LSI Industries Inc. (NASDAQ: LYTS, or the “Company”) a
leading U.S. based manufacturer of indoor/outdoor lighting and
graphics solutions, today announced results for the fiscal first
quarter 2020.
First Quarter 2020 Summary
- Sales of $88.7 million, 4% growth versus prior year
- EPS of $0.17; Adjusted EPS of $0.04
- Net Income of $4.5 million, Adjusted Net income $1.0
million
- EBITDA of $9.2 million; Adjusted EBITDA of $4.7
million
- Free Cash Flow of $18.3 million; Net Debt reduced by $20.4
million versus prior year
- Net Debt to Adjusted EBITDA ratio improves to 1.7x
Net sales increased 4% to $88.7 million in the
fiscal first quarter 2020, versus $85.0 million in the first
quarter 2019. Reported net income was $4.5 million, or $0.17
per diluted share, versus income of $1.7 million or $0.07 per
diluted share, in the first quarter 2019. Reported fiscal
first quarter 2020 results include a $4.8 million pre-tax gain on
sale resulting from the divestiture of the New Windsor, NY facility
in September 2019. Fiscal first quarter results also include
restructuring charges of $0.2 million.
EBITDA was $9.2 million for the quarter compared
to $5.6 million in the prior year quarter. Non-GAAP
adjusted EBITDA was $4.7 million in fiscal first quarter 2020,
versus $6.2 million in the fiscal quarter 2019. The prior
year period included a $1.2 million non-reoccurring favorable
adjustment related to a change in the Company’s employee benefits
policy.
The Company generated free cash flow of $18.3
million in the fiscal first quarter 2020, including $12.3 million
in net proceeds resulting from the sale of the New Windsor
facility. Excluding the impact of net proceeds from the
facility sale, total free cash flow was $6.0 million in the fiscal
first quarter 2020, compared to $1.5 million in the fiscal first
quarter 2019.
During the twelve months ended September 30,
2019, LSI reduced total net debt outstanding by 49% to $21.6
million, consistent with the Company’s ongoing focus on disciplined
capital management. At the end of the fiscal first quarter
2020, the Company’s net debt to Adjusted EBITDA ratio was
1.7x. The schedule reconciling GAAP and non-GAAP financial
results is included later in this release.
The Company declared a regular cash dividend of
$0.05 per share payable November 26, 2019 to shareholders of record
on November 18, 2019.
Management Commentary
James A. Clark, President and Chief Executive Officer commented,
“We reported year-over-year growth in sales, net income and free
cash flow during the first quarter, a performance driven by our
focus on all facets of the business and improved execution
throughout the organization. Continued growth in cash flow
from operations, together with proceeds from the recently completed
sale of the New Windsor facility, contributed to a significant
reduction in net leverage during the first quarter, as
planned. We have realized significant improvements
throughout all aspects of our commercial, operational, and
financial operations during the past year, creating a solid
foundation to advance the business as we move forward.
“We achieved balanced sales growth during the first quarter,
supported by solid performances within both the Lighting and
Graphics segments. In our Lighting segment, sales increased
3% compared to prior year, and our gross margin rate improved 140
bps, driven primarily by improved price and mix. In what
remains an inconsistent market environment, we achieved these
results by focusing strongly on those market verticals where our
proven solutions provide customers’ exceptional value, including
retail parking, automotive, petroleum and convenience store
applications. During the first quarter, we continued to
expand our lighting sales team and launched several new products in
both the project and stock and flow channels which provide improved
performance characteristics for our customers and a cost savings to
LSI.”
“The Graphics segment continued to generate solid growth,
increasing 8% versus the first quarter 2019. Our core
petroleum market vertical continued to grow with both new and
existing customers. We have four major customer programs
currently active, and our program management teams are busy with
development work on four potential customer projects. This
upfront investment and customer collaboration is critical to
becoming the preferred supplier for projects involving hundreds to
several thousand customer locations. In addition, we recently
completed our 500th installation in Mexico, a testament to the
long-term customer relationships we have developed as a trusted,
proven partner in the petroleum market.
“The first quarter also saw improvements in our manufacturing
and supply chain capabilities. We completed the production
transition from the New Windsor, NY facility closure, realizing
initial cost savings from improved capacity and asset utilization,
contributing to the lighting gross margin rate expansion. We
anticipate operating at the annualized cost savings target of $4
million by the end of the fiscal second quarter. Improvements
to production floor layouts and scheduling processes at several
manufacturing locations has reduced cycle times and contributed to
improved inventory levels. Capital investment is planned to
increase modestly in fiscal 2020, with targeted programs focused on
planned new products and factory cost reductions, as well as
service and quality enhancements.
“Our first quarter results prove that with the right focus,
planning, and execution, we can profitably grow our business,”
concluded Clark. “Looking forward, current market activity in
Lighting remains volatile and conditions are projected to remain
the same throughout the fiscal second quarter. During a
period of industry transition, LSI remains a proven, stable source
for innovative, high-performance lighting and graphics solutions,
including expert support and service.”
CONFERENCE
CALL
A conference call will be held today at 11:00 A.M. ET to review
the Company’s financial results and conduct a question-and-answer
session.
A webcast of the conference call and accompanying presentation
materials will be available in the Investor Relations section of
LSI Industries’ website at www.lsi-industries.com.
Individuals can also participate by teleconference dial-in.
To listen to a live broadcast, go to the site at least 15 minutes
prior to the scheduled start time in order to register, download,
and install any necessary audio software.
Details of the conference call are as follows:
Call Dial-In: |
877-407-4018 |
Conference ID: |
13695905 |
|
|
Call
Replay: |
844-512-2921 |
Replay Passcode: |
13695905 |
A replay of the conference call will be available between
November 6, 2019 and November 20, 2019. To listen to a replay
of the teleconference via webcast, please visit the Investor
Relations section of LSI Industries’ website at
www.lsi-industries.com.
ABOUT LSI INDUSTRIES
LSI Industries Inc. is a U.S.-based manufacturer of lighting,
graphics and technology solutions for both indoor and outdoor
applications. We are a leading solutions provider to the
primary end-markets we serve, including petroleum, automotive,
quick serve restaurants, grocery, banking, retail, renovation,
parking and warehousing. Our products are marketed throughout
North America through a network of independent sales
representatives and distributors, as well as through national
accounts. We partner with our customers to provide a full
range of design support, engineering, installation and project
management services. Headquartered in Blue Ash, Ohio, LSI
currently employs over 1,200 employees and operates seven
facilities throughout the United States.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements.
Forward-looking statements may be identified by words such as
“estimates,” “anticipates,” “encourage,” “projects,” “plans,”
“expects,” “can,” “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. For
details on the uncertainties that may cause our actual results to
be materially different than those expressed in our forward-looking
statements, visit http://www.lsi-industries.com/fls as well as our
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q
which contain risk factors.
INVESTOR CONTACT
Noel Ryan, IRC720.778.2415LYTS@vallumadvisors.com
Financial Highlights
|
|
Three Months Ended September 30 |
(Unaudited) |
|
(In thousands, except per share data) |
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
Net Sales |
|
$ |
88,701 |
|
|
$ |
84,957 |
|
|
4 |
% |
|
|
|
|
|
|
|
Operating Income as reported |
|
|
6,839 |
|
|
|
2,934 |
|
|
133 |
% |
|
|
|
|
|
|
|
Restructuring and plant closure (gains)
costs |
|
|
(4,588 |
) |
|
|
590 |
|
|
|
|
|
|
|
|
|
|
Operating Income as adjusted |
|
$ |
2,251 |
|
|
$ |
3,524 |
|
|
-36 |
% |
|
|
|
|
|
|
|
Net Income as reported |
|
$ |
4,475 |
|
|
$ |
1,749 |
|
|
156 |
% |
|
|
|
|
|
|
|
Net Income as adjusted |
|
$ |
1,026 |
|
|
$ |
2,203 |
|
|
-53 |
% |
|
|
|
|
|
|
|
Earnings per share as reported |
|
$ |
0.17 |
|
|
$ |
0.07 |
|
|
143 |
% |
|
|
|
|
|
|
|
Earnings per share as adjusted |
|
$ |
0.04 |
|
|
$ |
0.08 |
|
|
-51 |
% |
|
|
(amounts in
thousands) |
|
|
9/30/19 |
|
6/30/19 |
Working Capital |
|
$ |
62,366 |
|
$ |
71,105 |
Total Assets |
|
$ |
203,521 |
|
$ |
201,100 |
Long-Term Debt |
|
$ |
23,181 |
|
$ |
39,541 |
Other Long-Term Liabilities |
|
$ |
12,010 |
|
$ |
1,747 |
Shareholders' Equity |
|
$ |
123,158 |
|
$ |
119,937 |
|
|
|
|
|
First Quarter Fiscal 2020 Results
Net sales in the first quarter of fiscal 2020 were $88,701,000,
up 4% from last year’s first quarter net sales of
$84,957,000. Lighting Segment net sales of $63,191,000
increased 3% and Graphics Segment net sales of $25,510,000
increased 8% from last year’s first quarter net sales. The Company
recorded pre-tax restructuring and plant closure costs (gains) of
$(4,588,000) primarily due to the gain on the sale of the Company’s
New Windsor, New York facility in the Lighting Segment. The fiscal
2020 first quarter net income of $4,475,000, or $0.17 per share,
compares to fiscal 2019 first quarter net income of $1,749,000 or
$0.07 per share. Earnings per share represents diluted
earnings per share.
Balance Sheet
The balance sheet at September 30, 2019 included current assets
of $107.5 million, current liabilities of $45.2 million and working
capital of $62.4 million, which includes cash of $1.6
million. The Company adopted the new lease accounting
standard which recorded a “Right of Use” asset in other assets of
$10.4 million and a corresponding liability of $10.8 million other
liabilities with the difference of $0.4 million recorded to
retained earnings. The balance sheet also included shareholders’
equity of $123.2 million and $23.2 million of long-term debt. It is
the Company’s priority to continuously generate sufficient cash
flow coupled with an approved credit facility to adequately fund
operations.
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 2020 payable November 26, 2019 to shareholders of record as
of the close of business on November 18, 2019. The indicated
annual cash dividend rate is $0.20 per share. The Board of
Directors has adopted a policy regarding dividends which provides
that dividends will be determined by the Board of Directors in its
discretion based upon its evaluation of earnings both on a GAAP and
non-GAAP basis, cash flow requirements, financial condition, debt
levels, stock repurchases, future business developments and
opportunities, and other factors deemed relevant by the
Board.
Non-GAAP Financial Measures
This press release includes adjustments to GAAP operating
income, net income and earnings per share for the three months
ended September 30, 2019 and 2018. Operating income, net
income and earnings per share, which exclude the impact of
restructuring and plant closure costs, are non-GAAP financial
measures. We exclude these non-recurring items because they
are not representative of the ongoing results of operations of our
business. Also included in this press release are non-GAAP
financial measures including Earnings before Interest, Taxes,
Depreciation and Amortization (EBITDA and Adjusted EBITDA) and Free
Cash Flow. 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, and are frequently referenced by those who follow the
Company. Below is a reconciliation of these non-GAAP
financial measures to the net income and earnings per share
reported for the periods indicated along with the calculation of
EBIDTA, Adjusted EBITDA and Free Cash Flow.
|
|
|
YEAR-TO-DATE |
|
(In thousands, except per share data) |
|
|
2019 |
|
|
|
|
2018 |
|
|
|
|
|
Diluted EPS |
|
|
Diluted EPS |
|
Reconciliation of net income to adjusted net
income |
|
|
|
Net Income as reported |
|
$ |
4,475 |
|
$ |
0.17 |
|
|
$ |
1,749 |
$ |
0.07 |
|
|
|
|
|
|
|
|
|
Restructuring and plant closure costs |
|
|
(3,449 |
) |
|
(0.13 |
) |
|
|
454 |
$ |
0.01 |
|
|
|
|
|
|
|
|
|
Net Income adjusted |
|
$ |
1,026 |
|
$ |
0.04 |
|
|
$ |
2,203 |
$ |
0.08 |
|
|
|
|
|
|
|
|
(Unaudited; In thousands) |
|
Three Months Ended September 30 |
EBITDA |
|
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
Operating Income as reported |
|
$ |
6,839 |
|
|
$ |
2,934 |
|
|
133 |
% |
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
2,399 |
|
|
|
2,643 |
|
|
|
EBITDA |
|
$ |
9,238 |
|
|
$ |
5,577 |
|
|
65.6 |
% |
|
|
|
|
|
|
|
(Unaudited; In thousands) |
|
Three Months Ended September 30 |
Adjusted EBITDA |
|
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
Operating Income as adjusted |
|
$ |
2,251 |
|
|
$ |
3,524 |
|
|
-36 |
% |
|
|
|
|
|
|
|
Depreciation and Amortization |
|
|
2,399 |
|
|
|
2,643 |
|
|
|
Adjusted EBITDA |
|
$ |
4,650 |
|
|
$ |
6,167 |
|
|
-24.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited; In thousands) |
|
Three Months Ended September 30 |
Free Cash Flow |
|
|
|
2019 |
|
|
|
2018 |
|
|
% Change |
Cash Flow From Operations |
|
$ |
6,359 |
|
|
$ |
2,188 |
|
|
191 |
% |
|
|
|
|
|
|
|
Proceeds from Sale of Facility |
|
|
12,332 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
(355 |
) |
|
|
(648 |
) |
|
|
Free Cash Flow |
|
$ |
18,336 |
|
|
$ |
1,540 |
|
|
n/m |
|
|
|
|
|
|
|
Condensed Consolidated Statements of
Operations
|
|
Three Months Ended September 30 |
(Unaudited) |
|
(In thousands, except per share data) |
|
|
2,019 |
|
|
|
2,018 |
|
Net Sales |
|
|
88,701 |
|
|
|
84,957 |
|
|
|
|
|
|
|
Cost of Products Sold |
|
|
66,588 |
|
|
|
63,541 |
|
Restructuring Costs |
|
|
258 |
|
|
|
155 |
|
|
|
|
|
|
|
Gross Profit |
|
|
21,855 |
|
|
|
21,261 |
|
|
|
|
|
|
|
Selling and Administrative Costs |
|
|
19,862 |
|
|
|
18,327 |
|
Restructuring Costs |
|
|
(4,846 |
) |
|
|
-- |
|
|
|
|
|
|
|
Operating (Loss) |
|
|
6,839 |
|
|
|
2,934 |
|
|
|
|
|
|
|
Other Expense |
|
|
82 |
|
|
|
-- |
|
Interest Expense |
|
|
431 |
|
|
|
518 |
|
|
|
|
|
|
|
Income Before Taxes |
|
|
6,326 |
|
|
|
2,416 |
|
|
|
|
|
|
|
Income Tax |
|
|
1,851 |
|
|
|
667 |
|
|
|
|
|
|
|
Net Income |
|
|
4,475 |
|
|
|
1,749 |
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding |
|
|
|
|
|
|
|
Basic |
|
|
26,236 |
|
|
|
26,032 |
|
Diluted |
|
|
26,293 |
|
|
|
26,365 |
|
|
|
|
|
|
|
Income (Loss) Per Share |
|
|
|
|
|
Basic |
|
$ |
0.17 |
|
|
$ |
0.07 |
|
Diluted |
|
$ |
0.17 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
(amounts in
thousands) |
|
|
9/30/19 |
|
6/30/19 |
Current Assets (Less Assets Held for Sale) |
|
$ |
107,538 |
|
$ |
103,468 |
Assets Held for Sale |
|
|
-- |
|
|
7,512 |
Property, Plant and Equipment, net |
|
|
30,511 |
|
|
31,976 |
Other Assets |
|
|
65,472 |
|
|
58,144 |
Total Assets |
|
$ |
203,521 |
|
$ |
201,100 |
|
|
|
|
|
Current Liabilities |
|
$ |
45,172 |
|
$ |
39,875 |
Long-Term Debt |
|
|
23,181 |
|
|
39,541 |
Other Long-Term Liabilities |
|
|
12,010 |
|
|
1,747 |
Shareholders' Equity |
|
|
123,158 |
|
|
119,937 |
|
|
$ |
203,521 |
|
$ |
201,100 |
|
|
|
|
|
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