<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, 1996.
/_/ 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 October 30, 1996: 9,026,546
<PAGE> 2
LSI INDUSTRIES INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
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.................................. 7
PART II. Other Information
ITEM 6. Exhibits and Reports on Form 8-K................. 9
Signatures ................................................. 10
</TABLE>
Page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30
------------------
(In thousands, except per 1996 1995
share amounts) ---- ----
<S> <C> <C>
Net sales $36,885 $35,882
Cost of products sold 24,745 23,940
------- -------
Gross profit 12,140 11,942
Selling and administrative expenses 8,805 8,312
------- -------
Operating income 3,335 3,630
Interest (income) expense, net (97) 143
Other expense 14 5
------- -------
Income before income taxes 3,418 3,482
Income tax expense 1,282 1,288
-------- --------
Net income $ 2,136 $ 2,194
======= =======
Net income per common share $ .23 $ .28
======= =======
Average shares outstanding 9,240 7,961
======= =======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 3
<PAGE> 4
LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) September 30, June 30,
1996 1996
------------- --------
ASSETS
- ------
<S> <C> <C>
Current Assets
Cash and cash equivalents $12,448 $11,138
Accounts receivable 26,438 24,825
Inventories 17,899 19,660
Other current assets 1,788 2,246
------- -------
Total current assets 58,573 57,869
Property, plant and equipment, net 20,231 20,327
Goodwill 1,290 1,300
------- -------
$80,094 $79,496
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
Current Liabilities
Notes payable to bank $ 344 $ --
Current maturities of long-term debt 180 180
Accounts payable 9,932 10,855
Accrued expenses 10,342 10,688
------- -------
Total current liabilities 20,798 21,723
Long-Term Debt 1,353 1,382
Other Long-Term Liabilities 1,684 1,654
Shareholders' Equity
Preferred shares, without par value;
Authorized 1,000,000 shares; none issued -- --
Common shares, without par value;
Authorized 30,000,000 shares;
Outstanding 9,023,861 and 8,964,491
shares, respectively 28,190 28,082
Retained earnings 28,069 26,655
------- -------
Total shareholders' equity 56,259 54,737
------- -------
$80,094 $79,496
======= =======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 4
<PAGE> 5
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Three Months Ended
September 30
------------------
1996 1995
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 2,136 $ 2,194
Non-cash items included in income
Depreciation and amortization 710 567
Deferred income taxes 30 20
(Gain) loss on disposition of fixed assets 4 (4)
Changes in operating assets and liabilities
Accounts receivable (1,613) (2,388)
Inventories 1,761 (691)
Accounts payable and other (811) (217)
Change in liability for discontinued operations -- (52)
------- -------
Net cash flows from operating activities 2,217 (571)
------- -------
Cash Flows from Investing Activities
Purchase of property, plant and equipment (608) (960)
Proceeds from sale of fixed assets -- 4
------- -------
Net cash flows from investing activities (608) (956)
------- -------
Cash Flows from Financing Activities
Increase in notes payable to bank 344 1,500
Payment of long-term debt (29) (196)
Cash dividends paid (722) (684)
Exercise of stock options 108 125
------- -------
Net cash flows from financing activities (299) 745
------- --------
Increase (decrease) in cash and cash equivalents 1,310 (782)
Cash and cash equivalents at beginning of year 11,138 2,124
------- --------
Cash and cash equivalents at end of period $12,448 $ 1,342
======= ========
Supplemental Cash Flow Information
Interest paid $ 39 $ 166
Income taxes paid $ 27 $ 74
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 5
<PAGE> 6
LSI INDUSTRIES INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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, 1996,
and the results of its operations and its cash flows for the periods ended
September 30, 1996 and 1995. These statements should be read in conjunction
with the financial statements and footnotes included in the fiscal 1996
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 include the dilutive effect of stock
options of 245,000 and 379,000 shares, respectively, for the three month
periods ended September 30, 1996 and 1995.
NOTE 3: INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ --------------
<S> <C> <C> <C>
Raw Materials $ 9,727 $11,432
Work-in-Process and
Finished Goods 8,172 8,228
------- -------
$17,899 $19,660
======= =======
</TABLE>
NOTE 4: CASH DIVIDENDS
The Company paid cash dividends of $722,000 and $684,000 in the three
month periods ended September 30, 1996 and 1995, respectively. In
October 1996, the Company's Board of Directors declared a $.05 per
share regular quarterly cash dividend ($451,000) payable on November
19, 1996 to shareholders of record November 12, 1996.
Page 6
<PAGE> 7
NOTE 5: SALES TO MAJOR CUSTOMERS
The Company's sales in both the Image and Commercial / Industrial
Lighting segments (see discussion in Management's Discussion and
Analysis of Financial Condition and Results of Operations) to a major
customer, Chevron U.S.A., represented 11% of consolidated net sales in
the three month periods ended September 30, 1996 and 1995,
respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
NET SALES BY BUSINESS SEGMENT
(In thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30
-------------------
1996 1995
---- ----
<S> <C> <C>
Image Segment $24,933 $24,212
Commercial / Industrial
Lighting Segment 11,952 11,670
------- -------
$36,885 $35,882
======= =======
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS
ENDED SEPTEMBER 30, 1995
Net sales of $36.9 million increased 3% over first quarter net sales
last year of $35.9 million. The Company has changed its disclosure of business
segments in order to more closely align the business segments with the market
focus which the Company uses to manage its business. In prior years, the
business segments included the Lighting segment and the Graphics segment.
Beginning in fiscal year 1997, segment reporting will be on the basis of the
Image segment and the Commercial / Industrial Lighting segment. Prior year data
will be restated accordingly when presented with current data. The Image segment
represents markets and customers to whom the Company has the opportunity to sell
both lighting and graphics; for example, the petroleum / convenience store,
automotive, and quick service restaurant markets. The Commercial / Industrial
Lighting segment represents markets and customers to whom the Company would sell
only lighting systems and fixtures with those customers and markets having no
requirement for graphics; for example, shopping center lighting, industrial
lighting, and landscape lighting.
Fiscal year 1997 first quarter Image segment sales increased 3.0% and
Commercial / Industrial Lighting segment sales increased 2.4% over the first
quarter of fiscal year 1996. The Company experienced good sales growth in the
multi-site retail market with net sales up over 30%. Sales to the Petroleum /
Convenience Store market, representing about 47% of the Company's total sales,
decreased 4% from the first quarter of fiscal 1996 as the decreased graphics
sales (structural graphics and printed graphics) more than offset increased
petroleum
Page 7
<PAGE> 8
lighting sales. Sales of graphics products in the first quarter of fiscal 1997
were below last year as two of the Company's major oil company customers delayed
roll-out implementation of image conversion programs for which the Company has
orders and/or contracts. This trend of lower graphics products sales has
continued through the filing date of this Form 10-Q. The Company has one
customer, Chevron U.S.A., who accounted for 11% of net sales (reported in the
Image segment) in the first quarter of both 1997 and 1996. 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. The
increase in net sales in the first quarter of fiscal 1997 was primarily the
result of increased volume. While sales prices were increased, inflation did not
have a significant impact on sales in 1997 as competitive pricing pressures held
price increases to a minimum.
Gross profit of $12.1 million, or 32.9% of net sales, increased over
last year's gross profit of $11.9 million or 33.3% of net sales. The increase in
amount of gross profit is attributed primarily to the 3% increase in net sales.
A lower utilization of manufacturing capacity in the Company's graphics
operations, and lower graphics sales more than offset improved margins and
efficiencies in the Company's lighting operations. Selling and administrative
expenses increased to $8.8 million primarily as a result of increased sales
volume and increased marketing expenses, and were increased to 24% of net sales
in the first quarter of fiscal 1997 from 23% last year.
The Company reported net interest income of $97,000 in the first
quarter of fiscal 1997 as compared to net interest expense of $143,000. The
change from the prior year is related to the Company's use of the net proceeds
from the February 1996 Public Offering of Common Shares. Substantially all of
the Company's outstanding debt in February 1996 was paid down with a portion of
the net proceeds, and the remainder was invested in high-quality short term cash
investments. The Company's effective tax rate increased to 37.5% from 37.0% last
year as a result of the increased provision for state income taxes.
Net income of $2.1 million or $.23 per share compares to last year's
first quarter net income of $2.2 million or $.28 per share. The change resulted
from increased gross profit from increased sales, the reporting of net interest
income rather than net interest expense, a lower income tax provision, and
increased marketing and selling expenses. The weighted average common shares
outstanding increased in the first quarter of 1997 to 9,240,000 shares from
7,961,000 shares in 1996 primarily as a result of the 1.2 million common shares
issued during the third quarter of fiscal 1996 in the Company's Public Offering.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996 the Company had working capital of $37.8 million,
compared to $36.1 million at June 30, 1996. The ratio of current assets to
current liabilities increased to 2.82 to 1 from 2.66 to 1. The increased working
capital is primarily attributed to increases in accounts receivable, and cash
and cash equivalents, partially offset by reductions in inventories and accounts
payable.
Page 8
<PAGE> 9
The Company generated $2.2 million of cash from operating activities in
the first quarter of 1997 as compared to a use of cash of $.6 million in the
first quarter of 1996. The Company generated more cash in the first three months
of fiscal 1997 primarily due to inventory reductions in the Company's lighting
operations and due to less of an increase in accounts receivable than in last
year's first quarter. As of June 30, 1996, the Company's days sales outstanding
were at approximately 67 days as compared to 59 days at June 30, 1996.
In addition to cash and cash equivalents (high grade, short-term
investments), the Company's primary source of liquidity continues to be its
lines of credit. The Company has two revolving lines of credit totaling $13
million, all of which is available as of October 30, 1996. The Company believes
that the total of available lines of credit plus cash flows from operating
activities is adequate for the Company's 1997 operational and capital
expenditure needs. The Company is in compliance with all of its loan covenants.
Capital expenditures of $.6 million in the first quarter of fiscal 1997 compare
to $1.0 million in the first quarter of 1996. Spending in fiscal year 1997 is
primarily related to manufacturing equipment and process improvements. Capital
expenditures of $4 million are planned for 1997.
In October 1996, the Board of Directors declared a regular quarterly
cash dividend of $.05 per share ($451,000) to be paid November 19, 1996 to
shareholders of record on November 12, 1996.
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. The Company believes that adequate financing for
any such investments or acquisitions will be available through future borrowings
due to the enhanced financial condition of the Company after the Public Offering
or through the issuance of common or preferred shares in payment for acquired
businesses.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule
(b) Reports on 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.]
Page 9
<PAGE> 10
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 5, 1996
Page 10
<PAGE> 1
EXHIBIT 11
LSI INDUSTRIES INC.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended
September 30
---------------------
1996 1995
---- -----
<S> <C> <C>
NET INCOME $2,136 $2,194
- ---------- ====== ======
AVERAGE SHARES OUTSTANDING
- --------------------------
Weighted average shares
outstanding during the period 8,995 7,582
Common Share Equivalents:
Common Shares to be issued
under Stock Option Plan 245 379
------ ------
Average Shares Outstanding 9,240 7,961
====== ======
NET INCOME PER SHARE $ .23 $ .28
- -------------------- ====== ======
</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.
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763532
<NAME> LSI INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 12,448
<SECURITIES> 0
<RECEIVABLES> 26,845
<ALLOWANCES> (407)
<INVENTORY> 17,899
<CURRENT-ASSETS> 58,573
<PP&E> 32,102
<DEPRECIATION> (11,871)
<TOTAL-ASSETS> 80,094
<CURRENT-LIABILITIES> 20,798
<BONDS> 1,353
0
0
<COMMON> 28,190
<OTHER-SE> 28,069
<TOTAL-LIABILITY-AND-EQUITY> 80,094
<SALES> 36,885
<TOTAL-REVENUES> 36,885
<CGS> 24,745
<TOTAL-COSTS> 8,805
<OTHER-EXPENSES> 14
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (97)
<INCOME-PRETAX> 3,418
<INCOME-TAX> 1,282
<INCOME-CONTINUING> 2,136
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,136
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
