<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1995.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM _______ TO_______.
Commission File No. 0-13375
LSI Industries Inc.
State of Incorporation - Ohio IRS Employer I.D. No. 31-0888951
10000 Alliance Road
Cincinnati, Ohio 45242
(513) 793-3200
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
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Common Shares, no par value. Shares Outstanding at October 30, 1995: 7,622,189.
Page 1 of 10
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LSI INDUSTRIES INC.
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 1995
INDEX
<TABLE>
<CAPTION>
Begins on
Page
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<S> <C>
PART I. Financial Information
ITEM 1. Financial Statements
Consolidated Income Statements........................ 3
Consolidated Balance Sheets........................... 4
Consolidated Statements of Cash Flows................. 5
Notes to Financial Statements......................... 6
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................... 7
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K...................... 9
Signatures ...................................................... 9
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30
1995 1994
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<S> <C> <C>
(In thousands, except per
share amounts)
Net sales $35,882 $29,320
Cost of products sold 23,940 19,462
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Gross profit 11,942 9,858
Selling and administrative expenses 8,312 6,905
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Operating income 3,630 2,953
Interest expense 143 64
Other expenses 5 9
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Income before income taxes 3,482 2,880
Income tax expense 1,288 1,031
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Net income $ 2,194 $ 1,849
======= =======
Net income per common share $ .28 $ .24
======= =======
Average shares outstanding 7,961 7,748
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
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LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) September 30, June 30,
1995 1995
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(Unaudited) (Derived from Audited
financial statements)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,342 $ 2,124
Accounts receivable 21,661 19,273
Inventories 19,275 18,584
Other current assets 1,244 1,835
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Total current assets 43,522 41,816
Property, plant and equipment, net 19,800 19,398
Goodwill 1,330 1,339
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$64,652 $62,553
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LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 1,500 $ --
Current maturities of long-term debt 843 842
Accounts payable 11,881 10,641
Accrued expenses 10,825 12,545
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Total current liabilities 25,049 24,028
Long-Term Debt 7,060 7,257
Other Long-Term Liabilities 1,455 1,815
Shareholders' Equity:
Preferred shares, without par value; -- --
Authorized 1,000,000 share, none issued
Common shares, without par value; 8,040 7,915
Authorized 13,000,000 shares;
Outstanding 7,613,776 and 7,554,229 shares,
respectively
Retained earnings 23,048 21,538
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Total shareholders' equity 31,088 29,453
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$64,652 $62,553
======= =======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
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LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Three Months Ended
September 30
----------------------
1995 1994
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<S> <C> <C>
Cash Flows From Operating Activities:
Net income from continuing operations $ 2,194 $ 1,849
Non-cash items included in income:
Depreciation and amortization 567 457
Deferred income taxes 20 54
(Gain) on disposition of fixed assets (4) --
Changes in operating assets and liabilities:
Accounts receivable (2,388) (3,196)
Inventories (691) (1,772)
Accounts payable and other (217) (296)
Change in liability for discontinued operations (52) (26)
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Net cash flows from operating activities (1,571) (2,930)
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (960) (777)
Proceeds from sale of fixed assets 4 --
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Net cash flows from investing activities (956) (777)
Cash Flows from Financing Activities:
Increase (decrease) in lines of credit 1,500 375
Payment of long-term debt (196) (29)
Increase in long-term debt -- 2,500
Cash dividends paid (684) (476)
Exercise of stock options 125 100
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Net cash flows from financing activities 745 2,470
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Increase (decrease) in cash (782) (1,237)
Cash at beginning of year 2,124 1,614
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Cash at end of period $ 1,342 $ 377
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</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
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LSI INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1: INTERIM FINANCIAL STATEMENTS
The interim financial statements are unaudited and are prepared in
accordance with rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. In the opinion of Management, the interim
financial statements include all normal adjustments and disclosures
necessary to present fairly the Company's financial position as of
September 30, 1995, and the results of its operations and its cash flows
for the periods ended September 30, 1995 and 1994. These statements
should be read in conjunction with the financial statements and
footnotes included in the fiscal 1995 annual report.
NOTE 2: NET INCOME PER COMMON SHARE
The computation of net income per common share is based on the weighted
average common shares outstanding for the period, including common share
equivalents. Common share equivalents consist of dilutive stock options
of which there were 379,000 and 270,000 shares, respectively, for the
three month periods ended September 30, 1995 and 1994.
NOTE 3: INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, 1995 June 30, 1995
------------------ -------------
(unaudited) (derived from audited
financial statements)
<S> <C> <C>
Raw Materials $10,093 $ 9,821
Work-in-Process and
Finished Goods 9,182 8,763
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$19,275 $18,584
======= =======
</TABLE>
NOTE 4: CASH DIVIDENDS
The Company paid dividends of $476,000 in September 1994 (annual
dividend for fiscal year 1994) and $684,000 in September 1995 (fourth
quarter and special year end dividend for fiscal year 1995). In October
1995, the Company's Board of Directors declared a $.04 per share regular
quarterly dividend payable on November 13, 1995 to shareholders of
record as of November 6, 1995.
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NOTE 5: SALES TO MAJOR CUSTOMERS
The Company made sales in both the Lighting and Graphics segments to a
major customer, Chevron U.S.A., representing 11% and 15%, respectively,
of consolidated net sales in the three month periods ended September 30,
1995 and 1994, respectively.
NOTE 6: INCOME TAXES
The Company discontinued a certain part of its operations in 1992 and
reported a $4.3 million loss, net of a $3.2 million income tax benefit.
The Internal Revenue Service (IRS) has completed its audit of the
Company's 1989 through 1992 federal income tax returns. The IRS
questioned the tax treatment of the loss associated with the
discontinued operations, specifically as to whether it should receive
ordinary loss or capital loss treatment. In October 1994, the IRS
proposed audit adjustments which would have resulted in a return of
approximately $2 million of income taxes (plus interest) which had been
refunded to the Company with the filing of its 1992 income tax return.
The Company is discussing a possible settlement with the IRS Appeals
Division which could result in payment of approximately $1.8 million
(composed of taxes and interest), and in a charge to discontinued
operations of approximately $1.5 million to increase the Company's
reserve for remaining liabilities associated with the discontinued
operations. However, there can be no assurances as to the timing or
amount of the resolution of this matter. The Company continues to
investigate other options which may be available to it with respect to
this matter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
Three Months Ended
(In thousands; unaudited) September 30
------------------
1995 1994
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<S> <C> <C>
Lighting $22,531 $16,247
Graphics 13,351 13,073
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$35,882 $29,320
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</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 1994
Net sales of $35,882,000 increased 22% over first quarter sales last year of
$29,320,000. Lighting segment sales increased 39% and Graphics segment sales
increased 2%, as a result of strong lighting sales in the petroleum/convenience
store and the multi-site retail markets. One customer, Chevron U.S.A., accounted
for 11% of
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net sales in the first quarter of fiscal 1996 and 15% of net sales in the
corresponding period of 1995. The Company believes that it continues to maintain
a good business relationship with this major customer; however, the level of
total sales is never assured in the future.
Gross profit of $11,942,000, or 33.3% of net sales, increased over last year's
first quarter gross profit of $9,858,000 or 33.6% of net sales. The increase in
amount of gross profit is attributed primarily to the 22% increase in sales. A
sales mix shift in the Company's Graphics segment to somewhat lower margin
programs in the first quarter and an increase in lighting sales to the petroleum
market both provided influences that reduced the gross profit percentage.
Selling and administrative expenses increased to $8,312,000 primarily as a
result of increased sales volume, and were reduced to 23% of net sales in fiscal
1996 from 24% of net sales in fiscal 1995.
Interest expense increased from $64,000 to $143,000, primarily as a result of
increased average borrowings on the Company's revolving lines of credit and term
loan facilities in addition to increased effective borrowing rates. The
Company's effective tax rate increased to 37% as a result of the increased
provision for state income taxes.
Net income of $2,194,000 or $.28 per share increased 19% from last year's net
income of $1,849,000 or $.24 per share as a result of increased sales and gross
profit, partially offset by increased operating expenses and increased provision
for income taxes.
As discussed in Note 6 to the financial statements and as previously described
under "Legal Proceedings" in the Company's prior reports on Form 10-Q, the
Company has been involved in a dispute with the Internal Revenue Service (IRS)
in which the IRS has proposed audit adjustments which could result in a payment
of income taxes by the Company of approximately $2 million, plus interest. The
proposed adjustments relate to the Company's 1992 discontinued operations and
are associated with income tax which had been refunded to the Company with the
filing of its 1992 income tax return. The Company is discussing a possible
settlement with the IRS Appeals Division which could result in payment of
approximately $1.8 million, composed of taxes and interest, and in a charge to
discontinued operations of approximately $1.5 million to increase the Company's
reserve for remaining liabilities associated with the discontinued operations.
However, there can be no assurances as to the timing or amount of the resolution
of this matter. The Company continues to investigate other options which may be
available to it with respect to this matter.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995 the Company had working capital of $18,473,000, compared
to $17,788,000 at June 30, 1995. The ratio of current assets to current
liabilities remained at 1.74 to 1. The increased working capital is primarily
attributed to increases in accounts receivable and inventories, and to a
reduction in accrued expenses, partially offset by increases in notes payable to
banks, to increases in accounts payable (related to increased sales and
production volumes), and to decreased cash. The Company used $1.6 million in
cash for operating activities in the first quarter of fiscal year 1996. The debt
to equity ratio of .28 to 1 at September 30, 1995 decreased from .30 to 1 as of
June 30, 1995. The Company's primary source of liquidity continues to be its
lines of
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credit, which carried $9 million of available borrowing capacity as of November
2, 1995. The Company believes its sources of liquidity and capital are adequate
to meet its operating needs.
Capital expenditures of $960,000 in the first quarter of fiscal year 1996
compares to $777,000 in the comparable period last year. Spending in fiscal year
1996 is primarily related to manufacturing equipment and process improvements
and is expected to total approximately $4.4 million for the full year. The
Company paid cash dividends of $476,000 ($.07 per share) and a 5% stock dividend
in September 1994. Cash dividends of $684,000 ($.04 per share for the regular
fourth quarter dividend and $.05 per share for a special year-end dividend) were
paid in September 1995. In October 1995, the Company's Board of Directors
declared a regular quarterly cash dividend of $.04 per share ($305,000) to be
paid November 13, 1995 to shareholders of record as of November 6, 1995.
The Company continues to seek opportunities to invest in new products and
markets and in acquisitions which fit its strategic growth plans in the lighting
and graphics markets.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
11 Statement Re Computation of Earnings per share
(b) Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this Report is filed.
[All other items required in Part II have been omitted because they
are not applicable or are not required.]
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LSI Industries Inc.
BY: /s/ ROBERT J. READY
--------------------------------
Robert J. Ready
President and Chief Executive Officer
(Principal Executive Officer)
BY: /s/ RONALD S. STOWELL
--------------------------------
Ronald S. Stowell
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
November 10, 1995
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EXHIBIT 11
LSI INDUSTRIES INC.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended
September 30
-------------------
1995 1994
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<S> <C> <C>
NET INCOME $2,194 $1,849
- ---------- ====== ======
AVERAGE SHARES OUTSTANDING
Weighted average shares
outstanding during the period 7,582 7,478
Common Share Equivalents:
Common Shares to be issued
under Stock Option Plan 379 270
------ ------
Average Shares Outstanding 7,961 7,748
====== ======
NET INCOME PER SHARE $ .28 $ .24
- -------------------- ====== ======
</TABLE>
Note: Calculated using the "Treasury Stock" method as if options were
exercised and the funds were used to purchase Common Shares at the
average market price during the period.
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,342
<SECURITIES> 0
<RECEIVABLES> 21,907
<ALLOWANCES> 246
<INVENTORY> 19,275
<CURRENT-ASSETS> 43,522
<PP&E> 29,317
<DEPRECIATION> 9,517
<TOTAL-ASSETS> 64,652
<CURRENT-LIABILITIES> 25,049
<BONDS> 7,060
<COMMON> 8,040
0
0
<OTHER-SE> 23,048
<TOTAL-LIABILITY-AND-EQUITY> 64,652
<SALES> 35,882
<TOTAL-REVENUES> 35,882
<CGS> 23,940
<TOTAL-COSTS> 8,312
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 143
<INCOME-PRETAX> 3,482
<INCOME-TAX> 1,288
<INCOME-CONTINUING> 2,194
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,194
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
