<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
----------------------
FORM 10-K
---------
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ---- ACT OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1998.
OR
____ 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
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Shares
(No par value)
Indicate by check mark 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant at September 4, 1998 was approximately $161,623,000, based on a
closing price of $18.625. At September 4, 1998, 9,679,647 shares of no par value
Common Shares were issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's Proxy Statement filed with the Commission for its
1998 annual meeting are incorporated by reference in Part III, as specified.
<PAGE> 2
LSI INDUSTRIES INC.
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Begins on
Page
----
PART I
<S> <C> <C>
ITEM 1. BUSINESS .............................................................. 1
ITEM 2. PROPERTIES ............................................................ 2
ITEM 3. LEGAL PROCEEDINGS ..................................................... 3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS ....................................................... 3
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDERS' MATTERS ................................. 3
ITEM 6. SELECTED FINANCIAL DATA ............................................... 3
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ........................... 3
ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .............. 3
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ........................... 3
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE .......................................... 4
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT .................... 4
ITEM 11. EXECUTIVE COMPENSATION ................................................ 4
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT ................................................ 4
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ........................ 4
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON
FORM 8-K ...................................................... 4
SIGNATURES ..................................................................... 6
</TABLE>
i
<PAGE> 3
PART I
------
ITEM 1. BUSINESS
The Company's two business segments are the Image Group and the
Commercial / Industrial Lighting Group. Sales by segment are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Image Group ........... $138,886 $101,562 $110,808
Commercial / Industrial
Lighting Group ... 50,253 43,180 41,925
-------- -------- --------
Total ................. $189,139 $144,742 $152,733
======== ======== ========
</TABLE>
The Image Group manufactures and sells exterior and interior visual
image elements (lighting, graphics, and menu board systems) for the petroleum /
convenience store market and for multi-site retail operations. The Image Group
includes the operations of LSI Petroleum Lighting, LSI Automotive, LSI Images,
LSI Metal Fabrication, SGI Integrated Graphic Systems and Grady McCauley. The
Commercial / Industrial Lighting Group manufactures and sells outdoor, indoor,
and landscape lighting for the commercial / industrial and multi-site retail
markets. The Commercial / Industrial Lighting Group includes the operations of
LSI Lighting Systems, Courtsider Lighting, and Greenlee Lighting, and the
Company's most recent acquisition, LSI Marcole. The Company's most significant
market is the petroleum / convenience store market with approximately 50% of net
sales concentrated in this market. See Note 3 of Notes to Consolidated Financial
Statements beginning on page S-13 of this Form 10-K for additional information
on business segments.
On February 6, 1998, the Company acquired the outstanding common shares
of Marcole, Inc., a privately owned manufacturer of electrical wiring harnesses
primarily for the appliance industry. For financial statement purposes the
acquisition was accounted for as a purchase with operating results of Marcole
first included in the Company's fiscal 1998 third quarter financial statements.
The purchase price was 12,000 common shares of the Company (valued at $200,000)
plus $712,000 in cash. The purchase price exceeded the estimated fair value of
net assets acquired by $210,000, which is recorded as goodwill. See Note 12 of
Notes to Consolidated Financial Statements beginning on page S-20 of this Form
10-K for additional information on this acquisition.
The Company believes that it is a low-cost producer for its types of
products, and as such, is in a position to promote its product lines with
substantial marketing and sales activities.
The Company is not dependent on any one supplier for any of its
component parts.
The Company's sales are partially seasonal as installation of outdoor
lighting and graphic systems in the northern states lessens during the harshest
winter months. One customer, Chevron U.S.A. Inc. accounted for 12% of
consolidated net sales in 1996. The Company had a backlog of orders, believed by
it to be firm, of $13.9 million and $13.6 million at June 30, 1998 and 1997,
respectively. All orders are believed to be shippable within twelve months.
The Company has approximately 1,100 full-time and 200 temporary
employees. The Company has a comprehensive compensation and benefit program for
most employees, including competitive wages, a discretionary bonus plan, a
profit-sharing plan and retirement plan, a 401(k) savings plan, a non-qualified
deferred compensation plan (for certain employees), a stock option plan, and
medical and dental insurance.
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<PAGE> 4
The Company sells its products throughout the United States and Canada.
LSI Industries encounters strong competition in all markets served by
the Company's product lines. The Company has many competitors, some of which
have greater financial and other resources. The Company considers product
quality and performance, price, customer service, prompt delivery, and
reputation to be important competitive factors.
The Company has several product and process patents which it has
obtained in the normal course of business. The Company in general does not
believe that patent protection is critical to its business, however it does
believe that patent protection is important for a few select products.
ITEM 2. PROPERTIES
The Company has seven facilities:
<TABLE>
<CAPTION>
Description Size Location Status
----------- ---- -------- ------
<S> <C> <C> <C> <C>
1) LSI Corporate 225,000 sq. ft., Cincinnati, OH Owned
Headquarters, and (includes 38,000
lighting fixture and sq. ft. of office
graphics manufacturing space)
2) LSI pole manufac- 131,000 sq. ft. Cincinnati, OH Owned
turing and dry
powder-coat painting
3) LSI Metal Fabrication 99,000 sq. ft. Independence, KY Owned
and LSI Images manu- (includes 5,000
facturing and dry sq. ft. of office
powder-coat painting space)
4) SGI office; 229,000 sq. ft. Houston, TX Leased
screen printing (includes 35,000
manufacturing; and sq. ft. of office space
architectural graphics and 35,000 sq. ft. of
manufacturing outside warehouse space)
5) Greenlee office 40,000 sq. ft. Dallas, TX Leased
and manufacturing (includes 4,000 sq. ft.
of office space)
6) Grady McCauley office 120,000 sq. ft. North Canton, OH Owned
and manufacturing (includes 20,000
sq. ft. of office space)
7) LSI Marcole office and 38,000 sq. ft. Manchester, TN Owned
manufacturing of electrical (includes 4,000 sq. ft.
wire harnesses (acquired of office space)
February 6, 1998)
</TABLE>
The Company considers these facilities adequate for its current level of
operations.
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<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the year
covered by this report.
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS'
MATTERS
"Common Share Information" appears beginning on page S-21 of this Form
10-K.
ITEM 6. SELECTED FINANCIAL DATA
"Selected Financial Data" appears on page S-23 of this Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" appears on pages S-1 through S-4 of this Form
10-K.
ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Begins
Index to Financial Statements on Page
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Financial Statements:
<S> <C> <C>
Report of Independent Public Accountants S-5
Consolidated Income Statements for the years
ended June 30, 1998, 1997 and 1996 S-6
Consolidated Balance Sheets at June 30, 1998 and 1997 S-7
Consolidated Statements of Cash Flows for the
years ended June 30, 1998, 1997 and 1996 S-9
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1998, 1997 and 1996 S-10
Notes to Consolidated Financial Statements S-11
Financial Statement Schedules:
II - Valuation and Qualifying Accounts for the S-24
years ended June 30, 1998, 1997 and 1996
</TABLE>
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<PAGE> 6
Schedules other than those listed above are omitted for the reason(s)
that they are either not applicable or not required or because the
information required is contained in the financial statements or notes
thereto.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
PART III
--------
ITEMS 10, 11, 12 and 13 of Part III are incorporated by reference to the LSI
Industries Inc. Proxy Statement for its Annual Meeting of Shareholders to be
held November 12, 1998, as filed with the Commission pursuant to Regulation 14A.
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial Statements
Appear as part of Item 8 of this Form 10-K.
(2) Financial Statement Schedules
Appear as part of Item 8 of this Form 10-K.
(3) Exhibit list - listing of exhibits required to be filed with Form 10-K
incorporated by reference to Exhibit(s) filed as part of:
<TABLE>
<S> <C> <C> <C>
Proxy-89 = Proxy statement for 1989 Annual Shareholders' Meeting
10K-89 = Annual Report on Form 10-K for the fiscal year ended June 30,
1989
10K-95 = Annual Report on Form 10-K for the fiscal year ended June 30, 1995
10K-96 = Annual Report on Form 10-K for the fiscal year ended June 30, 1996
S-3 (96) = Form S-3 Registration Statement No. 33-65043
S-8 (95-1) = Form S-8 Registration Statement No. 33-64721 for the LSI
Industries Inc. 1995 Stock Option Plan
S-8 (95-2) = Form S-8 Registration Statement No. 33-64723 for the LSI
Industries Inc. 1995 Directors' Stock Option Plan
or filed herewith where so noted.
</TABLE>
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<PAGE> 7
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Current
Form 10-K Report/ Exhibit
Exhibit No. Description of Exhibit Document Number
- ----------- ---------------------- -------- ------
<S> <C> <C> <C> <C>
3.1 Articles of Incorporation of LSI Industries Inc. S-3 (96) 3.1
3.2 Code of Regulations of LSI Industries Inc. S-3 (96) 3.2
4 Instruments Defining the Rights of o
Security Holders
<CAPTION>
Management Compensatory Agreements
----------------------------------
<S> <C> <C> <C> <C>
10.1 LSI Industries Inc. Retirement Plan 10K-95 10.4
and Trust
10.2 1985 Stock Option Plan 10K-89 10.1
10.3 LSI Industries Inc. 1995 Stock Option Plan S-8 (95-1) 4.1
10.4 LSI Industries Inc. 1995 Directors' Stock
Option Plan S-8 (95-2) 4.1
10.5 LSI Industries Inc. Nonqualified Deferred 10K-96 10.5
Compensation Plan, and Rabbi Trust
Agreement
22 Subsidiaries of the Registrant Filed herewith
23 Consent of Independent Public Accountants Filed herewith
24 Powers of Attorney (4) Filed herewith
27 Financial Data Schedule Filed herewith
o The Company has no outstanding issue or indebtedness exceeding
10% of the Company's assets on a consolidated basis. A copy of
the instruments defining the right of security holders will be
furnished to the Commission upon request.
</TABLE>
(b) Form 8-K:
There have been no reports on Form 8-K filed during the last quarter of
fiscal year 1998.
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<PAGE> 8
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
September 9, 1998 BY:/s/ Robert J. Ready
- ------------------------------ ---------------------------------------
Date Robert J. Ready
Chairman of the Board and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ Robert J. Ready Chairman of the Board and President
- ----------------------------------- (Principal Executive Officer)
Robert J. Ready
Date: September 9, 1998
---------------------
/s/ Ronald S. Stowell Vice President, Chief Financial Officer, and
- ----------------------------------- Treasurer
Ronald S. Stowell (Principal Financial and Accounting Officer)
Date: September 9, 1998
---------------------
*Michael J. Burke Director
- -----------------------------------
Michael J. Burke
*Allen L. Davis Director
- -----------------------------------
Allen L. Davis
*James P. Sferra Secretary; Executive Vice President
- ----------------------------------- - Manufacturing; and Director
James P. Sferra
*John N. Taylor, Jr. Director
- -----------------------------------
John N. Taylor, Jr.
</TABLE>
*The undersigned, by signing his name hereto, executed this Annual Report on
Form 10-K on September 9, 1998, pursuant to Powers of Attorney executed by the
above named Directors of the Registrant and filed with the Securities and
Exchange Commission as Exhibit 24 hereto.
September 9, 1998 By: /s/ Ronald S. Stowell
- ---------------------------------- ----------------------------
Date Attorney-in-Fact
-6-
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SALES BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Image Group $138,886 $101,562 $110,808
Commercial / Industrial
Lighting Group 50,253 43,180 41,925
-------- -------- --------
$189,139 $144,742 $152,733
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
1998 COMPARED TO 1997
Net sales of $189,139,000 in 1998 increased 31% over 1997 net sales of
$144,742,000. Results of the Image Group in fiscal 1998 include the operations
of the Company's new graphics subsidiary, Grady McCauley, which was acquired
June 30, 1997. Results of the Commercial / Industrial Lighting Group include the
operations of the Company's newest subsidiary, LSI Marcole, which was acquired
February 6, 1998. Image Group net sales increased 37% and Commercial /
Industrial Lighting Group net sales increased 16% in fiscal 1998 as compared to
the prior year primarily as a result of growth in the multi-site retail market.
The increase in Image Group sales is attributed to growth in substantially all
markets and products, particularly graphics, petroleum lighting, and quick
service restaurant, as well as to the inclusion of Grady McCauley in the
operating results in fiscal 1998. Net sales of the Image Group to the petroleum
/ convenience store market represented 49% and 50% of net sales in fiscal 1998
and fiscal 1997, respectively. While sales prices were increased, inflation did
not have a significant impact on sales in 1998 as competitive pricing pressures
held price increases to a minimum.
Gross profit of $64,480,000 increased 33% over last year's gross profit
of $48,542,000, and increased as a percentage of net sales to 34.1% in fiscal
year 1998 as compared to 33.5% in the prior year. The increase in amount of
gross profit is due primarily to the 31% increase in net sales. The increase in
gross profit percentage is primarily related to the Company's graphics
operations reporting an improved aggregate gross profit percentage, to changes
in lighting product mix to higher margin products, and to improved manufacturing
operating efficiencies in the Company's lighting business. Selling and
administrative expenses increased to $44,286,000 from $34,833,000 primarily as a
result of increased sales volume and the addition of Grady McCauley. As a
percentage of net sales, selling and administrative expenses were at 23.4% in
fiscal 1998 as compared to 24.1% in the prior year.
The Company reported net interest income of $37,000 in fiscal 1998 as
compared to net interest income of $487,000 in fiscal 1997 reflective of the
significantly reduced amount of short-term cash investments during the year.
Cash which had been invested was used at the end of fiscal 1997 for the
acquisition of Grady McCauley. The Company's effective tax rate increased to
37.5% in fiscal 1998 as compared to 37.0% in fiscal 1997 primarily due to an
increase in the rate of federal income tax.
S-1
<PAGE> 10
Net income of $12,587,000 in fiscal 1998 increased 42% over $8,872,000
in fiscal 1997. The increased net income resulted from increased gross profit on
higher net sales, partially offset by increased operating expenses, increased
income taxes, and from the reporting of a larger amount of net interest income
in fiscal 1997 as compared to fiscal 1998. Diluted earnings per share of $1.29
increased 33% in fiscal 1998 from $.97 per share in fiscal 1997. The weighted
average common shares outstanding for purposes of computing diluted earnings per
share increased 7% in 1998 to 9,790,000 shares from 9,188,000 shares in 1997
primarily as a result the common shares used in the acquisition of Grady
McCauley in June 1997.
Certain recently issued accounting pronouncements will affect the
Company's future financial statements and / or disclosures. See Note 1 to these
financial statements for additional discussion.
1997 COMPARED TO 1996
Net sales of $144,742,000 for 1997 compared to 1996 net sales of
$152,733,000 -- a 5% reduction. Image Group net sales decreased 8% while
Commercial / Industrial Lighting Group net sales increased 3% during fiscal
1997. The Company recorded strong sales growth in the multi-site retail market
which was more than offset by reduced sales in the petroleum / convenience store
market and commercial / industrial lighting market. Sales in the Image Group to
the petroleum / convenience store market, representing 50% of net sales in
fiscal 1997, decreased 12%. The reduction in net sales is primarily related to
significant re-imaging and re-lighting programs for customers last year that did
not repeat this year, as well as to lower volume of printed graphics sales. The
Company has one customer, Chevron U.S.A., who accounted for 12% of net sales
(reported in the Image Group) in fiscal 1996. The Company believes that it
continues to maintain a good business relationship with this continuing
customer; however, the level of total net sales, which for fiscal 1997 was under
ten percent of the Company's total net sales, is never assured in the future.
While sales prices were increased, inflation did not have a significant impact
on sales in fiscal 1997 as competitive pricing pressures held price increases to
a minimum.
Gross profit of $48,542,000 was increased slightly over last year's
gross profit; however, as a percentage of net sales, fiscal year 1997
performance improved to 33.5% as compared to 31.8% of net sales. With a 5%
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 Image Group's graphics operations. Selling and
administrative expenses decreased to $34,833,000 from $35,101,000 primarily as a
result of decreased sales volume as well as some non-recurring expenses in 1996,
but increased to 24% of net sales in fiscal 1997 from 23% last year.
The Company reported net interest income of $487,000 in fiscal 1997 as
compared to net interest expense of $344,000 in fiscal 1996. 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 during the year in high grade, short-term cash investments. Cash
which had been invested was used at the end of fiscal 1997 for an
S-2
<PAGE> 11
acquisition of a business (see also LIQUIDITY AND CAPITAL RESOURCES). The
Company's effective tax rate increased to 37.0% from 36.4% the prior year.
Income from continuing operations of $8,872,000 increased 7% over
$8,270,000 in fiscal 1996. The increased income resulted from an increased gross
profit percentage on lower net sales, decreased operating expenses, and from the
reporting of net interest income rather than net interest expense, partially
offset by an increased income tax provision. Diluted earnings per share from
continuing operations in fiscal 1997 of $.97 compares to $.98 per share in
fiscal 1996. The weighted average common shares outstanding increased 9% in 1997
to 9,188,000 shares from 8,456,000 shares in 1996 primarily as a result of the
effect of the 1.2 million common shares issued in the Company's February 1996
Public Offering. Net income of $8,872,000, or $.97 per share, compares to fiscal
1996 net income of $6,770,000, or $.80 per share. The increase resulted from
increased income from continuing operations in fiscal 1997 and the $1.5 million
charge to Discontinued Operations taken in fiscal 1996 (as more fully described
in Note 10 to the financial statements) with no similar charge in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 the Company had working capital of $40.2 million,
compared to $30.2 million at June 30, 1997. The ratio of current assets to
current liabilities increased to 2.37 to 1 from 2.22 to 1. The increased working
capital is primarily attributed to increased accounts receivable, cash, and
inventories, partially offset by increased accrued expenses and accounts
payable.
The Company generated $14.3 million of cash from operating activities
in fiscal 1998 as compared to $11.9 million fiscal 1997. The Company generated
more cash in fiscal 1998 primarily due to increased net income, and increased
depreciation and amortization expenses. Additionally, significant increases in
accounts receivable and inventories in fiscal 1998 compared to lesser increases
in fiscal 1997, and significantly larger fiscal 1998 decreases in accounts
payable and accrued expenses contributed to the change between years in net cash
flows from operating activities. As of June 30, 1998, the Company's days sales
outstanding were at approximately 55 days as compared to 58 days at June 30,
1997. Inventories increased $1.6 million with increases primarily in the
Company's graphics operations in addition to all lighting operations.
In addition to cash generated from operations, the Company's primary
source of liquidity continues to be its lines of credit. The Company has two
revolving lines of credit totaling $24 million, all of which was available as of
August 26, 1998. These lines of credit are unsecured and expire in fiscal 1999.
The Company believes that the total of available lines of credit plus cash flows
from operating activities is adequate for the Company's fiscal 1999 operational
and capital expenditure needs. The Company is in compliance with all of its loan
covenants. Excluding the acquisitions of Marcole and Grady McCauley in their
respective years, capital expenditures of $4.1 million in fiscal 1998 compare to
$2.6 million in the prior year. Spending in fiscal year 1998 is primarily
related to tooling for new products and to expansion of certain of the Company's
graphics operations. Capital expenditures totaling approximately $7 million are
planned for fiscal 1999.
On August 19, 1998, the Board of Directors declared a cash dividend of
$0.125 per share (approximately $1,211,000), comprised of a $0.0625 regular
quarterly dividend and a
S-3
<PAGE> 12
$0.0625 special year-end dividend, to be paid September 15, 1998 to shareholders
of record on September 8, 1998. During fiscal 1998, the Company paid cash
dividends each quarter.
The Company has completed a review of its business systems, office
support systems, and its facilities and equipment with respect to year 2000
programming deficiencies. The review has extended to major suppliers and
customers, and this element of the review is expected to be completed by June
30, 1999. The Company does not anticipate material costs to be incurred to
modify or replace any affected systems. The Company anticipates completion of
this process prior to June 30, 1999.
The Company acquired the outstanding common stock of Marcole
Industries, Inc. on February 6, 1998 as well as the building and real estate in
Manchester, Tennessee from which Marcole will continue to operate. Total
purchase price was approximately $912,000, which includes 12,000 common shares
(valued at approximately $200,000) of LSI Industries. For financial statement
purposes the acquisition was accounted for as a purchase, effective on the date
of acquisition. The new subsidiary, LSI Marcole Inc., is a manufacturer of
electrical wire harnesses for the appliance and white goods industry. The
purchase price exceeded the estimated fair value of net assets acquired by
$210,000, which is being amortized over forty years. The allocation was based on
preliminary estimates and may be revised at a later date pending the completion
of certain analysis.
On June 30, 1997, the Company acquired substantially all assets and
assumed certain liabilities of Grady McCauley, Incorporated, a privately owned
manufacturer of custom interior graphics primarily for the retail market. For
financial statement purposes the acquisition was accounted for as a purchase
with operating results of Grady McCauley first included in the Company's fiscal
1998 financial statements. The purchase price was 475,700 common shares of the
Company (valued at $6,000,000) plus $15.2 million in cash, exclusive of
acquisition costs. The purchase price exceeded the estimated fair value of net
assets acquired by $11.8 million, which is recorded as goodwill and is being
amortized over forty years.
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
or through the issuance of common or preferred shares in payment for acquired
businesses.
S-4
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors and Shareholders of LSI Industries Inc.:
We have audited the accompanying consolidated balance sheets of LSI
Industries Inc. (an Ohio corporation) and subsidiaries as of June 30, 1998 and
1997, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended June 30, 1998.
These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of LSI Industries Inc.
and subsidiaries as of June 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1998 in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index to the
financial statements is presented for purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The information in this schedule as of June 30, 1998 and 1997 and
for each of the years in the period ended June 30, 1998 has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Cincinnati, Ohio
August 14, 1998
S-5
<PAGE> 14
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
(In thousands, except per share)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 189,139 $ 144,742 $ 152,733
Cost of products sold 124,659 96,200 104,221
--------- --------- ---------
Gross profit 64,480 48,542 48,512
Selling and administrative expenses 44,286 34,833 35,101
--------- --------- ---------
Operating income 20,194 13,709 13,411
Interest (income) (143) (528) (154)
Interest expense 106 41 498
Other expense 108 114 62
--------- --------- ---------
Income from continuing operations
before income taxes 20,123 14,082 13,005
Income tax expense 7,536 5,210 4,735
--------- --------- ---------
Income from continuing operations 12,587 8,872 8,270
Discontinued operations -- -- (1,500)
--------- --------- ---------
Net income $ 12,587 $ 8,872 $ 6,770
========= ========= =========
Earnings per common share
Basic earnings per share from
continuing operations $ 1.32 $ .99 $ 1.02
========= ========= =========
Basic earnings per share $ 1.32 $ .99 $ .84
========= ========= =========
Diluted earnings per share from
continuing operations $ 1.29 $ .97 $ .98
========= ========= =========
Diluted earnings per share $ 1.29 $ .97 $ .80
========= ========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
S-6
<PAGE> 15
LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
(In thousands, except shares)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 9,338 $ 2,612
Accounts receivable, less allowance
for doubtful accounts of $560 and $401,
respectively 33,184 27,412
Inventories 24,958 23,058
Refundable income taxes 157 157
Other current assets 1,911 1,613
--------- ---------
Total current assets 69,548 54,852
Property, Plant and Equipment, at cost
Land 3,459 3,348
Buildings 15,458 14,433
Machinery and equipment 25,874 22,893
--------- ---------
44,791 40,674
Less accumulated depreciation (17,056) (13,529)
--------- ---------
Net property, plant and equipment 27,735 27,145
Goodwill, net 12,921 13,047
Other Assets 112 145
--------- ---------
$ 110,316 $ 95,189
========= =========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
S-7
<PAGE> 16
<TABLE>
<CAPTION>
1998 1997
-------- --------
LIABILITIES & SHAREHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt $ 190 $ 187
Accounts payable 13,689 12,337
Accrued expenses 15,432 12,136
-------- --------
Total current liabilities 29,311 24,660
Long-Term Debt 1,005 1,195
Other Long-Term Liabilities 112 68
Deferred Income Taxes 1,231 1,298
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 9,634,608 and 9,499,231
shares, respectively
(see Note 7) 35,368 34,516
Retained earnings 43,289 33,452
-------- --------
Total shareholders' equity 78,657 67,968
-------- --------
$110,316 $ 95,189
======== ========
</TABLE>
S-8
<PAGE> 17
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 1998, 1997 and 1996
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 12,587 $ 8,872 $ 6,770
Non-cash items included in income
Depreciation and amortization 4,375 2,975 2,456
Deferred income taxes (401) (74) (129)
Deferred compensation plan 209 346 --
Loss on disposition of fixed assets 108 75 23
Change in
Accounts receivable (5,326) (73) (5,552)
Inventories (1,569) (564) (1,076)
Refundable income taxes -- 188 93
Accounts payable 1,086 92 214
Accrued expenses and other 3,235 44 (2,069)
Change in liability for discontinued operations (21) (17) (324)
-------- -------- --------
Net cash flows from operating activities 14,283 11,864 406
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (4,120) (2,587) (3,392)
Proceeds from sale of fixed assets 30 3 23
Acquisition of businesses, net of cash received (712) (15,639) --
-------- --------
Net cash flows from investing activities (4,802) (18,223) (3,369)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (448) (180) (6,537)
Cash dividends paid (2,750) (2,075) (1,653)
Exercise of stock options 676 321 586
Purchase of treasury shares (233) (233) --
Proceeds from public offering of shares -- -- 19,581
-------- -------- --------
Net cash flows from financing activities (2,755) (2,167) 11,977
-------- -------- --------
Increase (decrease) in cash and cash equivalents 6,726 (8,526) 9,014
Cash and cash equivalents at beginning of year 2,612 11,138 2,124
-------- -------- --------
Cash and cash equivalents at end of year $ 9,338 $ 2,612 $ 11,138
======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
S-9
<PAGE> 18
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1998, 1997, AND 1996
(In thousands)
<TABLE>
<CAPTION>
Common Shares
------------------------
Number of Retained
Shares Amount Earnings Total
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1995 7,554 $ 7,915 $ 21,538 $ 29,453
Net income -- -- 6,770 6,770
Public offering of shares 1,233 19,581 -- 19,581
Stock options exercised 177 586 -- 586
Dividends - $.21 per share -- -- (1,653) (1,653)
-------- -------- -------- --------
BALANCE AT JUNE 30, 1996 8,964 28,082 26,655 54,737
Net income -- -- 8,872 8,872
Purchase of treasury shares (21) (233) -- (233)
Deferred stock compensation -- 346 -- 346
Stock options exercised 80 321 -- 321
Common shares issued for
acquisition 476 6,000 -- 6,000
Dividends - $.23 per share -- -- (2,075) (2,075)
-------- -------- -------- --------
BALANCE AT JUNE 30, 1997 9,499 34,516 33,452 67,968
NET INCOME -- -- 12,587 12,587
PURCHASE OF TREASURY SHARES (12) (233) --
(233)
DEFERRED STOCK COMPENSATION -- 209 -- 209
STOCK OPTIONS EXERCISED 136 676 -- 676
COMMON SHARES ISSUED FOR
ACQUISITION 12 200 -- 200
DIVIDENDS - $.29 PER SHARE -- -- (2,750) (2,750)
-------- -------- -------- --------
BALANCE AT JUNE 30, 1998 9,635 $ 35,368 $ 43,289 $ 78,657
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
S-10
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION:
The consolidated financial statements include the accounts of LSI Industries
Inc. and its subsidiaries, all of which are wholly owned. All significant
intercompany transactions have been eliminated.
RECLASSIFICATION:
Certain reclassifications have been made to prior year amounts in order to be
consistent with the presentation for the current year.
USE OF ESTIMATES:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
REVENUE RECOGNITION:
Revenue is recognized when the customer accepts title and the resultant risks
and rewards of ownership. Generally this occurs upon shipment of goods or
shortly thereafter. Amounts received from customers prior to the recognition of
revenue are accounted for as customer pre-payments under accrued expenses.
CASH AND CASH EQUIVALENTS:
The cash balance includes cash and cash equivalents which have original
maturities of less than three months.
INVENTORIES:
Inventories are stated at the lower of cost or market. Cost is determined on the
first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT AND RELATED DEPRECIATION:
Property, plant and equipment are stated at cost. Major additions and
betterments are capitalized while maintenance and repairs are expensed. For
financial reporting purposes, depreciation is computed on the straight-line
method over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings 31 - 40 years
Machinery and equipment 3 - 10 years
</TABLE>
S-11
<PAGE> 20
GOODWILL:
The excess of cost over fair value of assets acquired ("goodwill") is amortized
over a forty year period. As of June 30, 1998 and 1997, accumulated amortization
of goodwill was $662,000 and $326,000, respectively. The Company periodically
evaluates goodwill and other long-lived assets for permanent impairment based
upon anticipated cash flows. To date no impairments have been recorded, nor are
any anticipated.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company has financial instruments consisting primarily of cash and cash
equivalents, revolving lines of credit, and long-term debt. The fair value of
these financial instruments approximates carrying value because of their
short-term maturity and variable, market-driven interest rates. The Company has
no financial instruments with off-balance sheet risk.
EMPLOYEE BENEFIT PLANS:
The Company has a defined contribution retirement plan and a discretionary
profit sharing plan covering substantially all of its employees, and a
non-qualified deferred compensation plan covering certain employees. The costs
of employee benefit plans are charged to expense and funded annually. Total
costs were $1,641,000 in 1998, $1,399,000 in 1997, and $1,378,000 in 1996.
INCOME TAXES:
Deferred income taxes are provided on items reported in income in different
periods for financial reporting and tax purposes.
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 231,000 shares in
1998, 184,000 shares in 1997, and 360,000 shares in 1996. See also Notes 4 and
7.
RECENT PRONOUNCEMENTS:
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings Per Share,"
which requires the presentation of basic and diluted earnings per share on the
face of the income statement for all entities with complex capital structures
and requires a reconciliation of both the numerator and denominator of the basic
and dilutive earnings per share computations. SFAS No. 128 is effective for
financial statements for both interim and annual periods ending after December
15, 1997. The Company adopted this standard in the second quarter of fiscal year
1998 with no material impact on earnings per share. All prior period earnings
per share have been restated for the new disclosure.
S-12
<PAGE> 21
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. SFAS No. 130 is effective for financial
statements for annual periods beginning after December 15, 1997 (fiscal 1999 for
the Company). The Company does not expect adoption to have a significant impact
on its financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), "Accounting for
Derivative Instruments and for Hedging Activities," which establishes standards
for reporting and disclosure of derivative and hedging instruments. SFAS No. 133
is effective as of the beginning of fiscal years ending after June 15, 1999. The
Company will not be affected by this new standard because the Company has no
derivative or hedging financial instruments.
NOTE 2 - DISCONTINUED OPERATIONS
In 1992 the Company sold the assets and operations of its U.K. subsidiary,
Duramark, to its management and reported a loss from Discontinued Operations.
Consideration received included cash and assumption of liabilities by
management. The remaining liabilities which were not assumed by the management
buy-out group of the discontinued operations, net of related taxes, are included
in accrued expenses in the amounts of $562,000 and $575,000 as of June 30, 1998
and 1997, respectively.
NOTE 3 - BUSINESS SEGMENT INFORMATION
LSI operates in two business segments - the Image Group and the Commercial /
Industrial Lighting Group. The Image Group manufactures and sells exterior and
interior visual image elements (lighting, graphics, and menu board systems) for
the petroleum / convenience store market and for multi-site retail operations.
The Image Group includes the operations of LSI Petroleum Lighting, LSI
Automotive, LSI Images, LSI Metal Fabrication, SGI Integrated Graphic Systems,
and Grady McCauley. The Commercial / Industrial Lighting Group manufactures and
sells primarily outdoor, indoor, and landscape lighting for the commercial /
industrial and multi-site retail markets. The Commercial / Industrial Lighting
Group includes the operations of LSI Lighting Systems, Courtsider Lighting,
Greenlee Lighting, and LSI Marcole. The Company's most significant market is the
petroleum / convenience store market with approximately 50% of net sales
concentrated in this market.
The following information is provided for the following periods:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
(In thousands)
NET SALES:
Image Group $138,886 $101,562 $110,808
Commercial / Industrial Lighting Group 50,253 43,180 41,925
-------- -------- --------
$189,139 $144,742 $152,733
======== ======== ========
OPERATING INCOME:
Image Group $ 15,056 $ 9,055 $ 10,903
Commercial / Industrial Lighting Group 5,138 4,654 2,508
-------- -------- --------
$ 20,194 $ 13,709 $ 13,411
======== ======== ========
</TABLE>
S-13
<PAGE> 22
<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS:
<S> <C> <C> <C>
Image Group $ 79,555 $ 74,284 $ 48,449
Commercial / Industrial Lighting Group 20,730 17,734 19,223
-------- -------- --------
100,285 92,018 67,672
Corporate 10,031 3,171 11,824
-------- -------- --------
$110,316 $ 95,189 $ 79,496
======== ======== ========
CAPITAL EXPENDITURES:
Image Group $ 3,029 $ 1,902 $ 2,085
Commercial / Industrial Lighting Group 1,091 685 1,307
-------- -------- --------
$ 4,120 $ 2,587 $ 3,392
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Image Group $ 3,410 $ 2,085 $ 1,695
Commercial / Industrial Lighting Group 965 890 761
-------- -------- --------
$ 4,375 $ 2,975 $ 2,456
======== ======== ========
</TABLE>
Operating income of the business segments includes sales less all operating
expenses including allocations of corporate expense, but excluding interest
expense. Sales between business segments are immaterial.
Identifiable assets are those assets used by each segment in its operations,
including allocations of shared assets. Corporate assets consist primarily of
cash and cash equivalents, and refundable income taxes.
NOTE 4 - EARNINGS PER COMMON SHARE
The following table presents the amounts used to compute earnings per common
share and the effect of dilutive potential common shares on net income and
weighted average shares outstanding:
<TABLE>
<CAPTION>
(In thousands, except per share) 1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Income from continuing operations $ 12,587 $ 8,872 $ 8,270
========== ========== ==========
Net income $ 12,587 $ 8,872 $ 6,770
========== ========== ==========
Weighted average shares outstanding
during the period, net
of treasury shares 9,559 9,004 8,096
========== ========== ==========
Basic earnings per share
from continuing operations $ 1.32 $ .99 $ 1.02
========== ========== ==========
Basic earnings per share $ 1.32 $ .99 $ .84
========== ========== ==========
</TABLE>
S-14
<PAGE> 23
DILUTED EARNINGS PER SHARE
- --------------------------
<TABLE>
<S> <C> <C> <C>
Income from continuing operations $12,587 $ 8,872 $ 8,270
======= ======= =======
Net income $12,587 $ 8,872 $ 6,770
======= ======= =======
Weighted average shares outstanding
during the period, net of
treasury shares 9,559 9,004 8,096
Effect of dilutive securities:
Impact of common shares to be
issued under stock option plans
and a deferred compensation plan 231 184 360
------- ------- -------
Weighted average shares
outstanding (A) (B) 9,790 9,188 8,456
======= ======= =======
Diluted earnings per share
from continuing operations $ 1.29 $ .97 $ .98
======= ======= =======
Diluted earnings per share $ 1.29 $ .97 $ .80
======= ======= =======
</TABLE>
(A) Calculated using the "Treasury Stock" method as if dilutive
securities were exercised and the funds were used to purchase Common
Shares at the average market price during the period.
(B) Options to purchase 4,390 common shares, 15,385 common shares, and
5,862 common shares at June 30, 1998, 1997, and 1996, respectively,
were not included in the computation of diluted earnings per share
because the exercise price was greater than the average fair market
value of the common shares.
NOTE 5 - BALANCE SHEET DATA
The following information is provided as of June 30:
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
(In thousands)
INVENTORIES:
Raw materials $12,192 $10,272
Work-in-process and
finished goods 12,766 12,786
------- -------
$24,958 $23,058
======= =======
ACCRUED EXPENSES:
Compensation and benefits $ 6,405 $ 3,797
Customer prepayments $ 3,945 $ 5,098
</TABLE>
S-15
<PAGE> 24
NOTE 6 - REVOLVING LINES OF CREDIT AND LONG-TERM DEBT
The Company has lines of credit with its banks in the aggregate amount of $24
million, all of which was available at June 30, 1998. These revolving lines of
credit are unsecured and expire in fiscal year 1999. Interest on the revolving
lines of credit is charged based upon an increment over the LIBOR rate as
periodically determined, or at the banks' base lending rate less 1.25 percentage
points, at the Company's option. The increment over the LIBOR borrowing rate, as
periodically determined, with one of the Company's credit lines is 100 basis
points, and with the second credit line fluctuates between 85 and 150 basis
points depending upon the ratio of indebtedness to tangible net worth. As of
June 30, 1998 the borrowing rate on this line of credit would be 85 basis points
over the LIBOR rate. Under terms of these agreements, the Company has agreed to
maintain minimum levels of profitability and net worth, and is subject to
certain maximum levels of leverage.
The Company has an Industrial Revenue Development Bond (IRB) borrowing in the
amount of $1,070,000 associated with its facility in Northern Kentucky. The term
of this IRB is 15 years with semi-annual interest payments and annual principal
payments for retirement of bond principal in increasing amounts over the term of
the bonds. The IRB interest rate, which is reestablished semi-annually, is
currently 4.45%, plus a .75% letter of credit fee. The IRB is secured by the
Company's Kentucky real estate, which has a net carrying value of $1.4 million.
The Company has equipment loans outstanding totaling $125,000 with two
governmental agencies in Kentucky. The loans are for terms of five years at a
weighted average interest rate of 2.2% and are secured by the Company's Kentucky
equipment which has a net carrying value of $1.3 million. The Company makes
quarterly principal and interest payments of $32,000 through June 1999 and has
committed to specified job growth in its Kentucky facility.
<TABLE>
<CAPTION>
LONG-TERM DEBT: 1998 1997
------ ------
(In thousands)
<S> <C> <C>
Industrial Revenue Development Bond at 5.2% $1,070 $1,135
Equipment loans (average rate of 2.2%) 125 247
------ ------
1,195 1,382
Less current maturities 190 187
------ ------
$1,005 $1,195
====== ======
</TABLE>
Future maturities of long-term debt at June 30, 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 and after
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
$190 $ 70 $ 75 $ 80 $ 80 $700
</TABLE>
NOTE 7 - SHAREHOLDERS' EQUITY
The Company generated $19.6 million in net proceeds from a public offering of
1,232,894 common shares in February 1996. The Company used a portion of the net
proceeds to repay all outstanding indebtedness under its revolving lines of
credit and its term loan facility with its banks.
The Company has stock option plans which cover all of its full-time employees
and has a plan covering all non-employee directors. The options granted pursuant
to these plans are granted at fair market value at date of grant. Options
granted to non-employee directors are immediately
S-16
<PAGE> 25
exercisable and options granted to employees generally become exercisable 25%
per year (cumulative) beginning one year after the date of grant. The number of
shares reserved for issuance is 890,126, of which 389,750 shares were available
for future grant as of June 30, 1998. The plans allow for the grant of both
incentive stock options and non-qualified stock options. At June 30, 1998, there
were 127,837 options exercisable at an average price of $9.40 per share.
On June 30, 1997 the Company issued 475,700 common shares at a stated value of
$6,000,000 as a portion of the purchase price of an acquired business, and on
February 6, 1998 the Company issued 12,000 common shares at a stated value of
$200,000 as a portion of the purchase price of an acquired business (see further
discussion in Note 12).
Statement of Financial Accounting Standards No. 123 (SFAS No. 123) requires, at
a minimum, pro forma disclosures of expense for stock-based awards based on
their fair values. The fair value of each option on the date of grant has been
estimated using the Black-Scholes option pricing model. The following weighted
average assumptions were used for grants in fiscal 1998, 1997, and 1996.
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dividend yield 2% 2% 2%
Expected volatility 49% 43% 38%
Risk-free interest rate 5.56%-6.54% 6.17%-6.28% 5.91%-6.64%
Expected life 4-8 yrs. 4-8 yrs. 4-8 yrs.
</TABLE>
At June 30, 1998, the 154,400 options granted during fiscal 1998 to employees
and non-employee directors have exercise prices ranging from $14.00 to $19.00,
fair values ranging from $6.16 to $9.44 per option, and remaining contractual
lives of four to nine years. The 6,900 options granted during fiscal 1997 to
employees and non-employee directors had, as of June 30, 1997, exercise prices
ranging from $11.25 to $13.66, fair values ranging from $4.91 to $5.26, and
remaining contractual lives of four to nine years.
If the Company had adopted the expense recognition provisions of SFAS No. 123,
net income and earnings per share for the years ended June 30, 1998, 1997, and
1996 would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
(In thousands except earnings per share)
Net income
<S> <C> <C> <C>
As reported $ 12,587 $ 8,872 $ 6,770
Pro forma $ 12,225 $ 8,646 $ 6,539
Earnings per share
Basic
Continuing operations
As reported $ 1.32 $ .99 $ 1.02
Pro forma $ 1.28 $ .96 $ .99
Basic
As reported $ 1.32 $ .99 $ .84
Pro forma $ 1.28 $ .96 $ .81
</TABLE>
S-17
<PAGE> 26
<TABLE>
<S> <C> <C> <C>
Diluted
Continuing operations
As reported $1.29 $.97 $.98
Pro forma $1.26 $.95 $.96
Diluted
As reported $1.29 $.97 $.80
Pro forma $1.26 $.95 $.78
</TABLE>
Since SFAS No. 123 has not been applied to options granted prior to December 15,
1994, the resulting compensation cost shown above may not be representative of
that expected in future years.
Transactions involving the stock option plans for the years ended June 30, 1998,
1997 and 1996 are shown in the table below:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- ----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
(Shares in thousands) Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 518 $ 9.89 619 $ 9.04 492 $ 4.13
Granted 154 15.31 7 11.68 342 13.14
Terminated (17) 13.86 (21) 12.95 (22) 12.10
Exercised (155) 5.79 (87) 3.23 (193) 3.43
------ ------ ------
Outstanding at end of year 500 $12.70 518 $ 9.89 619 $ 9.04
=== === ===
</TABLE>
The Company implemented a non-qualified Deferred Compensation Plan in fiscal
1997 and a certain portion of the Plan's investments are in common shares of the
Company. A total of 33,723 and 21,045 common shares were held in the Plan as of
June 30, 1998 and 1997, respectively, and, accordingly, have been recorded as
treasury shares.
On August 19, 1998, the Board of Directors declared a cash dividend of $0.125
per share, comprised of a $0.0625 regular quarterly dividend and a $0.0625
special year-end dividend, to be paid September 15, 1998 to shareholders of
record on September 8, 1998. Annual cash dividend payments made during fiscal
years 1998, 1997, and 1996 were $.29, $.23, and $.21 per share, respectively.
NOTE 8 - SALES TO MAJOR CUSTOMERS
The Company made sales in the Image Group to a major customer which exceeded 10%
of consolidated net sales. Sales to Chevron U.S.A. represented 12% of
consolidated net sales in 1996.
NOTE 9 - LEASES
The Company leases certain of its facilities and equipment under operating lease
arrangements. Rental expense was $1,094,000 in 1998, $920,000 in 1997, and
$656,000 in 1996. Minimum
S-18
<PAGE> 27
annual rental commitments under non-cancelable operating leases are: $994,000 in
1999, $973,000 in 2000, $895,000 in 2001, and $197,000 in 2002.
NOTE 10 - INCOME TAXES
The following information is provided for the years ended June 30:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(In thousands)
<S> <C> <C> <C>
PROVISION (BENEFIT) FOR INCOME TAXES:
Current federal $ 7,143 $ 4,705 $ 4,290
CURRENT STATE AND LOCAL 794 579 574
Deferred (401) (74) (129)
-------- -------- --------
$ 7,536 $ 5,210 $ 4,735
======== ======== ========
RECONCILIATION TO FEDERAL STATUTORY RATE:
Federal statutory tax rate 35.0% 34.3% 34.2%
STATE AND LOCAL TAXES 2.6 2.7 2.9
Goodwill and other (.1) -- (.7)
-------- -------- --------
Effective tax rate 37.5% 37.0% 36.4%
======== ======== ========
</TABLE>
The components of deferred income tax assets and liabilities at June 30, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
------- -------
(In thousands)
CURRENT ASSETS (LIABILITIES):
<S> <C> <C>
Reserves against current assets $ 515 $ 267
Prepaid expenses (256) (101)
Accrued expenses 842 593
------- -------
Deferred income tax asset included in Other Current
Assets on the Consolidated Balance Sheets $ 1,101 $ 759
======= =======
NONCURRENT (ASSETS) LIABILITIES:
Depreciation $ 1,573 $ 1,595
Goodwill and acquisition costs (144) (154)
Deferred compensation (198) (143)
------- -------
$ 1,231 $ 1,298
======= =======
</TABLE>
The Company discontinued its European operations in 1992 and reported a $4.3
million loss, net of a $3.2 million income tax benefit. The Internal Revenue
Service (IRS) completed its audit of the Company's 1989 through 1992 federal
income tax returns and proposed audit adjustments which would have resulted in a
return of approximately $2 million of income taxes (plus interest) to the IRS
which had been refunded to the Company with the filing of its 1992 income tax
return. The IRS questioned the tax treatment of the loss associated with the
discontinued operations, specifically as to whether it should receive ordinary
loss or capital loss treatment.
S-19
<PAGE> 28
The Company's settlement discussions with the IRS Appeals Division relating to
the proposed audit assessment were concluded in December 1995. An agreement was
reached that re-characterized a portion of the 1992 loss associated with
discontinued European operations as a long-term capital loss. The agreement
resulted in payment of $1.7 million (composed of taxes and interest), and in a
fiscal 1996 charge to discontinued operations of $1.5 million to increase the
Company's reserve for remaining liabilities associated with the discontinued
operations.
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash payments:
Interest $ 126 $ 109 $ 924
Income taxes $ 7,184 $ 4,786 $ 5,588
Non-cash investing and financing activities:
Common shares issued for acquisitions $ 200 $ 6,000 $ --
Details of acquisitions:
Working capital, less cash $ 59 $ 2,377 $ --
Property, plant & equipment 647 7,245 --
Other assets, net (4) 232 --
Excess of purchase price paid over estimated
net assets of acquired businesses 210 11,785 --
-------- -------- --------
912 21,639 --
less fair value of common shares issued (200) (6,000) --
-------- -------- --------
Cash paid for acquisitions $ 712 $ 15,639 $ --
======== ======== ========
</TABLE>
NOTE 12 - ACQUISITIONS
On June 30, 1997, the Company acquired substantially all assets and assumed
certain liabilities of Grady McCauley, Incorporated, a privately owned
manufacturer of custom interior graphics primarily for the retail market. For
financial statement purposes the acquisition was accounted for as a purchase
with operating results of Grady McCauley first included in the Company's fiscal
1998 financial statements. The purchase price was 475,700 common shares of the
Company (valued at $6,000,000) plus $15.2 million in cash, exclusive of
acquisition costs. The purchase price exceeded the estimated fair value of net
assets acquired by $11.8 million, which is recorded as goodwill and is being
amortized over forty years. On February 6, 1998, the Company acquired the
outstanding common shares of Marcole, Inc., a privately owned manufacturer of
electrical wiring harnesses primarily for the appliance industry. For financial
statement purposes the acquisition was accounted for as a purchase with
operating results of Marcole first included in the Company's fiscal 1998 third
quarter financial statements. The purchase price was 12,000 common shares of the
Company (valued at $200,000) plus $712,000 in cash. The purchase price exceeded
the estimated fair value of net assets acquired by $210,000, which is recorded
as goodwill and is being amortized over forty years. The allocation was based on
preliminary estimates and may be revised at a later date pending the completion
of certain appraisals and other analysis.
The following unaudited pro forma consolidated results give effect to the above
acquisition of Grady McCauley, Incorporated as though it had been acquired at
the beginning of each period
S-20
<PAGE> 29
presented. Neither the acquisition price of Marcole nor its operating results
are material to LSI Industries and therefore Marcole is not included in the pro
forma results presented below. The pro forma information has been presented for
comparative purposes only and does not purport to be indicative of the results
of operations which actually would have resulted had the acquisition been made
at the beginning of the earliest period presented, or of results which may occur
in the future.
<TABLE>
<CAPTION>
1997 1996
------------ ------------
(In thousands except earnings per share;
unaudited)
<S> <C> <C>
Net sales $ 159,082 $ 167,034
Income from continuing operations $ 8,901 $ 8,577
Net income $ 8,901 $ 7,077
Earnings per share
Basic
Continuing operations $ .94 $ 1.00
Total $ .94 $ .83
Diluted
Continuing operations $ .92 $ .96
Total $ .92 $ .79
</TABLE>
NOTE 13 - SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended
-------------------------------------------------------------------- Fiscal
Sept. 30 Dec. 31 March 31 June 30 Year
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1998
Net sales $ 43,957 $ 47,754 $ 43,386 $ 54,042 $ 189,139
Gross profit 15,519 17,120 13,717 18,124 64,480
Net income 2,975 3,680 1,917 4,015 12,587
Earnings per share
Basic $ .31 $ .39 $ .20 $ .42 $ 1.32
Diluted $ .31 $ .38 $ .20 $ .41 $ 1.29(a)
Range of share prices
High $ 17.38 $ 19.38 $ 22.75 $ 24.00 $ 24.00
Low $ 13.50 $ 15.75 $ 16.75 $ 18.38 $ 13.50
1997
Net sales $ 36,885 $ 37,539 $ 30,836 $ 39,482 $ 144,742
Gross profit 12,140 13,258 10,013 13,131 48,542
Net income 2,136 2,718 1,269 2,749 8,872
Earnings per share
Basic $ .24 $ .30 $ .14 $ .30 $ .99(a)
Diluted $ .23 $ .30 $ .14 $ .30 $ .97
</TABLE>
S-21
<PAGE> 30
<TABLE>
Range of share prices
<S> <C> <C> <C> <C> <C>
High $ 18.00 $ 16.75 $ 14.50 $ 15.25 $ 18.00
Low $ 13.50 $ 9.50 $ 12.00 $ 10.50 $ 9.50
</TABLE>
(a) The total of the earnings per share for each of the four quarters does
not equal the total earnings per share for the full year because the
calculations are based on the average shares outstanding during each of
the individual periods.
At August 21, 1998, there were 410 shareholders of record. The Company believes
this represents approximately 2,800 beneficial shareholders.
NOTE 14 - SUBSEQUENT EVENT
In August 1998, the Company entered into a letter of intent to acquire,
through merger, all of the capital stock of Mid-West Chandelier Company and
Fairfax Lighting Co. both privately owned and located in Kansas City. The
purchase price for the two related companies is expected to be $16 million
consisting of $8 million in cash and $8 million in common shares of LSI
Industries. In addition, a contingent "earn-out" having a maximum value of $1
million in cash and $1 million in stock could be earned during the three years
subsequent to the closing of the contemplated merger provided certain minimum
earnings thresholds are exceeded. The merger is expected to be completed in the
third quarter of fiscal 1999, and is subject to, among other things, completion
of pre-acquisition due diligence, execution of a definitive merger agreement,
and completion of the required Hart-Scott-Rodino Act filing. Mid-West Chandelier
and Fairfax Lighting are engaged in the business of designing, manufacturing,
and selling a broad line of fluorescent lighting fixtures for the retail and
commercial markets. Net sales for the two companies for the year ended December
31, 1997, were approximately $19,000,000.
S-22
<PAGE> 31
LSI INDUSTRIES INC.
SELECTED FINANCIAL DATA
(In thousands except per share)
The following data has been selected from the Consolidated Financial Statements
of the Company for the periods and dates indicated:
<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 189,139 $ 144,742 $ 152,733 $ 119,927 $ 93,535
Cost of products sold 124,659 96,200 104,221 80,156 62,430
Operating expenses 44,286 34,833 35,101 29,509 23,965
--------- --------- --------- --------- ---------
Operating income 20,194 13,709 13,411 10,262 7,140
Interest (income) (143) (528) (154) (39) (25)
Interest expense 106 41 498 498 224
Other (income) expense 108 114 62 160 290
--------- --------- --------- --------- ---------
Income from continuing opera-
tions before income taxes 20,123 14,082 13,005 9,643 6,651
Income taxes 7,536 5,210 4,735 3,469 2,461
--------- --------- --------- --------- ---------
Income from continuing
operations $ 12,587 $ 8,872 $ 8,270 $ 6,174 $ 4,190
========= ========= ========= ========= =========
Net income $ 12,587 $ 8,872 $ 6,770 $ 6,174 $ 4,190
========= ========= ========= ========= =========
Earnings per share from
continuing operations
Basic $ 1.32 $ .99 $ 1.02 $ .82 $ .56
Diluted $ 1.29 $ .97 $ .98 $ .79 $ .55
Cash dividends paid $ .29 $ .23 $ .21 $ .15 $ .03
Weighted average common shares
Basic 9,559 9,004 8,096 7,515 7,420
Diluted 9,790 9,188 8,456 7,802 7,656
BALANCE SHEET DATA:
(At June 30) 1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
Working capital $ 40,237 $ 30,192 $ 36,146 $ 17,788 $ 11,223
Total assets 110,316 95,189 79,496 62,553 46,287
Long-term debt,
including current
maturities 1,195 1,382 1,562 8,099 3,600
Shareholders' equity 78,657 67,968 54,737 29,453 23,981
</TABLE>
S-23
<PAGE> 32
LSI INDUSTRIES INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions
Balance Charged to Balance
Beginning Costs and (A) End of
Description of Period Expenses Deductions Period
- ----------- --------- -------- ---------- ------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year Ended June 30, 1998 $401 $465 $(306) $560
Year Ended June 30, 1997 $358 $ 11 (B) $ 32 $401
Year Ended June 30, 1996 $242 $328 $(212) $358
INVENTORY OBSOLESCENCE RESERVES:
Year Ended June 30, 1998 $551 $688 $(398) $841
Year Ended June 30, 1997 $694 $525 (C) $(668) $551
Year Ended June 30, 1996 $453 $892 $(651) $694
</TABLE>
(A) For allowance for doubtful accounts, deductions are uncollectible accounts
charged off, less recoveries.
(B) Includes $50 resulting from net assets purchased on June 30, 1997.
(C) Includes $100 resulting from net assets purchased on June 30, 1997.
S-24
<PAGE> 1
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
Percent
Business and Owned by State of
Subsidiary Location Registrant Incorporation
- ---------- ------------ ---------- -------------
<S> <C> <C> <C>
SGI Integrated Graphic Limited Partner 100% Delaware
Systems Inc. Wilmington, DE
SGI Delaware Systems Inc. General Partner 100% Delaware
Wilmington, DE
SGI Integrated Graphic Screen printed materials, 100% Delaware
Systems L.P. and illuminated and non- (Partnership)
illuminated architectural
graphics
Houston, TX
Greenlee Lighting Inc. Limited Partner 100% Delaware
Wilmington, DE
Greenlee Incorporated General Partner 100% Delaware
Wilmington, DE
Greenlee Lighting L.P. Landscape Lighting 100% Delaware
Dallas, TX (Partnership)
Grady McCauley Inc. Digital image and screen 100% Ohio
printed graphics
North Canton, OH
LSI Marcole Inc. Electrical wire harnesses 100% Tennessee
Manchester, TN
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statement File No.'s 33-3490, 33-19326, 33-30840, 33-64721,
33-64723, 333-11503, and 333-31239.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Cincinnati, Ohio
September 9, 1998
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of LSI Industries Inc., an Ohio corporation, which is about to file an
annual report on Form 10-K for the fiscal year ended June 30, 1998, under
provisions of the Securities Exchange Act of 1934, with the Securities and
Exchange Commission, Washington, D.C., hereby constitutes and appoints Robert J.
Ready or Ronald S. Stowell his true and lawful attorney-in-fact and agent, and
each of them with full power to act without the other, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, in any and
all capacities, to sign such Form 10-K and any and all amendments thereof, with
power where appropriate to affix the corporate seal of said corporation thereto
and to attest to said seal, and to file such Form 10-K and each such amendment,
with all exhibits thereto, and any and all other documents, in connection
therewith, with the Securities and Exchange Commission, hereby grants unto said
attorney-in-fact and agent, and each of them, full power and authority to do and
perform any and all acts and things requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person and hereby ratifies and confirms all that said attorney-in-fact and
agent, or either of them may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
19th day of August, 1998.
/s/ Michael J. Burke
---------------------------------------
Michael J. Burke
<PAGE> 2
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of LSI Industries Inc., an Ohio corporation, which is about to file an
annual report on Form 10-K for the fiscal year ended June 30, 1998, under
provisions of the Securities Exchange Act of 1934, with the Securities and
Exchange Commission, Washington, D.C., hereby constitutes and appoints Robert J.
Ready or Ronald S. Stowell his true and lawful attorney-in-fact and agent, and
each of them with full power to act without the other, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, in any and
all capacities, to sign such Form 10-K and any and all amendments thereof, with
power where appropriate to affix the corporate seal of said corporation thereto
and to attest to said seal, and to file such Form 10-K and each such amendment,
with all exhibits thereto, and any and all other documents, in connection
therewith, with the Securities and Exchange Commission, hereby grants unto said
attorney-in-fact and agent, and each of them, full power and authority to do and
perform any and all acts and things requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person and hereby ratifies and confirms all that said attorney-in-fact and
agent, or either of them may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
19th day of August, 1998.
/s/ Allen L. Davis
---------------------------------------
Allen L. Davis
<PAGE> 3
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of LSI Industries Inc., an Ohio corporation, which is about to file an
annual report on Form 10-K for the fiscal year ended June 30, 1998, under
provisions of the Securities Exchange Act of 1934, with the Securities and
Exchange Commission, Washington, D.C., hereby constitutes and appoints Robert J.
Ready or Ronald S. Stowell his true and lawful attorney-in-fact and agent, and
each of them with full power to act without the other, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, in any and
all capacities, to sign such Form 10-K and any and all amendments thereof, with
power where appropriate to affix the corporate seal of said corporation thereto
and to attest to said seal, and to file such Form 10-K and each such amendment,
with all exhibits thereto, and any and all other documents, in connection
therewith, with the Securities and Exchange Commission, hereby grants unto said
attorney-in-fact and agent, and each of them, full power and authority to do and
perform any and all acts and things requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person and hereby ratifies and confirms all that said attorney-in-fact and
agent, or either of them may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
19th day of August, 1998.
/s/ James P. Sferra
---------------------------------------
James P. Sferra
<PAGE> 4
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or
director of LSI Industries Inc., an Ohio corporation, which is about to file an
annual report on Form 10-K for the fiscal year ended June 30, 1998, under
provisions of the Securities Exchange Act of 1934, with the Securities and
Exchange Commission, Washington, D.C., hereby constitutes and appoints Robert J.
Ready or Ronald S. Stowell his true and lawful attorney-in-fact and agent, and
each of them with full power to act without the other, his true and lawful
attorney-in-fact and agent, for him and in his name, place and stead, in any and
all capacities, to sign such Form 10-K and any and all amendments thereof, with
power where appropriate to affix the corporate seal of said corporation thereto
and to attest to said seal, and to file such Form 10-K and each such amendment,
with all exhibits thereto, and any and all other documents, in connection
therewith, with the Securities and Exchange Commission, hereby grants unto said
attorney-in-fact and agent, and each of them, full power and authority to do and
perform any and all acts and things requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person and hereby ratifies and confirms all that said attorney-in-fact and
agent, or either of them may lawfully do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand on this
19th day of August, 1998.
/s/ John N. Taylor
---------------------------------------
John N. Taylor
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000763532
<NAME> LSI INDUSTRIES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 9,338
<SECURITIES> 0
<RECEIVABLES> 33,744
<ALLOWANCES> (560)
<INVENTORY> 24,958
<CURRENT-ASSETS> 69,548
<PP&E> 44,791
<DEPRECIATION> (17,056)
<TOTAL-ASSETS> 110,316
<CURRENT-LIABILITIES> 29,311
<BONDS> 1,005
0
0
<COMMON> 35,368
<OTHER-SE> 43,289
<TOTAL-LIABILITY-AND-EQUITY> 110,316
<SALES> 189,139
<TOTAL-REVENUES> 189,139
<CGS> 124,659
<TOTAL-COSTS> 43,821
<OTHER-EXPENSES> 108
<LOSS-PROVISION> 465
<INTEREST-EXPENSE> (37)
<INCOME-PRETAX> 20,123
<INCOME-TAX> 7,536
<INCOME-CONTINUING> 12,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,587
<EPS-PRIMARY> 1.32
<EPS-DILUTED> 1.29
</TABLE>
