<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
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FORM 10-K
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X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED JUNE 30, 1999.
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 10, 1999 was approximately $214,544,000, based on a
closing price of $23.25. At September 10, 1999 there were 10,175,306 shares of
no par value Common Shares issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's Proxy Statement filed with the Commission for its
1999 annual meeting are incorporated by reference in Part III, as specified.
<PAGE> 2
LSI INDUSTRIES INC.
1999 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Begins on
Page
----
PART I
<S> <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........................................... 4
ITEM 6. SELECTED FINANCIAL DATA......................................................... 4
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 4
ITEM 7A. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK........................ 4
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................................... 4
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.................................................... 5
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.............................. 5
ITEM 11. EXECUTIVE COMPENSATION.......................................................... 5
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.......................................................... 5
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................................. 5
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, REPORTS ON
FORM 8-K................................................................ 5
SIGNATURES............................................................................... 7
</TABLE>
i
<PAGE> 3
PART I
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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):
1999 1998 1997
---- ---- ----
Image Group $159,277 $138,886 $101,562
Commercial / Industrial
Lighting Group 68,512 50,253 43,180
-------- -------- --------
Total $227,789 $189,139 $144,742
======== ======== ========
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, Grady McCauley, and LSI
Retail Graphics (acquired in the fourth quarter of fiscal year 1999). 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, Greenlee Lighting, LSI Marcole, and
LSI MidWest Lighting (acquired in the third quarter of fiscal year 1999). The
Company's most significant market is the petroleum / convenience store market
with approximately 43%, 49% and 50% of net sales concentrated in this market in
the fiscal years ended June 30, 1999, June 30, 1998, and June 30, 1997,
respectively. 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.
The Company completed the acquisition of Mid-West Chandelier Company
and Fairfax Lighting, Inc., two privately owned manufacturers of interior
fluorescent lighting fixtures, effective January 1, 1999. For financial
statement purposes these acquisitions were accounted for as purchases with
operating results of LSI MidWest Lighting first included in the Company's third
quarter fiscal 1999 results in the Commercial / Industrial Lighting Group. The
total purchase price for the two companies was $16,000,000, exclusive of
acquisition costs, consisting of $8,000,000 in cash and 357,143 common shares of
the Company (valued at $8,000,000). The acquisition provides for a contingent
"earn-out" having a maximum value of $1 million in cash and $1 million in stock
which could be earned during the three years subsequent to the merger providing
certain minimum earnings thresholds are exceeded. An additional approximate $1
million was used immediately following the acquisition to reduce acquired
liabilities. The purchase price exceeded the estimated fair value of net assets
acquired by $7.7 million, which is recorded as goodwill.
On April 9, 1999, the Company acquired substantially all assets and
assumed certain liabilities of Retail Graphics, Inc., a privately owned
manufacturer of interior graphics primarily for the retail store market. For
financial statement purposes the acquisition was accounted for as a purchase
with operating results of LSI Retail Graphics first included in the Company's
fourth quarter fiscal 1999 results in the Image Group. The total purchase price
for the business, exclusive of acquisition costs, was $3,300,000, consisting of
$2,475,000 in cash and 47,578 common shares of the Company (valued at $825,000).
The acquisition provides for a contingent "earn-out" having a maximum value of
$600,000, payable in similar percentages of cash and common shares, which could
be earned during the first two years after acquisition
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providing certain minimum net sales and earnings thresholds are exceeded. An
additional approximate $1 million was used immediately following the acquisition
to reduce acquired liabilities. The purchase price exceeded the estimated fair
value of net assets acquired by $3.2 million, which is recorded as goodwill. See
Note 11 of Notes to Consolidated Financial Statements beginning on page S-20 of
this Form 10-K for additional information on these acquisitions.
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. The Company had a backlog of orders, believed by it to be firm,
of $27.2 million and $13.9 million at June 30, 1999 and 1998, respectively. All
orders are believed to be shippable within twelve months.
The Company has approximately 1,500 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.
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 nine facilities:
<TABLE>
<CAPTION>
Description Size Location Status
----------- ---- -------- ------
<S> <C> <C> <C>
1) LSI Industries 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 Industries pole 131,000 sq. ft. Cincinnati, OH Owned
manufacturing and dry
powder-coat painting
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
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 Integrated Graphic 198,000 sq. ft. Houston, TX Leased
Systems office; screen (includes 34,000
printing manufacturing; sq. ft. of office space)
and architectural graphics
manufacturing
5) Greenlee Lighting office 40,000 sq. ft. Dallas, TX Leased
and manufacturing (includes 4,000 sq. ft.
of office space)
6) Grady McCauley office 132,000 sq. ft. North Canton, OH Owned
and manufacturing (includes 20,000
sq. ft. of office space
and 12,000 sq. ft.
of leased warehouse
space)
7) LSI Marcole office and 38,000 sq. ft. Manchester, TN Owned
manufacturing of electrical (includes 4,000 sq. ft.
wire harnesses; contract of office space)
assembly services
8) LSI MidWest Lighting 137,000 sq. ft. Kansas City, KS Owned
office and manufacturing (includes 6,000 sq. ft.
of office space)
9) LSI Retail Graphics office 27,000 sq. ft. Woonsocket, RI Owned
and manufacturing (includes 5,000 sq. ft.
of office space and
6,000 sq. ft. of leased
warehouse space)
</TABLE>
The Company considers these facilities adequate for its current level of
operations, however it plans to expand two facilities in Ohio and its Kentucky
facility in fiscal 2000 to add capacity for future growth.
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.
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDERS' MATTERS
Common share information appears in Note 12 - SUMMARY OF
QUARTERLY RESULTS (UNAUDITED) under "Range of share prices" on
page S-22 of this Form 10-K. Information related to "Earnings
per share from continuing operations" and "Cash dividends paid
per share" appears in SELECTED FINANCIAL DATA on page S-23 of
this Form 10-K.
The Company's policy with respect to dividends is to pay a
quarterly cash dividend representing a payout ratio of between
10% and 20% of the then current fiscal year net income forecast.
In addition to the four quarterly dividend payments, the Company
may declare a special year-end cash and/or stock dividend that,
in conjunction with the regularly quarterly cash dividends,
would achieve a target payout ratio of between 20% and 40% of
reported net income. The Company has paid annual dividends since
fiscal 1987 and quarterly dividends since fiscal 1995.
During the quarterly period ended June 30, 1999, the Company
issued 47,578 Common Shares to the owner of a company which was
acquired. This issuance was exempt from the registration
requirements of the Securities Act of 1933 as a private offering
pursuant to Section 4(2) of that Act.
At August 21, 1999, there were 395 shareholders of record. The
Company believes this represents approximately 3,800 beneficial
shareholders. The Company's common shares are traded on the
Nasdaq National Market under the symbol LYTS.
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
See ITEM 1. BUSINESS on page 1 and MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
beginning on page S-1 of this Form 10-K. In addition, the
information set forth in NOTE 1 under "Fair value of financial
instruments" beginning on page S-11 of this Form 10-K in the
Company's fiscal year 1999 consolidated financial statements is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Begins
Index to Financial Statements on Page
-------
Financial Statements:
Report of Independent Public Accountants S-5
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<PAGE> 7
Consolidated Income Statements for the years
ended June 30, 1999, 1998 and 1997 S-6
Consolidated Balance Sheets at June 30, 1999 and 1998 S-7
Consolidated Statements of Shareholders' Equity for
the years ended June 30, 1999, 1998 and 1997 S-9
Consolidated Statements of Cash Flows for the
years ended June 30, 1999, 1998 and 1997 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, 1999, 1998 and 1997
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. Selected quarterly financial data appears on page S-22 in
NOTE 12 of the accompanying consolidated financial statements.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
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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 11, 1999, 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:
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
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<PAGE> 8
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.
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Current
Form 10-K Report/ Exhibit
Exhibit No. Description of Exhibit Document Number
- ----------- ---------------------- -------- ------
<S> <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 -
Security Holders
Management Compensatory Agreements
----------------------------------
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 (5) Filed herewith
27 Financial Data Schedule Filed herewith
</TABLE>
- 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.
(b) Form 8-K:
There have been no reports on Form 8-K filed during the last quarter of
fiscal year 1999.
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<PAGE> 9
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 24, 1999 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, Chief Executive
- ----------------------------------- Officer, and President
Robert J. Ready (Principal Executive Officer)
Date: September 24, 1999
-----------------------
/s/ Ronald S. Stowell Vice President, Chief Financial Officer, and
- ----------------------------------- Treasurer
Ronald S. Stowell (Principal Financial and Accounting Officer)
Date: September 24, 1999
-----------------------
*Michael J. Burke Director
- -----------------------------------
Michael J. Burke
*Allen L. Davis Director
- -----------------------------------
Allen L. Davis
*Wilfred T. O'Gara Director
- -----------------------------------
Wilfred T. O'Gara
*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 24, 1999, 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 24, 1999 By: /s/ Ronald S. Stowell
- ----------------------------- ----------------------
Date Attorney-in-Fact
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<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SALES BY BUSINESS SEGMENT
(In thousands) 1999 1998 1997
-------- -------- --------
Image Group $159,277 $138,886 $101,562
Commercial / Industrial
Lighting Group 68,512 50,253 43,180
-------- -------- --------
$227,789 $189,139 $144,742
======== ======== ========
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
Net sales of $227,789,000 in fiscal 1999 increased 20% over fiscal 1998
net sales of $189,139,000. Results of the Image Group in fiscal 1999 include the
operations of LSI Retail Graphics (acquired April 1999; less than 1% of net
sales in fiscal 1999). Results of the Commercial / Industrial Lighting Group
include the operations of LSI MidWest Lighting (acquired January 1999;
approximately 4% of net sales in fiscal 1999). Commercial / Industrial Lighting
Group net sales increased 36% and Image Group net sales increased 15% in fiscal
1999 as compared to the prior year. The increase in the Commercial / Industrial
Lighting Group net sales resulted from growth in substantially all markets and
from inclusion of the results of LSI MidWest Lighting. The increase in Image
Group net sales is attributed to growth in substantially all markets and
products, particularly petroleum lighting, quick service restaurant, and
interior graphics, as well as to the inclusion of the results of LSI Retail
Graphics. Net sales of the Image Group to the petroleum / convenience store
market represented 43% and 49% of net sales in fiscal 1999 and fiscal 1998,
respectively. While sales prices were increased, inflation did not have a
significant impact on sales in 1999 as competitive pricing pressures held price
increases to a minimum.
Gross profit of $77,108,000 increased 20% over last year's gross profit
of $64,480,000, and decreased as a percentage of net sales to 33.9% in fiscal
year 1999 as compared to 34.1% in the prior year. The increase in amount of
gross profit is due primarily to the 20% increase in net sales. The decrease in
gross profit percentage is primarily related to slightly lower margins from
businesses acquired in fiscal 1999. Selling and administrative expenses
increased to $49,880,000 from $44,286,000 primarily as a result of increased
sales volume and the addition of the acquired businesses. As a percentage of net
sales, selling and administrative expenses were at 21.9% in fiscal 1999 as
compared to 23.4% in the prior year.
The Company reported net interest income of $253,000 in fiscal 1999 as
compared to net interest income of $37,000 in fiscal 1998 primarily reflective
of an increased amount of short-term cash investments. The Company's effective
tax rate increased to 37.6% in fiscal 1999 as compared to 37.5% in fiscal 1998
primarily due to increased amortization of goodwill which is not deductible for
tax purposes.
S-1
<PAGE> 11
Net income of $17,101,000 increased 36% over $12,587,000 in fiscal
1998. The increased net income resulted from increased gross profit on higher
net sales, and from the reporting of a larger amount of net interest income in
fiscal 1999 as compared to 1998, partially offset by increased operating
expenses and income taxes. Diluted earnings per share of $1.70 increased 32% in
fiscal 1999 from $1.29 per share in fiscal 1998. The weighted average common
shares outstanding for purposes of computing diluted earnings per share
increased 3% in fiscal 1999 to 10,088,000 shares from 9,790,000 shares in 1998
primarily as a result of common shares issued to acquire businesses and the
exercise of stock options during the year.
Certain recently issued accounting pronouncements will affect the
Company's future financial statements and / or disclosures. See Note 1 to the
accompanying consolidated financial statements for additional discussion.
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-2
<PAGE> 12
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.
LIQUIDITY AND CAPITAL RESOURCES
The Company considers its level of cash on hand, its current ratio and
working capital levels to be its most important measures of short-term
liquidity. For long-term liquidity indicators, the Company believes its ratio of
long-term debt to equity and its historical levels of net cash flows from
operating activities to be the most important measures.
At June 30, 1999 the Company had working capital of $49.6 million,
compared to $40.2 million at June 30, 1998. The ratio of current assets to
current liabilities increased to 2.56 to 1 from 2.37 to 1. The increased working
capital is primarily attributed to increased cash and receivables, partially
offset by increases in accounts payable and accrued expenses.
The Company generated $21.9 million of cash from operating activities
in fiscal 1999 as compared to $14.3 million fiscal 1998. The Company generated
more net cash flows from operating activities in fiscal 1999 primarily due to
increased net income, reduction of inventories, and a lesser increase in
accounts receivable, partially offset by a decrease in accounts payable and less
of an increase in accrued expenses, net of effects of acquisitions. As of June
30, 1999, the Company's days sales outstanding were at approximately 54 days,
decreased from the June 30, 1998 statistic of 55 days. Essentially all current
assets and current liabilities increased as of June 30, 1999 as compared to June
30, 1998 due to growth of the business and due to the two acquisitions made in
the second half of fiscal 1999.
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
unsecured revolving lines of credit totaling $32 million, all of which was
available as of August 24, 1999. A $12 million line of credit expires in the
fourth quarter of fiscal 2000. The primary line of credit in the amount of $20
million is a three year committed credit facility expiring in fiscal 2002 with
an annual renewal in the fourth quarter of fiscal 2000. The Company believes
that the total of available lines of credit plus cash flows from operating
activities is adequate for the Company's fiscal 2000 operational and capital
expenditure needs. The Company is in compliance with all of its loan covenants.
Excluding the acquisitions of LSI MidWest Lighting and LSI Retail Graphics in
fiscal 1999 and LSI Marcole in fiscal 1998, capital expenditures of $4.5 million
in fiscal 1999 compare to $4.1 million in the prior year. Spending in fiscal
year 1999 was primarily related to expansion of the Company's graphics
capabilities, initial capitalization of Company-wide enterprise resource
planning software, and tooling for new products. Capital expenditures totaling
approximately $8 million are planned for fiscal 2000, exclusive of business
acquisitions.
On August 18 1999 the Board of Directors declared a cash dividend of
$0.1475 per share (approximately $1,500,000), comprised of a $0.0675 per share
regular quarterly dividend and a $0.08 per share special year-end dividend, to
be paid September 14, 1999 to
S-3
<PAGE> 13
shareholders of record on September 7, 1999. During fiscal 1999, the Company
paid cash dividends each quarter. Cash paid for dividends in fiscal 1999 was
$3.2 million, a 17% increase over the $2.8 million paid in fiscal 1998.
On April 9, 1999, the Company acquired substantially all assets and
assumed certain liabilities of Retail Graphics, Inc., a privately owned
manufacturer of interior graphics primarily for the retail market. For financial
statement purposes the acquisition was accounted for as a purchase with
operating results of LSI Retail Graphics first included in the Company's fourth
quarter fiscal 1999 results in the Image Group. The total purchase price for the
business, exclusive of acquisition costs, was $3,300,000, consisting of
$2,475,000 in cash and 47,578 common shares of the Company (valued at $825,000).
The acquisition provides for a contingent "earn-out" having a maximum value of
$600,000, payable in similar percentages of cash and common shares, which could
be earned during the first two years after acquisition providing certain minimum
net sales and earnings thresholds are exceeded. An additional approximate $1
million was used immediately following the acquisition to reduce acquired
liabilities. The purchase price exceeded the estimated fair value of net assets
acquired by $3.2 million, which is recorded as goodwill and is being amortized
over twenty years.
The Company completed the acquisition of Mid-West Chandelier Company
and Fairfax Lighting, Inc., two privately owned manufacturers of interior
fluorescent lighting fixtures, effective January 1, 1999. For financial
statement purposes these acquisitions were accounted for as purchases with
operating results of LSI MidWest Lighting first included in the Company's third
quarter fiscal 1999 results in the Commercial / Industrial Lighting Group. The
total purchase price for the two companies was $16,000,000, exclusive of
acquisition costs, consisting of $8,000,000 in cash and 357,143 common shares of
the Company (valued at $8,000,000). The acquisition provides for a contingent
"earn-out" having a maximum value of $1 million in cash and $1 million in stock
which could be earned during the three years subsequent to the merger providing
certain minimum earnings thresholds are exceeded. An additional approximate $1
million was used immediately following the acquisition to reduce acquired
liabilities. The purchase price exceeded the estimated fair value of net assets
acquired by $7.7 million, which is recorded as goodwill and is being amortized
over forty years.
The Company has completed its review of its business systems, office
support systems, and its facilities and equipment with respect to year 2000
programming deficiencies. No systems or equipment critical to operation of the
business have been identified as having a year 2000 deficiency, and therefore
the Company has not yet developed any contingency plans. The review has extended
to major suppliers and customers, and this element of the review is expected to
be completed by September 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 September 30, 1999. The Company
has not to date developed any contingency plans related to its major suppliers.
Such plans will depend upon the responses from major suppliers in the event any
of them should indicate that they will not be year 2000 compliant.
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> 14
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Board of Directors 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, 1999 and
1998, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended June 30, 1999.
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 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, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1999 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. This schedule 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 13, 1999
S-5
<PAGE> 15
LSI INDUSTRIES INC.
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1999, 1998, AND 1997
(In thousands, except per share)
1999 1998 1997
---- ---- ----
Net sales $ 227,789 $ 189,139 $ 144,742
Cost of products sold 150,681 124,659 96,200
--------- --------- ---------
Gross profit 77,108 64,480 48,542
Selling and administrative expenses 49,880 44,286 34,833
--------- --------- ---------
Operating income 27,228 20,194 13,709
Interest (income) (477) (143) (528)
Interest expense 224 106 41
Other expense 95 108 114
--------- --------- ---------
Income before income taxes 27,386 20,123 14,082
Income tax expense 10,285 7,536 5,210
--------- --------- ---------
Net income $ 17,101 $ 12,587 $ 8,872
========= ========= =========
Earnings per common share
Basic earnings per share $ 1.73 $ 1.32 $ .99
========= ========= =========
Diluted earnings per share $ 1.70 $ 1.29 $ .97
========= ========= =========
The accompanying notes are an
integral part of these financial statements.
S-6
<PAGE> 16
LSI INDUSTRIES INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
(In thousands, except shares)
1999 1998
---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 13,881 $ 9,338
Accounts receivable, less allowance
for doubtful accounts of $1,213 and $560,
respectively 39,630 33,184
Inventories 25,261 24,958
Refundable income taxes 157 157
Other current assets 2,530 1,911
--------- ---------
Total current assets 81,459 69,548
Property, Plant and Equipment, at cost
Land 3,863 3,459
Buildings 18,477 15,458
Machinery and equipment 30,642 25,874
--------- ---------
52,982 44,791
Less accumulated depreciation (19,997) (17,056)
--------- ---------
Net property, plant and equipment 32,985 27,735
Goodwill, net 23,270 12,921
Other Assets -- 112
--------- ---------
$ 137,714 $ 110,316
========= =========
The accompanying notes are an
integral part of these financial statements.
S-7
<PAGE> 17
1999 1998
---- ----
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable to bank $ 379 $ --
Current maturities of long-term debt 196 190
Accounts payable 14,628 13,689
Accrued expenses 16,641 15,432
-------- --------
Total current liabilities 31,844 29,311
Long-Term Debt 1,705 1,005
Other Long-Term Liabilities -- 112
Deferred Income Taxes 1,413 1,231
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 10,151,690 and 9,634,608
shares, respectively 45,588 35,368
Retained earnings 57,164 43,289
-------- --------
Total shareholders' equity 102,752 78,657
-------- --------
$137,714 $110,316
======== ========
S-8
<PAGE> 18
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999, 1998, AND 1997
(In thousands, except per share)
<TABLE>
<CAPTION>
Common Shares
---------------------
Number of Retained
Shares Amount Earnings Total
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
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, net 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, net 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
NET INCOME -- -- 17,101 17,101
PURCHASE OF TREASURY SHARES (12) (224) -- (224)
DEFERRED STOCK COMPENSATION -- 334 -- 334
STOCK OPTIONS EXERCISED, NET 124 1,285 -- 1,285
COMMON SHARES ISSUED FOR
ACQUISITION 405 8,825 -- 8,825
DIVIDENDS - $.33 PER SHARE -- -- (3,226) (3,226)
--------- --------- --------- ---------
BALANCE AT JUNE 30, 1999 10,152 $ 45,588 $ 57,164 $ 102,752
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
S-9
<PAGE> 19
LSI INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999, 1998 AND 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 17,101 $ 12,587 $ 8,872
Non-cash items included in income
Depreciation and amortization 4,813 4,375 2,975
Deferred income taxes (84) (401) (74)
Deferred compensation plan 334 209 346
Loss on disposition of fixed assets 95 108 75
Change (excluding effects of acquisitions) in
Accounts receivable (4,075) (5,326) (73)
Inventories 2,273 (1,569) (564)
Refundable income taxes 117 -- 188
Accounts payable (262) 1,086 92
Accrued expenses and other 1,646 3,235 44
Change in liability for discontinued operations (70) (21) (17)
-------- -------- --------
Net cash flows from operating activities 21,888 14,283 11,864
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment (4,455) (4,120) (2,587)
Proceeds from sale of fixed assets 14 30 3
Acquisition of businesses, net of cash received (8,657) (712) (15,639)
-------- -------- --------
Net cash flows from investing activities (13,098) (4,802) (18,223)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of long-term debt (2,082) (448) (180)
Cash dividends paid (3,226) (2,750) (2,075)
Exercise of stock options 1,285 676 321
Purchase of treasury shares (224) (233) (233)
-------- -------- --------
Net cash flows from financing activities (4,247) (2,755) (2,167)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 4,543 6,726 (8,526)
Cash and cash equivalents at beginning of year 9,338 2,612 11,138
-------- -------- --------
Cash and cash equivalents at end of year $ 13,881 $ 9,338 $ 2,612
======== ======== ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
S-10
<PAGE> 20
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 and balances have been eliminated.
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:
Buildings 31 - 40 years
Machinery and equipment 3 - 10 years
GOODWILL:
The excess of cost over fair value of assets acquired ("goodwill") is amortized
over periods ranging between twenty and forty years. As of June 30, 1999 and
1998, accumulated amortization of goodwill was $1,138,000 and $662,000,
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
S-11
<PAGE> 21
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, a second
discretionary profit sharing plan covering employees of one subsidiary, 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 $1,937,000 in 1999, $1,641,000 in 1998, and $1,399,000 in 1997.
INCOME TAXES:
Deferred income taxes are provided on items reported in income in different
periods for financial reporting and tax purposes.
EARNINGS PER COMMON SHARE:
The computation of basic earnings per common share is based on the weighted
average common shares outstanding for the period. The computation of diluted
earnings per share includes common share equivalents. Common share equivalents
include the dilutive effect of stock options, contingently issuable shares (for
which issuance has been determined to be probable), and common shares to be
issued under a deferred compensation plan, all of which totaled 205,000 shares
in 1999, 231,000 shares in 1998, and 184,000 shares in 1997. See also Notes 4
and 7.
RECENT PRONOUNCEMENTS:
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 financial statements of the Company were not impacted by
adoption of this new standard.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosures About
Segments of an Enterprise and Related Information." This Statement requires
disclosure related to each segment into which a company is organized by the
chief operating decision maker for the purpose of making operating decisions and
assessing performance. Reportable segments are based on products and services,
geography, legal structure, management structure and any manner in which
management disaggregates a company. The Company adopted SFAS No. 131 during
fiscal 1999. This Statement, which requires expansion or modification to
existing disclosures, had no impact on the Company's reported consolidated
financial position, results of operations or cash flows. See Note 3 for business
segment information.
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
S-12
<PAGE> 22
Hedging Activities," which establishes standards for reporting and disclosure of
derivative and hedging instruments. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000. The Company will not be affected by this new
standard because the Company has no derivative or hedging financial instruments.
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.
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 $491,000 and $562,000 as of June 30, 1999
and 1998, 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,
Grady McCauley, and LSI Retail Graphics. 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, LSI Marcole, and LSI MidWest Lighting.
The Company's most significant market is the petroleum / convenience store
market with approximately 43%, 49%, and 50% of net sales concentrated in this
market in fiscal 1999, 1998, and 1997, respectively.
The following information is provided for the following periods:
1999 1998 1997
---- ---- ----
(In thousands)
NET SALES:
Image Group $159,277 $138,886 $101,562
Commercial / Industrial Lighting Group 68,512 50,253 43,180
-------- -------- --------
$227,789 $189,139 $144,742
======== ======== ========
S-13
<PAGE> 23
OPERATING INCOME:
Image Group $ 19,848 $ 15,056 $ 9,055
Commercial / Industrial Lighting Group 7,380 5,138 4,654
-------- -------- --------
$ 27,228 $ 20,194 $ 13,709
======== ======== ========
IDENTIFIABLE ASSETS:
Image Group $ 86,011 $ 79,487 $ 74,284
Commercial / Industrial Lighting Group 37,645 20,730 17,734
-------- -------- --------
123,656 100,217 92,018
Corporate 14,058 10,099 3,171
-------- -------- --------
$137,714 $110,316 $ 95,189
======== ======== ========
CAPITAL EXPENDITURES:
Image Group $ 3,214 $ 3,029 $ 1,902
Commercial / Industrial Lighting Group 1,241 1,091 685
-------- -------- --------
$ 4,455 $ 4,120 $ 2,587
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Image Group $ 3,425 $ 3,410 $ 2,085
Commercial / Industrial Lighting Group 1,388 965 890
-------- -------- --------
$ 4,813 $ 4,375 $ 2,975
======== ======== ========
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:
(In thousands, except per share) 1999 1998 1997
---- ---- ----
BASIC EARNINGS PER SHARE
- ------------------------
Net income $ 17,101 $ 12,587 $8,872
========== ========== ======
Weighted average shares outstanding
during the period, net
of treasury shares 9,883 9,559 9,004
========== ========== ======
Basic earnings per share $ 1.73 $ 1.32 $ .99
========== ========== ======
S-14
<PAGE> 24
DILUTED EARNINGS PER SHARE
- --------------------------
Net income $17,101 $12,587 $ 8,872
======= ======= =======
Weighted average shares outstanding
during the period, net of
treasury shares 9,883 9,559 9,004
Effect of dilutive securities (A):
Impact of common shares to be
issued under stock option plans,
a deferred compensation plan,
and contingently issuable shares 205 231 184
------- ------- -------
Weighted average shares
outstanding (B) 10,088 9,790 9,188
======= ======= =======
Diluted earnings per share $ 1.70 $ 1.29 $ .97
======= ======= =======
(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 14,359 common shares, 4,390 common shares, and
15,385 common shares at June 30, 1999, 1998, and 1997, 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:
1999 1998
---- ----
(In thousands)
INVENTORIES:
Raw materials $12,485 $12,192
Work-in-process and
finished goods 12,776 12,766
------- -------
$25,261 $24,958
======= =======
ACCRUED EXPENSES:
Compensation and benefits $ 8,659 $ 6,405
Customer prepayments $ 1,662 $ 3,945
NOTE 6 - REVOLVING LINES OF CREDIT, AND LONG-TERM DEBT
The Company has two unsecured revolving lines of credit with its banks in the
aggregate amount of $32 million. As of June 30, 1999 the Company had borrowed
$0.4 million against its revolving lines of credit and $31.6 million was
available. A $12 million line of credit expires in
S-15
<PAGE> 25
the fourth quarter of fiscal 2000. The primary line of credit in the amount of
$20 million is a three year committed credit facility expiring in fiscal 2002,
with an annual renewal for the third year of commitment in the fourth quarter of
fiscal 2000. Interest on the revolving lines of credit is charged based upon an
increment over the LIBOR rate as periodically determined, or at the bank's base
lending rate less an increment, at the Company's option. The increment over the
LIBOR borrowing rate, as periodically determined, on the Company's primary line
of credit fluctuates between 50 and 95 basis points and the commitment fee on
the unused balance fluctuates between 15 and 25 basis points depending upon the
ratio of indebtedness to earnings before interest, taxes, depreciation and
amortization (EBITDA). The increment over the LIBOR borrowing rate, as
periodically determined, on the Company's secondary line of credit fluctuates
between 50 and 125 basis points depending upon the ratio of indebtedness to
tangible net worth. The increment under the bank's base lending rate on both
lines of credit fluctuates between 150 and 75 basis points depending upon the
same performance ratios as under LIBOR borrowings. At June 30, 1999 the interest
rate on the Company's outstanding borrowings on its revolving line of credit was
5.75%. Under terms of these agreements, the Company has agreed to a negative
pledge of assets, to maintain minimum levels of profitability and net worth, and
is subject to certain maximum levels of leverage. The Company incurred average
borrowings under its revolving lines of credit of approximately $163,000 during
fiscal year 1999. The average interest rate paid on these average outstanding
borrowings was 6.6%.
The Company has an Industrial Revenue Development Bond (IRB) borrowing in the
amount of $1,005,000 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 through fiscal 2010. The IRB interest rate, which is reestablished
semi-annually, is currently 4.5%, plus a 75 basis point letter of credit fee.
The IRB is secured by the Company's Kentucky real estate, which has a net
carrying value of $1.6 million.
The Company has equipment loans outstanding totaling $896,000 with a bank and a
governmental agency. The loans are for terms of seven years through fiscal 2006
at a weighted average interest rate of 4.9% and are secured by specified
equipment which has a net carrying value of $993,000. The Company makes monthly
principal and interest payments and is committed to specified job growth in its
facility in Northeast Ohio.
LONG-TERM DEBT: 1999 1998
---- ----
(In thousands)
Industrial Revenue Development Bond at 5.2% $1,005 $1,070
Equipment loans (average rate of 4.9%) 896 125
------ ------
1,901 1,195
Less current maturities 196 190
------ ------
$1,705 $1,005
====== ======
Future maturities of long-term debt at June 30, 1999 are as follows (in
thousands):
2000 2001 2002 2003 2004 2005 and after
---- ---- ---- ---- ---- --------------
$196 $202 $209 $211 $218 $865
S-16
<PAGE> 26
NOTE 7 - SHAREHOLDERS' EQUITY
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 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 340,800 shares were available for future grant as
of June 30, 1999. The plans allow for the grant of both incentive stock options
and non-qualified stock options.
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 1999, 1998, and 1997.
1999 1998 1997
---- ---- ----
Dividend yield 1.25% 2% 2%
Expected volatility 44% 49% 43%
Risk-free interest rate 4.45%-6.24% 5.56%-6.54% 6.17%-6.28%
Expected life 4-8 YRS. 4-8 yrs. 4-8 yrs.
At June 30, 1999, the 56,900 options granted during fiscal 1999 to employees and
non-employee directors have exercise prices ranging from $16.88 to $23.00, fair
values ranging from $8.49 to $11.89 per option, and remaining contractual lives
of four to nine years. The 154,400 options granted during fiscal 1998 to
employees and non-employee directors had, as of June 30, 1998, exercise prices
ranging from $14.00 to $19.00, fair values ranging from $6.16 to $9.44, 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, 1999, 1998, and
1997 would have been as follows:
1999 1998 1997
---- ---- ----
(In thousands except earnings per share)
Net income
As reported $ 17,101 $ 12,587 $ 8,872
Pro forma $ 16,629 $ 12,225 $ 8,646
Earnings per share
Basic
As reported $ 1.73 $ 1.32 $ .99
Pro forma $ 1.68 $ 1.28 $ .96
S-17
<PAGE> 27
Diluted
As reported $ 1.70 $ 1.29 $ .97
Pro forma $ 1.66 $ 1.26 $ .95
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.
Information involving the stock option plans for the years ended June 30, 1999,
1998 and 1997 is shown in the table below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ---------------- -----------------
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 500 $ 12.70 518 $ 9.89 619 $ 9.04
Granted 57 19.82 154 15.31 7 11.68
Terminated (8) 16.23 (17) 13.86 (21) 12.95
Exercised (141) 10.33 (155) 5.79 (87) 3.23
---- ---- ----
Outstanding at end of year 408 $ 14.41 500 $ 12.70 518 $ 9.89
==== ==== ====
Exercisable at end of year 129 $ 12.92 128 $ 9.40 180 $ 6.10
==== ==== ====
</TABLE>
The Company implemented a non-qualified Deferred Compensation Plan in fiscal
1997. All Plan investments are in common shares of the Company. A total of
45,030 and 33,723 common shares were held in the Plan as of June 30, 1999 and
1998, respectively, and, accordingly, have been recorded as treasury shares.
On the dates indicated, the Company issued the following amounts of common
shares as a portion of the purchase price for acquired businesses (see further
discussion in Note 11):
Number of Stated
Date Common Shares Value
---- ------------- -----
6/30/97 475,700 $6,000,000
2/6/98 12,000 $ 200,000
1/1/99 357,143 $8,000,000
4/9/99 47,578 $ 825,000
On August 18, 1999, the Board of Directors declared a cash dividend of $0.1475
per share, comprised of a $0.0675 regular quarterly dividend and a $0.08 special
year-end dividend, to be paid September 14, 1999 to shareholders of record on
September 7, 1999. Annual cash dividend payments made during fiscal years 1999,
1998, and 1997 were $0.33, $0.29, and $0.23 per share, respectively.
S-18
<PAGE> 28
NOTE 8 - LEASES
The Company leases certain of its facilities and equipment under operating lease
arrangements. Rental expense was $1,174,000 in 1999, $1,094,000 in 1998, and
$920,000 in 1997. Minimum annual rental commitments under non-cancelable
operating leases are: $1,023,000 in 2000, $922,000 in 2001, $276,000 in 2002,
and $1,000 in 2003.
NOTE 9 - INCOME TAXES
The following information is provided for the years ended June 30:
1999 1998 1997
---- ---- ----
(In thousands)
PROVISION (BENEFIT) FOR INCOME TAXES:
Current federal $ 9,466 $ 7,143 $ 4,705
Current state and local 903 794 579
Deferred (84) (401) (74)
--------- -------- --------
$ 10,285 $ 7,536 $ 5,210
========= ======== ========
RECONCILIATION TO FEDERAL STATUTORY RATE:
Federal statutory tax rate 35.0% 35.0% 34.3%
State and local taxes 2.1 2.6 2.7
Goodwill and other .5 (.1) --
--------- -------- --------
Effective tax rate 37.6% 37.5% 37.0%
========= ======== ========
The components of deferred income tax assets and liabilities at June 30, 1999
and 1998 are as follows:
1999 1998
---- ----
(In thousands)
CURRENT ASSETS (LIABILITIES):
Reserves against current assets $ 862 $ 515
Prepaid expenses (410) (256)
Accrued expenses 953 842
------- -------
Deferred income tax asset included in
Other Current Assets on the Consolidated
Balance Sheets $ 1,405 $ 1,101
======= =======
NONCURRENT (ASSETS) LIABILITIES:
Depreciation $ 1,853 $ 1,573
Goodwill and acquisition costs (129) (144)
Deferred compensation (311) (198)
------- -------
$ 1,413 $ 1,231
======= =======
S-19
<PAGE> 29
NOTE 10 - SUPPLEMENTAL CASH FLOW INFORMATION
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash payments:
Interest $ 148 $ 126 $ 109
Income taxes $ 10,034 $ 7,184 $ 4,786
Non-cash investing and financing activities:
Common shares issued for acquisitions $ 8,825 $ 200 $ 6,000
Details of acquisitions:
Working capital, less cash $ 2,417 $ 59 $ 2,377
Property, plant & equipment 5,241 647 7,245
Other assets, net (947) (4) 232
Excess of purchase price paid over estimated
net assets of acquired businesses 10,771 210 11,785
-------- -------- --------
17,482 912 21,639
less fair value of common shares issued (8,825) (200) (6,000)
-------- -------- --------
Cash paid for acquisitions $ 8,657 $ 712 $ 15,639
======== ======== ========
</TABLE>
NOTE 11 - ACQUISITIONS
On April 9, 1999, the Company acquired substantially all assets and assumed
certain liabilities of Retail Graphics, Inc., a privately owned manufacturer of
interior graphics primarily for the retail store market. For financial statement
purposes the acquisition was accounted for as a purchase with operating results
of LSI Retail Graphics first included in the Company's fourth quarter fiscal
1999 results in the Image Group. The total purchase price for the business,
exclusive of acquisition costs, was $3,300,000, consisting of $2,475,000 in cash
and 47,578 common shares of the Company (valued at $825,000). The acquisition
provides for a contingent "earn-out" having a maximum value of $600,000, payable
in similar percentages of cash and common shares, which could be earned during
the first two years after acquisition providing certain minimum net sales and
earnings thresholds are exceeded. An additional approximate $1 million was used
immediately following the acquisition to reduce acquired liabilities. The
purchase price exceeded the estimated fair value of net assets acquired by $3.2
million, which is recorded as goodwill and is being amortized over twenty years.
The Company completed the acquisition of Mid-West Chandelier Company and Fairfax
Lighting, Inc., two privately owned manufacturers of interior fluorescent
lighting fixtures, effective January 1, 1999. For financial statement purposes
these acquisitions were accounted for as purchases with operating results of LSI
MidWest Lighting first included in the Company's third quarter fiscal 1999
results in the Commercial / Industrial Lighting Group. The total purchase price
for the two companies was $16,000,000, exclusive of acquisition costs,
consisting of $8,000,000 in cash and 357,143 common shares of the Company
(valued at $8,000,000). The acquisition provides for a contingent "earn-out"
having a maximum value of $1 million in cash and $1 million in stock which could
be earned during the three years subsequent to the merger providing certain
minimum earnings thresholds are exceeded. An additional approximate $1 million
was used immediately following the acquisition to reduce acquired liabilities.
The purchase price exceeded the estimated fair value of net assets
S-20
<PAGE> 30
acquired by $7.7 million, which is recorded as goodwill and is being amortized
over forty years. The purchase price allocations of both LSI Retail Graphics and
LSI MidWest Lighting were based on preliminary estimates of fair value of assets
acquired and may be revised at a later date pending the completion of other
analysis.
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
in the Commercial / Industrial Lighting Group. 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.
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 in the Image Group. 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 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 the fiscal year in which it was acquired. Neither the
acquisition price of any of the four companies acquired in fiscal years 1998 and
1999 nor their individual operating results are material to the Company.
Therefore these four companies are 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.
1997
----
(In thousands except earnings per share;
unaudited)
Net sales $ 159,082
Income from continuing operations $ 8,901
Net income $ 8,901
Earnings per share
Basic
Continuing operations $ .94
Total $ .94
Diluted
Continuing operations $ .92
Total $ .92
S-21
<PAGE> 31
NOTE 12 - 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>
1999
Net sales $ 53,414 $ 56,059 $ 53,408 $ 64,908 $ 227,789
Gross profit 18,234 19,759 17,009 22,106 77,108
Net income 3,912 4,668 3,083 5,438 17,101
Earnings per share
Basic $ .41 $ .48 $ .31 $ .54 $ 1.73(a)
Diluted $ .40 $ .47 $ .30 $ .53 $ 1.70
Range of share prices
High $ 22.00 $ 23.00 $ 22.75 $ 24.38 $ 24.38
Low $ 17.25 $ 15.75 $ 15.88 $ 17.25 $ 15.75
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
</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, 1999, there were 395 shareholders of record. The Company believes
this represents approximately 3,800 beneficial shareholders.
S-22
<PAGE> 32
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:
INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 227,789 $ 189,139 $ 144,742 $ 152,733 $ 119,927
Cost of products sold 150,681 124,659 96,200 104,221 80,156
Operating expenses 49,880 44,286 34,833 35,101 29,509
--------- --------- --------- --------- ---------
Operating income 27,228 20,194 13,709 13,411 10,262
Interest (income) (477) (143) (528) (154) (39)
Interest expense 224 106 41 498 498
Other expense 95 108 114 62 160
--------- --------- --------- --------- ---------
Income from continuing opera-
tions before income taxes 27,386 20,123 14,082 13,005 9,643
Income taxes 10,285 7,536 5,210 4,735 3,469
--------- --------- --------- --------- ---------
Income from continuing
operations $ 17,101 $ 12,587 $ 8,872 $ 8,270 $ 6,174
========= ========= ========= ========= =========
Net income $ 17,101 $ 12,587 $ 8,872 $ 6,770 $ 6,174
========= ========= ========= ========= =========
Earnings per share from
continuing operations
Basic $ 1.73 $ 1.32 $ .99 $ 1.02 $ .82
Diluted $ 1.70 $ 1.29 $ .97 $ .98 $ .79
Cash dividends paid per share $ .33 $ .29 $ .23 $ .21 $ .15
Weighted average common shares
Basic 9,883 9,559 9,004 8,096 7,515
Diluted 10,088 9,790 9,188 8,456 7,802
BALANCE SHEET DATA:
(At June 30) 1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Working capital $ 49,615 $ 40,237 $ 30,192 $ 36,146 $ 17,788
Total assets 137,714 110,316 95,189 79,496 62,553
Long-term debt,
including current
maturities 1,901 1,195 1,382 1,562 8,099
Shareholders' equity 102,752 78,657 67,968 54,737 29,453
</TABLE>
S-23
<PAGE> 33
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
- ----------- --------- -------- ---------- ------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<S> <C> <C> <C> <C>
Year Ended June 30, 1999 $560 $1,133 (B) $(480) $1,213
Year Ended June 30, 1998 $401 $ 465 $(306) $ 560
Year Ended June 30, 1997 $358 $ 11 (C) $ 32 $ 401
INVENTORY OBSOLESCENCE RESERVES:
Year Ended June 30, 1999 $841 $ 982 $(740) $1,083
Year Ended June 30, 1998 $551 $ 688 $(398) $ 841
Year Ended June 30, 1997 $694 $ 525 (D) $(668) $ 551
</TABLE>
(A) For allowance for doubtful accounts, deductions are uncollectible accounts
charged off, less recoveries.
(B) Includes $190 resulting from net assets purchased in fiscal year 1999.
(C) Includes $50 resulting from net assets purchased on June 30, 1997.
(D) 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
LSI MidWest Lighting Inc. Fluorescent Lighting 100% Kansas
Kansas City, KA
LSI Retail Graphics Inc. Interior graphics and signs 100% Ohio
Woonsocket, RI
</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 24, 1999
<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, 1999, 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
18th day of August, 1999.
/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, 1999, 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
18th day of August, 1999.
/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, 1999, 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
18th day of August, 1999.
/s/ Wilfred T. O'Gara
------------------------
Wilfred T. O'Gara
<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, 1999 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
18th day of August, 1999.
/s/ James P. Sferra
------------------------
James P. Sferra
<PAGE> 5
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, 1999, 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
18th day of August, 1999.
/s/ John N. Taylor, Jr.
------------------------
John N. Taylor, Jr.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000763532
<NAME> LSI INDUSTRIES INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-1-1998
<PERIOD-END> JUN-30-1999
<CASH> 13,881
<SECURITIES> 0
<RECEIVABLES> 40,843
<ALLOWANCES> (1,213)
<INVENTORY> 25,261
<CURRENT-ASSETS> 81,459
<PP&E> 52,982
<DEPRECIATION> (19,997)
<TOTAL-ASSETS> 137,714
<CURRENT-LIABILITIES> 31,844
<BONDS> 1,705
0
0
<COMMON> 45,588
<OTHER-SE> 57,164
<TOTAL-LIABILITY-AND-EQUITY> 137,714
<SALES> 227,789
<TOTAL-REVENUES> 227,789
<CGS> 150,681
<TOTAL-COSTS> 48,747
<OTHER-EXPENSES> 95
<LOSS-PROVISION> 1,133
<INTEREST-EXPENSE> (253)
<INCOME-PRETAX> 27,386
<INCOME-TAX> 10,285
<INCOME-CONTINUING> 17,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,101
<EPS-BASIC> 1.73
<EPS-DILUTED> 1.70
</TABLE>
