LSI Industries Inc. (NASDAQ:LYTS)
today:
- reported first quarter FY 2017 net sales of $84,159,000, a
decrease of 2% as compared to $85,925,000 in the same period of the
prior fiscal year;
- reported pre-tax Restructuring costs and Plant Closure costs in
the first quarter of FY 2017 totaling $1,056,000 (includes a
related $400,000 inventory write-down);
- reported first quarter FY 2017 net income of $829,000, or $0.03
per share, a decrease of 78% as compared to $3,750,000, or $0.15
per share, for the same period of the prior fiscal year; and
- declared a regular quarterly cash dividend of $0.05 per share
payable November 15, 2016 to shareholders of record on November 7,
2016.
Financial Highlights |
|
|
|
|
|
|
|
(In
thousands, except per |
|
Three Months Ended |
share data;
unaudited) |
|
September 30 |
|
|
|
2016 |
|
|
|
2015 |
|
|
% Change |
|
|
|
|
|
|
|
|
Net
Sales |
|
$ |
84,159 |
|
|
$ |
85,925 |
|
|
|
(2 |
)% |
|
|
|
|
|
|
|
|
|
Operating
Income as reported |
|
$ |
1,066 |
|
|
$ |
5,763 |
|
|
|
(82 |
)% |
|
Restructuring costs an plant
closure costs |
|
|
1,056 |
|
|
|
-- |
|
|
|
n/m |
|
|
Severance Costs |
|
|
145 |
|
|
|
-- |
|
|
|
n/m |
|
|
Operating
Income as adjusted (a) |
|
$ |
2,267 |
|
|
|
5,763 |
|
|
|
(61 |
)% |
|
|
|
|
|
|
|
|
|
Net Income
as reported |
|
$ |
829 |
|
|
$ |
3,750 |
|
|
|
(78 |
)% |
|
Net Income
as adjusted |
|
$ |
1,621 |
|
|
$ |
3,750 |
|
|
|
(57 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share (diluted) as reported |
|
$ |
0.03 |
|
|
$ |
0.15 |
|
|
|
(80 |
)% |
|
Earnings
per share (diluted) as adjusted |
|
$ |
0.06 |
|
|
$ |
0.15 |
|
|
|
(60 |
)% |
|
|
|
|
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|
|
|
|
Financial Highlights
(continued) |
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|
(In thousands, except
per |
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|
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|
|
|
|
|
share data;
unaudited) |
|
|
|
|
|
|
|
|
|
|
9/30/16 |
|
6/30/16 |
Working Capital |
|
$ |
89,213 |
|
|
$ |
88,510 |
|
Total Assets |
|
$ |
192,825 |
|
|
$ |
195,560 |
|
Long-Term Debt |
|
|
nil |
|
|
|
nil |
|
Shareholders’
Equity |
|
$ |
156,891 |
|
|
$ |
155,520 |
|
|
|
|
|
|
|
|
|
|
(a) The Company recorded pre-tax restructuring costs and plant
closure costs totaling $1,056,000, and incurred net pre-tax other
severance expense of $145,000 in the first quarter of fiscal
2017. Operating income, net income, and earnings per share
(diluted) before the restructuring costs, plant closure costs and
severance expense are Non-GAAP financial measures (see page 4).
Management Comments and Outlook
Dennis W. Wells, Chief Executive Officer and
President, commented, “During the first quarter of fiscal 2017,
revenues declined 2% year-over-year in what was a difficult
quarterly comparison, especially given the strength of the Phillips
66 program in our Graphics Segment last year.
“Gross margin was 24.8% in the quarter, or 25.8%
excluding restructuring and plant closure costs, compared to 27.2%
a year ago. A significant increase in steel pricing was the
primary reason for the gross margin decline. This cost
increase was partially offset by savings in other areas, including
cost improvements in LED drivers and other materials, improved
labor utilization, and freight costs.
“Operating expenses were higher due to investments
in our sales force, commission payments and increased state use
tax. During the quarter we announced the shutdown of the
Beaverton, Oregon and Kansas City, Kansas facilities, incurring
charges of approximately $1.1 million.
"We are making solid progress with our major fiscal
2017 initiatives, including the ongoing pursuit of operating
efficiencies and facility consolidation. The LSI Business
System is active. We completed 33 Kaizen events in the first
quarter, with a goal of 125 events during fiscal 2017. With
the consolidation of the Beaverton and Kansas City facilities, we
expect to see annual savings of over $1.8 million.
"While the first quarter results were below
expectations, our efforts over the past two years to lay the
groundwork for sustained growth are bearing fruit. We have
invigorated our sales teams across all segments. I am excited
by the caliber of the new sales hires, and our current order
pipeline is healthy.
"Internal investments in our SOAR™ Digital Signage
program are showing compelling results, leading us to direct
additional investments towards our marketing and sales efforts for
this program. AirLink™ and SmartVision™, two of our Smart
Lighting programs, are also continuing to show promise.
Additionally, we are continuing to pursue external growth
opportunities using a disciplined acquisition strategy.
"While the current market environment has proven
challenging, we are committed to achieving above-market revenue
growth and improving margins moving forward. Our confidence
stems from: 1) our expectation that the strategic initiatives
put into place over the past two years will continue to strengthen
our business and improve our competitive position; 2) tactical
actions that have been initiated to address recent weakness; and 3)
the motivation of the entire LSI team.
"Our financial position remains strong, and our
cash position was $30.7 million versus $28.4 million a year
ago. We are maintaining our dividend at a $0.20 annual rate,
and will consider increasing that rate based upon the strength of
operating results in upcoming quarters."
First Quarter Fiscal 2017 Results
Net sales in the first quarter of fiscal 2017 were $84,159,000,
a decrease of 2% as compared to last year’s first quarter net sales
of $85,925,000. Lighting Segment net sales increased 2.2% to
$60,370,000, Graphics Segment net sales decreased 15.4% to
$18,894,000, and Technology Segment net sales (excluding
significant intersegment net sales) increased 8.3% to
$4,895,000. After consideration of the Technology Segment’s
intersegment sales in support of LED products manufactured and sold
by the Lighting Segment, this segment’s net sales decreased 1.6% in
the first quarter as compared to the prior year. In the first
quarter of fiscal 2017 the Company recorded pre-tax restructuring
costs of $656,000 ($503,000 was expensed in Cost of Products Sold
and $153,000 was expensed in Selling and Administrative expenses)
and plant closure costs related to an inventory write-down of
$400,000 as the Company exits the manufacturing of fluorescent
lighting fixtures -- combining to a total of
$1,056,000. Additionally, the Company recorded other
severance costs of $145,000 in the first quarter of fiscal
2017. The fiscal 2017 first quarter net income of $829,000,
or $0.03 per share, decreased 78% as compared to the fiscal 2016
first quarter net income of $3,750,000 or $0.15 per share.
Earnings per share represents diluted earnings per share.
Balance Sheet
The balance sheet at September 30, 2016 included current assets
of $124.0 million, current liabilities of $34.8 million and working
capital of $89.2 million, which includes cash of $30.7
million. The current ratio was 3.6 to 1. The Company
has shareholders’ equity of $156.9 million, no long-term debt, and
borrowing capacity on its commercial bank facility as of September
30, 2016 of $29.6 million. 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 $0.05 per share in connection with the first quarter of
fiscal 2017 payable November 15, 2016 to shareholders of record as
of November 7, 2016. The indicated annual cash dividend rate
is $0.20 per share. The Board of Directors has adopted a 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.
Non-GAAP Financial Measures
This press release includes adjustments to GAAP net income and
earnings per share for the three month period ended September 30,
2016. Adjusted net income and earnings per share, which
exclude the impact of restructuring and plant closure costs, and
other severance costs, are non-GAAP financial measures. We
believe that these are useful as supplemental measures in assessing
the operating performance of our business. These measures are
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 these non-GAAP financial measures to the net
income and earnings per share reported for the periods
indicated.
(in thousands, except per share data;
unaudited) |
|
First Quarter |
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|
Diluted |
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|
Diluted |
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FY 2017 |
|
EPS |
|
FY 2016 |
|
EPS |
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|
Reconciliation of net income to adjusted net
income: |
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Net income and earnings per share
as reported |
|
$ |
829 |
|
|
$ |
0.03 |
|
|
$ |
3,750 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
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|
|
Adjustment for restructuring and
plant closure costs, inclusive of the income tax effect |
|
|
695 |
|
|
|
0.03 |
|
|
|
-- |
|
|
|
-- |
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Adjustment for other severance
costs, inclusive of the income tax effect |
|
|
97 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
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|
Adjusted net income and earnings
per share |
|
$ |
1,621 |
|
|
$ |
0.06 |
|
|
$ |
3,750 |
|
|
$ |
0.15 |
|
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"Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995
This document contains certain forward-looking statements that
are subject to numerous assumptions, risks or
uncertainties. The Private Securities Litigation Reform
Act of 1995 provides a safe harbor for forward-looking
statements. Forward-looking statements may be identified
by words such as “estimates,” “anticipates,” “projects,” “plans,”
“expects,” “intends,” “believes,” “seeks,” “may,” “will,” “should”
or the negative versions of those words and similar expressions,
and by the context in which they are used. Such
statements, whether expressed or implied, are based upon current
expectations of the Company and speak only as of the date
made. Actual results could differ materially from those
contained in or implied by such forward-looking statements as a
result of a variety of risks and uncertainties over which the
Company may have no control. These risks and
uncertainties include, but are not limited to, the impact of
competitive products and services, product demand and market
acceptance risks, potential costs associated with litigation and
regulatory compliance, reliance on key customers, financial
difficulties experienced by customers, the cyclical and seasonal
nature of our business, the adequacy of reserves and allowances for
doubtful accounts, fluctuations in operating results or costs
whether as a result of uncertainties inherent in tax and accounting
matters or otherwise, unexpected difficulties in integrating
acquired businesses, the ability to retain key employees of
acquired businesses, unfavorable economic and market conditions,
the results of asset impairment assessments, our ability to
remediate any material weaknesses in our internal control over
financial reporting and any other risk factors that are identified
herein. You are cautioned to not place undue reliance on
these forward-looking statements. In addition to the
factors described in this paragraph, the risk factors identified in
our Form 10-K and other filings the Company may make with the SEC
constitute risks and uncertainties that may affect the financial
performance of the Company and are incorporated herein by
reference. The Company does not undertake and hereby
disclaims any duty to update any forward-looking statements to
reflect subsequent events or circumstances.
About the Company
We are a customer-centric company that positions itself as a
value-added, trusted partner in developing superior image solutions
through our world-class lighting, graphics, and technology
capabilities. Our core strategy of "Lighting + Graphics +
Technology = Complete Image Solutions" differentiates us from our
competitors.
We are committed to advancing solid-state LED technology to make
affordable, high performance, energy-efficient lighting and custom
graphic products that bring value to our customers. We have a
vast offering of innovative solutions for virtually any lighting or
graphics application. In addition, we provide sophisticated
lighting and energy management control solutions to help customers
manage their energy performance. Further, we provide a full
range of design support, engineering, installation and project
management services to our customers.
We are a vertically integrated U.S.-based manufacturer
concentrating on serving customers in North America and Latin
America. Our major markets include commercial / industrial
lighting, petroleum / convenience store and multi-site retail
(including automobile dealerships, restaurants and national retail
accounts). Headquartered in Cincinnati, Ohio, LSI has
facilities in Ohio, California, Kansas, Kentucky, New York, Rhode
Island and Texas. The Company’s common shares are traded on
the NASDAQ Global Select Market under the symbol LYTS.
For further information, contact either Dennis
Wells, Chief Executive Officer and President, or Ron Stowell, Vice
President, Chief Financial Officer, and Treasurer at (513)
793-3200.
Additional note: Today’s news
release, along with past releases from LSI Industries, is available
on the Company’s internet site at www.lsi-industries.com or by
email or fax, by calling the Investor Relations Department at (513)
793-3200.
Condensed Consolidated
Statements of Operations |
|
|
|
|
|
|
Three Months
Ended |
|
(in thousands, except per |
|
September
30 |
|
share data; unaudited) |
|
2016 |
|
2015 |
|
|
|
|
|
|
|
|
|
|
Net sales |
|
|
$ |
84,159 |
|
|
$ |
85,925 |
|
|
|
|
|
|
|
|
|
|
|
Cost of products and services sold |
|
|
|
62,821 |
|
|
|
62,576 |
|
|
|
Restructuring costs – cost of sales |
|
|
|
503 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
20,835 |
|
|
|
23,349 |
|
|
|
|
|
|
|
|
|
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|
Selling and administrative expenses |
|
|
|
19,616 |
|
|
|
17,586 |
|
|
|
|
|
|
|
|
|
|
|
Restructuring costs – SG&A expense |
|
|
|
153 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
1,066 |
|
|
|
5,763 |
|
|
|
|
|
|
|
|
|
|
|
Interest (income), net |
|
|
|
(14 |
) |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
|
1,080 |
|
|
|
5,763 |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
251 |
|
|
|
2,013 |
|
|
|
Net income (loss) |
|
|
$ |
829 |
|
|
$ |
3,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
$ |
0.03 |
|
|
$ |
0.15 |
|
|
|
Diluted |
|
|
$ |
0.03 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
25,275 |
|
|
|
24,764 |
|
|
|
Diluted |
|
|
|
25,912 |
|
|
|
25,194 |
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated
Balance Sheets |
(in thousands, unaudited) |
|
September 30, |
|
June 30, |
|
|
2016 |
|
2016 |
|
|
|
|
|
Current Assets |
|
$ |
124,003 |
|
|
$ |
127,743 |
|
Property, Plant and Equipment,
net |
|
|
47,691 |
|
|
|
47,462 |
|
Other Assets |
|
|
21,131 |
|
|
|
20,355 |
|
|
|
$ |
192,825 |
|
|
$ |
195,560 |
|
|
|
|
|
|
Current Liabilities |
|
$ |
34,790 |
|
|
$ |
39,233 |
|
Long-Term Debt |
|
|
-- |
|
|
|
-- |
|
Other Long-Term Liabilities |
|
|
1,144 |
|
|
|
807 |
|
Shareholders’ Equity |
|
|
156,891 |
|
|
|
155,520 |
|
|
|
$ |
192,825 |
|
|
$ |
195,560 |
|
|
|
|
|
|
CONTACT: DENNIS WELLS or
RON STOWELL
(513) 793-3200
LSI Industries (NASDAQ:LYTS)
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