LSI Industries Inc. (Nasdaq:LYTS)
today:
- reported second quarter net sales of $84,715,000, an increase
of 11% as compared to $76,123,000 in the same period of the prior
fiscal year;
- reported second quarter net income of $1,588,000, or $0.06 per
share, an increase of 83% as compared to net income of $870,000, or
$0.04 per share, for the same period of the prior fiscal year;
- reported first half net sales of $163,181,000, an increase of
4% as compared to $156,609,000 in the same period of the prior
fiscal year;
- reported first half net income of $3,115,000, or $0.13 per
share, an increase of 14% as compared to net income of $2,735,000,
or $0.11 per share, for the same period of the prior fiscal year;
and
- declared a regular quarterly cash dividend of $0.02 per share
payable February 17, 2015 to shareholders of record February 10,
2015, an increase in the indicated annual rate from $0.04 to $0.08
per share.
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Financial Highlights |
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(In thousands, except per |
Three Months Ended |
Six Months Ended |
share data; unaudited) |
December 31 |
December 31 |
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2014 |
2013 |
% Change |
2014 |
2013 |
% Change |
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Net Sales |
$84,715 |
$76,123 |
11% |
$163,181 |
$156,609 |
4% |
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Operating Income |
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Before severance costs and sale of
assets (a) |
$3,024 |
$1,511 |
100% |
$5,780 |
$4,350 |
33% |
Severance costs |
(800) |
-- |
n/m |
(800) |
-- |
n/m |
(Loss) on sale of assets, net |
-- |
-- |
n/m |
(222) |
-- |
n/m |
Operating income as reported |
$2,224 |
$1,511 |
47% |
$4,758 |
$4,350 |
9% |
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Net Income |
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Before severance costs and sale of assets
(a) |
$2,105 |
$870 |
142% |
$3,872 |
$2,735 |
42% |
Net income as reported |
$1,588 |
$870 |
83% |
$3,115 |
$2,735 |
14% |
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Earnings per share (diluted) |
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Before severance costs and sale of assets
(a) |
$0.09 |
$0.04 |
125% |
$0.16 |
$0.11 |
45% |
Earnings per share as reported |
$0.06 |
$0.04 |
50% |
$0.13 |
$0.11 |
18% |
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12/31/14 |
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6/30/14 |
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Working Capital |
$ 80,179 |
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$ 76,788 |
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Total Assets |
$ 173,778 |
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$ 169,888 |
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Long-Term Debt |
$ nil |
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$ nil |
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Shareholders' Equity |
$ 140,880 |
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$ 138,412 |
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(a) The Company incurred pre-tax severance costs of $800,000 in
the second quarter of fiscal 2015. The Company also sold a
manufacturing facility as well as a subsidiary in the first quarter
of fiscal 2015, both of which netted to a pre-tax net loss of
$222,000. Operating income before severance costs and sale of
assets, net income before severance costs and sale of assets, and
earnings per share (diluted) before severance costs and sale of
assets are Non-GAAP financial measures.
Management Comments and Outlook
Dennis W. Wells, Chief Executive Officer and President,
commented, "Having now had the opportunity to more fully evaluate
the lighting, graphics and technology business units that comprise
LSI Industries, I am pleased to report that there really is
'opportunity everywhere.' This statement applies to both reducing
costs and expenses as well as implementing programs to drive sales.
My mission is to achieve higher earnings, increase cash dividends
and develop shareholder value.
"LSI's operating results for the second quarter were quite good
and much improved. Net sales of $84.7 million increased 11%
over the same period of the prior fiscal year. Similarly,
Lighting sales increased over 4%, Graphics over 44% and Electronic
Components by nearly 13%. Net income for the second quarter
was up over 82% and diluted earnings per share increased from $0.04
to $0.06. It should be noted that a one-time severance cost of
$800,000 was taken during the most recent quarter in connection
with the retirement of Robert J. Ready, the founder and previous
CEO of the Company. Bob did a great job in building LSI
Industries for 38 years and my intention is to carry on with that
tradition with a strong emphasis on improving profitability.
"Adjusting fiscal 2015 second quarter operating results for
severance cost produces non-GAAP net income of $2,105,000 and
diluted earnings per share of $0.09 as compared to $870,000 and
$0.04 for the second quarter of fiscal 2014.
"During the second quarter just ended, LSI's manufacturing
benefited from a Lean Transformation Program, primarily in the
production of lighting fixtures, which has improved, and will
continue to improve, the Company's gross profit margins. There
is opportunity for substantial continuing improvement
here. Additionally, we are reviewing and taking actions to
reduce costs and improve efficiencies through selected work force
reductions and replacements, facility consolidations and other cost
saving opportunities.
"The outlook is, I believe, very positive as we execute programs
designed to increase sales and reduce costs. This quarter I
will be introducing an LSI Business System, a comprehensive
company-wide discipline. Twelve separate profit improvement
teams are at work to address individual opportunities. Having used
similar systems, I know the potential and continuous positive
impact this program will have. The fundamental strategy of
"Lighting + Graphics + Technology = Complete Image Solution" that
differentiates LSI is solid, but needs to be better promoted and
developed. I recognize the need to add seasoned executives to
the team. We recently hired John Bagwell as President, LSI
Technology Division, and will be hiring a Chief Technology Officer
and an Executive Vice President for Human Resources and the LSI
Business System. LSI's LED position continues to grow with
about 60% of lighting sales in the second quarter attributed to
this technology. New LED product introductions will be
ongoing.
"The general business environment and outlook are supportive for
LSI's lighting, graphics and technology products. Market
indicators are encouraging for our niche and commercial/industrial
markets for re-imaging, refurbishment and new construction
opportunities.
"In summary, I like what I see at LSI Industries. Now my
most important job is to increase profits through sales growth,
better manufacturing efficiencies and close control of
expenses."
Second Quarter Fiscal 2015 Results
Net sales in the second quarter of fiscal 2015 were $84,715,000,
an increase of 11% as compared to last year's second quarter net
sales of $76,123,000. Lighting Segment net sales increased
4.3% to $59,848,000, Graphics Segment net sales increased 44.7% to
$18,740,000, Electronic Components Segment net sales increased
12.9% to $4,598,000 and All Other Category net sales decreased
10.9% to $1,529,000. In the second quarter of fiscal 2015 the
Company recorded $800,000 of pre-tax severance costs, with no
comparable expense in the second quarter of fiscal 2014. The
fiscal 2015 second quarter net income of $1,588,000, or $0.06 per
share, increased 82.5% from fiscal 2014 second quarter net income
of $870,000, or $0.04 per share. Earnings per share represents
diluted earnings per share.
First Half Fiscal 2015 Results
Net sales in the first half of fiscal 2015 were $163,181,000, an
increase of 4% as compared to last year's first half net sales of
$156,609,000. Lighting Segment net sales decreased 0.4% to
$116,369,000, Graphics Segment net sales increased 20.7% to
$32,551,000, Electronic Components Segment net sales increased
14.5% to $10,478,000 and All Other Category net sales increased
3.8% to $3,783,000. In the first half of fiscal 2015 the
Company recorded $800,000 of pre-tax severance costs, with no
comparable expense in the first half of fiscal 2014. Also in
the first half 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 half of fiscal
2014. The fiscal 2015 first half net income of $3,115,000, or
$0.13 per share, increased 13.9% from fiscal 2014 first half net
income of $2,735,000, or $0.11 per share. Earnings per share
represents diluted earnings per share.
Balance Sheet
The balance sheet at December 31, 2014 included current assets
of $110.9 million, current liabilities of $30.8 million and working
capital of $80.2 million, which includes cash of $18.1
million. The current ratio was 3.6 to 1. The Company has
shareholders' equity of $140.9 million, no long-term debt, and
borrowing capacity on its commercial bank facility as of December
31, 2014 of $30.0 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 $0.02 per share payable February 17, 2015 to
shareholders of record as of February 10, 2015. The indicated
annual cash dividend rate is now $0.08 per share, up from the
previous $0.04 per share indicated annual rate. 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 six month periods ended
December 31, 2014. Adjusted net income and earnings per share,
which excludes the impact of severance costs, 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 and earnings per share
reported for the periods indicated.
(in thousands, except per share data;
unaudited) |
Second Quarter |
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Diluted |
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Diluted |
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FY 2015 |
EPS |
FY 2014 |
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 |
$1,588 |
$0.06 |
$870 |
$0.04 |
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Adjustment for severance costs, inclusive
of the income tax effect |
517 |
0.02 |
-- |
-- |
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Adjusted net income and earnings per
share |
$2,105 |
$0.09 |
$870 |
$0.04 |
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(in thousands, except per share data;
unaudited) |
First Half |
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Diluted |
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Diluted |
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FY 2015 |
EPS |
FY 2014 |
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 |
$3,115 |
$0.13 |
$2,735 |
$0.11 |
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Adjustment for severance costs, inclusive
of the income tax effect |
517 |
0.02 |
-- |
-- |
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Adjustment for the gain on the sale
of a manufacturing facility, inclusive of the income tax
effect |
(224) |
(0.01) |
-- |
-- |
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Adjustment for the loss on sale of a
subsidiary |
565 |
0.02 |
-- |
-- |
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Income tax effect of utilization of a
long-term capital loss |
(101) |
0.00 |
-- |
-- |
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Adjusted net income and earnings per
share |
$3,872 |
$0.16 |
$2,735 |
$0.11 |
"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, the Company's ability
to maintain an effective system of internal control over financial
reporting, our ability to remediate any material weaknesses in our
internal control over financial reporting and the 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
Leadership. Strength. Innovation. These are the
key values upon which LSI Industries Inc. was founded in
1976. Today LSI demonstrates these values in our dedication to
advancing technology throughout all aspects of our
business. From product solutions to production techniques, we
are committed to American innovation through technology. The
fundamental core strategy of LSI Industries is "Lighting + Graphics
+ Technology = Complete Image Solution."
We are a vertically integrated manufacturer which combines
technology, design and manufacturing to produce efficient, high
quality lighting and graphics products. We are dedicated to
advancing solid-state LED technology to make affordable, high
performance, energy efficient lighting and custom graphic products
that provide value to our customers. We offer design support,
engineering, installation and project management for custom
lighting and graphics rollout programs for the retail
environment.
Our major markets include commercial / industrial lighting,
petroleum / convenience store and multi-site retail (including
automobile dealerships, restaurants and national retail
accounts).
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 |
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Three Months Ended |
Six Months
Ended |
(in thousands, except per |
December 31 |
December 31 |
share data; unaudited) |
2014 |
2013 |
2014 |
2013 |
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Net sales |
$84,715 |
$76,123 |
$163,181 |
$156,609 |
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Cost of products and services sold |
64,160 |
59,366 |
124,018 |
120,730 |
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Gross profit |
20,555 |
16,757 |
39,163 |
35,879 |
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Selling and administrative expenses |
18,331 |
15,246 |
34,405 |
31,529 |
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Operating income |
2,224 |
1,511 |
4,758 |
4,350 |
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Interest expense, net |
6 |
12 |
14 |
24 |
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Income before income taxes |
2,218 |
1,499 |
4,744 |
4,326 |
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Income tax expense (benefit) |
630 |
629 |
1,629 |
1,591 |
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Net income |
$1,588 |
$870 |
$3,115 |
$2,735 |
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Income (loss) per common share |
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Basic |
$0.06 |
$0.04 |
$0.13 |
$0.11 |
Diluted |
$0.06 |
$0.04 |
$0.13 |
$0.11 |
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Weighted average common shares
outstanding |
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Basic |
24,449 |
24,373 |
24,442 |
24,363 |
Diluted |
24,507 |
24,627 |
24,506 |
24,530 |
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Condensed Consolidated Balance
Sheets |
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(in thousands, unaudited) |
December 31, |
June 30, |
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2014 |
2014 |
Current Assets |
$110,946 |
$106,077 |
Property, Plant and Equipment, net |
44,332 |
44,282 |
Other Assets |
18,500 |
19,529 |
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$173,778 |
$169,888 |
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Current Liabilities |
$30,767 |
$29,289 |
Long-Term Debt |
-- |
-- |
Other Long-Term Liabilities |
2,131 |
2,187 |
Shareholders' Equity |
140,880 |
138,412 |
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$173,778 |
$169,888 |
CONTACT: DENNIS WELLS or
RON STOWELL
(513) 793-3200
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