LSI Reports 3% Drop in Sales

CINCINNATI, Nov. 10, 2014 (GLOBE NEWSWIRE) — LSI Industries Inc. (LYTS) today:

• reported first quarter net sales of $78,466,000, a decrease of 3% as compared to $80,486,000 in the same period of the prior fiscal year;
• reported first quarter net income of $1,527,000, or $0.06 per share, as compared to net income of $1,865,000 or $0.08 per share for the same period of the prior fiscal year;
• reported a long-term capital loss of $565,000 on the sale of a subsidiary for which operating results had been reported in the All Other Category;
• reported a $343,000 gain (or $224,000 net of income taxes) on the sale of a Graphics Segment manufacturing facility; and
• declared a regular quarterly cash dividend of $0.01 per share payable November 28, 2014 to shareholders of record November 20, 2014

First Quarter Fiscal 2015 Results

Net sales in the first quarter of fiscal 2015 were $78,466,000, a decrease of (3)% as compared to last year’s first quarter net sales of $80,486,000. Lighting Segment net sales decreased 5.0% to $56,521,000, Graphics Segment net sales decreased 1.4% to $13,811,000, Electronic Components Segment net sales increased 15.7% to $5,880,000 and All Other Category net sales increased 17.0% to $2,254,000. In the first quarter of fiscal 2015 the Company recorded a $343,000 pre-tax gain on the sale of a manufacturing facility in the Graphics Segment, sold a subsidiary in the All Other Category for $1,928,000 and recorded a pre-tax loss of $565,000 in Corporate Administrative expenses, and recorded a $101,000 income tax benefit related to the utilization of a portion of this long-term capital loss, all with no comparable items in the first quarter of fiscal 2014. The fiscal 2015 first quarter net income of $1,527,000, or $0.06 per share, compares to fiscal 2014 first quarter net income of $1,865,000, or $0.08 per share. Earnings per share represents diluted earnings per share.

Balance Sheet

The balance sheet at September 30, 2014 included current assets of $106.3 million, current liabilities of $27.9 million and working capital of $78.3 million, which includes cash of $8.7 million. The current ratio was 3.8 to 1. The Company has shareholders’ equity of $138.6 million, no long-term debt, and borrowing capacity on its commercial bank facility as of September 30, 2014 of $30.0 million. The $5 million line of credit supporting the Canadian operation was terminated when that subsidiary was sold. With continued strong cash flow, a sound and conservatively capitalized balance sheet, and $30 million in credit facilities, LSI Industries believes its financial condition is sound and capable of supporting the Company’s planned growth, including acquisitions, if any.

Cash Dividend Actions

The Board of Directors declared a regular quarterly cash dividend of $0.01 per share payable November 28, 2014 to shareholders of record as of November 20, 2014. The new indicated annual cash dividend rate for fiscal 2015 is $0.04 per share. Additionally, the Board of Directors has adopted a new policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant. 

Company Comments

Dennis W. Wells, Chief Executive Officer and President, commented, “This is my first report to the shareholders of LSI Industries and I am very excited and optimistic about what I see as the future for the business. My management background has been in lighting, graphics and controls, so I am comfortable with these, the very same business elements that make up LSI. The fundamental strategy of Lighting + Graphics = Image, formulated many years ago by LSI’s founder Robert J. Ready, Chairman, is rock solid and just as relevant today as when it was first introduced. 

My first objective is to evaluate all of the operations that make up LSI with a view to increasing revenues and reducing costs. Together with the executive team, we are looking at each of the Company’s business units in great detail. The fiscal 2015 plan has been completed and the leaders of each unit (Shawn M. Toney, President, LSI Lighting Segment; David W. McCauley, President, LSI Graphics Segment; Kevin A. Kelly, President, LSI ADL Technology; and Jon A. Newell, COO, Lighting Controls) understand that they have the resources needed to make their planned forecasts and are being held responsible for achieving their operating results. 

Overall, we will continue to focus on programs designed to streamline operations and reduce costs. Many of the investments made during fiscal 2014 to improve our manufacturing operations are beginning to show a positive impact on operating results. On time shipping, particularly in the lighting division, has improved and the incoming order rate for both lighting and graphics products is encouraging. 

Our recently introduced new lighting products are being well received and LED-based products now represent over 50% of total lighting segment sales making LSI an industry leader in solid-state lighting. The business development pipeline is healthy, driven by renovation and new construction projects. Our niche and commercial/industrial lighting markets continue to show strength. 

The Graphics business is better today than it has been for several years with increased design development and engineering demand, especially in the petroleum/convenience store market, one of LSI’s most important niche markets. This type of work is often a precursor to large project opportunities that include both graphics and lighting products.

With our fiscal 2015 plan now completed, we addressed the topic of cash dividends with our Board of Directors. We have developed a new policy (dropped the previous policy, which no longer was appropriate), and set a modest annual cash dividend of $0.04 per share that can be improved upon as we achieve more profitable operations.

I hope you will join us on November 20, 2014 at the Annual Shareholders’ Meeting to celebrate the long careers of LSI’s founders, Robert J. Ready and James P. Sferra, as they move into retirement, as well as hear presentations from our leadership teams about their plans for improving the operating results of LSI Industries.”

Non-GAAP Financial Measures

This press release includes adjustments to GAAP net income for the three month periods ended September 30, 2014 and 2013. Adjusted net income and earnings per share, which excludes the impact of the sale of a manufacturing facility, the sale of a subsidiary, and the tax benefit of utilization of a portion of the related long-term capital loss are non-GAAP financial measures. We believe that it is useful as a supplemental measure in assessing the operating performance of our business. This measure is used by our management, including our chief operating decision maker, to evaluate business results. We exclude these non-recurring items because they are not representative of the ongoing results of operations of our business. Below is a reconciliation of this non-GAAP measurement to the net income reported for the periods indicated.