<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, 1997.
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, 1997: 9,021,427
<PAGE> 2
LSI INDUSTRIES INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
INDEX
Begins on
Page
----
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 ............... 10
Signatures ..................................................... 11
Page 2
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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 1997 1996 1997 1996
share amounts) ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $30,836 $33,495 $105,260 $114,938
Cost of products sold 20,823 23,494 69,849 79,171
------- ------- -------- --------
Gross profit 10,013 10,001 35,411 35,767
Selling and administrative expenses 7,996 8,406 25,823 26,033
------- ------- -------- --------
Operating income 2,017 1,595 9,588 9,734
Interest (income) expense, net (94) 83 (341) 433
Other expense 64 13 90 29
------- ------- -------- --------
Income from continuing operations
before income taxes 2,047 1,499 9,839 9,272
Income tax expense 778 551 3,716 3,437
------- ------- -------- --------
Income from continuing
operations 1,269 948 6,123 5,835
Discontinued operations -- -- -- (1,500)
------- ------- -------- --------
Net income $ 1,269 $ 948 $ 6,123 $ 4,335
======= ======= ======== ========
Net income (loss) per common share
Continuing operations $ .14 $ .11 $ .67 $ .71
Discontinued operations -- -- -- (.18)
------- ------- -------- --------
Total net income per share $ .14 $ .11 $ .67 $ .53
======= ======= ======== ========
Average shares outstanding 9,180 8,600 9,193 8,188
======= ======= ======== ========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
Page 3
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LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except share amounts) March 31, June 30,
1997 1996
--------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $14,306 $11,138
Accounts receivable 21,405 24,825
Inventories 20,795 19,660
Other current assets 1,839 2,246
------- -------
Total current assets 58,345 57,869
Property, plant and equipment, net 19,978 20,327
Goodwill and other assets 1,303 1,300
------- -------
$79,626 $79,496
======= =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to bank $ 130 $ --
Current maturities of long-term debt 187 180
Accounts payable 8,846 10,855
Accrued expenses 7,978 10,688
------- -------
Total current liabilities 17,141 21,723
Long-Term Debt 1,226 1,382
Other Long-Term Liabilities 2,110 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 9,020,427 and 8,964,491
shares, respectively 27,995 28,082
Retained earnings 31,154 26,655
------- -------
Total shareholders' equity 59,149 54,737
------- -------
$79,626 $79,496
======= =======
</TABLE>
The accompanying Notes to Financial Statements are an integral part of these
financial statements.
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<PAGE> 5
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) Nine Months Ended
March 31
--------------------------
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 6,123 $ 4,335
Non-cash items included in income
Depreciation and amortization 2,163 1,753
Deferred income taxes 90 80
(Gain) loss on disposition of fixed assets 61 --
Changes in operating assets and liabilities
Accounts receivable 3,420 (2,869)
Inventories (1,135) (2,267)
Accounts payable and other (3,976) (2,720)
Change in liability for discontinued operations (3) (82)
------- -------
Net cash flows from operating activities 6,743 (1,770)
------- -------
Cash Flows from Investing Activities
Purchase of property, plant and equipment (1,845) (2,439)
Proceeds from sale of fixed assets -- 16
------- -------
Net cash flows from investing activities (1,845) (2,423)
------- -------
Cash Flows from Financing Activities
Increase in notes payable to bank 130 --
Payment of long-term debt (149) (6,507)
Cash dividends paid (1,624) (1,295)
Purchase of treasury shares (214) --
Proceeds from issuance of common shares 127 19,911
------- -------
Net cash flows from financing activities (1,730) 12,109
------- -------
Increase (decrease) in cash and cash equivalents 3,168 7,916
Cash and cash equivalents at beginning of year 11,138 2,124
------- -------
Cash and cash equivalents at end of period $14,306 $10,040
======= =======
Supplemental Cash Flow Information
Interest paid $ 94 $ 834
Income taxes paid $ 3,605 $ 4,273
</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
(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 March 31, 1997, and the results of its operations and
its cash flows for the periods ended March 31, 1997 and 1996. 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 and common shares to be issued under
a deferred compensation plan of 165,000 and 357,000 shares,
respectively, for the three month periods ended March 31, 1997 and
1996, and 183,000 and 374,000 shares, respectively, for the nine month
periods ended March 31, 1997 and 1996.
NOTE 3: INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
-------------- -------------
<S> <C> <C>
Raw Materials $10,330 $11,432
Work-in-Process and
Finished Goods 10,465 8,228
------- -------
$20,795 $19,660
======= =======
</TABLE>
NOTE 4: CASH DIVIDENDS
The Company paid cash dividends of $1,624,000 and $1,295,000 in the
nine month periods ended March 31, 1997 and 1996, respectively. In
April, 1997, the Company's Board of Directors declared a $.05 per
share regular quarterly cash dividend ($451,000) payable on May 20,
1997 to shareholders of record May 13, 1997.
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NOTE 5: SHAREHOLDERS' EQUITY
The Company implemented a non-qualified Deferred Compensation Plan
effective July 1, 1996 and a certain portion of the Plan investments
are in common shares of the Company. As of March 31, 1997 a total of
19,651 common shares at a cost of $214,000 were held in the Plan, and,
accordingly, have been recorded as treasury shares.
NOTE 6: SALES TO MAJOR CUSTOMERS
The Company's sales in its Image segment (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 and nine
month periods ended March 31, 1996.
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 Nine Months Ended
March 31 March 31
------------------------ -----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Image Segment $22,461 $24,303 $ 73,597 $ 84,126
Commercial / Industrial
Lighting Segment 8,375 9,192 31,663 30,812
------- ------- -------- --------
$30,836 $33,495 $105,260 $114,938
======= ======= ======== ========
</TABLE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1996
Net sales of $30.8 million compared to third quarter net sales last
year of $33.5 million -- an 8% reduction. The effects of winter weather in some
markets impacted sales to some extent in both segments. Commercial / Industrial
Lighting segment net sales were $8.4 million as compared to $9.2 million last
year, a decrease of 9%. This change resulted from reduced lighting sales into
the commercial / industrial lighting market which offset strong lighting sales
into the multi-site retail market. Image segment net sales were $22.5 million
as compared to $24.3 million last year. The reduction in net sales is primarily
related to a significant re-imaging program for a major oil company last year
that did not repeat this year, as well as to a continued lower volume of
printed graphics sales. The Company's graphics business continued to operate at
the decreased volume that was reported in each of the first two quarters this
year. Sales in the Image segment to the petroleum / convenience store market,
representing 53% of
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total third quarter net sales in fiscal 1997, decreased 11%. The Company has
one customer, Chevron U.S.A., who accounted for 11% of net sales (reported in
the Image segment) in the third quarter of fiscal 1996. The Company believes
that it continues to maintain a good business relationship with this major
customer; however, the level of total sales, which for the third quarter of
fiscal 1997 was under ten percent of the Company's total net sales, is never
assured in the future. Inflation did not have a significant impact on sales in
1997 as competitive pricing pressures held price increases to a minimum.
Gross profit of $10.0 million, or 32.5% of net sales, was level with
last year's gross profit; however, as a percentage of net sales, fiscal year
1997 performance was at 32.5% as compared to 29.9% of net sales. With an 8%
reduction in net sales between years, the increase in gross profit as a
percentage of net sales is primarily due to improved manufacturing operating
efficiencies in the Company's lighting business, and to changes in lighting
product mix to higher margin products, partially offset by lower utilization of
manufacturing capacity in the Company's graphics operations. Selling and
administrative expenses decreased to $8.0 million as a result of decreased
sales volume as well as some non-recurring expenses in 1996, but increased to
26% of net sales in the third quarter of fiscal 1997 from 25% last year.
The Company reported net interest income of $94,000 in the third
quarter of fiscal 1997 as compared to net interest expense of $83,000. The
change reflects the Company's use of the net proceeds from the February 1996
Public Offering of Common Shares. Substantially all outstanding debt in
February 1996 was retired with a portion of the net proceeds. Remaining
proceeds from the Public Offering were invested in high-quality short term cash
investments. The Company's effective tax rate increased to 38.0% from 36.8%
last year primarily as a result of the increased provision for state income
taxes.
Net income of $1.3 million, or $.14 per share, compares to last year's
third quarter net income of $0.9 million, or $.11 per share. The increased net
income resulted from an increased gross profit percentage on lower net sales,
decreased operating expenses, from the reporting of net interest income rather
than net interest expense, partially offset by an increased income tax
provision. Weighted average common shares outstanding increased 7% in the third
quarter of 1997 to 9,180,000 shares from 8,600,000 shares in 1996 primarily as
a result of the 1.2 million common shares issued in the February 1996 Public
Offering.
NINE MONTHS ENDED MARCH 31, 1997 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1996
Net sales of $105.3 million compared to nine month net sales last year
of $114.9 million -- an 8% reduction. Commercial / Industrial Lighting segment
net sales were $31.7 million as compared to $30.8 million last year, an
increase of 3%. This change resulted from strong lighting sales into the
multi-site retail market which offset reduced lighting sales into the
commercial / industrial lighting market. Image segment net sales were $73.6
million as compared to $84.1 million last year. The reduction in net sales is
primarily related to a lack of year-end budget spending by the Company's major
oil customers as compared to the second quarter of fiscal 1996 during which the
Company shipped over five and one-half million dollars in significant year-end
spending programs and reimaging programs to oil customers as well as restaurant
customers. The Company's graphics business operated at a decreased volume as
compared to last year. Sales in the Image segment to the petroleum /
convenience store
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market, representing 49% of total nine month net sales, decreased 15%, and
sales to the multi-site retail market were increased due primarily to strong
national accounts and automotive lighting business. The Company has one
customer, Chevron U.S.A., who accounted for 11% of net sales (reported in the
Image segment) in the first nine months of fiscal 1996. The Company believes
that it continues to maintain a good business relationship with this major
customer; however, the level of total sales, which for the first nine months of
fiscal 1997 was under ten percent, is never assured in the future. While the
Company modestly increased sales prices of some products, inflation did not
have a significant impact on sales in 1997 as competitive pricing pressures
held price increases to a minimum.
Gross profit of $35.4 million, or 33.6% of net sales, decreased
slightly from last year's gross profit of $35.8 million or 31.1% of net sales.
The decrease is primarily related to the reduced sales volume as compared to
last year. The increase in gross profit as a percentage of net sales is
attributed primarily to improved manufacturing operating efficiencies in the
Company's lighting business, changes in lighting product mix to higher margin
products, partially offset by lower utilization of manufacturing capacity in
the Company's graphics operations. Selling and administrative expenses
decreased to $25.8 million primarily as a result of increased selling expenses,
and decreased administrative expenses associated with non-recurring items
incurred in fiscal 1996. Selling and administrative expenses increased to 25%
of net sales in the first nine months of fiscal 1997 from 23% last year.
The Company reported net interest income of $341,000 in the first nine
months of fiscal 1997 as compared to net interest expense of $433,000 last
year. The change reflects the Company's use of the net proceeds from the
February 1996 Public Offering of Common Shares. Substantially all outstanding
debt in February 1996 was paid down with a portion of the net proceeds.
Remaining proceeds from the Public Offering were invested in high-quality short
term cash investments. The Company's effective tax rate increased to 37.8%
from 37.1% last year primarily as a result of the increased provision for state
income taxes.
Income from continuing operations of $6.1 million or $.67 per share
compares to last year's nine month income from continuing operations of $5.8
million or $.71 per share. The increased income resulted from decreased gross
profit from decreased net sales, decreased operating expenses, an increased
income tax provision, and by the reporting of net interest income rather than
net interest expense. Weighted average common shares outstanding increased 12%
in the first nine months of 1997 to 9,193,000 shares from 8,188,000 shares in
1996 primarily as a result of the 1.2 million common shares issued in the
February 1996 Public Offering.
In the second quarter of fiscal 1996 the Company recorded a charge to
discontinued operations of $1.5 million, or $.18 per share, related to an
Internal Revenue Service tax audit associated with the 1992 discontinuation of
the Company's European operations. There was no similar charge to discontinued
operations in fiscal 1997.
Net income of $6.1 million, or $.67 per share, in the first nine
months of fiscal 1997 compares to net income of $4.3 million, or $.53 per share
in last year's similar period. The change results primarily from the 1996
reduction associated with the discontinued operations.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997 the Company had working capital of $41.2 million,
compared to $36.1 million at June 30, 1996. The ratio of current assets to
current liabilities increased to 3.40 to 1 from 2.66 to 1. The increased
working capital is primarily attributed to increased cash and cash equivalents,
increased inventories, and reductions in accounts payable and accrued expenses.
The Company generated $6.7 million of cash from operating activities
in the first nine months of fiscal 1997 as compared to a use of cash of $1.8
million in the same period last year. The Company generated more cash in the
first nine months of fiscal 1997 primarily due to improved net income, to
significant accounts receivable and inventory increases in fiscal 1996 as
compared to a significant decrease in accounts receivable and less of an
increase in inventory in fiscal 1997. This increased cash flow was partially
offset by a significant reduction in accounts payable in fiscal 1997 and a
lesser reduction in accrued expenses as compared to the prior year. As of March
31, 1997, the Company's days sales outstanding were at approximately 62 days as
compared to 59 days at June 30, 1996.
The Company has two revolving lines of credit totaling $20 million,
all of which is available as of May 5, 1997. 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 believes that the
total of available lines of credit plus cash flows from operating activities is
adequate for the Company's 1997-1998 operational and capital expenditure needs.
The Company is in compliance with all of its loan covenants. Capital
expenditures of $1.9 million in the first nine months of fiscal 1997 compare to
$2.4 million in the same period last year. Spending in fiscal year 1997 is
primarily related to manufacturing equipment and process improvements. Capital
expenditures totaling approximately $2.6 million are planned for full year
fiscal 1997.
In April 1997, the Board of Directors declared a regular quarterly
cash dividend of $.05 per share ($451,000) to be paid May 20, 1997 to
shareholders of record on May 13, 1997.
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
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(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.]
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)
May 5, 1997
Page 11
<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
------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET INCOME
Continuing operations $1,269 $ 948 $6,123 $5,835
Discontinued operations -- -- -- (1,500)
------ ------ ------ ------
Net income $1,269 $ 948 $6,123 $4,335
====== ====== ====== ======
AVERAGE SHARES OUTSTANDING
Weighted average shares
outstanding during the period 9,015 8,243 9,010 7,814
Common Share Equivalents
Common Shares to be issued under
a deferred compensation plan 18 -- 9 --
Common Shares to be issued
under stock option plans 147 357 174 374
------ ------ ------ ------
Average Shares Outstanding 9,180 8,600 9,193 8,188
====== ====== ====== ======
NET INCOME PER SHARE
Continuing operations $ .14 $ .11 $ .67 $ .71
Discontinued operations -- -- -- (.18)
------ ------ ------ ------
Net income per share $ .14 $ .11 $ .67 $ .53
====== ====== ====== ======
</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 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997 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-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,306
<SECURITIES> 0
<RECEIVABLES> 21,847
<ALLOWANCES> (442)
<INVENTORY> 20,795
<CURRENT-ASSETS> 58,345
<PP&E> 32,823
<DEPRECIATION> (12,845)
<TOTAL-ASSETS> 79,626
<CURRENT-LIABILITIES> 17,141
<BONDS> 1,226
0
0
<COMMON> 27,995
<OTHER-SE> 31,154
<TOTAL-LIABILITY-AND-EQUITY> 79,626
<SALES> 105,260
<TOTAL-REVENUES> 105,260
<CGS> 69,849
<TOTAL-COSTS> 25,823
<OTHER-EXPENSES> 90
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (341)
<INCOME-PRETAX> 9,839
<INCOME-TAX> 3,716
<INCOME-CONTINUING> 6,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,123
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.67
</TABLE>
