10-Q 1 lyts20231231_10q.htm FORM 10-Q lyts20231231_10q.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

 

 


 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2023, 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

lyts20231231_10qimg001.jpg

 

LSI Industries Inc.

(Exact name of registrant as specified in its charter)

 

Ohio

 

31-0888951

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

10000 Alliance Road, Cincinnati, Ohio

 

45242

(Address of principal executive offices)

 

(Zip Code)

(513) 793-3200

Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which

    registered

Common Stock, no par value

LYTS

NASDAQ Global Select Market

 

Indicate by checkmark whether the registrant:  (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (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  ☒  No  ☐

 

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☒   No  ☐

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer ☐  

Accelerated filer

Emerging growth company

 

Non-accelerated filer ☐ 

Smaller reporting company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No ☒

 

As of January 29, 2024, there were 29,070,313 shares of the registrant's common stock, no par value per share, outstanding.  

 

1

 

 

 

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED December 31, 2023

 

INDEX

 

PART I.  FINANCIAL INFORMATION

3

   

ITEM 1.

FINANCIAL STATEMENTS

3

   

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

3

   

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

4

   

CONDENSED CONSOLIDATED BALANCE SHEETS

5

   

CONDENSED CONSOLIDATED BALANCE SHEETS

6

   

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

7

   

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

8

   

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9

   

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

20

   

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

28

   

ITEM 4.

CONTROLS AND PROCEDURES

28

   

PART II.  OTHER INFORMATION

29

   

ITEM 5.

OTHER INFORMATION

29

   

ITEM 6.

EXHIBITS

29

   

SIGNATURES

30

 

2

 
 

 

PART I.  FINANCIAL INFORMATION

 

ITEM 1.  FINANCIAL STATEMENTS

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

December 31

   

December 31

 

(In thousands, except per share data)

 

2023

   

2022

   

2023

   

2022

 
                                 

Net Sales

  $ 109,005     $ 128,804     $ 232,446     $ 255,873  
                                 

Cost of products and services sold

    77,438       94,646       163,943       186,964  
                                 

Severance and restructuring costs

    31       18       378       31  
                                 

Gross profit

    31,536       34,140       68,125       68,878  
                                 

Severance and restructuring costs

    4       15       10       15  
                                 

Selling and administrative expenses

    23,713       25,087       49,268       49,804  
                                 

Operating income

    7,819       9,038       18,847       19,059  
                                 

Interest expense

    453       1,258       1,019       2,046  
                                 

Other (income) expense

    (29 )     (55 )     67       158  
                                 

Income before income taxes

    7,395       7,835       17,761       16,855  
                                 

Income tax expense

    1,489       1,418       3,827       4,177  
                                 

Net income

  $ 5,906     $ 6,417     $ 13,934     $ 12,678  
                                 
                                 

Earnings per common share (see Note 4)

                               

Basic

  $ 0.20     $ 0.23     $ 0.48     $ 0.45  

Diluted

  $ 0.20     $ 0.22     $ 0.47     $ 0.44  
                                 
                                 

Weighted average common shares outstanding

                               

Basic

    29,024       28,078       28,890       27,874  

Diluted

    30,043       29,204       29,949       28,766  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

3

 
 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

December 31

   

December 31

 

(In thousands)

 

2023

   

2022

   

2023

   

2022

 
                                 

Net Income

  $ 5,906     $ 6,417     $ 13,934     $ 12,678  
                                 

Foreign currency translation adjustment

    71       68       15       75  
                                 

Comprehensive Income

  $ 5,977     $ 6,485     $ 13,949     $ 12,753  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

4

 
 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

December 31,

   

June 30,

 

(In thousands, except shares)

 

2023

   

2023

 
                 

ASSETS

               
                 

Current assets

               
                 

Cash and cash equivalents

  $ 2,660     $ 1,828  
                 

Accounts receivable, less allowance for credit losses of $448 and $435, respectively

    72,160       77,681  
                 

Inventories

    60,154       63,718  
                 

Refundable income taxes

    2,033       3,120  
                 

Other current assets

    4,386       3,529  
                 

Total current assets

    141,393       149,876  
                 

Property, Plant and Equipment, at cost

               

Land

    4,010       4,010  

Buildings

    24,543       24,561  

Machinery and equipment

    66,582       67,457  

Buildings under finance leases

    2,033       2,033  

Construction in progress

    2,988       1,231  
      100,156       99,292  

Less accumulated depreciation

    (73,924 )     (73,861 )

Net property, plant and equipment

    26,232       25,431  
                 

Goodwill

    45,030       45,030  
                 

Other intangible assets, net

    60,823       63,203  
                 

Operating lease right-of-use assets

    9,931       8,921  
                 

Other long-term assets, net

    4,139       3,688  
                 

Total assets

  $ 287,548     $ 296,149  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

5

 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

December 31,

   

June 30,

 

(In thousands, except shares)

 

2023

   

2023

 
                 

LIABILITIES & SHAREHOLDERS' EQUITY

               
                 

Current liabilities

               

Current maturities of long-term debt

  $ 3,571     $ 3,571  

Accounts payable

    23,136       29,206  

Accrued expenses

    38,847       43,785  
                 

Total current liabilities

    65,554       76,562  
                 

Long-term debt

    17,950       31,629  
                 

Finance lease liabilities

    800       960  
                 

Operating lease liabilities

    6,851       5,954  
                 

Other long-term liabilities

    3,459       3,466  
                 

Commitments and contingencies (Note 12)

           
                 

Shareholders' Equity

               

Preferred shares, without par value; Authorized 1,000,000 shares, none issued

    -       -  

Common shares, without par value; Authorized 50,000,000 shares; Outstanding 29,059,820 and 28,488,570 shares, respectively

    152,924       148,691  

Treasury shares, without par value

    (8,088 )     (7,166 )

Deferred compensation plan

    8,088       7,166  

Retained earnings

    39,656       28,548  

Accumulated other comprehensive income

    354       339  
                 

Total shareholders' equity

    192,934       177,578  
                 

Total liabilities & shareholders' equity

  $ 287,548     $ 296,149  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

6

 
 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

 

   

Common Shares

   

Treasury Shares

   

Key Executive

   

Accumulated

Other

           

Total

 
   

Number Of

           

Number Of

           

Compensation

   

Comprehensive

   

Retained

   

Shareholders'

 

(In thousands, except per share data)

 

Shares

   

Amount

   

Shares

   

Amount

   

Amount

   

Income

   

Earnings

   

Equity

 
                                                                 

Balance at June 30, 2022

    27,484     $ 139,500       (822 )   $ (5,927 )   $ 5,927     $ 45     $ 8,224     $ 147,769  
                                                                 

Net Income

    -       -       -       -       -       -       6,261       6,261  

Other comprehensive gain

    -       -       -       -       -       7       -       7  

Board stock compensation

    12       75       -       -       -       -       -       75  

Restricted stock units issued, net of shares withheld for tax withholdings

    201       (66 )     -       -       -       -       -       (66 )

Shares issued for deferred compensation

    80       539       -       -       -       -       -       539  

Activity of treasury shares, net

    -       -       (77 )     (512 )     -       -       -       (512 )

Deferred stock compensation

    -       -       -       -       512       -       -       512  

Stock-based compensation expense

    -       551       -       -       -       -       -       551  

Stock options exercised, net

    -       -       -       -       -       -       -       -  

Dividends — $0.20 per share

    -       -       -       -       -       -       (1,408 )     (1,408 )
                                                                 

Balance at September 30, 2022

    27,777     $ 140,599       (899 )   $ (6,439 )   $ 6,439     $ 52     $ 13,077     $ 153,728  
                                                                 

Net Income

    -       -       -       -       -       -       6,417       6,417  

Other comprehensive gain

    -       -       -       -       -       68       -       68  

Board stock compensation

    23       98       -       -       -       -       -       98  

Restricted stock units issued, net of shares withheld for tax withholdings

    71       (399 )     -       -       -       -       -       (399 )

Shares issued for deferred compensation

    57       548       -       -       -       -       -       548  

Activity of treasury shares, net

    -       -       (58 )     (549 )     -       -       -       (549 )

Deferred stock compensation

    -       -       -       -       549       -       -       549  

Stock-based compensation expense

    -       864       -       -       -       -       -       864  

Stock options exercised, net

    192       1,278       -       -       -       -       -       1,278  

Dividends — $0.20 per share

    -       -       -       -       -       -       (1,286 )     (1,286 )
                                                                 

Balance at December 31, 2022

    28,120     $ 142,988       (957 )   $ (6,988 )   $ 6,988       120     $ 18,208     $ 161,316  

 

   

Common Shares

   

Treasury Shares

   

Key Executive

   

Accumulated

Other

           

Total

 
   

Number Of

           

Number Of

           

Compensation

   

Comprehensive

   

Retained

   

Shareholders'

 
   

Shares

   

Amount

   

Shares

   

Amount

   

Amount

   

Income

   

Earnings

   

Equity

 
                                                                 

Balance at June 30, 2023

    28,488     $ 148,691       (922 )   $ (7,166 )   $ 7,166     $ 339     $ 28,548     $ 177,578  
                                                                 

Net Income

    -       -       -       -       -       -       8,028       8,028  

Other comprehensive loss

    -       -       -       -       -       (56 )     -       (56 )

Board stock compensation

    9       113       -       -       -       -       -       113  

ESPP stock awards

    3       57       -       -       -       -       -       57  

Restricted stock units issued, net of shares withheld for tax withholdings

    276       -       -       -       -       -       -       -  

Shares issued for deferred compensation

    32       437       -       -       -       -       -       437  

Activity of treasury shares, net

    -       -       (30 )     (417 )     -       -       -       (417 )

Deferred stock compensation

    -       -       -       -       417       -       -       417  

Stock-based compensation expense

    -       1,220       -       -       -       -       -       1,220  

Stock options exercised, net

    70       549       -       -       -       -       -       549  

Dividends — $0.20 per share

    -       -       -       -       -       -       (1,380 )     (1,380 )
                                                                 

Balance at September 30, 2023

    28,878     $ 151,067       (952 )   $ (7,583 )   $ 7,583     $ 283     $ 35,196     $ 186,546  
                                                                 

Net Income

    -       -       -       -       -       -       5,906       5,906  

Other comprehensive loss

    -       -       -       -       -       71       -       71  

Board stock compensation

    7       112       -       -       -       -       -       112  

ESPP stock awards

    4       41       -       -       -       -       -       41  

Restricted stock units issued, net of shares withheld for tax withholdings

    28       (244 )     -       -       -       -       -       (244 )

Shares issued for deferred compensation

    36       506       -       -       -       -       -       506  

Activity of treasury shares, net

    -       -       (36 )     (505 )     -       -       -       (505 )

Deferred stock compensation

    -       -       -       -       505       -       -       505  

Stock-based compensation expense

    -       814       -       -       -       -       -       814  

Stock options exercised, net

    107       628       -       -       -       -       -       628  

Dividends — $0.20 per share

    -       -       -       -       -       -       (1,446 )     (1,446 )
                                                                 

Balance at December 31, 2023

    29,060     $ 152,924       (988 )   $ (8,088 )   $ 8,088     $ 354     $ 39,656     $ 192,934  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

7

 
 

 

LSI INDUSTRIES INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

 

   

Six Months Ended

 
   

December 31

 

(In thousands)

 

2023

   

2022

 
                 

Cash Flows from Operating Activities

               

Net income

  $ 13,934     $ 12,678  

Non-cash items included in net income

               

Depreciation and amortization

    4,728       4,840  

Deferred income taxes

    (591 )     49  

Deferred compensation plan

    943       1,087  

ESPP discount

    98       -  

Stock compensation expense

    2,034       1,415  

Issuance of common shares as compensation

    225       173  

Loss on disposition of fixed assets

    141       37  

Allowance for credit losses

    25       (108 )

Inventory obsolescence reserve

    234       300  
                 

Changes in certain assets and liabilities

               

Accounts receivable

    5,496       10,506  

Inventories

    3,330       916  

Refundable income taxes

    1,087       (284 )

Accounts payable

    (6,070 )     (7,490 )

Accrued expenses and other

    (6,529 )     (1,581 )

Customer prepayments

    783       (2,476 )

Net cash flows provided by operating activities

    19,868       20,062  
                 

Cash Flows from Investing Activities

               

Proceeds from the sale of fixed assets

    26       1  

Purchases of property, plant and equipment

    (3,349 )     (995 )

Net cash flows used in investing activities

    (3,323 )     (994 )
                 

Cash Flows from Financing Activities

               

Payments of long-term debt

    (96,600 )     (102,152 )

Borrowings of long-term debt

    82,921       85,377  

Cash dividends paid

    (2,826 )     (2,694 )

Shares withheld for employees' taxes

    (244 )     (465 )

Payments on financing lease obligations

    (156 )     (123 )

Proceeds from stock option exercises

    1,177       1,278  

Net cash flows used in financing activities

    (15,728 )     (18,779 )
                 

Change related to foreign currency

    15       14  
                 

Increase in cash and cash equivalents

    832       303  
                 

Cash and cash equivalents at beginning of period

    1,828       2,462  
                 

Cash and cash equivalents at end of period

  $ 2,660     $ 2,765  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

 

8

 

LSI INDUSTRIES INC.

 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of December 31, 2023, the results of its operations for the three and six-month periods ended December 31, 2023, and 2022, and its cash flows for the six-month periods ended December 31, 2023, and 2022. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2023 Annual Report on Form 10-K. Financial information as of June 30, 2023, has been derived from the Company’s audited consolidated financial statements.

 

 

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Consolidation:

 

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2023 Annual Report on Form 10-K.

 

Revenue Recognition:

 

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within 30 to 90 days from the shipping date, depending on the terms with the customer. The Company offers standard warranties that do not represent separate performance obligations.

 

Installation is a separate performance obligation, except for the Company’s digital signage products. For digital signage products, installation is not a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities other than standard warranties.

 

A number of the Company's display solutions and select lighting products are customized for specific customers. As a result, these customized products do not have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does not accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is no alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

 

 

Customer specific branded print graphics

 

Electrical components based on customer specifications

 

Digital signage and related media content

 

The Company also offers installation services for its display solutions elements and select lighting products. Installation revenue is recognized over time as the customer simultaneously receives and consumes the benefits provided through the installation process.

 

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the performance obligation.

 

On occasion, the Company enters into bill-and-hold arrangements on a limited basis. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (1) the customer has requested delayed delivery and storage of the products by the Company because the customer wants to secure a supply of the products but lacks storage space; (ii) the risk of ownership has passed to the customer; (iii) the products are segregated from the Company’s other inventory items held for sale; (iv) the products are ready for shipment to the customer; and (v) the Company does not have the ability to use the products or direct them to another customer.

 

9

 

Disaggregation of Revenue

 

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because the Company believes it best depicts the nature, amount, and timing of its revenue and cash flows. The table below presents a reconciliation of the disaggregation by reportable segments:

 

 

   

Three Months Ended

 

(In thousands)

 

December 31, 2023

   

December 31, 2022

 
   

Lighting

Segment

   

Display

Solutions

Segment

   

Lighting

Segment

   

Display

Solutions

Segment

 

Timing of revenue recognition

                               

Products and services transferred at a point in time

  $ 54,619     $ 29,268     $ 58,591     $ 47,027  

Products and services transferred over time

    10,176       14,942       8,242       14,944  
    $ 64,795     $ 44,210     $ 66,833     $ 61,971  

 

   

Six Months Ended

 
   

December 31, 2023

   

December 31, 2022

 
   

Lighting

Segment

   

Display

Solutions

Segment

   

Lighting

Segment

   

Display

Solutions

Segment

 

Timing of revenue recognition

                               

Products and services transferred at a point in time

  $ 112,271     $ 69,256     $ 116,668     $ 94,516  

Products and services transferred over time

    20,165       30,754       17,698       26,991  
    $ 132,436     $ 100,010     $ 134,366     $ 121,507  

 

   

Three Months Ended

 
   

December 31, 2023

   

December 31, 2022

 
   

Lighting

Segment

   

Display

Solutions

Segment

   

Lighting

Segment

   

Display

Solutions

Segment

 

Type of Product and Services

                               

LED lighting, digital signage solutions, electronic circuit boards

  $ 53,116     $ 8,791     $ 54,410     $ 5,801  

Poles, other display solution elements

    10,968       24,829       11,632       41,683  

Project management, installation services, shipping and handling

    711       10,590       791       14,487  
    $ 64,795     $ 44,210     $ 66,833     $ 61,971  

 

   

Six Months Ended

 
   

December 31, 2023

   

December 31, 2022

 
   

Lighting

Segment

   

Display

Solutions

Segment

   

Lighting

Segment

   

Display

Solutions

Segment

 

Type of Product and Services

                               

LED lighting, digital signage solutions, electronic circuit boards

  $ 108,607     $ 17,724     $ 109,945     $ 12,976  

Poles, other display solution elements

    22,351       59,698       22,761       83,154  

Project management, installation services, shipping and handling

    1,478       22,588       1,660       25,377  
    $ 132,436     $ 100,010     $ 134,366     $ 121,507  

 

10

 

 

Practical Expedients and Exemptions

 

 

The Company’s contracts with customers have an expected duration of one year or less, as such, the Company applies the practical expedient to expense sales commissions as incurred and has omitted disclosures on the amount of remaining performance obligations.

 

Shipping costs that are not material in context of the delivery of products are expensed as incurred.

 

The Company’s accounts receivable balance represents the Company’s unconditional right to receive payment from its customers with contracts. Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing; therefore, payments do not contain significant financing components.

 

The Company collects sales tax and other taxes concurrent with revenue-producing activities which are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

 

New Accounting Pronouncements:

 

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” creating an exception to the recognition and measurement principles in ASC 805. The amendment requires that entities apply ASC 606, “Revenue from Contracts with Customers,” rather than using fair value, to recognize and measure contracts assets and contract liabilities from contracts with customers acquired in a business combination. The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods therein. Early adoption is permitted, including adoption in an interim period, regardless of whether a business combination occurs in that period. The guidance should be applied prospectively; however, an entity that elects to early adopt in an interim period should apply the amendments to all business combinations that occurred during the fiscal year that includes that interim period. There has not been a material impact on the Company’s consolidated financial statements and related disclosures as a result of its adoption of the guidance on July 1, 2023.

 

 

NOTE 3 - SEGMENT REPORTING INFORMATION

 

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s two operating segments are Lighting and Display Solutions (formerly known as the Graphics Segment), with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

 

The Lighting Segment includes non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market. The Company also services lighting product customers through the commercial and industrial project, stock and flow, and renovation channels. In addition to the manufacture and sale of lighting fixtures, the Company offers a variety of lighting controls to complement its lighting fixtures which include sensors, photocontrols, dimmers, motion detection and Bluetooth systems. The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

 

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, display fixtures, refrigerated displays, and custom display elements. These products are used in visual image programs in several markets including the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market. The Display Solutions Segment also provides a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage.

 

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item. These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing, and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

 

11

 

There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three and six months ended December 31, 2023, or 2022. There was no concentration of accounts receivable at December 31, 2023, or 2022.

 

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of December 31, 2023, and December 31, 2022:

 

   

Three Months Ended

   

Six Months Ended

 

(In thousands)

 

December 31

   

December 31

 
   

2023

   

2022

   

2023

   

2022

 

Net Sales:

                               

Lighting Segment

  $ 64,795     $ 66,833     $ 132,436     $ 134,366  

Display Solutions Segment

    44,210       61,971       100,010       121,507  
    $ 109,005     $ 128,804     $ 232,446     $ 255,873  
                                 

Operating Income (Loss):

                               

Lighting Segment

  $ 8,856     $ 6,754     $ 17,609     $ 15,912  

Display Solutions Segment

    3,302       7,762       10,521       14,258  

Corporate and Eliminations

    (4,339 )     (5,478 )     (9,283 )     (11,111 )
    $ 7,819     $ 9,038     $ 18,847     $ 19,059  
                                 

Capital Expenditures:

                               

Lighting Segment

  $ 1,151     $ 74     $ 2,013     $ 323  

Display Solutions Segment

    529       539       1,048       700  

Corporate and Eliminations

    276       (52 )     288       (28 )
    $ 1,956     $ 561     $ 3,349     $ 995  
                                 

Depreciation and Amortization:

                               

Lighting Segment

  $ 1,293     $ 1,382     $ 2,602     $ 2,769  

Display Solutions Segment

    989       975       1,965       1,949  

Corporate and Eliminations

    75       62       161       122  
    $ 2,357     $ 2,419     $ 4,728     $ 4,840  

 

 

   

December 31,
2023

   

June 30,
2023

 

Total Assets:

               

Lighting Segment

  $ 135,689     $ 142,941  

Display Solutions Segment

    141,782       145,307  

Corporate and Eliminations

    10,077       7,901  
    $ 287,548     $ 296,149  

 

The segment net sales reported above represent sales to external customers. Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses. Identifiable assets are those assets used by each segment in its operations.

 

The Company records a 10% mark-up on inter-segment revenues. Any inter-segment profit in inventory is eliminated in consolidation. Inter-segment revenues were eliminated in consolidation as follows:

 

Inter-segment sales

                               
   

Three Months Ended

   

Six Months Ended

 

(In thousands)

 

December 31

   

December 31

 
   

2023

   

2022

   

2023

   

2022

 

Lighting Segment inter-segment net sales

  $ 5,286     $ 5,067     $ 12,150     $ 11,210  
                                 

Display Solutions Segment inter-segment net sales

  $ (15 )   $ 30     $ 440     $ 36  

 

12

 

 

 

NOTE 4 - EARNINGS PER COMMON SHARE

 

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data):

 

   

Three Months Ended

   

Six Months Ended

 
   

December 31

   

December 31

 
   

2023

   

2022

   

2023

   

2022

 
                                 

BASIC EARNINGS PER SHARE

                               
                                 

Net income

  $ 5,906     $ 6,417     $ 13,934     $ 12,678  
                                 

Weighted average shares outstanding during the period, net of treasury shares

    27,979       27,005       27,858       26,890  

Weighted average vested restricted stock units outstanding

    76       117       78       81  

Weighted average shares outstanding in the Deferred Compensation Plan during the period

    969       956       954       903  

Weighted average shares outstanding

    29,024       28,078       28,890       27,874  
                                 

Basic earnings per common share

  $ 0.20     $ 0.23     $ 0.48     $ 0.45  
                                 
                                 

DILUTED EARNINGS PER SHARE

                               
                                 

Net income

  $ 5,906     $ 6,417     $ 13,934     $ 12,678  
                                 

Weighted average shares outstanding:

                               
                                 

Basic

    29,024       28,078       28,890       27,874  
                                 

Effect of dilutive securities (a):

                               

Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any

    1,019       1,126       1,059       892  

Weighted average shares outstanding

    30,043       29,204       29,949       28,766  
                                 

Diluted earnings per common share

  $ 0.20     $ 0.22     $ 0.47     $ 0.44  
                                 
                                 

Anti-dilutive securities (b)

    -       85       -       452  

 

 

(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)

Anti-dilutive securities were excluded from the computation of diluted net income per share for the three and six months ended December 31, 2023, and December 31, 2022, because the exercise price was greater than the average fair market price of the common shares or because the assumed proceeds from the award’s exercise or vesting was greater than the average fair market price of the common shares.

 

13

 

 

 

NOTE 5INVENTORIES, NET

 

The following information is provided as of the dates indicated:                           

 

   

December 31,

   

June 30,

 

(In thousands)

 

2023

   

2023

 
                 

Inventories:

               

Raw materials

  $ 44,225     $ 47,689  

Work-in-progress

    3,726       3,373  

Finished goods

    12,203       12,656  

Total Inventories

  $ 60,154     $ 63,718  

 

 

NOTE 6 - ACCRUED EXPENSES

 

The following information is provided as of the dates indicated:

 

   

December 31,

   

June 30,

 

(In thousands)

 

2023

   

2023

 
                 

Accrued Expenses:

               

Customer prepayments

  $ 6,209     $ 5,425  

Compensation and benefits

    8,570       13,116  

Accrued warranty

    6,244       6,501  

Operating lease liabilities

    3,752       3,566  

Accrued sales commissions

    4,183       5,082  

Accrued Freight

    3,291       3,821  

Accrued FICA

    483       546  

Finance lease liabilities

    307       284  

Other accrued expenses

    5,808       5,444  

Total Accrued Expenses

  $ 38,847     $ 43,785  

 

 

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

 

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

 

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of three reporting units that contain goodwill. One reporting unit is within the Lighting Segment and two reporting units are within the Display Solutions Segment. The tradename intangible assets have an indefinite life and are also tested separately on an annual basis. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

 

14

 

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

 

Goodwill

         

Display

         

(In thousands)

 

Lighting

   

Solutions

         
   

Segment

   

Segment

   

Total

 

Balance as of December 31, 2023

                       

Goodwill

  $ 70,971     $ 63,347     $ 134,318  

Accumulated impairment losses

    (61,763 )     (27,525 )     (89,288 )

Goodwill, net as of December 31, 2023

  $ 9,208     $