LSI Industries Inc. (NASDAQ:LYTS)
today:
- reported third quarter FY 2017 net sales of $78,156,000, an
increase of 10% over $70,740,000 in the same period of the prior
fiscal year. Excluding the acquisition of Atlas Lighting,
organic sales growth was 1% in the quarter
year-over-year;
- reported a third quarter FY 2017 net loss of $(531,000), or
$(0.02) per share, as compared to net income of $522,000, or $0.02
per share, for the same period of the prior fiscal year. On a
Non-GAAP basis, net income was $357,000 or $0.01 per share, a
decrease of 44% or $0.01, compared to the prior year Non-GAAP
results. Non-GAAP results exclude adjustments related to the
impairment of an intangible asset, restructuring and plant closure
costs, acquisition deal costs, fair market inventory write-up, and
severance costs (see Non-GAAP Financial Measures);
- reported nine month FY 2017 net sales of $247,973,000, an
increase of 3% as compared to $241,352,000 in the prior fiscal
year. Excluding the acquisition of Atlas Lighting, organic
sales growth was 0% in the nine month period
year-over-year;
- reported nine month FY 2017 net income of $2,304,000, or $0.09
per share, a decrease of 71% as compared to net income of
$8,054,000, or $0.32 per share, for the prior fiscal year. On
a Non-GAAP basis, net income was $4,455,000 or $0.17 per share, a
decrease of 46% or $0.16, compared to the prior year Non-GAAP
results. Non-GAAP results exclude adjustments related to the
impairment of an intangible asset, restructuring and plant closure
costs, acquisition deal costs, fair market inventory write-up, and
severance costs (see Non-GAAP Financial Measures); and
- declared a regular quarterly cash dividend of $0.05 per share
payable May 16, 2017 to shareholders of record May 8, 2017.
Financial
Highlights |
|
|
|
|
|
|
(In thousands, except
per |
Three Months Ended |
Nine Months Ended |
share data;
unaudited) |
March 31 |
March 31 |
|
2017 |
2016 |
% Change |
2017 |
2016 |
% Change |
Net Sales |
$78,156 |
$70,740 |
10% |
$247,973 |
$241,352 |
3% |
Operating Income
(Loss) |
|
|
|
|
|
|
as
reported |
$(774) |
$732 |
n/m |
$3,110 |
$11,875 |
(74)% |
Impairment of intangible |
|
|
|
|
|
|
Asset |
479 |
-- |
n/m |
479 |
-- |
n/m |
Acquisition deal costs |
1,480 |
-- |
n/m |
1,480 |
-- |
n/m |
Fair
market value inventory |
|
|
|
|
|
|
write-up |
155 |
-- |
n/m |
155 |
-- |
n/m |
Financial Highlights (continued) |
|
|
(In thousands, except
per |
Three Months Ended |
Nine Months Ended |
share data;
unaudited) |
March 31 |
March 31 |
|
2017 |
2016 |
% Change |
2017 |
2016 |
% Change |
Restructuring and plant |
|
|
|
|
|
|
closure
costs (income) |
(957) |
-- |
n/m |
796 |
-- |
n/m |
Severance
costs |
49 |
178 |
(72)% |
222 |
401 |
(45)% |
Operating Income |
|
|
|
|
|
|
as
adjusted (a) |
$ 432 |
$ 910 |
(53)% |
$ 6,242 |
$ 12,276 |
(49)% |
Net Income (Loss) as
reported |
$ (531) |
$ 522 |
n/m |
$ 2,304 |
$ 8,054 |
(71)% |
Net Income as
adjusted |
$ 357 |
$ 639 |
(44)% |
$ 4,455 |
$ 8,317 |
(46)% |
Earnings (Loss) per
share |
|
|
|
|
|
|
(diluted)
as reported |
$ (0.02 ) |
$ 0.02 |
n/m |
$ 0.09 |
$ 0.32 |
(72)% |
Earnings per share |
|
|
|
|
|
|
(diluted)
as adjusted |
$ 0.01 |
$ 0.02 |
(50)% |
$ 0.17 |
$ 0.33 |
(48)% |
|
3/31/17 |
6/30/16 |
Working Capital |
$ 67,007 |
$ 88,510 |
Total Assets |
$255,916 |
$195,560 |
Long-Term Debt |
$ 54,966 |
$ nil |
Shareholders’
Equity |
$ 159,577 |
$155,520 |
(a) The Company
recorded a $479,000 pre-tax impairment of an intangible asset in
the third quarter and nine month periods of fiscal 2017. The
Company also recorded pre-tax acquisition deal costs of $1,480,000
in the third quarter and nine month periods of fiscal 2017,
respectively. The Company also recorded pre-tax restructuring
costs (income) and plant closure costs totaling $(957,000) and
$796,000 in the third quarter and nine month periods of fiscal
2017, respectively. The Company recorded a $155,000 fair
market value inventory write-up associated with the acquisition of
Atlas Lighting in the third quarter and nine month periods of
fiscal 2017. Restructuring costs in fiscal 2017 include a
$1,361,000 gain on the sale of one of the facilities that had been
closed. Additionally, the Company incurred pre-tax severance
costs of $49,000 and $178,000 in the third quarter of fiscal 2017
and 2016, respectively, and incurred pre-tax severance costs of
$222,000 and $401,000 in the first nine months of fiscal 2017 and
fiscal 2016, respectively.
Management Comments and Outlook
Dennis W. Wells, Chief Executive Officer and President,
commented, “Results during our third quarter of fiscal 2017 were
mixed. On the one hand, we made significant progress towards
positioning the company for long-term growth through our
acquisition of Atlas Lighting Products, continued lean initiatives,
and internal investments in new technologies. On the other
hand, growth and profitability were constrained due to continued
inflationary pressures and softer market conditions that impacted
both the Lighting and Graphics segments. During the quarter,
organic revenues increased 1%.
“From an accounting standpoint the quarter was impacted by the
Atlas acquisition, restructuring and plant closure costs,
impairment of an intangible asset, and severance costs.
Excluding these items our adjusted gross margin in the quarter was
24.2% compared to 23.4% a year ago, and adjusted EPS was $0.01
compared to $0.02 last year. Nine-month adjusted EPS was
$0.17 compared to $0.33 a year ago.
“We invite you to review the reconciliation table that appears
in the Non-GAAP Financial Measures section of this press
release.
“Inflationary pressures continued to play a significant role in
the quarter impacting raw materials, labor, healthcare, and freight
costs. While we were able to offset some of the pressure
through a combination of productivity and pricing initiatives, it
was not enough to fully counter the impact. Aggressive
measures are in place to continue to mitigate these inflationary
effects going forward.
“In addition to inflationary pressures, market conditions were
decidedly soft in the quarter. Industry sources have cited
flat to negative growth in lighting during the past couple of
quarters, as well as flat growth in graphics.
“Among the positive developments in the quarter, I am very
pleased to report on early progress following our acquisition of
Atlas Lighting Products. The Atlas team is fully engaged in
the integration and we are continuing to receive positive input
from customers, agents, and distributors. In addition to
top-line synergies that are beginning to materialize, we expect
LSI’s organic business to benefit from sourcing relationships that
Atlas is bringing to the table, which are expected to accelerate
the timetable for margin improvements throughout the Company.
The fit between these two companies could not be better, and I look
forward to reporting on continued progress.
“Internal investments continue to progress. Our SOAR™
Digital Signage program is gaining momentum, bolstered by the trend
to replace static signage as digital versions become more
affordable. We have installed a beta version of our
SmartVision® platform at a petroleum station, and early feedback
has been encouraging. Additionally, Airlink™, our wireless
lighting control system, is garnering interest and orders are
increasing.
“During the third quarter we began to realize savings from the
closing of three facilities during the first half of fiscal
2017. These early indications provide me with confidence that
we will realize an estimated $2.5 million in annual savings going
forward.
“We are cautiously optimistic as we look ahead to the fourth
quarter and beyond. Our caution comes from the uncertainty
that is still lingering in our markets, as well as inflationary
pressures that continue to trend upwards. Nonetheless, our
quote rate is strong, suggestive of pent-up demand in the
marketplace. The LSI Business System is continuing to deliver
results, and we are confident that we will continue to realize
savings as a result of recent plant closures. Lastly, I
expect Atlas to begin to contribute meaningfully to both the top-
and bottom-line as we move forward.
“Our financial position remains strong. During the quarter
we established a $100 million revolving line of credit with our
bank related to the acquisition of Atlas Lighting Products.
Our current debt position was $55.0 million at March 31, 2017, down
17% from $66.0 million on the date of the Atlas transaction.
Our cash position at quarter-end was $4.4 million. We are
continuing to maintain our dividend at a $0.20 annual rate, and
will consider increasing the rate based upon the strength of our
operating results, financial position, and other factors in
upcoming quarters.
“As I have said in the past, we remain committed to achieving
above-market revenue growth and improving margins going
forward. I am confident that much of the internal progress
that we achieved during the quarter will impact our operating
leverage as market conditions improve.
Third Quarter Fiscal 2017 Results
Net sales in the third quarter of fiscal 2017 were $78,156,000,
up 10% from last year’s third quarter net sales of
$70,740,000. Lighting Segment net sales of $56,039,000, which
include the results of recently acquired Atlas Lighting from
February 21st through March 31st, were up 13.6% from last year’s
third quarter net sales, Graphics Segment net sales decreased 4.5%
to $16,463,000, and Technology Segment net sales (excluding
significant intersegment net sales) increased 35.5% to
$5,654,000. After consideration of the Technology Segment’s
intersegment sales primarily in support of LED products
manufactured and sold by the Lighting Segment, this segment’s net
sales increased 9.7% in the third quarter of fiscal 2017. The
Company recorded a $479,000 pre-tax impairment of an intangible
asset in the third quarter of fiscal 2017. The Company
recorded $1,480,000 of pre-tax acquisition deal costs in the third
quarter of fiscal 2017 related to the acquisition of Atlas Lighting
Products, Inc. Operating results of Atlas Lighting beginning
February 21, 2017 are included in the Company’s consolidated
operating results. In the third quarter of fiscal 2017 the
Company recorded a net pre-tax restructuring gain of $989,000
($312,000 was expensed in Cost of Products Sold and a net gain of
$1,301,000, primarily resulting from the gain on sale of a
manufacturing facility, was recorded in Selling and Administrative
expenses). Additionally, the Company recorded other pre-tax
severance costs of $49,000 and $178,000 in the third quarter of
fiscal 2017 and 2016, respectively. Fiscal 2017 third quarter
and nine month results were favorably impacted by significant
adjustments to the Company’s incentive compensation and stock
compensation accruals. The fiscal 2017 third quarter net loss
of $(531,000), or $(0.02) per share, compared to the fiscal 2016
third quarter net income of $522,000 or $0.02 per share.
Earnings per share represents diluted earnings per share.
Nine Month Fiscal 2017 Results
Net sales in the first nine months of fiscal 2017 were
$247,973,000, an increase of 2.7% as compared to last year’s nine
month net sales of $241,352,000. Lighting Segment net sales,
which include the results of recently acquired Atlas Lighting from
February 21st through March 31st, increased 5.1% to
$176,578,000, Graphics Segment net sales decreased 8.0% to
$55,939,000, and Technology Segment net sales (excluding
significant intersegment net sales) increased 22.9% to
$15,456,000. After consideration of the Technology Segment’s
intersegment sales primarily in support of LED products
manufactured and sold by the Lighting Segment, this segment’s net
sales increased 3.8% in the first nine months of fiscal 2017.
The Company recorded a $479,000 pre-tax impairment of an intangible
asset in the first nine months of fiscal 2017. The Company
recorded $1,480,000 of pre-tax acquisition deal costs in the first
nine months of fiscal 2017 related to the acquisition of Atlas
Lighting Products, Inc. Operating results of Atlas Lighting
beginning February 21, 2017 are included in the Company’s
consolidated operating results. In the first nine months of
fiscal 2017 the Company recorded a net pre-tax restructuring cost
of $364,000 ($1,455,000 was expensed in Cost of Products Sold and a
net gain of $1,091,000, primarily resulting from the gain on sale
of a manufacturing facility, was recorded in Selling and
Administrative expenses), and plant closure costs related to an
inventory write-down of $432,000 as the Company exited the
manufacturing of fluorescent lighting fixtures -- combining
to a net total expense of $796,000. Additionally, the Company
recorded other pre-tax severance costs of $222,000 and $401,000 in
the first nine months of fiscal 2017 and 2016, respectively. Fiscal
2017 nine month results were favorably impacted by significant
adjustments to the Company’s incentive compensation and stock
compensation accruals. The nine month fiscal 2017 net income of
$2,304,000, or $0.09 per share, decreased 71% from fiscal 2016 nine
month net income of $8,054,000, or $0.32 per share. Earnings
per share represents diluted earnings per share.
Balance Sheet
The balance sheet at March 31, 2017 included current assets of
$106.9 million, current liabilities of $39.9 million and working
capital of $67.0 million, which includes cash of $4.4
million. The current ratio was 2.7 to 1. The Company
has shareholders’ equity of $159.6 million and $55.0 million of
long-term debt on its balance sheet as of March 31, 2017.
With continued strong cash flow, a sound balance sheet, and $45.0
million available in its credit facility, LSI Industries believes
its financial condition is sound and is 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 third quarter of
fiscal 2017 payable May 16, 2017 to shareholders of record as of
May 8, 2017. 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 and nine month periods ended March
31, 2017 and 2016. Adjusted net income and earnings per
share, which exclude the impact of the impairment of an intangible
asset, acquisition deal costs, fair market value inventory
write-up, 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.
|
Third Quarter |
(in
thousands, except per share data; unaudited) |
|
Diluted |
|
Diluted |
|
FY 2017 |
EPS |
FY 2016 |
EPS |
Reconciliation of net income to adjusted net income: |
|
|
|
|
Net income (loss) and earnings (loss) per |
|
|
|
|
share as reported |
$(531) |
$(0.02) |
$522 |
$0.02 |
Adjustment for impairment of intangible asset, |
|
|
|
|
inclusive of the income tax effect |
335 |
0.01 |
-- |
-- |
Adjustment for acquisition deal costs, |
|
|
|
|
Inclusive of the income tax effect |
1,030 |
0.04 |
-- |
-- |
Adjustment for fair market inventory |
|
|
|
|
write-up, inclusive of the income |
|
|
|
|
tax effect |
108 |
-- |
-- |
-- |
Adjustment for restructuring and plant |
|
|
|
|
closure costs (income) , inclusive of the |
|
|
|
|
income tax effect |
(629) |
(0.02) |
-- |
-- |
Adjustment for other severance costs, |
|
|
|
|
inclusive of the income tax effect |
44 |
-- |
117 |
-- |
Adjusted net income and earnings per share |
$ 357 |
$0.01 |
$ 639 |
$0.02 |
|
|
|
|
|
|
Nine Month |
(in thousands, except
per share data; unaudited) Period |
|
Diluted |
|
Diluted |
|
FY 2017 |
EPS |
FY 2016 |
EPS |
Reconciliation of net
income to adjusted net income: |
|
|
|
|
Net
income and earnings per share as reported |
$2,304 |
$0.09 |
$8,054 |
$0.32 |
Adjustment for impairment of intangible asset, |
|
|
|
|
inclusive
of the income tax effect |
335 |
0.01 |
-- |
-- |
Adjustment for acquisition deal costs, |
|
|
|
|
Inclusive
of the income tax effect |
1,030 |
0.04 |
-- |
-- |
Adjustment for fair market value inventory |
|
|
|
|
write-up,
inclusive of the income |
|
|
|
|
tax
effect |
108 |
-- |
-- |
-- |
Adjustment for restructuring and plant closure |
|
|
|
|
costs,
inclusive of the income tax effect |
514 |
0.02 |
-- |
-- |
Adjustment for other severance costs, |
|
|
|
|
inclusive
of the income tax effect |
164 |
0.01 |
263 |
0.01 |
Adjusted
net income and earnings per share |
$4,455 |
$0.17 |
$8,317 |
$0.33 |
|
|
|
|
|
"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, failure of an acquisition or acquired company
to achieve its plans or objectives generally, 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,
the ability to maintain an effective system of internal control
over financial reporting, the ability to remediate any material
weaknesses in 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, Kentucky, New York, North Carolina
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 |
Nine Months Ended |
(in thousands,
except per |
|
March 31 |
March 31 |
share data;
unaudited) |
|
2017 |
2016 |
2017 |
2016 |
Net sales |
|
$78,156 |
$70,740 |
$247,973 |
$241,352 |
Cost of products and
services sold |
|
59,445 |
54,191 |
185,877 |
177,528 |
Restructuring costs –
cost of sales |
|
312 |
-- |
1,455 |
-- |
Gross
profit |
|
18,399 |
16,549 |
60,641 |
|
|
|
|
|
|
63,824 |
Selling and
administrative expenses |
|
18,515 |
15,817 |
56,663 |
51,949 |
Impairment of an
intangible asset |
|
479 |
-- |
479 |
-- |
Acquisition deal
costs |
|
1,480 |
-- |
1,480 |
-- |
Restructuring costs –
SG&A expense |
|
(1,301) |
-- |
(1,091) |
-- |
Operating
income (loss) |
|
(774) |
732 |
3,110 |
11,875 |
Interest (income)
expense, net |
|
163 |
(19) |
129 |
(27) |
Income
(loss) before income taxes |
|
(937) |
751 |
2,981 |
11,902 |
Income tax expense
(benefit) |
|
(406) |
229 |
677 |
3,848 |
|
|
|
|
|
|
Net income (loss) |
|
$ (531) |
$ 522 |
$ 2,304 |
$ 8,054 |
Income (loss) per
common share |
|
|
|
|
|
Basic |
|
$ (0.02) |
$ 0.02 |
$ 0.09 |
$ 0.32 |
Diluted |
|
$ (0.02) |
$ 0.02 |
$ 0.09 |
$ 0.32 |
Weighted average common
shares outstanding |
|
|
|
|
|
Basic |
|
25,452 |
25,080 |
25,346 |
24,918 |
Diluted |
|
25,452 |
25,700 |
25,881 |
25,494 |
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets |
|
|
(in thousands,
unaudited) |
March 31, |
June 30, |
|
2017 |
2016 |
Current
Assets |
$106,890 |
$127,743 |
Property,
Plant and Equipment, net |
46,120 |
47,462 |
Other
Assets |
102,906 |
20,355 |
|
$255,916 |
$195,560 |
Current
Liabilities |
$39,883 |
$39,233 |
Long-Term
Debt |
54,966 |
-- |
Other
Long-Term Liabilities |
1,490 |
807 |
Shareholders’ Equity |
159,577 |
155,520 |
|
$255,916 |
$195,560 |
|
|
|
CONTACT: DENNIS WELLS or
RON STOWELL
(513) 793-3200
LSI Industries (NASDAQ:LYTS)
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