<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
MARCH 31, 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
----- -----
Common Shares, no par value. Shares Outstanding at April 30, 1995: 5,023,811.
Page 1 of 14
INDEX TO EXHIBITS IS ON PAGE 14
<PAGE> 2
LSI INDUSTRIES INC.
FORM 10-Q
FOR QUARTER ENDED MARCH 31, 1995
INDEX
<TABLE>
<CAPTION>
Begins on
Page
----
<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 . . . . . . . . . . . . . . . . . . . . . . . 8
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
Page 2 of 14
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
(In thousands, except per 1995 1994 1995 1994
share amounts) ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $26,920 $20,273 $88,604 $69,156
Cost of products sold 18,350 13,948 59,002 45,898
------ ------ ------ ------
Gross profit 8,570 6,325 29,602 23,258
Selling and administrative expenses 7,279 5,475 21,872 17,906
------ ------ ------ ------
Operating Income 1,291 850 7,730 5,352
Other expenses 135 138 333 304
------ ------ ------ ------
Income before income taxes 1,156 712 7,397 5,048
Income tax expense 407 259 2,640 1,875
------ ------ ------ ------
Net income $ 749 $ 453 $ 4,757 $ 3,173
====== ====== ====== ======
Net income per common share $ .14 $ .09 $ .92 $ .62
====== ====== ====== ======
Average shares outstanding 5,199 5,146 5,182 5,086
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 3 of 14
<PAGE> 4
LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Dollars in thousands) March 31 June 30,
1995 1994
-------- --------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 853 $ 1,614
Accounts receivable 15,263 14,376
Inventories 16,187 11,079
Other current assets 1,629 1,390
------ ------
Total current assets 33,932 28,459
Property, plant and equipment, net 18,266 16,451
Goodwill 1,348 1,377
------ ------
$53,546 $46,287
====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt $ 842 $ 265
Accounts payable 8,140 7,958
Accrued expenses 7,267 9,013
------ ------
Total current liabilities 16,249 17,236
Long-Term Debt 7,454 3,335
Other Long-Term Liabilities 1,786 1,735
Shareholders' Equity:
Preferred shares, without par value; -- --
Authorized 1,000,000 share, none issued
Common shares, without par value; 7,734 7,539
Authorized 13,000,000 shares;
Outstanding 5,012,561 and 4,977,967 shares,
respectively
Retained earnings 20,323 16,442
------ ------
Total shareholders' equity 28,057 23,981
------ ------
$53,546 $46,287
====== ======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 4 of 14
<PAGE> 5
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Nine Months Ended
March 31
--------------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income of continuing operations $ 4,757 $ 3,173
Non-cash items included in income:
Depreciation and amortization 1,461 1,246
Deferred income taxes 90 37
Loss on disposition of fixed assets -- 111
Changes in operating assets and liabilities:
Accounts receivable (887) (1,401)
Inventories (5,108) (1,040)
Accounts payable and other (1,803) 4,231
Change in liability for discontinued operations (39) (188)
------- -------
Net cash flows from operating activities (1,529) 6,169
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (3,247) (3,700)
------- -------
Net cash flows from investing activities (3,247) (3,700)
Cash Flows from Financing Activities:
Increase (decrease) in lines of credit -- (1,312)
Payment of long-term debt (253) (647)
Increase in long-term debt 4,949 --
Cash dividends paid (876) (234)
Exercise of stock options 195 282
------- -------
Net cash flows from financing activities 4,015 (1,911)
Increase (decrease) in cash (761) 558
Cash at beginning of year 1,614 159
------- -------
Cash at end of period $ 853 $ 717
======= =======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 5 of 14
<PAGE> 6
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 March 31, 1995, and the results of its operations and
its cash flows for the periods ended March 31, 1995 and 1994. These
statements should be read in conjunction with the financial statements
and footnotes included in the fiscal 1994 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 181,328 and 185,812 shares,
respectively, for the three month periods ended March 31, 1995 and
1994, and 178,608 and 148,981 shares, respectively, for the nine month
periods ended March 31, 1995 and 1994.
NOTE 3: INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1995 June 30, 1994
-------------- -------------
(unaudited)
<S> <C> <C>
Raw Materials $ 7,953 $ 5,926
Work-in-Process and
Finished Goods 8,234 5,153
------ ------
$16,187 $11,079
====== ======
</TABLE>
NOTE 4: REVOLVING LINES OF CREDIT AND LONG-TERM DEBT
The Company entered into two new revolving lines of credit in December
1994 in replacement of the previous $8,000,000 revolving line of
credit. Both new lines of credit are unsecured, permit the Company to
borrow at either the banks'
Page 6 of 14
<PAGE> 7
base lending rate or at a rate based upon a 1.00 percentage point
increment over the LIBOR rate as periodically determined, and both
lines expire in the fourth calendar quarter of 1995. The aggregate
total of revolving lines of credit is $13,000,000, all of which is
available at March 31, 1995.
The Company's ten year, secured term loan was drawn up to $6,700,000
and interest only has been paid through December 31, 1994. Equal
quarterly payments, plus interest, will be made beginning March 31,
1995. Interest on the term loan is charged based upon a 1.25
percentage point increment over the LIBOR rate as periodically
determined, or at the bank's base lending rate, at the Company's
option.
In February 1995 the Company completed an Industrial Revenue
Development Bond borrowing in the amount of $1,250,000 associated with
the 1994 purchase and 1995 expansion of the facility in Northern
Kentucky. The term of this IRB is 15 years with semi-annual interest
payments and annual principal payments or retirement of bond principal
in increasing amounts over the term of the bonds. The IRB interest
rate will be re-established semi-annually and is currently 6.15%,
including the letter of credit fee.
NOTE 5: CASH DIVIDENDS
The Company paid annual dividends of $234,000 in September 1993 and
$476,000 in September 1994 and quarterly dividends of $200,000 in both
November 1994 and February 1995. In May 1995, the Company's Board of
Directors declared a $.04 per share dividend payable on May 22, 1995
to shareholders of record as of May 15, 1995.
NOTE 6: SALES TO MAJOR CUSTOMERS
The Company made sales in both the Lighting and Graphics segments to a
major customer, Chevron U.S.A., representing 19% and 11%,
respectively, of consolidated net sales in the three month periods
ended March 31, 1995 and 1994, and 16% and 13%, respectively, for the
nine month periods ended March 31, 1995 and 1994.
NOTE 7: INCOME TAXES
The Internal Revenue Service (IRS) has completed its audit of the
Company's 1989 through 1992 federal income tax returns. In October
1994, the Company received a 30-day letter from the IRS for proposed
return of approximately $2 million of income taxes which had been
refunded to the Company with the filing of its 1992 income tax return.
The IRS has 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. The Company plans to
vigorously protest this assessment and has filed a protest letter with
the IRS
Page 7 of 14
<PAGE> 8
stating that the Company believes that its filing position has merit.
The Company does not expect that the ultimate outcome of any final
assessment would be material to its financial position.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(In thousands; unaudited) March 31 March 31
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Lighting $16,299 $12,401 $52,405 $40,943
Graphics 10,621 7,872 36,199 28,213
------ ------ ------ ------
$26,920 $20,273 $88,604 $69,156
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1994
Net sales of $26,920,000 increased 33% over third quarter sales last year of
$20,273,000. Lighting segment sales increased 31% and Graphics segment sales
increased 32%, as a result of strong sales into the three major markets served
by the Company: the petroleum/convenience store, multi-site retail, and
commercial/industrial lighting. One customer, Chevron U.S.A., accounted for
19% of net sales in the third quarter of fiscal 1995 and 11% of net sales in
1994. 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 $8,570,000, or 31.8% of net sales, increased over last year's
third quarter gross profit of $6,325,000 or 31.2% of net sales. The increase
in amount of gross profit is attributed primarily to the 33% increase in sales.
Additionally, sales price increases to pass on materials cost increases were
effective in most business units for the entire third quarter. Selling and
administrative expenses increased to $7,279,000 primarily as a result of
increased sales volume, and remained at 27% of net sales.
Other expenses were substantially level at $135,000. Interest expense was up
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 third quarter of fiscal 1994 also included a
loss on disposition of fixed assets; there was no corresponding charge against
income in 1995.
Net income of $749,000 or $.14 per share increased from last year's net income
of $453,000 or $.09 per share as a result of increased sales and gross profit,
partially offset by increased provision for taxes.
Page 8 of 14
<PAGE> 9
NINE MONTHS ENDED MARCH 31, 1995 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1994
Net sales of $88,604,000 increased 28% over nine month sales last year of
$69,156,000. Both Lighting segment and Graphics segment sales increased 28%
primarily as a result of strong sales into the petroleum/convenience store and
multi-site retail markets. Sales to the commercial/industrial lighting market
were also increased. One customer, Chevron U.S.A., accounted for 16% of net
sales in the first nine months of fiscal 1995 as compared to 13% of net sales
in 1994. 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. Sales to the petroleum/convenience store market
have increased to 48% of total sales in the first nine months of fiscal 1995,
up from 45% last year. Contributing to this increase are sales of lighting
fixture upgrade kits as well as increased sales to Chevron.
Gross profit of $29,602,000, or 33.4% of net sales, increased over last year's
nine month gross profit of $23,258,000 or 33.6% of net sales. The increase in
amount of gross profit is attributed primarily to the 28% increase in sales.
The reduction in the gross profit percentage relates to two issues that
effected the first two quarters of fiscal 1995: sales volume and pricing.
Increased sales volume caused some manufacturing inefficiencies, increased
employment levels and related training, overtime and additional shifts, and
increased freight costs to satisfy customers' delivery requirements.
Production throughput in the Company's new metal fabrication facility was lower
than planned, therefore resulting in unabsorbed manufacturing overhead. The
Company has addressed each of these areas with corrective programs and believes
that the third quarter was not significantly impacted by these issues. The
Company experienced cost increases in several raw materials and components from
suppliers in the first half. Sales price increases for most product lines have
been implemented where appropriate to pass along these cost increases. Selling
and administrative expenses decreased from 26% to 25% of net sales, but
increased to $21,872,000 primarily as a result of increased sales volume.
Other expenses increased to $333,000 from $304,000. Interest expense was up
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. Fiscal 1994 also included a loss on disposition of
fixed assets; there was no corresponding charge against income in 1995.
Net income of $4,757,000 or $.92 per share increased from last year's nine month
net income of $3,173,000 or $.62 per share as a result of increased sales and
gross profit, partially offset by increased selling, administrative, and
interest expense, and increased provision for taxes.
Page 9 of 14
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995 the Company had working capital of $17,683,000, compared to
$11,223,000 at June 30, 1994, and the ratio of current assets to current
liabilities increased to 2.09 to 1 from 1.65 to 1. The increased working
capital is primarily attributed to increases in accounts receivable,
inventories, and other current assets, and a reduction in accrued expenses
related to income tax and compensation payments, partially offset by increases
in accounts payable related to increased sales and production volumes,
increased current maturities of long-term debt, and to decreased cash. The
Company used $1.5 million in cash for operating activities in the first nine
months of fiscal year 1995. The debt to equity ratio of .30 to 1 at March 31,
1995 increased from .15 to 1 as of June 30, 1994.
Capital expenditures of $3,247,000 in the first nine months of fiscal year 1995
compares to $3,700,000 in the comparable period last year. Spending in fiscal
year 1995 is primarily related to office expansion, and manufacturing equipment
and process improvements and is expected to total approximately $4 million for
the full year. The Company paid an annual dividend of $.10 per share or
$476,000 and a 5% stock dividend in September 1994. Additionally, $.04 per
share or $200,000 quarterly cash dividends were paid in November 1994 and
February 1995.
The Company entered into two new revolving lines of credit in December 1994 in
replacement of the previous $8,000,000 revolving line of credit. Both new
lines of credit are unsecured, permit the Company to borrow at either the
banks' base lending rate or at a rate based upon a 1.00 percentage point
increment (improved from the previous 1.25 percentage point increment) over the
LIBOR rate as periodically determined and both lines expire in the fourth
calendar quarter of 1995. The aggregate total of revolving lines of credit is
$13,000,000, all of which is available at March 31, 1995. A final draw of $1.2
million was made in December 1994 on the Company's ten year term loan. Equal
quarterly payments of $167,500, plus interest, began in March 1995. In
February 1995 the Company completed an Industrial Revenue Development Bond
borrowing in the amount of $1,250,000 associated with the 1994 purchase and
1995 expansion of the facility in Northern Kentucky. The term of this IRB is
15 years with semi-annual interest payments and annual principal payments or
retirement of bond principal in increasing amounts over the term of the bonds.
The IRB interest rate will be re-established semi-annually and is currently
6.15%, including the letter of credit fee. The Company is in compliance with
all of its loan covenants. The Company believes that the total available line
of credit plus cash flows from operating activities are adequate for the
Company's operational and capital expenditure needs.
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.
Page 10 of 14
<PAGE> 11
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 Accounting Officer)
May 10, 1995
Page 11 of 14
<PAGE> 12
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
LSI INDUSTRIES INC.
Commission File No. 0-13375
EXHIBIT VOLUME
Form 10-Q
March 31, 1995
Page 12 of 14
<PAGE> 13
LSI INDUSTRIES INC.
Form 10-Q
March 31, 1995
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Begins on
Exhibit Page
Number Description of Exhibit Number
- - - - ------ ---------------------- ------
<S> <C> <C>
11 Statement Re Computation of Earnings per
Share 14
</TABLE>
Page 13 of 14
<PAGE> 1
EXHIBIT 11
LSI INDUSTRIES INC.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
------------------ -----------------
1994 1993 1995 1994
<S> <C> <C> <C> <C>
NET INCOME $ 749 $ 453 $ 4,757 $ 3,173
====== ====== ====== ======
AVERAGE SHARES OUTSTANDING (a)
Weighted average shares
outstanding during the period,
net of treasury shares 5,018 4,960 5,004 4,937
Common Share Equivalents:
Common Shares to be issued
under Stock Option Plan (b) 181 186 178 149
------ ------ ------ ------
Average Shares Outstanding 5,199 5,146 5,182 5,086
====== ====== ====== ======
NET INCOME PER SHARE $ .14 $ .09 $ .92 $ .62
====== ====== ====== ======
</TABLE>
Notes (a): Weighted average shares outstanding and Common Share
Equivalents reflect the 5% stock dividend paid in September
1994.
(b): 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.
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q FILED FOR THE PERIOD ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763532
<NAME> LSI INDUSTRIES INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 853
<SECURITIES> 0
<RECEIVABLES> 15,537
<ALLOWANCES> (274)
<INVENTORY> 16,187
<CURRENT-ASSETS> 33,932
<PP&E> 28,248
<DEPRECIATION> (9,982)
<TOTAL-ASSETS> 53,546
<CURRENT-LIABILITIES> 16,249
<BONDS> 0
<COMMON> 7,734
0
0
<OTHER-SE> 20,323
<TOTAL-LIABILITY-AND-EQUITY> 53,546
<SALES> 88,604
<TOTAL-REVENUES> 88,604
<CGS> 59,002
<TOTAL-COSTS> 59,002
<OTHER-EXPENSES> 21,901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 304
<INCOME-PRETAX> 7,397
<INCOME-TAX> 2,640
<INCOME-CONTINUING> 4,757
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,757
<EPS-PRIMARY> .92
<EPS-DILUTED> .92
</TABLE>
