LSI Industries Inc. (NASDAQ: LYTS)
today announced:
Third Quarter Summary
- Sales of $72.8 million; GAAP EPS of $(0.12); Adjusted EPS
$(0.08)
- New Windsor plant closure on schedule, entered into definitive
agreement for sale of facility
- Debt reduction of $4.6 million
- Key organization additions to strengthen sales and marketing
leadership
Net sales in the third quarter of fiscal 2019 were $72.8
million, a decrease of 8% compared to the $78.8 million reported in
the third quarter of the prior year. The third quarter
reported net loss of $3.2 million compares to net income of $0.2
million in the same period of fiscal 2018. The Company
reported an EPS loss of $(0.12) versus reported EPS of $0.01 last
year. Reported results for the quarter include pre-tax
restructuring charges and a tax adjustment with a combined
unfavorable impact to EPS of $(0.04). The Company projects a
federal tax benefit position for fiscal 2019, and the fourth
quarter is projected to have a favorable tax benefit.
Third quarter adjusted net loss was $2.2 million versus net
income of $0.2 million in the same period 2018. Adjusted EPS
was $(0.08) compared to $0.01 prior year. The reconciliation
of GAAP to non-GAAP performance is provided below.
The Company continues its focus on disciplined capital
management, which led to reducing debt by $4.6 million in the
quarter. The Company also entered into a definitive agreement
for the sale of its New Windsor, New York facility, with the
transaction scheduled to close on or before June 30, 2019.
The facility sale is expected to generate gross proceeds of $12
million, providing the opportunity to reduce leverage while
continuing to pursue investments that support profitable
growth. The Company declared a regular cash dividend of $0.05
per share payable May 14, 2019 to shareholders of record on May 6,
2019.
Management Comments and Outlook
James A. Clark, President and Chief Executive Officer commented,
“When I joined the Company in November we were beginning the
transition toward a customer centric organization, organizing our
sales and innovation efforts around targeted market
verticals. While our current results for the third quarter
are not where we want them to be, this organizational
transformation continues to make solid progress toward our goal of
becoming more focused on our customers’ needs and improving the
quality of our sales and resulting profitability. Let me
highlight some of these actions.
“Within our commercial organization, we have taken steps to
bolster our sales and marketing leadership. Seth Walters was
hired as President of the Atlas business, strengthening our focus
on the important distributor stock and flow channel. In
addition, we filled two new senior positions in the marketing
organization reporting to the CMO. These positions satisfy
the critical need to better align product management with our
vertical sales model, and accelerate the market driven development
of new products and solutions. We also added a number of
targeted sales positions throughout our structure. The
different positions require specific competencies, and I’m
confident in the individuals we’ve hired. Expansion of
the sales team is designed to strengthen our visibility and
relationships with our sales agency and distributor partners, as
well as end customers, further deepening our ability to understand
their requirements, and provide value-add solutions which benefit
both of us.
“We have several key Operations Supply Chain initiatives
in-progress as well. The previously announced New Windsor
production transfer and facility closure project is proceeding on
schedule and will be completed by June 30, 2019. The
projected $4 million annual project savings remains on track.
As mentioned, we have a contract on the sale of the facility as
well. Separately, we finalized a lease agreement to add
42,000 square feet of existing space to our Houston facility.
This consolidates two off-site lease parcels, while providing the
product capabilities to manage continued growth in the petroleum
vertical, both domestic and our ongoing expansion into
Mexico.
“Our third quarter performance was impacted by several
factors. First, within our Lighting Segment, there is no
question the ongoing realignment to our sales organization and
market priorities is disruptive in the short-term, contributing to
a decline in third quarter sales. However, progress is
evident as our order book-to-bill ratio for March was strong,
serving to increase our backlog as we enter the fiscal fourth
quarter. Second, we elected not to run any quarter-end
distribution market promotional programs. These programs
serve to disrupt normal customer demand patterns and cause disorder
to our internal supply chain. We were successful in the
quarter in achieving our goal of generating positive price
realization, and we continue to closely manage our material input
costs. Communications are important through this process, and
we are strengthening dialogue with our partners, reaffirming our
commitment as we manage the transition. The previously
referenced facility consolidation provides the cost structure and
flexibility to support our focused approach to profitable sales
growth.
“The Graphics Segment had significant activity occurring in the
quarter, with overall sales increasing 16% compared to prior
year. The petroleum vertical generated sales growth of 26% in
the third quarter and was successful in securing another new large
customer. This resulted in several large programs in the
early stages of their lifecycle representing the majority of
petroleum graphics sales for the quarter. As is typical in
early stages of large projects, initial margins are low, and
increase throughout the lifecycle of the project.
“Digital graphics sales increased 12%, as market adoption of
digital solutions continues at an accelerated pace. Other
print retail sales were down in several applications reflecting the
technology shift to digital.
“The Graphics decrease in operating performance for the quarter
reflects a combination of decisions to position the business for
profitable growth in the coming quarters. These include the
start-up costs and initial production for large, early stage
petroleum projects; one-time costs and forward-investments in the
digital business; and the unfavorable impact of the decline in
several traditional print applications. We have initiated a
program to align print assets and capacity to the changing graphics
market.
“Concurrent with all the change management activity just
mentioned, I have begun formulating initial thoughts on the
strategic aspirations and goals for the company, where and how to
win, and the capabilities and management systems that enable this
path to success. The LSI team is committed to profitable and
sustainable growth, and I look forward to sharing more as the
framework develops.”
About LSI Industries, Inc.
LSI Industries Inc. is a U.S.-based manufacturer of lighting,
graphics and technology solutions for both indoor and outdoor
applications. We are a leading solutions provider to the
primary end-markets we serve, including petroleum, automotive,
quick serve restaurants, grocery, banking, retail, renovation,
parking and warehousing. Our products are marketed throughout
North America through a network of independent sales
representatives and distributors, as well as through national
accounts. We partner with our customers to provide a full
range of design support, engineering, installation and project
management services. Headquartered in Blue Ash, Ohio, LSI
currently employs over 1,200 employees and operates seven
facilities throughout the United States.
Forward-Looking Statements
For details on the uncertainties that may cause our actual
results to be materially different than those expressed in our
forward-looking statements, visit http://www.lsi-industries.com/fls
as well as our Annual Reports on Form 10-K and Quarterly Reports on
Form 10-Q which contain risk factors.
Conference Call
On April 25, 2019 at 11:00 a.m. EDT, James A. Clark, President
and Chief Executive Officer, and James E. Galeese, Executive Vice
President and Chief Financial Officer, will discuss the quarter’s
financial results, which will contain forward looking statements
and other material information.
Access to the live Webcast will be available via the Investor
Relations page of the Company’s website:
http://www.lsi-industries.com
A replay of the Webcast will be posted to the Investor Relations
page of the Company’s website shortly after the completion of the
conference call, where it will be archived for three months.
Additional note: Today’s news
release, along with past releases from LSI Industries, is available
on the Company’s internet site at www.lsi-industries.com.
Company Contact
Noel Ryan 513.372.3012 IR@LSI.com
Financial Highlights
Three Months Ended March
31 |
|
(Unaudited) |
|
Nine Months Ended March
31 |
2019 |
|
2018 |
|
% Change |
|
(In thousands, except per share data) |
|
2019 |
|
|
2018 |
|
|
% Change |
$ |
72,832 |
|
|
$ |
78,843 |
|
-8 |
% |
|
Net
Sales |
|
$ |
247,330 |
|
|
$ |
258,614 |
|
|
-4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,273 |
) |
|
|
743 |
|
n/m |
|
|
Operating (Loss) Income as reported |
|
|
(19,610 |
) |
|
|
(19,524 |
) |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-- |
|
|
|
-- |
|
|
|
Goodwill impairment |
|
|
20,165 |
|
|
|
28,000 |
|
|
|
|
368 |
|
|
|
-- |
|
|
|
Restructuring and plant closure costs |
|
|
1,991 |
|
|
|
-- |
|
|
|
|
42 |
|
|
|
8 |
|
|
|
Severance costs |
|
|
534 |
|
|
|
91 |
|
|
|
|
-- |
|
|
|
-- |
|
|
|
Transition and re-alignment costs |
|
|
120 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(1,863 |
) |
|
$ |
751 |
|
n/m |
|
|
Operating (Loss) Income as adjusted |
|
$ |
3,200 |
|
|
$ |
8,567 |
|
|
-63 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,168 |
) |
|
$ |
220 |
|
n/m |
|
|
Net (Loss) Income as reported |
|
$ |
(17,201 |
) |
|
$ |
(16,877 |
) |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2,170 |
) |
|
$ |
226 |
|
n/m |
|
|
Net (Loss) Income as adjusted |
|
$ |
908 |
|
|
$ |
5,227 |
|
|
-83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.12 |
) |
|
$ |
0.01 |
|
n/m |
|
|
(Loss) Earnings per share (diluted) as
reported |
|
$ |
(0.66 |
) |
|
$ |
(0.65 |
) |
|
n/m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.08 |
) |
|
$ |
0.01 |
|
n/m |
|
|
(Loss) Earnings per share (diluted) as
adjusted |
|
$ |
0.03 |
|
|
$ |
0.20 |
|
|
-85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(amounts in thousands) |
|
3/31/19 |
|
12/31/2018 |
6/30/18 |
Working
Capital |
$ |
68,260 |
|
$ |
74,613 |
$ |
67,882 |
Total
Assets |
$ |
208,695 |
|
$ |
225,078 |
$ |
229,517 |
Long-Term
Debt |
$ |
43,812 |
|
$ |
48,372 |
$ |
45,360 |
Shareholders' Equity |
$ |
120,239 |
|
$ |
124,325 |
$ |
139,251 |
|
|
|
|
|
|
|
|
Third Quarter Fiscal 2019 Results
Net sales in the third quarter of fiscal 2019 were $72,832,000,
down 8% from last year’s third quarter net sales of
$78,843,000. Lighting Segment net sales of $52,785,000
decreased 14% while Graphics Segment net sales of $20,047,000
increased 16% from last year’s third quarter net sales. The Company
recorded pre-tax restructuring and plant closure costs of $368,000
related to the closure of its New Windsor, New York facility in the
Lighting Segment and $42,000 of severance costs. The fiscal 2019
third quarter net loss of $(3,168,000), or $ (0.12) per share,
compares to fiscal 2018 third quarter net income of $220,000 or
$0.01 per share. Earnings per share represents diluted
earnings per share.
Nine Months Fiscal 2019 Results
Net sales in the first nine months of fiscal 2019 were
$247,330,000, down 4% from last year’s first nine months net sales
of $258,614,000. Lighting Segment net sales of $177,871,000
decreased 11% while Graphics Segment net sales of $69,459,000
increased 17% from last year’s first nine months net sales. The
Company recorded pre-tax restructuring and plant closure costs of
$1,991,000 related to the closure of its New Windsor, New York and
Hawthorne, California facilities in the Lighting Segment and
recorded a pre-tax goodwill impairment also in the Lighting Segment
of $20,165,000. The Company also recorded $534,000 of severance
costs and recorded an additional $120,000 of transition and
re-alignment costs. The fiscal 2019 first nine months net loss of
$(17,201,000), or $ (0.66) per share, compares to the fiscal 2018
first nine months net loss of $(16,877,000) or $(0.65) per
share. Earnings per share represents diluted earnings per
share.
Balance Sheet
The balance sheet at March 31, 2019 included current assets of
$111.1 million, current liabilities of $42.8 million and working
capital of $68.3 million, which includes cash of $1.7
million. The current ratio was 2.59 to 1. The balance
sheet also included shareholders’ equity of $120.2 million and
$43.8 million of long-term debt. It is the Company’s priority to
continuously generate sufficient cash flow coupled with an approved
credit facility to adequately fund operations.
Cash Dividend Actions
The Board of Directors declared a regular quarterly cash
dividend of $0.05 per share in connection with the third quarter of
fiscal 2019 payable May 14, 2019 to shareholders of record as of
the close of business on May 6, 2019. The indicated annual
cash dividend rate is $0.20 per share. The Board of Directors has
adopted a policy regarding dividends which provides that dividends
will be determined by the Board of Directors in its discretion
based upon its evaluation of earnings both on a GAAP and non-GAAP
basis, cash flow requirements, financial condition, debt levels,
stock repurchases, future business developments and opportunities,
and other factors deemed relevant by the Board.
Non-GAAP Financial Measures
This press release includes adjustments to GAAP operating
income, net income and earnings per share for the three and nine
months ended March 31, 2019 and 2018. Operating income,
adjusted net income and earnings per share, which exclude the
impact of goodwill impairment, severance costs, the tax impact due
to the change in the estimated annual tax rate used for GAAP
reporting purposes, transition and re-alignment costs, and
restructuring, and plant closure costs are non-GAAP financial
measures. We believe that these are useful as supplemental
measures in assessing the operating performance of our
business. These measures are used by our management,
including our chief operating decision maker, to evaluate business
results. We exclude these non-recurring items because they
are not representative of the ongoing results of operations of our
business. Below is a reconciliation of these non-GAAP
financial measures to the net income and earnings per share
reported for the periods indicated.
THIRD QUARTER |
|
|
|
YEAR-TO-DATE |
2019 |
|
|
2018 |
|
|
(In thousands, except per share data) |
|
2019 |
|
|
2018 |
|
|
Diluted EPS |
|
|
Diluted EPS |
|
Reconciliation of net income to adjusted net
income |
|
|
Diluted EPS |
|
|
Diluted EPS |
$ |
(3,168 |
) |
$ |
(0.12 |
) |
|
$ |
220 |
$ |
0.01 |
|
Net (Loss)
Income as reported |
|
$ |
(17,201 |
) |
$ |
(0.66 |
) |
|
$ |
(16,877 |
) |
$ |
0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-- |
|
|
-- |
|
|
|
-- |
|
-- |
|
Goodwill impairment |
|
|
15,361 |
|
|
0.59 |
|
|
|
17,361 |
|
|
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115 |
|
|
-- |
|
|
|
-- |
|
-- |
|
Restructuring and plant closure costs |
|
|
1,386 |
|
|
0.05 |
|
|
|
-- |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
|
-- |
|
|
|
|
-- |
|
Severance costs |
|
|
372 |
|
|
0.01 |
|
|
|
67 |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-- |
|
|
-- |
|
|
|
-- |
|
-- |
|
Transition and re-alignment costs |
|
|
94 |
|
|
-- |
|
|
|
-- |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
897 |
|
|
0.03 |
|
|
|
-- |
|
-- |
|
Tax Impact due to the change in the estimated annual tax
rate used for GAAP reporting purposes |
|
|
897 |
|
|
0.03 |
|
|
|
-- |
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-- |
|
|
-- |
|
|
|
6 |
|
-- |
|
Tax Impact from the reduction of the Deferred Tax
Assets |
|
|
-- |
|
|
-- |
|
|
|
4,676 |
|
|
0.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(2,170 |
) |
$ |
(0.08 |
) |
|
$ |
226 |
$ |
0.01 |
|
Net (Loss) Income adjusted |
|
$ |
908 |
|
$ |
0.03 |
|
|
$ |
5,227 |
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE: All adjustments are net of tax
except for the adjustment of the deferred tax assets and the Tax
Impact from the change in the estimated annual tax
rate
Condensed Consolidated Statements of
Operations
Three Months Ended March 31 |
(Unaudited) |
Nine Months Ended March 31 |
2019 |
|
2018 |
(In thousands, except per share data) |
2019 |
|
2018 |
$ |
72,832 |
|
|
$ |
78,843 |
|
Net
Sales |
$ |
247,330 |
|
|
$ |
258,614 |
|
|
|
|
|
|
|
|
|
|
57,180 |
|
|
|
58,925 |
|
Cost of Products Sold |
|
190,207 |
|
|
|
189,686 |
|
|
54 |
|
|
|
-- |
|
Severance Costs |
|
77 |
|
|
|
-- |
|
|
261 |
|
|
|
-- |
|
Restructuring Costs |
|
792 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
15,337 |
|
|
|
19,918 |
|
Gross Profit |
|
56,254 |
|
|
|
68,928 |
|
|
|
|
|
|
|
|
|
|
17,515 |
|
|
|
19,175 |
|
Selling and Administrative Costs |
|
54,990 |
|
|
|
60,452 |
|
|
-- |
|
|
|
-- |
|
Goodwill Impairment |
|
20,165 |
|
|
|
28,000 |
|
|
(12 |
) |
|
|
-- |
|
Severance Costs |
|
457 |
|
|
|
-- |
|
|
107 |
|
|
|
-- |
|
Restructuring Costs |
|
132 |
|
|
|
-- |
|
|
-- |
|
|
|
-- |
|
Transition and re-alignment costs |
|
120 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
(2,273 |
) |
|
|
743 |
|
Operating (Loss) Income |
|
(19,610 |
) |
|
|
(19,524 |
) |
|
|
|
|
|
|
|
|
|
183 |
|
|
|
-- |
|
Other Expense |
|
183 |
|
|
|
-- |
|
|
579 |
|
|
|
400 |
|
Interest Expense |
|
1,712 |
|
|
|
1,220 |
|
|
|
|
|
|
|
|
|
|
(3,035 |
) |
|
|
343 |
|
(Loss) Income Before Taxes |
|
(21,505 |
) |
|
|
(20,744 |
) |
|
|
|
|
|
|
|
|
|
133 |
|
|
|
123 |
|
Income Tax Expense (Benefit) |
|
(4,304 |
) |
|
|
(3,867 |
) |
|
|
|
|
|
|
|
|
$ |
(3,168 |
) |
|
$ |
220 |
|
Net (Loss) Income |
$ |
(17,201 |
) |
|
$ |
(16,877 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common
Shares Outstanding |
|
|
|
|
26,132 |
|
|
|
25,875 |
|
Basic |
|
26,083 |
|
|
|
25,835 |
|
|
26,132 |
|
|
|
26,437 |
|
Diluted |
|
26,083 |
|
|
|
25,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per Share |
|
|
|
$ |
(0.12 |
) |
|
$ |
0.01 |
|
Basic |
$ |
(0.66 |
) |
|
$ |
(0.65 |
) |
$ |
(0.12 |
) |
|
$ |
0.01 |
|
Diluted |
$ |
(0.66 |
) |
|
$ |
(0.65 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensed Consolidated Balance Sheets
|
(amounts in thousands) |
|
3/31/19 |
|
6/30/18 |
Current
Asset |
$ |
111,060 |
|
$ |
110,081 |
Property, Plant
and Equipment, net |
|
40,118 |
|
|
43,703 |
Other
Assets |
|
57,517 |
|
|
75,733 |
Total Assets |
$ |
208,695 |
|
$ |
229,517 |
|
|
|
|
Current
Liabilities |
$ |
42,800 |
|
$ |
42,199 |
Long-Term
Debt |
|
43,812 |
|
|
45,360 |
Other Long-Term
Liabilities |
|
1,844 |
|
|
2,707 |
Shareholders'
Equity |
|
120,239 |
|
|
139,251 |
|
$ |
208,695 |
|
$ |
229,517 |
|
|
|
|
|
|
LSI Industries (NASDAQ:LYTS)
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