LSI INDUSTRIES INC 10-Q

lyts20210331_10q.htm     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 MARCH 31, 2021 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. (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 April 23, 2021, there were 26,498,775 shares of the registrant's common stock, no par value per share, outstanding.     Page 1       LSI INDUSTRIES INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021   INDEX       Begins on Page PART I.  Financial Information                 ITEM 1. Financial Statements (Unaudited)                   Condensed Consolidated Statements of Operations   3     Condensed Consolidated Statements of Comprehensive Income   4     Condensed Consolidated Balance Sheets   5     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   21             ITEM 3. Quantitative and Qualitative Disclosures About Market Risk   31             ITEM 4. Controls and Procedures   31           PART II.  Other Information                           ITEM 5. Other Information   32             ITEM 6. Exhibits   32           Signatures   33   Page 2     PART I.    FINANCIAL INFORMATION   ITEM 1.    FINANCIAL STATEMENTS     LSI INDUSTRIES INC.   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)         Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands, except per share data)   2021     2020     2021     2020                                     Net Sales   $ 72,204     $ 71,010     $ 218,597     $ 242,088                                     Cost of products and services sold     54,112       54,834       162,519       183,558                                     Severance costs     -       11       5       11                                     Restructuring costs     -       223       3       758                                     Gross profit     18,092       15,942       56,070       57,761                                     Selling and administrative expenses     15,996       17,032       49,070       55,045                                     Severance costs     -       8       16       62                                     Restructuring gains     -       ( 3,729 )     -       ( 8,576 )                                   Operating income     2,096       2,631       6,984       11,230                                     Interest (income)     ( 2 )     ( 1 )     ( 4 )     ( 3 )                                   Interest expense     54       129       175       795                                     Other expense (income)     43       642       ( 197 )     633                                     Income before income taxes     2,001       1,861       7,010       9,805                                     Income tax expense     529       -       1,340       1,726                                     Net income   $ 1,472     $ 1,861     $ 5,670     $ 8,079                                                                       Earnings per common share (see Note 4)                                 Basic   $ 0.05     $ 0.07     $ 0.21     $ 0.31   Diluted   $ 0.05     $ 0.07     $ 0.21     $ 0.31                                                                       Weighted average common shares outstanding                                 Basic     26,771       26,301       26,642       26,250   Diluted     27,727       26,623       27,352       26,423     The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.   Page 3       LSI INDUSTRIES INC.   CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)         Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Net Income   $ 1,472     $ 1,861     $ 5,670     $ 8,079                                     Foreign currency translation adjustment     ( 54 )     ( 116 )     93       ( 110 )                                   Comprehensive Income   $ 1,418     $ 1,745     $ 5,763     $ 7,969     The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.   Page 4       LSI INDUSTRIES INC.   CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)         March 31,     June 30,   (In thousands, except shares)   2021     2020                     ASSETS                                   Current assets                                   Cash and cash equivalents   $ 23,528     $ 3,517                     Accounts receivable, less allowance for doubtful accounts of $ 241 and $ 273 , respectively     44,974       37,836                     Inventories     40,390       38,752                     Refundable income tax     3,233       2,776                     Other current assets     4,277       2,977                     Total current assets     116,402       85,858                     Property, Plant and Equipment, at cost                 Land     3,943       3,933   Buildings     20,667       20,638   Machinery and equipment     68,444       67,796   Buildings under finance leases     2,033       2,033   Construction in progress     778       440         95,865       94,840   Less accumulated depreciation     ( 71,713 )     ( 68,305 ) Net property, plant and equipment     24,152       26,535                     Goodwill     10,373       10,373                     Other Intangible Assets, net     27,948       29,960                     Operating Lease Right-of-Use Assets     7,673       8,663                     Other Long-Term Assets, net     10,546       10,874                     Total assets   $ 197,094     $ 172,263     The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.   Page 5     LSI INDUSTRIES INC.   CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)         March 31,     June 30,   (In thousands, except shares)   2021     2020                     LIABILITIES & SHAREHOLDERS' EQUITY                                   Current liabilities                 Accounts payable   $ 25,003     $ 14,216   Accrued expenses     30,302       20,433                     Total current liabilities     55,305       34,649                     Long-Term Debt     -       -                     Finance Lease Liabilities     1,568       1,755                     Operating Lease Liabilities     8,105       9,021                     Other Long-Term Liabilities     1,046       1,138                     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 40,000,000 shares;                 Outstanding 26,490,385 and 26,286,009 shares, respectively     131,330       127,713   Treasury shares, without par value     ( 2,111 )     ( 1,121 ) Deferred compensation plan     2,111       1,121   Retained (loss)     ( 260 )     ( 1,920 ) Accumulated other comprehensive income (loss)     -       ( 93 )                   Total shareholders' equity     131,070       125,700                     Total liabilities & shareholders' equity   $ 197,094     $ 172,263     The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.   Page 6       LSI INDUSTRIES INC.   CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)         Common Shares     Treasury Shares     Key Executive     Accumulated Other     Retained     Total   (In thousands, except per share data)   Number Of Shares     Amount     Number Of Shares     Amount     Compensation Amount     Comprehensive Income (Loss)     Earnings (Loss)     Shareholders' Equity                                                                     Balance at June 30, 2019     26,176     $ 125,729       ( 209 )   $ ( 1,468 )   $ 1,468       16     $ ( 5,808 )   $ 119,937                                                                     Net Income     -       -       -       -       -       -       8,079       8,079   Other comprehensive loss     -       -       -       -       -       ( 110 )     -       ( 110 ) Stock compensation awards     48       225       -       -       -       -       -       225   Restricted stock units issued     21       -       -       -       -       -       -       -   Shares issued for deferred compensation     54       296       -       -       -       -       -       296   Activity of treasury shares, net     -       -       42       411       -       -       -       411   Deferred stock compensation     -       -       -       -       ( 413 )     -       -       ( 413 ) Stock compensation expense     -       494       -       -       -       -       -       494   Stock options exercised, net     29       174       -       -       -       -       -       174   Dividends — $0.20 per share     -       -       -       -       -       -       ( 3,958 )     ( 3,958 ) Cumulative effect of adoption of accounting guidance     -       -       -       -       -       -       ( 428 )     ( 428 )                                                                   Balance at March 31, 2020     26,328     $ 126,918       ( 167 )   $ ( 1,057 )   $ 1,055     $ ( 94 )   $ ( 2,115 )   $ 124,707           Common Shares     Treasury Shares     Key Executive     Accumulated Other     Retained     Total       Number Of             Number Of             Compensation     Comprehensive     Earnings     Shareholders'       Shares     Amount     Shares     Amount     Amount     Income (Loss)     (Loss)     Equity                                                                     Balance at June 30, 2020     26,466     $ 127,713       ( 180 )   $ ( 1,121 )   $ 1,121       ( 93 )   $ ( 1,920 )   $ 125,700                                                                     Net Income     -       -       -       -       -       -       5,670       5,670   Other comprehensive income     -       -       -       -       -       93       -       93   Stock compensation awards     35       242       -       -       -       -       -       242   Restricted stock units issued     28       -       -       -       -       -       -       -   Shares issued for deferred compensation     141       1,096       -       -       -       -       -       1,096   Activity of treasury shares, net     -       -       ( 128 )     ( 990 )     -       -       -       ( 990 ) Deferred stock compensation     -       -       -       -       990       -       -       990   Stock compensation expense     -       1,317       -       -       -       -       -       1,317   Stock options exercised, net     128       962       -       -       -       -       -       962   Dividends — $0.20 per share     -       -       -       -       -       -       ( 4,010 )     ( 4,010 )                                                                   Balance at March 31, 2021     26,798     $ 131,330       ( 308 )   $ ( 2,111 )   $ 2,111     $ -     $ ( 260 )   $ 131,070     The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.   Page 7       LSI INDUSTRIES INC.   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)         Nine Months Ended       March 31   (In thousands)   2021     2020                     Cash Flows from Operating Activities                 Net income   $ 5,670     $ 8,079   Non-cash items included in net income                 Depreciation and amortization     5,943       6,631   Deferred income taxes     332       2,637   Deferred compensation plan     1,096       296   Stock compensation expense     1,317       494   Issuance of common shares as compensation     242       225   Gain on disposition of fixed assets     -       ( 8,510 ) Allowance for doubtful accounts     ( 15 )     ( 105 ) Inventory obsolescence reserve     1,226       1,720                     Changes in certain assets and liabilities                 Accounts receivable     ( 6,867 )     8,322   Inventories     ( 2,817 )     ( 1,981 ) Refundable income taxes     ( 444 )     ( 1,170 ) Accounts payable     10,450       1,015   Accrued expenses and other     1,269       ( 258 ) Customer prepayments     7,232       ( 298 ) Net cash flows provided by operating activities     24,634       17,097                     Cash Flows from Investing Activities                 Purchases of property, plant and equipment     ( 1,517 )     ( 1,538 ) Proceeds from the sale of fixed assets     -       20,040   Net cash flows (used in) provided by investing activities     ( 1,517 )     18,502                     Cash Flows from Financing Activities                 Payments of long-term debt     -       ( 169,671 ) Borrowings of long-term debt     -       138,049   Cash dividends paid     ( 3,963 )     ( 3,958 ) Shares withheld for employees' taxes     ( 28 )     ( 124 ) Payments on financing lease obligations     ( 178 )     -   Proceeds from stock option exercises     962       174   Net cash flows used in financing activities     ( 3,207 )     ( 35,530 )                   Change related to foreign currency     101       ( 215 )                   Increase (Decrease) in cash and cash equivalents     20,011       ( 146 )                   Cash and cash equivalents at beginning of period     3,517       966                     Cash and cash equivalents at end of period   $ 23,528     $ 820     The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.   Page 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 March 31, 2021, the results of its operations for the three and nine month periods ended March 31, 2021 and 2020, and its cash flows for the nine month periods ended March 31, 2021 and 2020. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2020 Annual Report on Form 10 -K. Financial information as of June 30, 2020 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 2020 Annual Report on Form 10 -K. Significant changes to our accounting policies as a result of adopting Accounting Standards Update (“ASU”) 2016 - 02 (“ASU 2016 - 02” ), “Leases (Topic 842 )” (ASC 842 ) in the first quarter of fiscal 2020 are discussed below.   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 Graphics and select Lighting products are highly 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 print graphics branding   ● Electrical components based on customer specifications   ● Digital signage and related media content   The Company also offers installation services for its Graphics and select Lighting products. Installation revenue is recognized over time as our 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 contract.   Page 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     Nine Months Ended   (In thousands)   March 31, 2021     March 31, 2021       Lighting Segment     Graphics Segment     Lighting Segment     Graphics Segment   Timing of revenue recognition                                 Products and services transferred at a point in time   $ 39,497     $ 12,550     $ 119,478     $ 42,991   Products and services transferred over time     6,243       13,914       16,793       39,335       $ 45,740     $ 26,464     $ 136,271     $ 82,326           Three Months Ended     Nine Months Ended       March 31, 2021     March 31, 2021       Lighting Segment     Graphics Segment     Lighting Segment     Graphics Segment   Type of Product and Services                                 LED lighting, digital signage solutions, electronic circuit boards   $ 40,298     $ 8,595     $ 118,681     $ 20,546   Poles, printed graphics, non-LED lighting     5,071       11,809       16,299       41,526   Project management, installation services, shipping and handling     371       6,060       1,291       20,254       $ 45,740     $ 26,464     $ 136,271     $ 82,326       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:   On July 1, 2019, the Company adopted ASU 2016 - 02 using a modified-retrospective transition method, under which it elected not to adjust comparative periods. The Company elected the package of practical expedients permitted under the new guidance. In addition, the Company elected accounting policies to not record short-term leases on the balance sheet and to not separate lease and non-lease components.   The Company’s most significant leases are those related to certain manufacturing facilities along with a small office space. Besides these real estate leases, most other leases are insignificant and consist of leases related to a vehicle, forklifts and various office equipment. The adoption of the new lease standard resulted in the recognition of right-of-use assets (“ROU assets”) of $ 10.4 million, lease liabilities of $ 10.8 million which includes the impact of existing deferred rents and tenant improvement allowances and a $ 0.4 million adjustment to retained earnings on the consolidated balance sheets as of July 1, 2019 for the Company’s real estate leases. The adoption of the standard resulted in no material impact to the consolidated statements of operations or consolidated statements of cash flow.   On July 1, 2020, the Company adopted ASU 2016 - 13, "Financial Instruments - Credit Losses (Topic 326 ): Measurement of Credit Losses on Financial Instruments" (ASC 326 or "CECL"), which amended the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. The adoption of ASU 2016 - 13 did not have a material impact on the consolidated financial statements and related disclosures.   Page 10     In March 2020 and January 2021, the FASB issued ASU 2020 - 04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021 - 01, “Reference Rate Reform: Scope,” respectively. Together, the ASUs provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures, if adopted.   Subsequent Events:   The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.   No items were identified during this evaluation that required adjustment to or disclosure in the accompanying consolidated financial statements.     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 Graphics, 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 outdoor and indoor lighting utilizing both traditional and LED light sources that have been fabricated and assembled for the Company’s markets, which primarily consist of petroleum/convenience stores, parking lot and garage markets, automotive dealerships, quick-service restaurants, grocery and pharmacy stores, and retail/national accounts. The Company serves these lighting product customers through the commercial, industrial, stock and flow, and renovation channels. 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 Graphics Segment designs, manufactures and installs exterior and interior visual image elements such as traditional graphics, interior branding, electrical and architectural signage, active digital signage along with the management of media content related to digital signage and menu board systems that are either digital or print by design. These products are used in visual image programs in several markets including the petroleum/convenience store market, quick-service restaurant market, the grocery store and pharmacy markets, as well as customers with multi-site retail operations. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.   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 expenses, 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.   There was no concentration of consolidated net sales in the three and nine months ended March 31, 2021 and 2020.  There was no concentration of accounts receivable at March 31, 2021 or June 30, 2020.    Page 11     Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of March 31, 2021 and March 31, 2020:       Three Months Ended     Nine Months Ended   (In thousands)   March 31     March 31       2021     2020     2021     2020   Net Sales:                                 Lighting Segment   $ 45,740     $ 49,013     $ 136,271     $ 165,640   Graphics Segment     26,464       21,997       82,326       76,448       $ 72,204     $ 71,010     $ 218,597     $ 242,088                                     Operating Income (Loss):                                 Lighting Segment   $ 3,797     $ 1,102     $ 9,519     $ 13,411   Graphics Segment     1,230       4,015       6,196       6,394   Corporate and Eliminations     ( 2,931 )     ( 2,486 )     ( 8,731 )     ( 8,575 )     $ 2,096     $ 2,631     $ 6,984     $ 11,230                                     Capital Expenditures:                                 Lighting Segment   $ 605     $ 126     $ 1,249     $ 1,013   Graphics Segment     17       234       84       279   Corporate and Eliminations     15       59       184       246       $ 637     $ 419     $ 1,517     $ 1,538                                     Depreciation and Amortization:                                 Lighting Segment   $ 1,566     $ 1,650     $ 4,795     $ 5,089   Graphics Segment     278       347       940       1,107   Corporate and Eliminations     76       83       208       435       $ 1,920     $ 2,080     $ 5,943     $ 6,631           March 31, 2021     June 30, 2020   Identifiable Assets:                 Lighting Segment   $ 121,245     $ 118,819   Graphics Segment     36,738       35,021   Corporate and Eliminations     39,111       18,423       $ 197,094     $ 172,263     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 intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:         Three Months Ended     Nine Months Ended   (In thousands)   March 31     March 31       2021     2020     2021     2020   Lighting Segment inter-segment net sales   $ 6,880     $ 744     $ 15,998     $ 2,415                                     Graphics Segment inter-segment net sales   $ 46     $ 153     $ 159     $ 251     The Company’s operations are located solely within North America. As a result, the geographic distribution of the Company’s net sales and long-lived assets originate within North America.   Page 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     Nine Months Ended       March 31     March 31       2021     2020     2021     2020                                     BASIC EARNINGS PER SHARE                                                                   Net income   $ 1,472     $ 1,861     $ 5,670     $ 8,079                                     Weighted average shares outstanding during the period, net of treasury shares     26,467       26,151       26,384       26,087   Weighted average vested restricted stock units outstanding     20       6       16       7   Weighted average shares outstanding in the Deferred Compensation Plan during the period     284       144       242       156   Weighted average shares outstanding     26,771       26,301       26,642       26,250                                     Basic income per share   $ 0.05     $ 0.07     $ 0.21     $ 0.31                                                                       DILUTED EARNINGS PER SHARE                                                                   Net income   $ 1,472     $ 1,861     $ 5,670     $ 8,079                                     Weighted average shares outstanding:                                                                   Basic     26,771       26,301       26,642       26,250                                     Effect of dilutive securities (a):                                 Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any     956       322       710       173   Weighted average shares outstanding     27,727       26,623       27,352       26,423                                     Diluted income per share   $ 0.05     $ 0.07     $ 0.21     $ 0.31                                                                       Anti-dilutive securities (b)     654       1,875       1,017       2,038       (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 nine months ended March 31, 2021 and March 31, 2020 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.   Page 13       NOTE 5   -   INVENTORIES   The following information is provided as of the dates indicated:       March 31,     June 30,   (In thousands)   2021     2020                     Inventories:                 Raw materials   $ 28,915     $ 27,331   Work-in-progress     1,423       1,566   Finished goods     10,052       9,855   Total Inventories   $ 40,390     $ 38,752       NOTE 6   - ACCRUED EXPENSES   The following information is provided as of the dates indicated:       March 31,     June 30,   (In thousands)   2021     2020                     Accrued Expenses:                 Customer prepayments   $ 8,938     $ 1,698   Compensation and benefits     6,738       5,271   Accrued warranty     5,786       6,956   Accrued FICA     2,239       730   Accrued sales commissions     2,039       1,289   Operating lease liabilities     304       376   Finance lease liabilities     248       239   Other accrued expenses     4,010       3,874   Total Accrued Expenses   $ 30,302     $ 20,433         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 fair value measurements of the reporting units are based on significant inputs not observable in the market and thus represent Level 3 measurements as defined by ASC 820 “Fair Value Measurements.” 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 two reporting units that contain goodwill. There is one reporting unit within the Lighting Segment and one reporting unit within the Graphics Segment. 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.   As of March 1, 2021, the Company performed its annual preliminary goodwill impairment test on the two reporting units that contain goodwill. The preliminary goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $ 28.2 million or 26 % above the carrying value of the reporting unit including goodwill. The preliminary goodwill impairment test of the reporting unit with goodwill in the Graphics Segment passed with an estimated business enterprise value of $ 11.4 million or 2,065 % above the carrying value of the reporting unit including goodwill. The definitive impairment test is expected to be completed in the fourth quarter of fiscal 2021. It is anticipated that the results of the definitive test will not change when the test is complete.   Page 14     The following table presents information about the Company's goodwill on the dates or for the periods indicated:     Goodwill                         (In thousands)   Lighting     Graphics               Segment     Segment     Total   Balance as of March 31, 2021                         Goodwill   $ 70,971     $ 28,690     $ 99,661   Accumulated impairment losses     ( 61,763 )     ( 27,525 )     ( 89,288 ) Goodwill, net as of March 31, 2021   $ 9,208     $ 1,165     $ 10,373                             Balance as of June 30, 2020                         Goodwill   $ 86,711     $ 28,690     $ 115,401   Accumulated impairment losses     ( 77,503 )     ( 27,525 )     ( 105,028 ) Goodwill, net as of June 30, 2020   $ 9,208     $ 1,165     $ 10,373     In the second quarter of fiscal 2021, the Company wrote-off the goodwill and impairment loss for a dissolved entity. The net impact to the consolidated financial statements, including the goodwill, net balance, was zero.   The Company performed its annual review of indefinite-lived intangible assets as of March 1, 2021 and determined there was no impairment. The preliminary indefinite-lived intangible impairment test passed with a fair market value of $ 15.7 million or 358 % above its carrying value. The definitive indefinite-lived impairment test is expected to be completed in the fourth quarter of fiscal 2021. It is anticipated that the results of the definitive test will not change when the test is complete.   The following table presents the gross carrying amount and accumulated amortization by each major asset class:   Other Intangible Assets   March 31, 2021   (In thousands)   Gross                       Carrying     Accumulated     Net       Amount     Amortization     Amount   Amortized Intangible Assets                         Customer relationships   $ 30,163     $ 10,273     $ 19,890   Patents     268       230       38   LED technology firmware, software     16,066       13,215       2,851   Trade name     2,658       911       1,747   Total Amortized Intangible Assets     49,155       24,629       24,526                             Indefinite-lived Intangible Assets                         Trademarks and trade names     3,422       -       3,422   Total indefinite-lived Intangible Assets     3,422       -       3,422                             Total Other Intangible Assets   $ 52,577     $ 24,629     $ 27,948     Page 15     Other Intangible Assets   June 30, 2020   (In thousands)   Gross                       Carrying     Accumulated     Net       Amount     Amortization     Amount   Amortized Intangible Assets                         Customer relationships   $ 35,563     $ 14,129     $ 21,434   Patents     338       277       61   LED technology firmware, software     16,066       12,852       3,214   Trade name     2,658       829       1,829   Total Amortized Intangible Assets     54,625       28,087       26,538                             Indefinite-lived Intangible Assets                         Trademarks and trade names     3,422       -       3,422   Total indefinite-lived Intangible Assets     3,422       -       3,422                             Total Other Intangible Assets   $ 58,047     $ 28,087     $ 29,960       In the second quarter of fiscal 2021, the Company wrote-off intangible assets’ gross carrying amount and accumulated amortization for a dissolved entity. The net impact to the consolidated financial statements, including the total other intangible assets, was zero.       Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Amortization Expense of Other Intangible Assets   $ 671     $ 670     $ 2,012     $ 2,016       The Company expects to record annual amortization expense as follows:   (In thousands)                   2021   $ 2,682   2022   $ 2,461   2023   $ 2,412   2024   $ 2,412   2025   $ 2,412   After 2025   $ 14,159         NOTE 8   -   REVOLVING LINE OF CREDIT   In March 2021, the Company amended its secured line of credit to a $ 100 million facility from a $ 75 million facility that expires in the third quarter of fiscal 2026. Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate or a base rate, at the Company’s option. The base rate is calculated as the highest of (a) the Prime rate, (b) the sum of the Overnight Funding Rate plus 50 basis points and (c) the sum of the Daily LIBOR Rate plus 100 basis points as long as a Daily LIBOR rate is offered, ascertainable and not unlawful. The increment over the LIBOR borrowing rate fluctuates between 100 and 200 basis points, and the increment over the Base Rate fluctuates between 0 and 100 basis points, both of which depend upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the line of credit agreement. The increment over LIBOR borrowing rate will be 100 basis points for the fourth quarter of fiscal 2021.  The fee on the unused balance of the $ 100 million committed line of credit fluctuates between 15 and 22.5 basis points. Under the terms of this line of credit, the Company has agreed to a negative pledge of real estate assets and is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum interest coverage ratio. As of March 31, 2021, there were no borrowings against the line of credit, and $ 100.0 million was available as of that date.   The Company is in compliance with all of its loan covenants as of March 31, 2021.   Page 16       NOTE 9   -   CASH DIVIDENDS   The Company paid cash dividends of $ 4.0 million in both the nine months ended March 31, 2021 and March 31, 2020. Dividends on restricted stock units in the amount of $ 109,685 and $ 59,077 were accrued as of March 31, 2021 and 2020, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In April 2021, the Board of Directors declared a regular quarterly cash dividend of $ 0.05 per share payable May 11, 2021 to shareholders of record as of May 3, 2021 . The indicated annual cash dividend rate is $ 0.20 per share.     NOTE 10  –  EQUITY COMPENSATION   In November 2019, the Company’s shareholders approved the 2019 Omnibus Award Plan ( “2019 Omnibus Plan”). The purpose of the 2019 Omnibus Plan is to provide a means through which the Company may attract and retain key personnel and to provide a means by which directors, officers, and employees can acquire and maintain an equity interest in the Company. The number of shares that remain reserved for issuance under the 2019 Omnibus Plan is 2,722,480 as of March 31, 2021. The 2019 Omnibus Plan implements the use of a fungible share ratio that consumes 2.5 available shares for every full value share awarded by the Company as stock compensation. The 2019 Omnibus Plan allows for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance stock units (“PSUs”) and other stock-based awards.   In the nine months ended March 31, 2021, the Company granted 318,406 non-qualified stock options with a weighted average exercise price of $ 6.86 , 134,017 PSUs with a weighted average fair value of $ 6.80 and 133,126 RSUs with a weighted average fair value of $ 6.81 . Stock compensation expense was $ 0.4 million and ($ 0.1 ) million for the three months ended March 31, 2021 and 2020, respectively, and $ 1.3 million and $ 0.5 million for the nine months ended March 31, 2021 and 2020, respectively.     NOTE 11   -   SUPPLEMENTAL CASH FLOW INFORMATION       Nine Months Ended   (In thousands)   March 31       2021     2020   Cash Payments:                 Interest   $ 71     $ 889   Income taxes   $ 1,473     $ 8                     Non-cash investing and financing activities                 Issuance of common shares as compensation   $ 242     $ 225   Issuance of common shares to fund deferred compensation plan   $ 1,096     $ 296       NOTE 12 - COMMITMENTS AND CONTINGENCIES   The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.   The Company may occasionally issue a standby letter of credit in favor of third parties. As of March 31, 2021, there were no such standby letters of credit issued.   Page 17       NOTE 13 – SEVERANCE COSTS   The activity in the Company’s accrued severance liability is as follows for the periods indicated:         Nine Months     Nine Months     Fiscal Year       Ended     Ended     Ended       March 31,     March 31,     June 30,   (In thousands)   2021     2020     2020                             Balance at beginning of period   $ 639     $ 1,134     $ 1,134   Accrual of expense     21       73       344   Payments     ( 555 )     ( 481 )     ( 839 ) Balance at end of period   $ 105     $ 726     $ 639     The $ 0.1 million severance reserve reported as of March 31, 2021 has been classified as a current liability and will be paid out over the next twelve months.     NOTE 14 – RESTRUCTURING COSTS   In the first quarter of fiscal 2020, the Company sold its New Windsor, New York facility. The net proceeds from the sale were $ 12.3 million resulting in a gain of $ 4.8 million. The Company also incurred additional restructuring costs totaling $ 0.2 million in the first quarter of fiscal 2020 related to the closure of the New Windsor facility, which impacted both the Lighting and Graphics segment.   Restructuring costs incurred in the second quarter of fiscal 2020 related to the realignment of the Company’s manufacturing footprint at its Houston, Texas facility, which impacted the Graphics segment.   In the third quarter of fiscal 2020, the Company sold its North Canton, Ohio facility. The net proceeds from the sale were $ 7.7 million resulting in a net gain of $ 3.7 million. Restructuring charges incurred in the third quarter of fiscal 2020 related to the relocation of the North Canton facility, which impacted the Graphics Segment. The Company also incurred $ 0.5 million of expense to write-down inventory which is not included in the tables below.   The following table presents information about restructuring costs for the periods indicated:       Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Exit costs   $ -     $ 235     $ 3     $ 419   Impairment of fixed assets and accelerated depreciation     -       -       -       49   Gain on sale of facility     -       ( 3,741 )     -       ( 8,562 ) Manufacturing realignment costs     -       -       -       276   Total   $ -     $ ( 3,506 )   $ 3     $ ( 7,818 )   The following table presents a roll forward of the beginning and ending liability balances related to the restructuring costs:       Balance as of                             Balance as of       June 30,     Restructuring                     March 31,   (In thousands)   2020     Expense     Payments     Adjustments     2021                                             Severance and termination benefits   $ 27     $ -     $ -     $ -     $ 27   Other restructuring costs     -       3       ( 3 )     -     $ -   Total   $ 27     $ 3     $ ( 3 )   $ -     $ 27       NOTE 15 - LEASES   The Company leases certain manufacturing facilities along with a small office space, several forklifts, several small tooling items and various items of office equipment. All but one of the Company’s leases are operating leases. Leases have a remaining term of one to seven years some of which have an option to renew. The Company does not assume renewals in determining the lease term unless the renewals are deemed reasonably certain. The lease agreements do not contain any material residual guarantees or material variable lease payments.   Page 18     The Company has periodically entered into short-term operating leases with an initial term of twelve months or less. The Company elected not to record these leases on the balance sheet. For the three and nine months ended March 31, 2021 and 2020, the rent expense for these leases is immaterial.   The Company has certain leases that contain lease and non-lease components and has elected to utilize the practical expedient to account for these components together as a single lease component.   Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments. The adoption of the new lease standard resulted in the recognition of ROU assets of $ 10.4 million and lease liabilities of $ 10.8 million which includes the impact of existing deferred rents and tenant improvement allowances on the consolidated balance sheets as of July 1, 2019 for the Company’s real estate leases. The adoption of the new standard resulted in no material impact to the consolidated statements of operations or consolidated statements of cash flow.       Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Operating lease cost   $ 576     $ 574     $ 1,714     $ 1,736   Financing lease cost:                                 Amortization of right of use assets     73       -       218       -   Interest on lease liabilities     22       -       69       -   Variable lease cost     -       -       2       -   Total lease cost   $ 671     $ 574     $ 2,003     $ 1,736       Supplemental Cash Flow Information:                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Cash flows from operating leases                 Fixed payments - operating cash flows   $ 1,707     $ 1,707   Liability reduction - operating cash flows   $ 1,397     $ 1,334                     Cash flows from finance leases                 Interest - operating cash flows   $ 69     $ -   Repayments of principal portion - financing cash flows   $ 178     $ -     Operating Leases:     March 31,     June 30,       2021     2020                     Total operating right-of-use assets   $ 7,673     $ 8,663                     Accrued expenses (Current liabilities)   $ 304     $ 376   Long-term operating lease liability     8,105       9,021   Total operating lease liabilities   $ 8,409     $ 9,397                     Weighted Average remaining Lease Term (in years)     3.99       4.59                     Weighted Average Discount Rate     4.86 %     4.85 %   Page 19     Finance Leases:     March 31,     June 30,       2021     2020                     Buildings under finance leases   $ 2,033     $ 2,033   Accumulated depreciation     ( 266 )     ( 48 ) Total finance lease assets, net   $ 1,767     $ 1,985                     Accrued expenses (Current liabilities)   $ 248     $ 239   Long-term finance lease liability     1,568       1,755   Total finance lease liabilities   $ 1,816     $ 1,994                     Weighted Average remaining Lease Term (in years)     6.08       6.83                     Weighted Average Discount Rate     4.86 %     4.86 %   Maturities of Lease Liability:     Operating Lease Liabilities     Finance Lease Liabilities   2021   $ 914     $ 149   2022     2,362       329   2023     2,351       329   2024     2,037       335   2025     1,469       362   Thereafter     435       665   Total lease payments     9,568       2,169   Less: Interest     ( 1,159 )     ( 353 ) Present Value of Lease Liabilities   $ 8,409     $ 1,816         NOTE 16 – INCOME TAXES   The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions.   The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March 2020. The CARES Act allowed the Company to carry back a federal net operating loss to prior tax years, offset taxable income in those earlier tax years and request a refund of income taxes that were paid at a higher statutory tax rate. The Company recognized tax benefits of $ 0.3 million in the third quarter of fiscal 2020 and $ 0.4 million in the first quarter of fiscal 2021 for utilizing the net operating losses in the prior tax years. The Company sold its North Canton, Ohio facility in the third quarter of fiscal 2020 which generated a capital gain and allowed the Company to utilize a capital loss carryforward. The resulting tax benefit reduced the anticipated full year fiscal 2020 estimated effective income tax rate.         Three Months Ended     Nine Months Ended       March 31     March 31       2021     2020     2021     2020   Reconciliation of effective tax rate:                                                                   Provision for income taxes at the anticipated annual tax rate     23.8 %     10.8 %     24.3 %     16.7 % Uncertain tax positions     0.8       1.5       ( 1.3 )     ( 0.3 ) Tax rate changes     -       ( 16.7 )     ( 5.0 )     ( 2.5 ) Shared-based compensation     1.8       4.4       1.1       3.7   Effective tax rate     26.4 %     - %     19.1 %     17.6 %   Page 20       ITEM 2. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS     Note About Forward-Looking Statements   This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including this section. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in in our Annual Report on Form 10-K in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Risk Factors.” All of those risks and uncertainties are incorporated herein by reference. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.   The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of LSI Industries Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended June 30, 2020, and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).   Our condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.   COVID-19 Pandemic   The COVID-19 pandemic continues to impact business activity across industries in the U.S. and worldwide, including, but not limited to, workforce and supply chain disruptions. We remain committed to taking actions to address the health, safety and welfare of our employees, customers, agents and suppliers. Future developments, such as the actions taken by governmental authorities in response to future outbreaks that are highly uncertain and unpredictable, will determine the extent to which COVID-19 continues to impact our results of operations and financial conditions. See the risk factor captioned “Our financial condition and results of operations for fiscal 2021 and future periods may be adversely affected by the recent novel coronavirus disease (“COVID-19”) outbreak or other outbreaks of infectious disease or similar public health threats and the resulting economic impact” in Item 1A, Risk Factors, included in Part I of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for an additional discussion of risks related to COVID-19.   Summary of Consolidated Results   Net Sales by Business Segment                                     Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Lighting Segment   $ 45,740     $ 49,013     $ 136,271     $ 165,640   Graphics Segment     26,464       21,997       82,326       76,448       $ 72,204     $ 71,010     $ 218,597     $ 242,088       Page 21     Operating Income (Loss) by Business Segment                                     Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Lighting Segment   $ 3,797     $ 1,102     $ 9,519     $ 13,411   Graphics Segment     1,230       4,015       6,196       6,394   Corporate and Eliminations     (2,931 )     (2,486 )     (8,731 )     (8,575 )     $ 2,096     $ 2,631     $ 6,984     $ 11,230     Net sales of $72.2 million for the three months ended March 31, 2021 increased $1.2 million or 2% as compared to net sales of $71.0 million for the three months ended March 31, 2020. Net sales were driven by increased net sales of the Graphics Segment (an increase of $4.5 million or 20%), partially offset by decreased net sales of the Lighting Segment (a decrease of $3.3 million or 7%).   Net sales of $218.6 million for the nine months ended March 31, 2021 decreased $23.5 million or 10% as compared to net sales of $242.1 million for the nine months ended March 31, 2020. Net sales were driven by decreased net sales of the Lighting Segment (a decrease of $29.4 million or 18%), partially offset by increased net sales of the Graphics Segment (an increase of $5.9 million or 8%).   Operating income of $2.1 million for the three months ended March 31, 2021 represents a $0.5 million decrease from operating income of $2.6 million in the three months ended March 31, 2020. The $0.5 decrease from fiscal 2020 was impacted by the sale of the North Canton, Ohio facility in the third quarter of fiscal 2020 which resulted in a pre-tax gain of $3.7 million. When the impact of the sale of the North Canton facility, other restructuring and plant closure costs, stock compensation expense and severance costs are removed from the operating results, adjusted operating income (loss), a Non-GAAP measure, was $2.5 million in the three months ended March 31, 2021 compared to ($0.5) million in the three months ended March 31, 2020. Refer to “Non-GAAP Financial Measures” below.   Operating income of $7.0 million for the nine months ended March 31, 2021 represents a $4.2 million decrease from operating income of $11.2 million in the nine months ended March 31, 2020. The $4.2 million decrease from fiscal 2020 was impacted by the sale of the New Windsor, New York facility in the first quarter of fiscal 2020, which resulted in a pre-tax gain of $4.8 million and the sale of the North Canton, Ohio facility in the third quarter of fiscal 2020, which resulted in a pre-tax gain of $3.7 million. When the impact of the sales of the New Windsor and North Canton facilities, other restructuring and plant closure costs, stock compensation expense and severance costs are removed from the operating results, adjusted operating income, a Non-GAAP measure, was $8.3 million in the nine months ended March 31, 2021 compared to $4.4 million in the nine months ended March 31, 2020. Refer to “Non-GAAP Financial Measures” below.   As of March 31, 2021, we reported a cash balance of $23.5 million and no long-term debt. We believe that our liquidity position is adequate to meet our projected needs in the reasonably foreseeable future.   Non-GAAP Financial Measures   We believe it is appropriate to evaluate our performance after making adjustments to the as-reported U.S. GAAP operating income, net income, and earnings per share. Adjusted operating income, net income and earnings per share, which exclude the impact of restructuring and plant closure costs (gains), stock compensation expense and severance costs are Non-GAAP financial measures. Also included below are Non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow and Net Debt. We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business. These supplemental measures are used by our management, including our chief operating decision maker, to evaluate business results. Although the impacts of some of these items have been recognized in prior periods and could recur in future periods, we exclude these items because they provide greater comparability and enhanced visibility into our results of operations. Below is a reconciliation of these Non-GAAP measures to operating income, net income, and earnings per share for the periods indicated along with the calculation of EBITDA and Adjusted EBITDA, Free Cash Flow and Net Debt.   Page 22     Reconciliation of operating income to adjusted operating income (loss):   Three Months Ended       March 31   (In thousands)   2021     2020                     Operating Income as reported   $ 2,096     $ 2,631                     Stock compensation expense     415       (103 )                   Severance costs     -       19                     Restructuring, plant closure costs (gains) and related inventory write-downs     -       (3,055 )                   Adjusted Operating Income (Loss)   $ 2,511     $ (508 )     Reconciliation of net income to adjusted net income (loss)                                     Three Months Ended       March 31   (In thousands, except per share data)   2021     2020               Diluted EPS             Diluted EPS                                     Net Income as reported   $ 1,472     $ 0.05     $ 1,861     $ 0.07                                     Stock compensation expense     314 (1)     0.01       (86 )(2)     -                                     Severance costs     -       -       16  (3)     -                                     Restructuring, plant closure costs (gains) and related inventory write-downs     -       -       (2,565 )(4)     (0.10 )                                   Tax impact due to the change in the estimated annual tax rate used for GAAP reporting purposes     44       -       (300 )     (0.01 )                                   Net Income (Loss) adjusted   $ 1,830     $ 0.07     $ (1,074 )   $ (0.04 )   The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S. and Mexico effective income tax rates for the periods indicated (in thousands):   (1) $101 (2) ($17) (3) $3 (4) ($490)     Reconciliation of operating income to adjusted operating income:                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Operating Income as reported   $ 6,984     $ 11,230                     Stock compensation expense     1,317       494                     Severance costs     21       73                     Restructuring, plant closure costs (gains) and related inventory write-downs     3       (7,367 )                   Adjusted Operating Income   $ 8,325     $ 4,430     Page 23     Reconciliation of net income to adjusted net income                                         Nine Months Ended       March 31   (In thousands, except per share data)   2021     2020                 Diluted EPS               Diluted EPS                                         Net Income as reported   $ 5,670       $ 0.21     $ 8,079       $ 0.31                                         Stock compensation expense     1,012   (1)     0.04       373   (4)     0.01                                         Severance costs     17   (2)     -       60   (5)     -                                         Restructuring, plant closure costs (gains) and related inventory write-downs     2   (3)     -       (5,788 ) (6)     (0.22 )                                       Tax impact due to the change in the estimated annual tax rate used for GAAP reporting purposes     (254 )       (0.01 )     (459 )       (0.02 )                                       Net Income adjusted   $ 6,447       $ 0.24     $ 2,265       $ 0.09     The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S. and Mexico effective income tax rates for the periods indicated (in thousands):   (1) $305 (2) $4 (3) $1 (4) $121 (5) $13 (6) ($1,579)   The reconciliation of reported net income and earnings per share to adjusted net income and earnings per share may not agree due to rounding differences and due to the difference between basic and dilutive weighted average shares outstanding in the computation of earnings per share.   Reconciliation of operating income to EBITDA and Adjusted EBITDA     Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Operating Income as reported   $ 2,096     $ 2,631     $ 6,984     $ 11,230                                     Depreciation and Amortization     1,920       2,080       5,943       6,631                                     EBITDA   $ 4,016     $ 4,711     $ 12,927     $ 17,861                                     Stock compensation expense     415       (103 )     1,317       494                                     Severance costs     -       19       21       73                                     Restructuring, plant closure costs (gains) and related inventory write-downs     -       (3,055 )     3       (7,367 )                                   Adjusted EBITDA   $ 4,431     $ 1,572     $ 14,268     $ 11,061     Reconciliation of cash flow from operations to free cash flow     Three Months Ended     Nine Months Ended       March 31     March 31   (In thousands)   2021     2020     2021     2020                                     Cash Flow from Operations   $ 11,217     $ (3,806 )   $ 24,634     $ 17,097                                     Proceeds from sale of fixed assets     -       7,700       -       20,032                                     Capital expenditures     (637 )     (419 )     (1,517 )     (1,538 )                                   Free Cash Flow   $ 10,580     $ 3,475     $ 23,117     $ 35,591     Page 24     Reconciliation of Net Debt                     March 31,     June 30,   (In thousands)   2021     2020                     Long-Term Debt as reported   $ -     $ -                     Less:                 Cash and cash equivalents as reported     23,528       3,517                     Net Debt   $ (23,528 )   $ (3,517 )   Results of Operations   THREE MONTHS ENDED MARCH 31, 2021 COMPARED TO THREE MONTHS ENDED MARCH 31, 2020   Lighting Segment                     Three Months Ended       March 31   (In thousands)   2021     2020                     Net Sales   $ 45,740     $ 49,013   Gross Profit   $ 14,159     $ 12,637   Operating Income   $ 3,797     $ 1,102     Lighting Segment net sales of $45.7 million in the three months ended March 31, 2021 decreased 7% from net sales of $49.0 million in the same period in fiscal 2020. The decrease is due to the impact of COVID-19 disruptions in construction markets, however; the sales gap versus the prior year continues to narrow, having improved each quarter of the current fiscal year.   Gross profit of $14.2 million in the three months ended March 31, 2021 increased $1.5 million or 12% from the same period of fiscal 2020. Gross profit as a percentage of net sales was 31.0% in the three months ended March 31, 2021 compared to 25.8% in the same period of fiscal 2020. The growth in gross profit as a percentage of net sales reflects our continued focus on the entire lighting model, including higher value applications, price management, new and cost reduced products and supply chain and operations productivity.   Selling and administrative expenses of $10.4 million in the three months ended March 31, 2021 decreased $1.2 million from the same period of fiscal 2020, primarily driven by programs to reduce spending as a result of the pandemic.   Lighting Segment operating income of $3.8 million for the three months ended March 31, 2021 increased $2.7 million from operating income of $1.1 million in the same period of fiscal 2020 primarily due to higher gross profit and lower operating expenses, partially offset by lower sales.   Graphics Segment                     Three Months Ended       March 31   (In thousands)   2021     2020                     Net Sales   $ 26,464     $ 21,997   Gross Profit   $ 3,933     $ 3,293   Operating Income   $ 1,230     $ 4,015     Graphics Segment net sales of $26.5 million in the three months ended March 31, 2021 increased $4.5 million or 20% from net sales of $22.0 million in the same period in fiscal 2021. The increase in sales is primarily due to growth in our Quick-Service Restaurants vertical.   Gross profit of $3.9 million in the three months ended March 31, 2021 increased $0.6 million or 19% from the same period of fiscal 2020. Gross profit as a percentage of net sales in the three months ended March 31, 2021 was consistent with gross profit as a percentage of net sales in the same period of fiscal 2020.   Selling and administrative expenses of $2.7 million in the three months ended March 31, 2021 increased $3.4 million from ($0.7) million in the same period of fiscal 2020. Selling and administrative expenses in the three months ended March 31, 2020 were reduced by the $3.7 million pre-tax gain on the sale of the North Canton, Ohio facility. When the $3.7 million gain is removed from the third quarter of fiscal 2020 results, selling and administrative expenses remained relatively flat in fiscal 2021 compared to the prior year.   Graphics Segment operating income of $1.2 million in the three months ended March 31, 2021 decreased $2.8 million from operating income of $4.0 million in the same period of fiscal 2020. The decrease of $2.8 million was primarily as a result of the $3.7 million pre-tax gain on the sale of the North Canton, Ohio facility in the third quarter of fiscal 2020. When all Non-GAAP items are removed from both fiscal years, Non-GAAP adjusted operating income for the three months ended March 31, 2021 was $1.2 million, or $0.2 million higher than Non-GAAP adjusted operating income of $1.0 million for the three months ended March 31, 2020 (refer to the Non-GAAP table below for a reconciliation of Graphics Segment operating income (loss) to adjusted operating income). The increase is primarily due to improved gross profit margin.   Page 25     Reconciliation of Graphics Segment operating income to adjusted operating income:                     Three Months Ended       March 31   (In thousands)   2021     2020                     Operating Income   $ 1,230     $ 4,015   Stock compensation expense     8       (28 ) Severance     -       27   Restructuring and plant closure costs (gains)     -       (3,044 ) Adjusted operating income   $ 1,238     $ 970       Corporate and Eliminations                     Three Months Ended       March 31   (In thousands)   2021     2020                     Gross Profit (Loss)   $ -     $ 12   Operating (Loss)   $ (2,931 )   $ (2,486 )   The gross profit (loss) relates to the change in the intercompany profit in inventory elimination.   Administrative expenses of $2.9 million in the three months ended March 31, 2021 increased $0.4 million or 18% from the same period of fiscal 2020. The net increase was primarily due to an increase in stock compensation expense due to prior year forfeitures and an increase in the employer match related to the deferred compensation plan as result of additional participants.   Consolidated Results   We reported $52,000 and $128,000 of net interest expense in the three months ended March 31, 2021 and March 31, 2020, respectively. We also recorded other expense of $43,000 and $642,000 in the three months ended March 31, 2021 and March 31, 2020, respectively, which is related to net foreign exchange currency transaction gains and losses through our Mexican subsidiary.   In the three months ended March 31, 2021, we recorded $0.5 million of income tax expense, which represents a consolidated effective tax rate of 26.4%. In the three months ended March 31, 2020, we recorded less than $1,000 of tax expense, which was driven by a favorable deferred tax asset adjustment related to a NOL carryback from the CARES Act.   We reported net income of $1.5 million in the three months ended March 31, 2021 compared to net income of $1.9 million in the three months ended March 31, 2020. Non-GAAP adjusted net income was $1.8 million for the three months ended March 31, 2021 compared to adjusted net loss of ($1.1) million for the three months ended March 31, 2020 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an improved gross profit margin, a reduction in operating expenses and decreased interest expense, partially offset by decreased net sales. Diluted earnings per share of $0.05 was reported in the three months ended March 31, 2021 as compared to $0.07 diluted earnings per share in the same period of fiscal 2020. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended March 31, 2021 were 27,727,000 shares as compared to 26,623,000 shares in the same period last year.   Page 26     NINE MONTHS ENDED MARCH 31, 2021 COMPARED TO NINE MONTHS ENDED MARCH 31, 2020   Lighting Segment                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Net Sales   $ 136,271     $ 165,640   Gross Profit   $ 41,689     $ 45,357   Operating Income   $ 9,519     $ 13,411       Lighting Segment net sales of $136.3 million in the nine months ended March 31, 2021 decreased 18% from net sales of $165.6 million in the same period in fiscal 2020. The decrease is due to the impact of COVID-19 disruptions in construction markets, however; the sales gap versus the prior year continues to narrow, having improved each quarter of the current fiscal year.   Gross profit of $41.7 million in the nine months ended March 31, 2021 decreased $3.7 million or 8% from the same period of fiscal 2020. Gross profit as a percentage of net sales was 30.6% in the nine months ended March 31, 2021 compared to 27.4% in the same period of fiscal 2020. The growth in gross profit as a percentage of net sales reflects our continued focus on the entire lighting model, including higher value applications, price management, new and cost reduced products and supply chain and operations productivity.   Selling and administrative expenses of $32.2 million in the nine months ended March 31, 2021 increased $0.3 million from $31.9 million in the same period of fiscal 2020. Selling and administrative expenses in the nine months ended March 31, 2020 were reduced by the $4.8 million pre-tax gain on the sale of the New Windsor facility. When the $4.8 million gain is removed from the fiscal 2020 results, selling and administrative expenses in fiscal 2021 decreased from the prior year, driven by programs to reduce spending as a result of the pandemic.   Lighting Segment operating income of $9.5 million for the nine months ended March 31, 2021 decreased $3.9 million from operating income of $13.4 million in the same period of fiscal 2020 primarily due to the $4.8 million pre-tax gain on the sale of the New Windsor facility in fiscal 2020. Non-GAAP adjusted operating income was $9.7 million in the nine months ended March 31, 2021 compared to adjusted operating income of $8.8 million in the nine months ended March 31, 2020 (refer to the Non-GAAP table below for a reconciliation of Lighting Segment operating income to adjusted operating income).   Reconciliation of Lighting Segment operating income to adjusted operating income:                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Operating Income   $ 9,519     $ 13,411   Stock compensation expense     199       91   Severance     2       18   Restructuring and plant closure costs (gains)     -       (4,674 ) Adjusted operating income   $ 9,720     $ 8,846       Graphics Segment                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Net Sales   $ 82,326     $ 76,448   Gross Profit   $ 14,381     $ 12,384   Operating Income   $ 6,196     $ 6,394     Page 27     Graphics Segment net sales of $82.3 million in the nine months ended March 31, 2021 increased $5.9 million or 8% from net sales of $76.4 million in the same period in fiscal 2020. The increase in sales is from growth in our Grocery and Quick-Service Restaurants verticals partially offset by a reduction in our Petroleum vertical.   Gross profit of $14.4 million in the nine months ended March 31, 2021 increased $2.0 million or 16% from the same period of fiscal 2020. Gross profit as a percentage of net sales increased to 17.5% in the nine months ended March 31, 2021 compared to 16.2% in the same period in fiscal 2020, primarily within our Petroleum and Grocery verticals.   Selling and administrative expenses of $8.2 million increased $2.2 million from $6.0 million in the same period of fiscal 2020. Selling and administrative expenses in the nine months ended March 31, 2020 were reduced by the $3.7 million pre-tax gain on the sale of the North Canton, Ohio facility. When the $3.7 million gain is removed from the fiscal 2020 results, selling and administrative expenses in fiscal 2021 decreased from the prior year, driven by programs to reduce spending as a result of the pandemic.   Graphics Segment operating income of $6.2 million in the nine months ended March 31, 2021 decreased $0.2 million from operating income of $6.4 million in the same period of fiscal 2020. Non-GAAP adjusted operating income was $6.3 million in the nine months ended March 31, 2021 compared to adjusted operating income of $3.7 million in the nine months ended March 31, 2020 (refer to the Non-GAAP table below for a reconciliation of Graphics Segment operating income to adjusted operating income). The increase is primarily due to improved gross profit margin.   Reconciliation of Graphics Segment operating income to adjusted operating income:                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Operating Income   $ 6,196     $ 6,394   Stock compensation expense     113       19   Severance     13       44   Restructuring and plant closure costs (gains)     3       (2,711 ) Adjusted operating income   $ 6,325     $ 3,746       Corporate and Eliminations                     Nine Months Ended       March 31   (In thousands)   2021     2020                     Gross Profit (Loss)   $ -     $ 20   Operating (Loss)   $ (8,731 )   $ (8,575 )   The gross profit relates to the change in the intercompany profit in inventory elimination.   Administrative expenses of $8.7 million in the nine months ended March 31, 2021 remained relatively consistent with the prior year period.   Consolidated Results   We reported $0.2 million net interest expense in the nine months ended March 31, 2021 compared to $0.8 million net interest expense in the nine months ended March 31, 2020. The decrease in interest expense from fiscal 2020 to fiscal 2021 is the result of lower levels of debt outstanding on our line of credit. We also recorded other income of $0.2 million in the nine months ended March 31, 2021 compared to other expense of $0.6 million in the nine months ended March 31, 2020, which is related to net foreign exchange currency transaction gains and losses through our Mexican subsidiary.   The $1.3 million income tax expense in the nine months ended March 31, 2021 represents a consolidated effective tax rate of 19.1% and was driven by a favorable deferred tax asset adjustment related to a net operating loss carryback from the CARES Act. The $1.7 million income tax expense in the nine months ended March 31, 2020 represents a consolidated effective tax rate of 17.6%. The effective tax rate is mostly driven by the following: 1) a discrete item related to stock-based compensation expense; 2) a deferred tax asset adjustment related to a NOL carryback from the CARES Act; and 3) the utilization of a capital loss carryforward related to the capital gain on the sale of the North Canton, Ohio facility.    Page 28     We reported net income of $5.7 million in the nine months ended March 31, 2021 compared to net income of $8.1 million in the nine months ended March 31, 2020. Non-GAAP adjusted net income was $6.4 million for the nine months ended March 31, 2020 compared to adjusted net income of $2.3 million for the nine months ended March 31, 2020 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an improved gross profit margin, decreased interest expense and other expense, partially offset by decreased net sales. Diluted earnings per share of $0.21 was reported in the mine months ended March 31, 2021 as compared to $0.31 diluted earnings per share in the same period of fiscal 2020. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the nine months ended March 31, 2021 were 27,352,000 shares as compared to 26,423,000 shares in the same period last year.   Liquidity and Capital Resources   We consider our level of cash on hand, borrowing capacity, current ratio and working capital levels to be our most important measures of short-term liquidity. For long-term liquidity indicators, we believe our ratio of long-term debt to equity and our historical levels of net cash flows from operating activities to be the most important measures.   At March 31, 2021, we had working capital of $61.1 million compared to $51.2 million at June 30, 2020. The ratio of current assets to current liabilities was 2.10 to 1 as compared to a ratio of 2.48 to 1 at June 30, 2020. The $9.9 million increase in working capital from June 30, 2020 to March 31, 2021 is primarily driven by a $20.0 million increase in cash, $7.1 million increase in net accounts receivable, $1.8 million increase in other current assets and $1.6 million increase in net inventory, partially offset by a $10.8 million increase in accounts payable and a $9.6 million increase in accrued expenses. While working capital has increased, non-cash working capital decreased as we continue to effectively manage it in the face of constantly changing market conditions due to COVID-19.   Net accounts receivable was $45.0 million and $37.8 million at March 31, 2021 and June 30, 2020, respectively. DSO decreased to 52 days at March 31, 2021 from 56 days at June 30, 2020. We believe that our receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate.   Net inventories of $40.4 million at March 31, 2021 increased $1.6 million from $38.8 million at June 30, 2020. The increase of $1.6 million is the result of an increase in gross inventory of $2.2 million and an increase in obsolescence reserves of $0.6 million. Based on a strategy of balancing inventory levels with customer service and the timing of shipments, net inventory increased $1.8 million in the Lighting Segment and $0.2 million in the Graphics segment in the nine months ended March 31, 2021.   Cash generated from operations and borrowing capacity under our line of credit is our primary source of liquidity. In March 2021, the Company amended its secured line of credit to a $100 million facility from a $75 million facility, with $100 million of the credit line available as of April 23, 2021. This $100 million five-year credit line expires in the third quarter of fiscal 2026. We are in compliance with all of our loan covenants. We believe that our $100 million line of credit plus cash flows from operating activities are adequate for fiscal 2021 operational and capital expenditure needs. However, as the impact of COVID-19 on the economy and our operations evolves, we will continue to assess our liquidity needs.   We generated $24.6 million of cash from operating activities in the nine months ended March 31, 2021 as compared to $17.1 million in the same period of fiscal 2020. The $7.5 million increase in net cash flows from operating activities is the result of our improved earnings as well as a $9.4 million increase in accounts payable, $7.5 million increase in customer project prepayments and $2.1 million increase in Accrued FICA from deferred payroll taxes allowed under the CARES Act, partially offset by an increase of $15.2 million in accounts receivable.   We used $1.5 million of cash related to investing activities in the nine months ended March 31, 2021 as compared to $18.5 million of cash provided by investing activities in the same period of fiscal 2020, resulting in a decrease of $20.0 million. Capital expenditures were $1.5 million in both the nine months ended March 31, 2021 and March 31, 2020. We sold our New Windsor manufacturing facility for $12.3 million and our North Canton facility for $7.7 million in the nine months ended March 31, 2020, which was the primary contributing factor to the decrease in cash flow from investing activities from fiscal 2020 to fiscal 2021.   We used $3.2 million of cash related to financing activities in the nine months ended March 31, 2021 compared to $35.5 million in the nine months ended March 31, 2020. The $32.3 million change in cash flow was primarily the net result of payments of long-term debt in excess of borrowings which was primarily driven by cash flow from operations and cash flow from investments due to the sale of the New Windsor and North Canton facilities.   Page 29     We have on our balance sheet financial instruments consisting primarily of cash and cash equivalents, short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.   Off-Balance Sheet Arrangements   We have no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.   Cash Dividends   In April 2021, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable May 11, 2021 to shareholders of record as of May 3, 2021. The indicated annual cash dividend rate for fiscal 2021 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.   Critical Accounting Policies and Estimates   A summary of our significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2020 Annual Report on Form 10-K.   As a result of the adoption of ASU 2016-13, the Company has updated its critical accounting policy related to trade account receivables and allowances for credit losses effective July 1, 2020 from the critical accounting policies previously disclosed in our audited financial statements for the year ended June 30, 2020 as follows:   All trade account receivables are reported net of allowances for credit losses. The allowances for credit losses represent management’s best estimate of the credit losses expected from our trade account receivables over the life of the underlying assets. Assets with similar risk characteristics are pooled together for determination of their current expected credit losses. The Company regularly performs detailed reviews of our pooled assets to evaluate the collectability of receivables based on a combination of past, current, and future financial and qualitative factors that may affect customers’ ability to pay. In circumstances where the Company is aware of a specific customer’s inability to meet its financial obligations, a specific reserve is recorded against amounts due to reduce the recognized receivable to the amount reasonably expected to be collected.   Page 30     ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   Except for the broad effects of the COVID-19 pandemic as a result of its negative impact on the global economy and major financial markets, there have been no material changes in our exposure to market risk since June 30, 2020. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 12 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2020.   ITEM 4.    CONTROLS AND PROCEDURES   Disclosure Controls and Procedures   We maintain disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.   We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2021, our disclosure controls and procedures were effective. Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.   Changes in Internal Control   There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   Page 31     PART II.    OTHER INFORMATION   ITEM 5. OTHER INFORMATION   None.   ITEM 6.    EXHIBITS   Exhibits:   10.1 Fifth Amendment to Loan Documents dated as of March 30, 2021 between LSI and PNC Bank, National Association (incorporated by reference to LSI’s Form 8-K filed on April 1, 2021).     31.1 Certification of Principal Executive Officer required by Rule 13a-14(a)     31.2 Certification of Principal Financial Officer required by Rule 13a-14(a)     32.1 Section 1350 Certification of Principal Executive Officer     32.2 Section 1350 Certification of Principal Financial Officer   101.INS Inline XBRL Instance Document   101.SCH Inline XBRL Taxonomy Extension Schema Document   101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document   101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document   101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document   101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document   104                Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)   Page 32     SIGNATURES   Pursuant to the requirements 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.                     By: /s/ James A. Clark       James A. Clark       Chief Executive Officer and President       (Principal Executive Officer)                     By: /s/ James E. Galeese       James E. Galeese       Executive Vice President and Chief Financial Officer       (Principal Financial Officer)   April 28, 2021         Page 33