<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
LSI INDUSTRIES INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
[LSI INDUSTRIES LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 13, 1997
Dear Shareholder:
We cordially invite you to attend our Annual Shareholders' Meeting to
be held at the Company's headquarters located at 10000 Alliance Road,
Cincinnati, Ohio on Thursday, November 13, 1997 at 10:00 a.m.
Eastern Standard Time.
The purposes of this Annual Meeting are to consider and act upon the
following proposals:
1) To elect three Class A directors to hold office until the
Annual Meeting of Shareholders in 1999 and until their
respective successors are duly elected and qualified; and
2) To amend the LSI Industries Inc. 1995 Stock Option Plan to
provide an additional 350,000 common shares as available for
grant under such plan, as well as various other plan feature
changes or additions; and
3) To ratify the appointment of Arthur Andersen LLP as the
Company's independent public accountants for fiscal year 1998;
and
4) To transact such other business as may properly be brought
before the meeting or any other adjournment thereof.
Shareholders of record at the close of business on Thursday, September
18, 1997 are entitled to notice and to vote at the meeting. This notice is given
pursuant to an order of the Board of Directors.
Following the meeting, we will review the Company's progress over the
last year and our plans for the future, and will have an open house at the
Cincinnati Operations. Our directors and executive officers will be available to
discuss the Company's business with you.
Yours truly,
/s/ Robert J. Ready
Robert J. Ready
Chairman of the Board and President
Dated: September 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, SIGN AND PROMPTLY
RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PROXIES MAY BE REVOKED BY
WRITTEN NOTICE OF REVOCATION, THE SUBMISSION OF A LATER PROXY OR BY ATTENDING
THE MEETING AND VOTING IN PERSON.
<PAGE> 3
LSI INDUSTRIES INC.
10000 ALLIANCE ROAD
CINCINNATI, OHIO 45242
TELEPHONE (513) 793-3200
------------------------------------------
P R O X Y S T A T E M E N T
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 13, 1997
INTRODUCTION
The Board of Directors of LSI Industries Inc. is requesting your Proxy
for the Annual Meeting of Shareholders on November 13, 1997, and at any
adjournment thereof, pursuant to the foregoing Notice. This Proxy Statement and
the accompanying proxy were first mailed on September 29, 1997, to shareholders
of record on September 18, 1997.
VOTING AT ANNUAL MEETING
GENERAL INFORMATION
- -------------------
Shareholders may vote in person or by proxy at the Annual Meeting.
Proxies given may be revoked at any time by filing with the Company either a
written revocation or a duly executed proxy bearing a later date, or by
appearing at the Annual Meeting and voting in person. All shares will be voted
as specified on each properly executed proxy. If no choice is specified, the
shares will be voted as recommended by the Board of Directors, namely "FOR"
Proposal 1 to elect the three persons nominated as Class A directors by the
Board of Directors, "FOR" Proposal 2 (Amendment of the LSI Industries Inc. 1995
Stock Option Plan), and "FOR" Proposal 3 (Ratification of Appointment of
Independent Public Accountants).
As of September 18, 1997, the record date for determining shareholders
entitled to notice of and to vote at the Annual Meeting, LSI Industries had
9,546,102 Common Shares outstanding. Each share is entitled to one vote. Only
shareholders of record at the close of business on September 18, 1997, will be
entitled to vote at the Annual Meeting. Abstentions and shares otherwise not
voted for any reason, including broker non-votes, will have no effect on the
outcome of any vote taken at the Annual Meeting.
<PAGE> 4
PRINCIPAL SHAREHOLDERS
- ----------------------
As of September 2, 1997, the following are the only shareholders known
by the Company to own beneficially 5% or more of its outstanding Common Shares:
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership Of Class
- ------------------------ -------------------- --------
<S> <C> <C>
Robert J. Ready 556,620 (a) 5.75%
State of Wisconsin Investment Board 858,300 8.87%
</TABLE>
(a) Includes exercisable options for 36,563 shares, 5,243 shares held in
the Company's non-qualified Deferred Compensation Plan, and 130,488
shares held in trust for Mr. Ready's children.
The business address of Mr. Ready is: 10000 Alliance Road, Cincinnati, Ohio
45242. Mr. Ready disclaims beneficial ownership of shares held by or in trust
for his children.
VOTING BY PROXY
- ---------------
All properly signed proxies will, unless a different choice is
indicated, be voted "FOR" the election of all three nominees for Class A
directors proposed by the Board of Directors, amendment of the LSI Industries
Inc. 1995 Stock Option Plan, and ratification of the appointment of independent
public accountants.
If any other matters come before the meeting or any adjournment, each
proxy will be voted in the discretion of the individuals named as proxies on the
card.
SHAREHOLDER PROPOSALS
- ---------------------
Shareholders who desire to have proposals included in the Notice for
the 1998 Annual Meeting of Shareholders must submit their proposals to the
Company at its offices on or before May 29, 1998.
PROPOSAL 1. ELECTION OF DIRECTORS
- ----------------------------------
The Company's Code of Regulations provides that the Board of Directors
be composed of two classes of directors, Class A and Class B, with each class
elected for a two-year term. One class is elected annually. The terms of the
Class A directors expire at the 1997 Annual Meeting of Shareholders while the
terms of the Class B directors expire at the 1998 Annual Meeting of
Shareholders. One Class B director's position is currently open due to the
August 1997 death of Donald E. Whipple.
The Board is nominating for reelection its present Class A directors,
namely, Michael J. Burke, Robert J. Ready, and John N. Taylor, Jr. Proxies
solicited by the Board will be voted for the election of these three nominees.
All Class A directors elected at the Annual Meeting will be elected to
hold office for two years and until their successors are elected and qualified.
2
<PAGE> 5
In voting to elect directors, shareholders are entitled to one vote for
each share held of record. Shareholders are not entitled to cumulate their votes
in the election of directors.
Should any of the nominees become unable to serve, proxies will be
voted for any substitute nominee designated by the Board. Nominees receiving the
highest number of votes cast for the positions to be filled will be elected.
RECOMMENDATION OF THE BOARD OF DIRECTORS
----------------------------------------
The Board of Directors recommends a vote in FAVOR of each of the
directors nominated in this Proxy Statement. Nominees receiving the
highest number of votes will be elected.
PROPOSAL 2. AMENDMENT OF THE LSI INDUSTRIES INC. 1995 STOCK OPTION PLAN
- ------------------------------------------------------------------------
This Stock Option Plan was originally established in 1995 following
expiration of the Company's original stock option plan. The Plan permits the
granting of either incentive stock options or nonqualified stock options to all
employees of the Company. This stock option plan was approved at the 1995 Annual
Shareholders Meeting.
On September 16, 1997, the Board of Directors approved and now
recommends that the LSI Industries Inc. 1995 Stock Option Plan be amended to
increase the Common Shares available for the granting of options from 450,000
shares (adjusted for the 3 for 2 stock split effective August 4, 1995) to
800,000 shares, an increase of 350,000 shares, and amended to add or change
various elements or features of the Plan as identified below.
The Stock Option Plan provides that options may be granted either as
incentive stock options or as nonqualified stock options. Options may be granted
for varying periods of from one to ten years. Options do not become exercisable
until one year from the date of grant. Thereafter, the right to exercise options
vests at a schedule determined at the time of grant, generally at a rate of 25%
per year, cumulative to the extent not exercised in prior periods.
There are presently options outstanding for employees to purchase
551,916 shares under this Plan and 10,600 shares are available for the grant of
additional options. Under these circumstances, the Board believes it appropriate
for the Plan to be increased so as to make additional options available for
grants in furtherance of the purposes of the Plan.
Additionally, there are presently options outstanding for non-employee
directors to purchase 41,500 shares under the LSI Industries Inc. 1995 Directors
Stock Option Plan and 33,500 shares are available for the grant of additional
options. The Board of Directors is not requesting amendment of the Directors
Stock Option Plan.
The exercise price for each option must be at least 95% of the last
sale price for the Common Shares on the last trading day preceding the date of
grant except that the price must be at least 100% of such sale price for
incentive options and, options granted to persons owning more than 10% of the
outstanding Common Shares must be at 110% of such sale price. The last sale
price of the Company's common shares on September 16, 1997 was $17.00.
3
<PAGE> 6
The Board recommends that Article 4 of the LSI Industries Inc. 1995
Stock Option Plan be amended to increase the number of shares subject to options
by 350,000 shares and, that the maximum number of shares with respect to which
options may be granted to an employee during any fiscal year of the Company be
increased to 75,000. Article 4 as so amended, will read in its entirety as
follows:
SHARES SUBJECT TO PLAN
4.1 The Shares that may be made subject to Options granted under
the Plan shall not exceed 800,000 Shares in the aggregate.
Except as provided in Section 4.2, upon lapse or termination
of any Option for any reason without being completely
exercised, the Shares which were subject to such Option may
again be subject to other Options.
4.2 The maximum number of Shares with respect to which options may
be granted to any employee during each fiscal year of the
Company is 75,000. If an Option is canceled, it continues to
be counted against the maximum number of Shares for which
Options may be granted to an employee. If an Option is
repriced, the transaction is treated as a cancellation of the
Option and a grant of a new Option.
The Board of Directors has identified several terms and conditions of
the Plan which should either be modified or added to the Plan. These changes,
outlined below, represent improvements and enhancements to the Plan for the
benefit of both shareholders and employee option holders.
Article 3.1 of the Plan states that the Plan shall be administered by a
Committee comprised solely of three or more outside directors of the Company who
are "disinterested persons" as defined under Rule 16b-3 of the Securities and
Exchange Act of 1934. The Board recommends that Article 3.1 of the LSI
Industries Inc. 1995 Stock Option Plan be amended in its entirety to read as
follows:
ADMINISTRATION
3.1 The Plan shall be administered by a committee (the
"Committee") designated by the Board of Directors of the
Company. The Committee shall be comprised solely of three or
more directors each of whom shall be (i) a "Non-Employee
Director" as defined in Rule 16b-3 of the Securities and
Exchange Act of 1934 (the "Act") and (ii) an "outside
director" to the extent required by Section 162(m) of the
Internal Revenue Code ("Section 162(m)") as such Rule and
Section may be amended, superseded or interpreted hereafter.
Notwithstanding the foregoing, to the extent relevant state
law now or hereafter permits, the Committee may be comprised
solely of two or more such directors.
Actions shall be taken by a majority of the Committee.
The Board recommends that Article 8 of the Plan related to payment of
the option price be amended in its entirety as follows:
4
<PAGE> 7
PAYMENT OF OPTION PRICE
Payment of the Option Price may be made in cash, by the tender
of shares owned by the Optionee for at least six months prior
to the date of tender, or both. Shares tendered shall be
valued at their Fair Market Value.
The Board recommends that Article 11.1 of the Plan related to
termination of options be amended in its entirety as follows:
TERMINATION OF OPTIONS
11.1 An Option may be terminated as follows:
A. During the period of continuous employment with the
Company, an Option will be terminated only if it has been
fully exercised or it has expired by its terms.
B. Options shall terminate immediately if employment is
terminated for cause or by voluntary action of the grantee
without the consent of the Company. Cause is defined as
including, but not limited to, theft of or intentional damage
to Company property, intentional harm to the Company's
reputation, material breach of the optionee's duty of fidelity
to the Company, excessive use of alcohol, the use of illegal
drugs, the commission of a criminal act, willful violation of
Company policies, or trading in shares for personal gain based
on knowledge of the Company's activities or results when such
information is not available to the general public.
C. If the grantee of an Option violates any terms of any
written employment, confidentiality or noncompetition
agreement between the Company and that person, all existing
Options granted to such person will terminate. In addition, if
at the time of such violation such person has exercised
Options but has not received certificates for the Shares to be
issued, the Company may void the Option and its exercise. Any
such actions by the Company shall be in addition to any other
rights or remedies available to the Company in such
circumstances.
D. If an Eligible Employee holding an Option dies or becomes
subject to a Permanent and Total Disability while employed or
within three months after termination of employment for any
reason other than cause, such Option may be exercised, to the
extent exercisable on the date of the occurrence of the event
which triggers the operation of this paragraph, at any time by
the estate or guardian of such person or by those persons to
whom the Option may have been transferred by will or by the
laws of descent and distribution until the earlier of (i) the
date which is one year after the date of such death or
occurrence of Permanent and Total Disability, or (ii) the
option expiration date set forth in the Option Agreement.
E. If the grantee of a Nonqualified Option who has fifteen
years of service retires after age 55 through a plan of
retirement acceptable to the Company, such Option will become
fully vested and may be exercised at any time within
5
<PAGE> 8
two years after the date of termination of employment, but not
later than the option expiration date set forth in the Option
Agreement.
F. In all other cases, upon termination of employment, the
then-exercisable portion of any Option will terminate on the
earlier of the 90th day after the date of termination or the
option expiration date set forth in the Option Agreement. The
portion not exercisable will terminate on the date of
termination of employment. For purposes of the Plan, a leave
of absence approved by the Company shall not be deemed to be
termination of employment.
The Board recommends that Article 12.3 of the Plan be amended in its
entirety and that Article 12.4 be added to the Plan as follows:
ADJUSTMENTS TO SHARES AND OPTION PRICE
12.3 In the event of the dissolution or liquidation of the Company
or any merger, other than a merger for the purpose of the
redomestication of the Company not involving a change in
control, consolidation, exchange or other transaction in which
the Company is not the surviving corporation or in which the
outstanding Shares of the Company are converted into cash,
other securities or other property, each outstanding Option
shall automatically become fully vested and fully exercisable
immediately prior to such event. Thereafter the holder of each
such Option shall, upon exercise of the Option, receive, in
lieu of the stock or other securities and property receivable
upon exercise of the Option prior to such transaction, the
stock or other securities or property to which such holder
would have been entitled upon consummation of such transaction
if such holder had exercised such Option immediately prior to
such transaction.
12.4 All outstanding Options shall become fully vested and
immediately exercisable in full if a change in control of the
Company occurs. For purposes of this Agreement, a "change in
control of the Company shall be deemed to have occurred if (a)
any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, other than a trustee
or other fiduciary holding securities under an employee
benefit plan of the Company becomes the "beneficial owner," as
defined in Rule 13d-3 under such Act, directly or indirectly,
of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding
securities; or (b) during any period of one year after January
1, 1998, individuals who at the beginning of such period
constitute the Board of Directors and any new director whose
election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the Directors then still in office who
either were Directors at the beginning of the period or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a majority
thereof.
The Board recommends that Article 14.1 of the Plan related to amendment
or discontinuance of the Plan be amended in its entirety as follows:
6
<PAGE> 9
AMENDMENT OR DISCONTINUANCE OF PLAN
14.1 The Board of Directors of the Company may at any time amend,
suspend, or discontinue the Plan; provided, however, that no
amendments by the Board of Directors of the Company shall,
without further approval of the shareholders of the Company:
A. Change the class of Eligible Employees;
B. Except as provided in Articles 4 and 12 hereof, increase
the number of Shares which may be subject to Options granted
under the Plan; or increase the maximum number of Shares with
respect to which Options may be granted to any eligible
Employee of the Company during any fiscal year.
C. Cause the Plan or any Option granted under the Plan to fail
to (i) qualify for exemption from Section 16(b) of the Act,
(ii) be excluded from the $1 million deduction limitation
imposed by Section 162(m), or (iii) qualify as an "Incentive
Stock Option" as defined by Section 422 of the Internal
Revenue Code.
All other terms and conditions of the Plan will remain unchanged.
RECOMMENDATION OF THE BOARD OF DIRECTORS
----------------------------------------
The Board of Directors recommends a vote in FAVOR of Proposal 2. The
affirmative vote of a majority of the sum of Common Shares voting at
the meeting is required for ratification of this proposal.
PROPOSAL 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------
The Board of Directors appointed Arthur Andersen LLP as the Company's
independent public accountants for fiscal 1998. Arthur Andersen LLP has been the
independent public accounting firm for the Company since March, 1996. Although
not required by law, the Board is seeking shareholder ratification of its
selection. If ratification is not obtained, the Board intends to continue the
employment of Arthur Andersen LLP at least through fiscal 1998.
Representatives of Arthur Andersen LLP are expected to be present at
the Shareholders' Meeting and will be given an opportunity to comment, if they
so desire, and to respond to appropriate questions that may be asked by
shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
----------------------------------------
The Board of Directors recommends a vote in FAVOR of Proposal 3. The
affirmative vote of a majority of Common Shares voting at the Annual
Meeting is required for ratification of this proposal.
OTHER MATTERS
- -------------
Any other matters considered at the Annual Meeting, including
adjournment, will require the affirmative vote of a majority of Common Shares
voting.
7
<PAGE> 10
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
The directors and executive officers of LSI Industries are:
<TABLE>
<CAPTION>
Common Shares
Beneficially Owned
------------------
Name and Age Position Amount Percentage
------------ -------- ------ ----------
<S> <C> <C> <C>
Robert J. Ready (a) Chairman, President, and 556,620 (d) 5.75%
57 Chief Executive Officer
John N. Taylor, Jr. (b)(c) Director 247,870 (e) 2.36%
62
James P. Sferra (a) Executive Vice President- 224,475 (e) 2.32%
58 Manufacturing; Secretary
and Director
Michael J. Burke (b)(c) Director and Assistant 29,000 (e) *
54 Secretary
Allen L. Davis (b)(c) Director 28,812 (e) *
55
Peter F. Carey President, LSI Image Group 44,379 (e) *
50
Ronald S. Stowell Chief Financial Officer and 26,497 (e) *
47 Treasurer
All Directors and Executive Officers --------- ------
as a Group (Seven Persons) 1,121,024 11.59%
========= ======
</TABLE>
- ------------------------------
Information as of September 2, 1997
(a) Executive Committee Member
(b) Compensation Committee Member
(c) Audit Committee Member
(d) See "Principal Shareholders"
(e) Includes options exercisable within 60 days for Mr. Sferra of 16,238
shares, Mr. Taylor of 6,500 shares, Mr. Burke of 17,000 shares, Mr.
Davis of 17,000 shares, Mr. Carey of 17,734 shares and Mr. Stowell of
13,481 shares; and indirect beneficial ownership for Mr. Sferra of
26,931 shares, and Mr. Taylor of 129,360 shares
* Less than 1%
Robert J. Ready is the founder of the Company and has been its
President and a Director since 1976. Mr. Ready was appointed Chairman of the
Board of Directors in February 1985. Mr. Ready is also a Director of Meridian
Diagnostics, Inc. (a Nasdaq listed company) and of Superior Label Systems, Inc.
8
<PAGE> 11
John N. Taylor, Jr. was elected a Director of the Company in November
1992. Mr. Taylor is Chairman and Chief Executive Officer of Kurz-Kasch, Inc., a
specialty manufacturer of plastic-based components, precision solenoids, stators
and coil products headquartered in Dayton, Ohio. Prior to that, Mr. Taylor
founded and was Chairman and Chief Executive Officer of Component Technology
Corp., a Nasdaq listed company in Erie, Pennsylvania, until its sale in 1989.
Mr. Taylor is a Director of Robbins & Myers Inc. (a Nasdaq listed company),
Dayton, Ohio, and serves as a Director of the Cincinnati branch of the Federal
Reserve Bank of Cleveland.
James P. Sferra shared in the formation of the Company. Mr. Sferra has
served as Corporate Vice President of Manufacturing from November 1989 to
November 1992, and as Executive Vice President-Manufacturing since then. Prior
to that, he served as Vice President-Manufacturing of LSI Lighting Systems, a
division of the Company. Mr. Sferra has served as a Director since 1976, and was
appointed Secretary in 1996.
Michael J. Burke was elected a Director and Assistant Secretary of the
Company in February 1985. Mr. Burke is a Managing Partner of the Cincinnati law
firm of Keating, Muething & Klekamp, P.L.L., counsel to the Company, and has
been associated with that firm since 1968.
Allen L. Davis was elected a Director of the Company in February 1985.
Mr. Davis has been the President and Chief Executive Officer, and a Director of
Provident Financial Group, Inc. (formerly Provident Bancorp, Inc.) and The
Provident Bank, Cincinnati, Ohio since 1986 and 1984, respectively.
Ronald S. Stowell has served as Chief Financial Officer since joining
the Company in December 1992, and was appointed Treasurer in November 1993. From
1985 to November 1992, Mr. Stowell served as Corporate Controller of Essef
Corporation (a Nasdaq listed Company), Chardon, Ohio, a manufacturer of high
performance composite and engineered plastics products.
Peter F. Carey has been President of the Image Group of LSI Industries
since July, 1996. Mr. Carey was President of the Company's subsidiary, SGI
Integrated Graphic Systems, from November 1993 through June 1996, and was the
Executive Vice President and Chief Operating Officer from October 1991 to his
appointment as President in November 1993. From 1990 to September 1991 he was
Executive Vice President of Stout Industries, a screen printer of point of
purchase signs. Prior to that he was Vice President of Marketing of PlastiLine,
Inc., a manufacturer of outdoor signs.
BOARD ACTIONS AND COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT OF
- ------------------------------------------------------------------------------
1934
- ----
The Board of Directors met nine times, including three telephone
conference calls, during fiscal 1997.
The Executive Committee, composed of Messrs. Ready (Chairman), and
Sferra, is responsible, during the intervals between meetings of the Board of
Directors, for exercising all the powers of the Board of Directors in the
management and control and the business of the Company to the extent permitted
by law. The Executive Committee did not meet during fiscal 1997.
9
<PAGE> 12
The Audit Committee, composed of Messrs. Davis (Chairman), Burke, and
Taylor, is responsible for reviewing the Company's internal accounting
operations. It also recommends the appointment of the Company's independent
public accountants and reviews the relationships between the Company and these
independent public accountants. The Audit Committee met two times during fiscal
1997.
The Compensation Committee, composed of Messrs. Burke (Chairman),
Davis, and Taylor, is responsible for establishing compensation levels for
management and for administering the Company's stock option plans and Deferred
Compensation Plan. The Compensation Committee did not meet during fiscal 1997.
The Company does not have a Nominating Committee.
Directors who are not employees of the Company receive $11,000 per year
for serving as a Director plus $1,000 for each meeting attended. Committee
members receive $750 per year for serving as Chairman of a committee plus $600
for each committee meeting attended. Directors who are employees of the Company
do not receive any compensation for serving as a Director. All directors
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and Committees of which they were members. Non-employee
directors receive an annual grant of an option to purchase 1,000 Common Shares.
The option is exercisable at the time of grant and has a ten year life.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than ten percent of the
Company's Common Shares to file reports of ownership and changes in ownership
with the Securities and Exchange Commission. Such persons are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely upon its review of copies of such forms received by it, or
upon written representation from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal 1997 all
filing requirements were met.
EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth information regarding annual, long-term,
and other compensation paid by the Company to its Chief Executive Officer and
each of the other three executive officers at June 30, 1997 during each of the
last three fiscal years for services rendered to the Company and its
subsidiaries.
10
<PAGE> 13
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------
Other Annual Securities All Other
Name and Compensation Underlying Compensation
Principal Position Year Salary Bonus (1) Options (2)
- ------------------ ---- ------ ----- ------ ------- -----------
(3)
<S> <C> <C> <C> <C> <S> <C>
Robert J. Ready 1997 $395,000 $ -- $33,144 -- $96,706
Chairman, President 1996 375,000 125,250 19,604 22,500 97,743
and Chief Executive 1995 350,000 175,000 13,152 -- 47,869
Officer
James P. Sferra 1997 300,000 -- 15,397 -- 49,889
Executive Vice President- 1996 275,000 99,069 16,485 15,000 58,626
Manufacturing; Secretary 1995 260,000 130,000 13,015 -- 24,666
Peter F. Carey 1997 190,000 -- 12,000 -- 22,261
President, LSI Image 1996 154,350 45,041 12,000 15,000 28,448
Group 1995 147,000 73,500 9,600 -- 14,617
Ronald S. Stowell 1997 142,000 -- 15,805 -- 29,105
Chief Financial Officer 1996 130,000 53,420 14,981 15,000 29,446
and Treasurer 1995 115,000 57,500 12,019 -- 18,598
- ----------------------
<FN>
(1) Other Annual Compensation consists of automobile allowances for all
executive officers as well as professional fee allowances for Mr. Ready,
and Mr. Sferra.
(2) Represents Common Shares underlying options awarded under the Company's
stock option plans.
(3) All Other Compensation includes Retirement Plan and Deferred Compensation
Plan contributions, and premiums paid on long-term disability and life
insurance policies, and payment of accrued vacation.
</TABLE>
The Company maintains a nonqualified Deferred Compensation Plan that is
designed to motivate certain executives and to further align the interests of
these executives with those of Company Shareholders. The Plan permits
executives to defer any portion of their salary and bonus, beginning in fiscal
year 1997, with a portion of that deferral being matched by the Company. If the
executive's salary deferral is voluntarily invested in LSI Common Shares, and
if a certain minimum return on average shareholders equity is achieved, then
the Company will match (in LSI Common Shares) a portion of the executive's
deferral. Additionally, beginning in fiscal year 1996, the Company also makes
contributions into the Deferred Compensation Plan for certain executives to
make up the retirement contribution that would have been credited to their
accounts in the qualified LSI Industries Inc. Retirement Plan if it were not
for ERISA-imposed limits on covered compensation. Such Deferred Compensation
Plan contribution aggregating $143,000, and $91,000 for the named executives is
included in the Summary Compensation Table for fiscal years 1996 and 1997,
respectively.
STOCK OPTIONS
- -------------
No stock options were granted to the executive officers shown in the
Summary Compensation Table in fiscal year 1997. The following table contains
information concerning the exercise and appreciation of stock options held by
the Named Executives.
11
<PAGE> 14
Fiscal 1997 Option Exercises and Year-End Option Values
-------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of
Shares Unexercised Options Unexercised In-the-Money
Acquired on Value at Fiscal Year-End Options at Fiscal Year-End(1)
Name Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert J. Ready 20,948 $247,815 54,602 / 26,016 $544,483 / $79,588
James P. Sferra 7,403 87,577 19,018 / 17,560 $201,294 / $34,856
Peter F. Carey 12,143 166,189 10,277 / 18,426 $ 81,276 / $37,144
Ronald S. Stowell 6,300 78,167 6,496 / 17,167 $ 51,963 / $27,384
</TABLE>
(1) In-the-Money Options are options for which the market value of the
underlying Common Shares exceeds the exercise price. Calculation is
based upon the market value of the underlying Common Shares at fiscal
year-end, minus the exercise price.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal year 1997.
The LSI Industries Inc. Compensation Committee annually establishes
salaries, bonuses and stock option awards for executive officers and key
management personnel. The Committee reviews the performance of the Company's
executive officers on an individual basis and also reviews each executive's
performance in connection with the Company's overall performance. The Committee
desires to establish executive compensation that enhances the Company's overall
fundamental objective of providing long-term value for its shareholders and
employees. The Committee believes that the interests of management and
shareholders can be more closely aligned by providing executives with
competitive levels of compensation that will enable LSI Industries to attract
and retain executives with the highest qualifications by recognizing exceptional
individual performance and by tying executive pay to overall corporate
performance.
The Committee uses base salaries, incentive compensation arrangements
and stock options designed to tie a portion of the executive's compensation to
the stock market performance of LSI's Common Shares.
BASE COMPENSATION
- -----------------
The Committee annually reviews the base salaries of the Company's
executive officers. This year particular thought and emphasis was given to the
strong competitive influences in the marketplace and the importance of retaining
key management employees of the Company. The Committee individually reviews each
executive's level of responsibility, potential and salary levels offered by
competitors. The executive's particular division of the Company is reviewed, and
its contribution to the overall results of the Company are assessed. The
Committee uses this information to determine the executive's base compensation
level and performance goals for the upcoming year.
The Committee applies a collective, subjective evaluation of the above
factors to determine the annual base compensation level of its executive
officers in light of the Company's performance and, in certain cases, its
various divisions. The Committee does not utilize a
12
<PAGE> 15
particular objective formula as a means of establishing annual base compensation
levels. Mr. Ready's salary was established on the same basis. The Committee did
not compare the Company's executive compensation with the level of compensation
paid by companies in the Dow Jones Electrical Equipment Index, nor did it
attempt to correlate executive compensation levels with the Company's relative
performance as shown in the Corporate Performance Graph above.
INCENTIVE COMPENSATION
- ----------------------
Incentive compensation awards for performance during fiscal 1997 were
made to those employees based upon the achievement of specific goals set forth
in the strategic Plan adopted for the 1997 fiscal year. The Plan states that 50%
of certain employees' bonuses are based upon overall corporate results, and
since the corporate goals were not met, 50% of the potential bonuses were not
earned. Bonuses for Corporate officers are based entirely upon corporate
results. Some discretionary bonuses were paid to certain managers based on the
Committee's analysis of the performance of the particular individual and
contribution to the success of the Company or the particular division for which
the manager was primarily responsible. None of the executive officers shown in
the Summary Compensation Table were awarded a bonus for fiscal 1997.
STOCK OPTION GRANTS
- -------------------
The shareholders of LSI Industries established a Stock Option Plan to
provide a method of attracting, retaining and providing appropriate incentives
to key employees. The Committee is responsible for the administration of this
Plan, both with respect to executive officers and all other employees. To that
end, the Committee determines which employees receive options, the time of grant
and the number of shares subject to the option. All option prices are set at
100% of market value on the date of grant.
Compensation Committee
----------------------
Michael J. Burke, Chairman
Allen L. Davis
John N. Taylor, Jr.
CORPORATE PERFORMANCE GRAPH
- ---------------------------
The following graph compares the cumulative total shareholder return on
the Company's Common Shares during the five fiscal years ended June 30, 1997,
with a cumulative total return on the Nasdaq Stock Market Index (U.S. companies)
and the Dow Jones Electrical Equipment Index. The comparison assumes $100 was
invested June 30, 1992 in the Company's Common Shares and in each of the indexes
presented; it also assumes reinvestment of dividends.
13
<PAGE> 16
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
LSI Nasdaq Dow Jones
Industries Market Index Electrical
June 30 Inc. (U.S.) Equipment Index
------- ---- ------ ---------------
<S> <C> <C> <C>
1992 100 100 100
1993 148 126 115
1994 326 127 113
1995 643 169 141
1996 881 218 170
1997 701 265 213
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- -----------------------------------------------------------
Michael J. Burke, who is Chairman of the Compensation Committee, is a
co-managing partner of Keating, Muething & Klekamp, P.L.L., Cincinnati, Ohio, a
law firm that provided legal services to the Company in fiscal year 1997.
Donald E. Whipple, a co-founder of the Company, a Director of the
Company since its inception in 1976, and retired President of the LSI Lighting
Systems and Insight Graphics division, served the Company as a consultant in
fiscal year 1997. Compensation paid to Mr. Whipple as a consultant and as a
non-employee Director amounted to $130,700 in fiscal year 1997. Donald E.
Whipple lost a brief battle with cancer and passed away on August 31, 1997. He
will be missed by the Board, Corporate management, and the employees of the
Company.
OTHER MATTERS
LSI Industries is not aware of any other matters to be presented at the
Annual Meeting other than those specified in the Notice.
By order of the Board of Directors
/s/ James P. Sferra
James P. Sferra
Secretary
Dated: September 25, 1997
14
<PAGE> 17
LSI INDUSTRIES INC.
PROXY The undersigned hereby appoints ALLEN L. DAVIS, JAMES P. SFERRA or
FOR either one of them, proxies of the undersigned, each with the power
ANNUAL of substitution, to vote all Common Shares which the undersigned would
MEETING be entitled to vote at the Annual Meeting of Shareholders of LSI
Industries Inc. to be held on November 13, 1997 at 10:00 A.M. Eastern
time at the Company's headquarters located at 10000 Alliance Road,
Cincinnati, Ohio and any adjournment of such meeting on the matters
specified below and in their discretion with respect to such other
business as may properly come before the meeting or any adjournment
thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS:
1. AUTHORITY TO ELECT AS CLASS A DIRECTORS THE THREE NOMINEES BELOW.
FOR ___ WITHHOLD AUTHORITY ___
MICHAEL J. BURKE, ROBERT J. READY, AND JOHN N. TAYLOR, JR.
WRITE THE NAME OF ANY NOMINEE(S) FOR
WHOM AUTHORITY TO VOTE IS WITHHELD ____________________________________
2. AMENDMENT OF THE LSI INDUSTRIES INC. 1995 STOCK OPTION PLAN.
FOR ___ AGAINST ___ ABSTAIN ___
3. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 1998.
FOR ___ AGAINST ___ ABSTAIN ___
THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS UNLESS A
CONTRARY CHOICE IS SPECIFIED.
, 1997
- ----------------------- ---------------------------------------
---------------------------------------
IMPORTANT: PLEASE SIGN EXACTLY
AS NAME APPEARS HEREON
INDICATING, WHERE PROPER,
OFFICIAL POSITION OR
REPRESENTATIVE CAPACITY. IN THE
CASE OF JOINT HOLDERS, ALL
SHOULD SIGN.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
