31/2017 (Unaudited)			3/31/2016 (Unaudited)			3/31/2017 (Unaudited)			3/31/2016 (Unaudited)
Service cost	$	23		$	26		$	70		$	79
Interest cost		67			71			203			215
Amortization of prior service credit		(168	)		(195	)		(505	)		(586	)
Amortization of net loss		30			4			90			11
	$	(48	)	$	(94	)	$	(142	)	$	(281	)

For the

nine

-month period ended

March

31,

2017,

the Company contributed

$3.5

million to the U.S. and

$0.8

to the UK pension plans. The Company estimates that it will contribute an additional

$1.1

million for the remainder of fiscal

2017.

The Company’s pension plans use fair value as the market-related value of plan assets and recognize net actuarial gains or losses in excess of

ten

percent

(10%)

of the greater of the market-related value of plan assets or of the plans’ projected benefit obligation in net periodic (benefit) cost as of the plan measurement date. Net actuarial gains or losses that are less than

10%

of the thresholds noted above are accounted for as part of the accumulated other comprehensive loss.

XML

Note 8 - Debt

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

Note

8

:   Debt

Debt is comprised of the following (in thousands):

	3/31/2017		6/30/2016
Notes payable and current maturities of long term debt
Loan and Security Agreement	$	1,596	$	1,543
Long-term debt
Loan and Security Agreement		15,904		17,109
	$	17,500	$	18,652

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 Line of Credit expires on

April

30,

2018

and has an interest rate of LIBOR plus

1.5%.

  The effective interest rate on the Line of Credit under the Loan and Security Agreement for the

nine

months ended

March

31,

2017

and

2016

was

2.5%

and

2.2%,

respectively. Based upon its

three

year term, the Line of Credit has been classified as long term. As of

March

31,

2017,

$9.4

million was outstanding on the Line of Credit.

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 then existing Loan and Security Agreement.  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

$160.6

thousand.  The Term Loan had a balance of

$8.1

million at

March

31,

2017.

The material 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

1.2)

annual capital expenditures not to exceed

$15.0

million,

3)

maintain a Debt Service Coverage Rate of a minimum of

1.25

to

1

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,

2017.

XML

Note 9 - Income Taxes

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9:

   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

2017

was

36.8%

and for the

third

quarter of fiscal

2016,

it was

50.2%.

For the

first

nine

months of fiscal

2017,

the effective tax rate was

40.8%

and for the

first

nine

months of fiscal

2016,

it was

67.2%.

The tax rate in fiscal

2017

is higher than the U.S. statutory rate since the benefit of earnings in foreign jurisdictions with lower effective tax rates was more than offset by discrete tax charges including the impact of a tax rate change in the U.K. applied to deferred tax assets which increased tax expense by

$298,000

in the

first

quarter. In fiscal

2016,

the tax rate is higher than the U.S. statutory rate primarily due to losses in foreign jurisdictions for which no tax benefit is recognized which was partially offset by discrete reductions to tax expense primarily as a result of return to provision adjustments of

$216,000.

U.S. Federal tax returns through fiscal

2013

are generally no longer subject to review by tax authorities; however, tax loss carryforwards from years before fiscal

2014

are still subject to adjustment. As of

March

31,

2017,

the Company has no 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 calendar years

2011

–

2016.

During the next

twelve

months, it is possible that there will be a reduction in the Company’s long term tax obligations for prior year exposures of

$931,000.

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 deferred tax assets related to temporary differences in items included in taxable income. 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 tax benefit provided by those differences. In the U.S., there is a valuation allowance against foreign tax credits to the extent they are limited. 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.

In

November

2015,

the FASB issued Accounting Standards Update No.

2015

-

17

("ASU

2015

-

17")

regarding ASC Topic

740

"Income Taxes: Balance Sheet Classification of Deferred Taxes." The amendments in ASU

2015

-

17

eliminate the requirement to bifurcate Deferred Taxes between current and non-current on the balance sheet and requires that all deferred tax liabilities and assets be classified as noncurrent on the balance sheet. The amendments for ASU-

2015

-

17

can be applied retrospectively or prospectively and early adoption is permitted. The Company has adopted the new guidance prospectively in the

first

quarter of fiscal

2017.

Prior periods were not retrospectively adjusted.

In

March

2016,

the FASB issued ASU No.

2016

-

09,

"Compensation - Stock Compensation (Topic

718),

Improvements to Employee Share-Based Payment Accounting." The ASU affects the accounting for employee share-based payment transactions as it relates to accounting for income taxes, accounting for forfeitures, and statutory tax withholding requirements. This ASU is effective for annual periods beginning after

December

15,

2016,

and interim periods within those periods with early adoption permitted. The Company has adopted the new guidance prospectively in the

first

quarter of fiscal

2017.

XML

Note 10 - Contingencies

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

10:

 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.

XML

Note 11 - Segment Information

9 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

11

. Segment Information

The segment information and the accounting policies of each segment are the same as those described in the notes to the consolidated financial statements entitled “Financial Information by Segment & Geographic Area” included in our Annual Report on Form

10

-K for the year ended

June

30,

2016.

Our business is aggregated into

two

reportable segments based on geography of operations: North American Operations and International Operations. Segment income is measured for internal reporting purposes by excluding corporate expenses which are included in unallocated in the table below. Other income and expense, including interest income and expense, the gain on the sale of a building and income taxes are excluded entirely from the table below. There were no significant changes in the segment operations or in the segment assets from the Annual Report. Financial results for each reportable segment are as follows (in thousands):

	North American Operations		International Operations			Unallocated			Total
Three Months ended March 31, 2017
Sales 1	$	31,791	$	18,879		$			$	50,670
Operating Income (Loss)	$	1,563	$	(693	)	$	(1,723	)	$	(853	)
Three Months ended March 31, 2016
Sales 2	$	32,473	$	17,856		$			$	50,329
Operating Income (Loss)	$	2,542	$	(112	)	$	(1,515	)	$	914

1. Excludes $1,493 of North American segment sales to the International segment and $2,536 of International segment sales to the North American segment.

2. Excludes $2,238 of North American segment sales to the International segment and $2,120 of International segment sales to the North American segment.

	North American Operations		International Operations			Unallocated			Total
Nine Months ended March 31, 2017
Sales 3	$	92,345	$	60,425		$			$	152,770
Operating Income (Loss)	$	4,520	$	(143	)	$	(5,251	)	$	(874	)
Nine Months ended March 31, 2016
Sales 4	$	99,188	$	55,850		$			$	155,038
Operating Income (Loss)	$	8,172	$	(1,583	)	$	(4,292	)	$	2,296

3. Excludes $6,189 of North American segment sales to the International segment and $8,585 of International segment sales to the North American segment.

4. Excludes $6,480 of North American segment sales to the International segment and $6,799 of International segment sales to the North American segment.

XML

Note 4 - Inventories (Tables)

9 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	3/31/2017			6/30/2016
Raw material and supplies	$	26,919		$	29,209
Goods in process and finished parts		17,356			16,459
Finished goods		41,220			39,449
		85,495			85,117
LIFO Reserve		(27,270	)		(28,796	)
Inventories	$	58,225		$	56,321

XML

Note 5 - Business Acquisition (Tables)

9 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

Cash	$	509
Accounts receivable		273
Inventories		243
Other current assets		18
Deferred software development costs		2,397
Fixed assets		47
Goodwill		2,618
Deferred tax liability		(647	)
Accounts payable & current liabilities		(80	)
Purchase Price (1)	$	5,378

XML

Note 6 - Goodwill and Intangible Assets (Tables)

9 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Goodwill [Table Text Block]

Balance at June 30, 2016	$	3,034
Acquisition of software company		2,618
Balance at March 31, 2017	$	5,652

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	3/31/2017			6/30/2016
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		5,548			2,402
Other intangible assets		325			325
Total		15,261			12,115
Accumulated amortization		(6,891	)		(5,625	)
Total net balance	$	8,370		$	6,490

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

2017 (Remainder of year)	$	653
2018		2,421
2019		2,186
2020		1,480
2021		872
2022		400
Thereafter		358

XML

Note 7 - Pension and Post-retirement Benefits (Tables)

9 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Net Benefit Costs [Table Text Block]

	Three Months Ended						Nine Months Ended
	3/31/2017 (Unaudited)			3/31/2016 (Unaudited)			3/31/2017 (Unaudited)			3/31/2016 (Unaudited)
Service cost	$	-		$	714		$	1,405		$	2,143
Interest cost		1,574			1,732			4,659			5,259
Expected return on plan assets		(1,284	)		(1,560	)		(3,878	)		(4,739	)
Amortization of net loss		6			13			102			39
	$	296		$	899		$	2,288		$	2,702

	Three Months Ended						Nine Months Ended
	3/31/2017 (Unaudited)			3/31/2016 (Unaudited)			3/31/2017 (Unaudited)			3/31/2016 (Unaudited)
Service cost	$	23		$	26		$	70		$	79
Interest cost		67			71			203			215
Amortization of prior service credit		(168	)		(195	)		(505	)		(586	)
Amortization of net loss		30			4			90			11
	$	(48	)	$	(94	)	$	(142	)	$	(281	)

XML

Note 8 - Debt (Tables)

9 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Debt [Table Text Block]

	3/31/2017		6/30/2016
Notes payable and current maturities of long term debt
Loan and Security Agreement	$	1,596	$	1,543
Long-term debt
Loan and Security Agreement		15,904		17,109
	$	17,500	$	18,652

XML

Note 11 - Segment Information (Tables)

9 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	North American Operations		International Operations			Unallocated			Total
Three Months ended March 31, 2017
Sales 1	$	31,791	$	18,879		$			$	50,670
Operating Income (Loss)	$	1,563	$	(693	)	$	(1,723	)	$	(853	)
Three Months ended March 31, 2016
Sales 2	$	32,473	$	17,856		$			$	50,329
Operating Income (Loss)	$	2,542	$	(112	)	$	(1,515	)	$	914

	North American Operations		International Operations			Unallocated			Total
Nine Months ended March 31, 2017
Sales 3	$	92,345	$	60,425		$			$	152,770
Operating Income (Loss)	$	4,520	$	(143	)	$	(5,251	)	$	(874	)
Nine Months ended March 31, 2016
Sales 4	$	99,188	$	55,850		$			$	155,038
Operating Income (Loss)	$	8,172	$	(1,583	)	$	(4,292	)	$	2,296

XML

Note 3 - Stock-based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Millions	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	500,000
The 2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	346,600
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term	5 years 273 days
Allocated Share-based Compensation Expense	$ 0.3	$ 0.3
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	$ 0.2
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 146 days
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	$ 1.3
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	$ 1.1
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, Exercisable, Number	20,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0	0
Employee Stock Option [Member] | Minimum [Member] | The 2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Employee Stock Option [Member] | Maximum [Member] | The 2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
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	105,634
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	45,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 10.86
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period	12,733
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 1.1
Restricted Stock Units (RSUs) [Member] | Minimum [Member] | The 2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Restricted Stock Units (RSUs) [Member] | Maximum [Member] | The 2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years

XML

Note 4 - Inventories (Details Textual) - USD ($) $ in Millions	9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Jun. 30, 2016
LIFO Inventory Amount	$ 7.2		$ 10.5
Inventory Difference Using FIFO Basis	27.3		$ 28.8
Cost of Sales [Member]
Inventory, LIFO Reserve, Effect on Income, Net	$ 1.5	$ 0.3

XML

Note 4 - Inventories - Components of Inventories (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Jun. 30, 2016
Raw material and supplies	$ 26,919	$ 29,209
Goods in process and finished parts	17,356	16,459
Finished goods	41,220	39,449
	85,495	85,117
LIFO Reserve	(27,270)	(28,796)
Inventories	$ 58,225	$ 56,321

XML

Note 5 - Business Acquisition (Details Textual) - Private Software Company [Member] - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Jun. 30, 2010
Business Combination, Consideration Transferred	$ 3.6	$ 1.5
Business Acquisition, Percentage of Voting Interests Acquired	63.00%	36.00%
Payments to Acquire Businesses, Gross	$ 1.8
Business Combination, Consideration Transferred, Liabilities Incurred	$ 1.8
Business Combination, Consideration Transferred, Subsequent Period	3 years
Business Combination, Consideration Transferred, Liabilities Incurred, Discounted	$ 1.6
Business Combination, Operating Profits, Percentage	30.00%
Business Combination, Operating Profits, Term	3 years

XML

Note 5 - Business Acquisition - Allocation of the Purchase Price to the Acquired Net Assets (Details) - USD ($) $ in Thousands		Mar. 31, 2017	Feb. 02, 2017	Dec. 31, 2016	Jun. 30, 2016	Nov. 22, 2011
Goodwill		$ 5,652		$ 3,034	$ 3,034	$ 3,034
Private Software Company [Member]
Cash			$ 509
Accounts receivable			273
Inventories			243
Other current assets			18
Deferred software development costs			2,397
Fixed assets			47
Goodwill			2,618
Deferred tax liability			(647)
Accounts payable & current liabilities			(80)
Purchase Price (1)	[1]		$ 5,378

[1] $1,833 + 1,555 ($1.8 million discounted at 5%) = $3,388 purchase price divided by 63% = $5.378

XML

Note 6 - Goodwill and Intangible Assets (Details Textual) - USD ($) $ in Thousands	9 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Jun. 30, 2016	Nov. 22, 2011
Goodwill	$ 5,652	$ 3,034	$ 3,034	$ 3,034
Trademarks and Trade Names [Member]
Finite-Lived Intangible Asset, Useful Life	14 years
Noncompete Agreements [Member]
Finite-Lived Intangible Asset, Useful Life	8 years
Technology-Based Intangible Assets [Member]
Finite-Lived Intangible Asset, Useful Life	10 years
Customer Relationships [Member]
Finite-Lived Intangible Asset, Useful Life	8 years
Computer Software, Intangible Asset [Member]
Finite-Lived Intangible Asset, Useful Life	5 years

XML

Note 6 - Goodwill and Intangible Assets - Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Balance	$ 3,034
Acquisition of software company	2,618
Balance	$ 5,652

XML

Note 6 - Goodwill and Intangible Assets - Finite-lived Intangible Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Jun. 30, 2016
Intangible assets, gross	$ 15,261	$ 12,115
Accumulated amortization	(6,891)	(5,625)
Total net balance	8,370	6,490
Noncompete Agreements [Member]
Intangible assets, gross	600	600
Trademarks and Trade Names [Member]
Intangible assets, gross	1,480	1,480
Technology-Based Intangible Assets [Member]
Intangible assets, gross	2,358	2,358
Customer Relationships [Member]
Intangible assets, gross	4,950	4,950
Computer Software, Intangible Asset [Member]
Intangible assets, gross	5,548	2,402
Other Intangible Assets [Member]
Intangible assets, gross	$ 325	$ 325

XML

Note 6 - Goodwill and Intangible Assets - Estimated Aggregate Amortization Expense (Details) $ in Thousands	Mar. 31, 2017 USD ($)
2017 (Remainder of year)	$ 653
2018	2,421
2019	2,186
2020	1,480
2021	872
2022	400
Thereafter	$ 358

XML

Note 7 - Pension and Post-retirement Benefits (Details Textual) - USD ($) $ in Millions	6 Months Ended	9 Months Ended
	Dec. 31, 2016	Mar. 31, 2017	Dec. 30, 2016
Defined Benefit Plan, Expected Future Employer Contributions, Remainder of Fiscal Year		$ 1.1
Pension Plan [Member]
Other Comprehensive Income (Loss), Defined Benefit Plan, Settlement and Curtailment Gain (Loss), before Tax	$ 6.9
Defined Benefit Plan, Assumptions Used Calculating Benefit Obligation, Discount Rate	4.31%		3.77%
Defined Benefit Plan, Benefit Obligation, Increase (Decrease) for Plan Amendment	$ 4.2
Pension Plan [Member] | Domestic Plan [Member]
Defined Benefit Plan, Plan Assets, Contributions by Employer		3.5
Pension Plan [Member] | Foreign Plan [Member]
Defined Benefit Plan, Plan Assets, Contributions by Employer		$ 0.8

XML

Note 7 - Pension and Post-retirement Benefits - Net Periodic Costs (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016
Pension Plan [Member]
Service cost		$ 714	$ 1,405	$ 2,143
Interest cost	1,574	1,732	4,659	5,259
Expected return on plan assets	(1,284)	(1,560)	(3,878)	(4,739)
Amortization of net loss	6	13	102	39
	296	899	2,288	2,702
Other Postretirement Benefits Plan [Member]
Service cost	23	26	70	79
Interest cost	67	71	203	215
Amortization of net loss	30	4	90	11
	(48)	(94)	(142)	(281)
Amortization of prior service credit	$ (168)	$ (195)	$ (505)	$ (586)

XML

Note 8 - Debt (Details Textual)		9 Months Ended
	Nov. 22, 2011 USD ($)	Mar. 31, 2017 USD ($)	Mar. 31, 2016
Line of Credit Facility, Maximum Borrowing Capacity		$ 23,000,000
Line of Credit Facility, Interest Rate During Period		2.50%	2.20%
Long-term Line of Credit		$ 9,400,000
Minimum Consolidated Cash and Liquid Investments Pursuant to New Loan and Security Agreement		$ 10,000,000
Maximum [Member]
Current Funded Debt to EBITDA Ratio		2.25
Annual Capital Expenditures		$ 15,000,000
Minimum [Member]
Debt Service Coverage Rate		1.25
Line of Credit [Member]
Debt Instrument, Term		3 years
Term Loan [Member]
Debt Instrument, Term	10 years
Long-term Line of Credit		$ 8,100,000
Debt Instrument, Face Amount	$ 15,500,000
Debt Instrument, Interest Rate, Stated Percentage	4.50%
Line of Credit Facility, Periodic Payment	$ 160,600
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate		1.50%

XML

Note 8 - Debt - Debt Schedule (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Jun. 30, 2016
Notes payable and current maturities of long term debt
Loan and Security Agreement	$ 1,596	$ 1,543
Long-term debt
Loan and Security Agreement	15,904	17,109
	$ 17,500	$ 18,652

XML

Note 9 - Income Taxes (Details Textual) - USD ($)	3 Months Ended			9 Months Ended		12 Months Ended
	Mar. 31, 2017	Sep. 30, 2016	Mar. 31, 2016	Mar. 31, 2017	Mar. 31, 2016	Jun. 30, 2016
Effective Income Tax Rate Reconciliation, Percent	36.80%		50.20%	40.80%	67.20%
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount		$ 298,000
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount, Return to Provision Adjustment						$ 216,000
Deferred Tax Assets, Valuation Allowance	$ 0			$ 0
Foreign Tax Authority [Member] | Secretariat of the Federal Revenue Bureau of Brazil [Member]
Unrecognized Tax Benefits	$ 931,000			$ 931,000

XML

Note 11 - Segment Information (Details Textual)	3 Months Ended				9 Months Ended
	Mar. 31, 2017 USD ($)		Mar. 31, 2016 USD ($)		Mar. 31, 2017 USD ($)		Mar. 31, 2016 USD ($)
Number of Reportable Segments					2
Revenue, Net	$ 50,670,000	[1]	$ 50,329,000	[2]	$ 152,770,000	[3]	$ 155,038,000	[4]
North American Segment [Member]
Revenue, Net	31,791,000	[1]	32,473,000	[2]	92,345,000	[3]	99,188,000	[4]
North American Segment [Member] | Intersegment Eliminations [Member]
Revenue, Net	1,493		2,238		6,189		6,480
International Segment [Member]
Revenue, Net	18,879,000	[1]	17,856,000	[2]	60,425,000	[3]	55,850,000	[4]
International Segment [Member] | Intersegment Eliminations [Member]
Revenue, Net	$ 2,536		$ 2,120		$ 8,585		$ 6,799

[1] Excludes $1,493 of North American segment sales to the International segment and $2,536 of International segment sales to the North American segment.

[2] Excludes $2,238 of North American segment sales to the International segment and $2,120 of International segment sales to the North American segment.

[3] Excludes $6,189 of North American segment sales to the International segment and $8,585 of International segment sales to the North American segment.

[4] Excludes $6,480 of North American segment sales to the International segment and $6,799 of International segment sales to the North American segment.

XML

Note 11 - Segment Information - Financial Results for Reportable Segments (Details) - USD ($) $ in Thousands	3 Months Ended				9 Months Ended
	Mar. 31, 2017		Mar. 31, 2016		Mar. 31, 2017		Mar. 31, 2016
Sales	$ 50,670	[1]	$ 50,329	[2]	$ 152,770	[3]	$ 155,038	[4]
Operating Income (Loss)	(853)		914		(874)		2,296
North American Segment [Member]
Sales	31,791	[1]	32,473	[2]	92,345	[3]	99,188	[4]
Operating Income (Loss)	1,563		2,542		4,520		8,172
International Segment [Member]
Sales	18,879	[1]	17,856	[2]	60,425	[3]	55,850	[4]
Operating Income (Loss)	(693)		(112)		(143)		(1,583)
Unallocated [Member]
Sales		[1]		[2]		[3]		[4]
Operating Income (Loss)	$ (1,723)		$ (1,515)		$ (5,251)		$ (4,292)

[1] Excludes $1,493 of North American segment sales to the International segment and $2,536 of International segment sales to the North American segment.

[2] Excludes $2,238 of North American segment sales to the International segment and $2,120 of International segment sales to the North American segment.

[3] Excludes $6,189 of North American segment sales to the International segment and $8,585 of International segment sales to the North American segment.

[4] Excludes $6,480 of North American segment sales to the International segment and $6,799 of International segment sales to the North American segment.