LSI Industries Inc. (NASDAQ:LYTS)
today:
- reported second quarter FY 2017 net sales of $85,658,000, an
increase of 1% over $84,687,000 in the same period of the prior
fiscal year;
- reported second quarter FY 2017 net income of $2,006,000, or
$0.08 per share, a decrease of 47% as compared to $3,782,000, or
$0.15 per share, for the same period of the prior fiscal year;
- reported first half FY 2017 net sales of $169,817,000, a
decrease of 0.5% as compared to $170,612,000 in the prior fiscal
year;
- reported first half FY 2017 net income of $2,835,000, or $0.11
per share, a decrease of 62% as compared to net income of
$7,532,000, or $0.30 per share, for the prior fiscal year;
and
- declared a regular quarterly cash dividend of $0.05 per share
payable February 14, 2017 to shareholders of record February 6,
2017.
Financial Highlights |
|
|
|
|
|
|
|
|
(In thousands, except
per |
|
Three Months Ended |
Six Months Ended |
|
share data;
unaudited) |
|
December 31 |
December 31 |
|
|
|
2016 |
|
2015 |
|
% Change |
|
|
2016 |
|
2015 |
|
|
% Change |
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
85,658 |
|
$ |
84,687 |
|
|
1 |
% |
|
|
$ |
169,817 |
|
$ |
170,612 |
|
|
(0.5 |
)% |
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
|
|
|
|
|
|
as
reported |
|
$ |
2,818 |
|
$ |
5,380 |
|
|
(48 |
)% |
|
|
$ |
3,884 |
|
$ |
11,143 |
|
|
(65 |
)% |
|
Restructuring costs and |
|
|
|
|
|
|
|
|
plant
closure costs |
|
|
697 |
|
|
-- |
n/m |
|
|
|
1,753 |
|
|
-- |
|
n/m |
|
Severance
Costs |
|
|
28 |
|
|
223 |
|
|
(87 |
)% |
|
|
|
173 |
|
|
223 |
|
(35 |
)% |
|
Operating Income |
|
|
|
|
|
|
|
|
as
adjusted (a) |
|
$ |
3,543 |
|
$ |
5,603 |
|
|
(37 |
)% |
|
|
$ |
5,810 |
|
$ |
11,366 |
|
|
(49 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income as
reported |
|
$ |
2,006 |
|
$ |
3,782 |
|
|
(47 |
)% |
|
|
$ |
2,835 |
|
$ |
7,532 |
|
|
(62 |
)% |
|
Net Income as
adjusted |
|
$ |
2,477 |
|
$ |
3,928 |
|
|
(37 |
)% |
|
|
$ |
4,098 |
|
$ |
7,678 |
|
|
(47 |
)% |
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
(diluted)
as reported |
|
$ |
0.08 |
|
$ |
0.15 |
|
|
(47 |
)% |
|
|
$ |
0.11 |
|
$ |
0.30 |
|
|
(63 |
)% |
|
Earnings per share |
|
|
|
|
|
|
|
|
(diluted)
as adjusted |
|
$ |
0.10 |
|
$ |
0.15 |
|
|
(33 |
)% |
|
|
$ |
0.16 |
|
$ |
0.30 |
|
|
(47 |
)% |
|
Financial Highlights (continued) |
|
|
|
|
|
|
(In thousands) |
|
|
|
|
|
|
|
|
12/31/16 |
|
|
|
6/30/16 |
Working Capital |
|
$ |
94,243 |
|
|
$ |
88,510 |
Total Assets |
|
$ |
195,836 |
|
|
$ |
195,560 |
Long-Term Debt |
|
$ |
nil |
|
|
$ |
nil |
Shareholders’
Equity |
|
$ |
157,820 |
|
|
$ |
155,520 |
|
|
|
|
|
|
|
|
(a) The Company recorded pre-tax restructuring costs
and plant closure costs totaling $697,000 and $1,753,000 in the
second quarter and first half periods of fiscal 2017,
respectively. Additionally, the Company incurred pre-tax
severance costs of $28,000 and $223,000 in the second quarter of
fiscal 2017 and 2016, respectively, and incurred pre-tax severance
costs of $173,000 and $223,000 in the first half of fiscal 2017 and
fiscal 2016, respectively.
Management Comments and Outlook
Dennis W. Wells, Chief Executive Officer and President,
commented, “The second quarter of fiscal 2017 proved to be a
challenge as a general weakness in our markets, combined with a
difficult comparison with the prior year (caused in part by
significant sales to a large graphics customer in the year-ago
period), led to soft sales growth. Net sales in the quarter
increased 1% year-over-year.
“Inflationary pressures affected raw material costs, especially
steel and aluminum; and freight costs increased as a percentage of
sales. We also saw increases in commissions, wages, and
health benefits, though some of this impact was blunted through
Lean activities aimed at cost reductions. Our gross margin
for the quarter was 25.0%, or 25.7% excluding restructuring costs,
compared to 28.3% a year ago.
“With the consolidation of Woonsocket, RI manufacturing into our
North Canton operation, we have now completed the closure of three
facilities during the first half of fiscal 2017. We will
begin to see the impact of these closures in our third fiscal
quarter in terms of savings, which are estimated to be $2.5 million
annually combined. Additionally, during the first half of the
year we completed 54 Kaizen events, and we are harvesting the
benefits of these Lean activities.
“In spite of the challenges we faced during the quarter, I am
pleased to report that we are continuing to make significant
strides with our strategic initiatives, including the
revitalization of our sales teams across all segments; investing in
new technologies including Smart Signage and Smart Lighting; and
the ongoing pursuit of operating efficiencies and facility
consolidation. Our LED mix continues to improve, with LED
sales representing 77% of total lighting sales during the
quarter.
“Internal investments in new technologies represent an important
strategic initiative at the Company. Our SOARTM Digital
Signage program is continuing to garner interest in the market,
leading us to further bolster our sales and marketing efforts for
this program. Additionally both AirLinkTM and SmartVisionTM,
two of our Smart Lighting programs, continue to show
promise.
“As we look ahead to the second half of fiscal year 2017, we see
a landscape filled with both challenges and opportunities.
Inflationary pressures, particularly for raw materials, are
trending upwards. We have begun to offset this impact by
initiating appropriate pricing strategies, as well as a continued
drive towards greater efficiency through the LSI Business
System. With regard to market dynamics, there are a number of
factors at play. While we experienced softer demand during
the first half of fiscal 2017 overall, December results showed
signs of strength. We are cautiously optimistic that this
trend will continue into the second half. We are paying close
attention to the new Administration as it pursues new tax and trade
policies, and believe that our strong U.S. manufacturing
capabilities may be of benefit with regard to trade policies.
Additionally we are continuing to pursue external growth
opportunities using a disciplined acquisition strategy.
“Our financial position remains strong and debt-free. We
are maintaining our dividend at a $0.20 annual rate, and will
consider increasing the rate based upon the strength of our
operating results in upcoming quarters.
“We remain committed to achieving above-market revenue growth
and improving margins moving forward, and we are confident that our
continued efforts will bear fruit.”
Second Quarter Fiscal 2017 Results
Net sales in the second quarter of fiscal 2017 were $85,658,000,
up 1% from last year’s second quarter net sales of
$84,687,000. Lighting Segment net sales of $60,169,000 were
up 1.0% from last year’s second quarter net sales, Graphics Segment
net sales decreased 2.9% to $20,582,000, and Technology Segment net
sales (excluding significant intersegment net sales) increased
26.5% to $4,907,000. 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 3.4% in the second quarter of fiscal 2017. In
the second quarter of fiscal 2017 the Company recorded pre-tax
restructuring costs of $697,000 ($640,000 was expensed in Cost of
Products Sold and $57,000 was expensed in Selling and
Administrative expenses). Additionally, in the second quarter
of fiscal 2016 the Company recorded a pre-tax severance cost
expense of $223,000. The second quarter and first half
results were favorably impacted by significant adjustments to the
Company’s incentive compensation and stock compensation
accruals. The fiscal 2017 second quarter net income of
$2,006,000, or $0.08 per share, decreased 47% from the fiscal 2016
second quarter net income of $3,782,000 or $0.15 per share.
Earnings per share represents diluted earnings per share.
First Half Fiscal 2017 Results
Net sales in the first half of fiscal 2017 were $169,817,000, a
decrease of 0.5% as compared to last year’s first half net sales of
$170,612,000. Lighting Segment net sales increased 1.6% to
$120,539,000, Graphics Segment net sales decreased 9.3% to
$39,476,000, and Technology Segment net sales (excluding
significant intersegment net sales) increased 16.7% to
$9,802,000. 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 0.8% in the first half of fiscal 2017. In the
first half of fiscal 2017 the Company recorded pre-tax
restructuring costs of $1,353,000 ($1,143,000 was expensed in Cost
of Products Sold and $210,000 was expensed in Selling and
Administrative expenses) and plant closure costs related to an
inventory write-down of $400,000 as the Company exited the
manufacturing of fluorescent lighting fixtures -- combining
to a total of $1,753,000. Additionally, the Company recorded other
severance costs of $173,000 and $223,000 in the first half of
fiscal 2017 and 2016, respectively. The second quarter and first
half results were favorably impacted by significant adjustments to
the Company’s incentive compensation and stock compensation
accruals. The first half fiscal 2017 net income of $2,835,000, or
$0.11 per share, decreased 62% from fiscal 2016 first half net
income of $7,532,000, or $0.30 per share. Earnings per share
represents diluted earnings per share.
Balance Sheet
The balance sheet at December 31, 2016 included current assets
of $131.1 million, current liabilities of $36.9 million and working
capital of $94.2 million, which includes cash of $33.0
million. The current ratio was 3.6 to 1. The Company
has shareholders’ equity of $157.8 million, no long-term debt, and
borrowing capacity on its commercial bank facility as of December
31, 2016 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 $0.05 per share in connection with the second quarter
of fiscal 2017 payable February 14, 2017 to shareholders of record
as of February 6, 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 six month periods ended
December 31, 2016 and 2015. 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) |
|
Second Quarter |
|
|
|
Diluted |
|
|
Diluted |
|
|
FY 2017 |
|
EPS |
|
FY 2016 |
|
EPS |
Reconciliation of net
income to adjusted net income: |
|
|
|
|
|
|
|
|
|
Net
income and earnings per share as reported |
|
$ |
2,006 |
|
$ |
0.08 |
|
$ |
3,782 |
|
$ |
0.15 |
|
|
|
|
|
Adjustment for restructuring and plant closure |
|
|
|
|
costs,
inclusive of the income tax effect |
|
|
448 |
|
|
0.02 |
|
-- |
|
|
-- |
|
|
|
|
|
Adjustment for other severance costs, |
|
|
|
|
inclusive
of the income tax effect |
|
|
23 |
|
|
-- |
|
|
146 |
|
|
0.01 |
|
|
|
|
|
Adjusted
net income and earnings per share |
|
$ |
2,477 |
|
$ |
0.10 |
|
$ |
3,928 |
|
$ |
0.15 |
|
|
|
|
|
(in thousands, except
per share data; unaudited) |
|
Six Month 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 |
|
$ |
2,835 |
|
$ |
0.11 |
|
$ |
7,532 |
|
$ |
0.30 |
|
|
|
|
|
Adjustment for restructuring and plant closure |
|
|
|
|
costs, inclusive of the income tax effect |
|
|
1,143 |
|
|
0.04 |
|
|
-- |
|
|
-- |
|
|
|
|
|
Adjustment for other severance costs, |
|
|
|
|
inclusive of the income tax effect |
|
|
120 |
|
|
-- |
|
|
146 |
|
|
0.01 |
|
|
|
|
|
Adjusted net income and earnings per share |
|
$ |
4,098 |
|
$ |
0.16 |
|
$ |
7,678 |
|
$ |
0.30 |
"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 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, 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 |
Six Months Ended |
(in thousands, except
per |
December 31 |
December 31 |
share data;
unaudited) |
2016 |
2015 |
2016 |
2015 |
|
|
|
|
|
Net sales |
|
$ |
85,658 |
|
|
$ |
84,687 |
|
|
$ |
169,817 |
|
|
$ |
170,612 |
|
|
|
|
|
|
Cost of products and
services sold |
|
|
63,611 |
|
|
|
60,761 |
|
|
|
126,432 |
|
|
|
123,337 |
|
Restructuring costs –
cost of sales |
|
|
640 |
|
|
|
-- |
|
|
|
1,143 |
|
|
|
-- |
|
|
|
|
|
|
Gross
profit |
|
|
21,407 |
|
|
|
23,926 |
|
|
|
42,242 |
|
|
|
47,725 |
|
|
|
|
|
|
Selling and
administrative expenses |
|
|
18,532 |
|
|
|
18,546 |
|
|
|
38,148 |
|
|
|
36,132 |
|
|
|
|
|
|
Restructuring costs –
SG&A expense |
|
|
57 |
|
|
|
-- |
|
|
|
210 |
|
|
|
-- |
|
|
|
|
|
|
Operating
income |
|
|
2,818 |
|
|
|
5,380 |
|
|
|
3,884 |
|
|
|
11,143 |
|
|
|
|
|
|
|
|
|
|
|
Interest (income)
expense, net |
|
|
(20 |
) |
|
|
(8 |
) |
|
|
(34 |
) |
|
|
(8 |
) |
|
|
|
|
|
Income
before income taxes |
|
|
2,838 |
|
|
|
5,388 |
|
|
|
3,918 |
|
|
|
11,151 |
|
|
|
|
|
|
Income tax expense |
|
|
832 |
|
|
|
1,606 |
|
|
|
1,083 |
|
|
|
3,619 |
|
|
|
|
|
|
Net income |
|
$ |
2,006 |
|
|
$ |
3,782 |
|
|
$ |
2,835 |
|
|
$ |
7,532 |
|
|
|
|
|
|
Income per common
share |
|
|
|
|
Basic |
|
$ |
0.08 |
|
|
$ |
0.15 |
|
|
$ |
0.11 |
|
|
$ |
0.30 |
|
Diluted |
|
$ |
0.08 |
|
|
$ |
0.15 |
|
|
$ |
0.11 |
|
|
$ |
0.30 |
|
|
|
|
|
|
Weighted average common
shares outstanding |
|
|
|
|
Basic |
|
|
25,314 |
|
|
|
24,911 |
|
|
|
25,924 |
|
|
|
24,838 |
|
Diluted |
|
|
25,803 |
|
|
|
25,624 |
|
|
|
25,859 |
|
|
|
25,405 |
|
Condensed Consolidated Balance
Sheets |
|
|
(in
thousands, unaudited) |
December 31, |
June 30, |
|
|
2016 |
2016 |
|
Current Assets |
$ |
131,140 |
|
|
$ |
127,743 |
|
Property, Plant and
Equipment, net |
|
43,426 |
|
|
|
47,462 |
|
Other Assets |
|
21,270 |
|
|
|
20,355 |
|
|
$ |
195,836 |
|
|
$ |
195,560 |
|
|
|
|
|
Current
Liabilities |
$ |
36,897 |
|
|
$ |
39,233 |
|
Long-Term Debt |
|
-- |
|
|
|
-- |
|
Other Long-Term
Liabilities |
|
1,119 |
|
|
|
807 |
|
Shareholders’
Equity |
|
157,820 |
|
|
|
155,520 |
|
|
$ |
195,836 |
|
|
$ |
195,560 |
CONTACT:
DENNIS WELLS or
RON STOWELL
(513) 793-3200
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