What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-06 compared with 2024-02-06 · 191 added, 146 removed, 624 unchanged (35% of the section changed)

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands, except per share data)

14 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

53 unchanged sentences

Key Executive

Accumulated Other

Comprehensive

22 unchanged sentences

Balance at December 31, 2022

Other comprehensive gain

Board stock compensation awards

ESPP stock Awards

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

Shares issued for deferred compensation

Activity of treasury shares, net

Deferred stock compensation

Stock-based compensation expense

Stock options exercised, net

Dividends — $ 0.05 per share

Balance at March 31, 2023

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

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Common Shares

1 unchanged sentence

Key Executive

Accumulated Other

Comprehensive

12 unchanged sentences

Balance at September 30, 2023

Other comprehensive loss

Other comprehensive gain

Board stock compensation

8 unchanged sentences

Balance at December 31, 2023

Other comprehensive gain

Board stock compensation

ESPP stock awards

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

Shares issued for deferred compensation

Activity of treasury shares, net

Deferred stock compensation

Stock-based compensation expense

Stock options exercised, net

Dividends — $ 0.05 per share

Balance at March 31, 2024

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(In thousands)

30 unchanged sentences

Change related to foreign currency

Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

6 unchanged sentences

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company’s financial position as of December 31, 2023, the results of its operations for the three and six-month periods ended December 31, 2023, and 2022, and its cash flows for the six-month periods ended December 31, 2023, and 2022.

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, 2024, the results of its operations for the three and nine-month periods ended March 31, 2024, and 2023, and its cash flows for the nine-month periods ended March 31, 2024, and 2023.

These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2023 Annual Report on Form 10-K.

38 unchanged sentences

(In thousands)

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

Timing of revenue recognition

1 unchanged sentence

Products and services transferred over time

Six Months Ended

December 31, 2023

December 31, 2022

Nine Months Ended

March 31, 2024

March 31, 2023

Timing of revenue recognition

2 unchanged sentences

Three Months Ended

December 31, 2023

December 31, 2022

March 31, 2024

March 31, 2023

Type of Product and Services

2 unchanged sentences

Project management, installation services, shipping and handling

Six Months Ended

December 31, 2023

December 31, 2022

Nine Months Ended

March 31, 2024

March 31, 2023

Type of Product and Services

34 unchanged sentences

Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

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

There was no concentration of accounts receivable at December 31, 2023, or 2022.

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

There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three and nine months ended March 31, 2024, or 2023.

There was no concentration of accounts receivable at March 31, 2024, or 2023.

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of March 31, 2024, and March 31, 2023:

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

20 unchanged sentences

Identifiable assets are those assets used by each segment in its operations.

The Company records a 10 % mark-up on inter-segment revenues.

Any inter-segment profit in inventory is eliminated in consolidation.

Inter-segment revenues were eliminated in consolidation as follows:

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:

Inter-segment sales

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

1 unchanged sentence

Display Solutions Segment inter-segment net sales

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.

NOTE 4 - EARNINGS PER COMMON SHARE

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

BASIC EARNINGS PER SHARE

12 unchanged sentences

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.

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

NOTE 5 – INVENTORIES, NET

Anti-dilutive securities were excluded from the computation of diluted net income per share for the three months ended March 31, 2024, and March 31, 2023, 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.

NOTE 5 – INVENTORIES

The following information is provided as of the dates indicated:

35 unchanged sentences

(In thousands)

Balance as of December 31, 2023

Balance as of March 31, 2024

Accumulated impairment losses

Goodwill, net as of December 31, 2023

Goodwill, net as of March 31, 2024

Balance as of June 30, 2023

3 unchanged sentences

Other Intangible Assets

December 31, 2023

March 31, 2024

(In thousands)

19 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

3 unchanged sentences

NOTE 8 - DEBT

The Company’s long-term debt as of December 31, 2023, and June 30, 2023, consisted of the following:

The Company’s long-term debt as of March 31, 2024, and June 30, 2023, consisted of the following:

(In thousands)

9 unchanged sentences

The increment over the SOFR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 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.

As of December 31, 2023, the Company’s borrowing rate against its revolving line of credit was 6.5 %.

The increment over the SOFR borrowing rate will be 100 basis points for the third quarter of fiscal 2024.

As of March 31, 2024, the Company has no borrowings against its revolving line of credit.

If the Company had borrowed on its revolving line of credit, the borrowing rate as of March 31, 2024, would have been 6.6 %.

The increment over the SOFR borrowing rate will be 100 basis points for the fourth quarter of fiscal 2024.

The fee on the unused balance of the $ 75 million committed line of credit fluctuates between 15 and 25 basis points.

Under the terms of this line of credit, the Company is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum fixed charge ratio.

As of December 31, 2023, there was $ 70.7 million available for borrowing under the $ 75 million line of credit.

The Company is in compliance with all of its loan covenants as of December 31, 2023.

As of March 31, 2024, the entire $ 75 million revolving line of credit was available for borrowing.

The Company is in compliance with all of its loan covenants as of March 31, 2024.

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of $ 2.8 million and $ 2.7 million in the six months ended December 31, 2023, and December 31, 2022, respectively.

In January 2024, the Board of Directors declared a regular quarterly cash dividend of $ 0.05 per share payable February 13 , 2024, to shareholders of record as of February 5 , 2024.

The Company paid cash dividends of $ 4.3 million and $ 4.1 million for the nine months ended March 31, 2024, and March 31, 2023, respectively.

In April 2024, the Board of Directors declared a regular quarterly cash dividend of $ 0.05 per share payable May 14, 2024 , to shareholders of record as of May 6, 2024 .

The indicated annual cash dividend rate is $ 0.20 per share.

NOTE 10 – EQUITY COMPENSATION

In November 2022, the Company’s shareholders approved the amendment and restatement of the 2019 Omnibus Award Plan (“2019 Omnibus Plan”) which increased the number of shares authorized for issuance under the plan by 2,350,000 and removed the Plan’s fungible share counting feature.

The 2019 Omnibus Award Plan (“2019 Omnibus Plan”) authorizes for issuance up to 2,350,000 shares.

The purpose of the 2019 Omnibus Plan is to provide a means to attract and retain key personnel and to align the interests of the directors, officers, and employees with the Company’s shareholders.

1 unchanged sentence

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 awards.

Except for Restricted Stock Unit (“RSU”) grants which are time-based, participants in the Company’s Long-Term Equity Compensation Plans are awarded the opportunity to acquire shares over a three-year performance measurement period tied to specific company performance metrics.

The number of shares that remain reserved for issuance under the 2019 Omnibus Plan equates to 1,981,391 as of December 31, 2023.

In the first half of fiscal 2024, the Company granted 175,251 PSUs and 116,834 RSUs, both with a weighted average market value of $ 12.76 .

Stock compensation expense was $ 0.7 million and $ 0.8 million for the three months ended December 31, 2023, and 2022, respectively, and $ 2.0 million and $ 1.4 million in the six months ended December 31, 2023, and 2022, respectively.

While RSU grants are time-based, PSU grants offer participants the opportunity to acquire shares over a three-year performance measurement period tied to specific company performance metrics.

As of March 31, 2024, 1,944,773 shares remain available for issuance under the 2019 Omnibus Plan.

In the first nine months of fiscal 2024, the Company granted 175,251 PSUs and 116,834 RSUs, both with a weighted average market value of $ 12.76 .

Stock compensation expense was $ 0.9 million and $ 0.9 million for the three months ended March 31, 2024, and 2023, respectively, and $ 2.9 million and $ 2.3 million in the nine months ended March 31, 2024, and 2023, respectively.

In the third quarter of fiscal 2024, the Company granted 30,000 inducement stock options, with a weighted average fair market value of $ 14.41 .

Stock compensation expense was $ 0.1 million for the three and nine months ended March 31, 2024, respectively.

In November of 2021, our board of directors approved the LSI Employee Stock Purchase Plan (“ESPP”).

2 unchanged sentences

Employees may end their participation at any time during the offering period, and participation ends automatically upon termination of employment with the company.

During the first half of fiscal year 2024, employees purchased 7,000 shares.

At December 31, 2023, 249,000 shares remained available for purchase under the ESPP.

During the first nine months of fiscal year 2024, employees purchased 11,000 shares.

At March 31, 2024, 245,000 shares remained available for purchase under the ESPP.

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

Six Months Ended

Nine Months Ended

(In thousands)

7 unchanged sentences

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.

Because it is not possible to predict with certainty the outcome or costs of these matters, the Company does not disclose a range of potential losses.

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 December 31, 2023, there were no such standby letters of credit issued.

As of March 31, 2024, there were no such standby letters of credit issued.

NOTE 13 - 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.

The Company also acquired buildings, machinery, and forklift leases with the acquisition of JSI, as well as one sublease.

The Company also has one sublease.

All but two of the Company’s leases are operating leases.

4 unchanged sentences

The Company elected not to record these leases on the balance sheet.

For the three and six months ended December 31, 2023, and 2022, the rent expense for these leases is immaterial.

For the three and nine months ended March 31, 2024, and 2023, 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.

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

7 unchanged sentences

Supplemental Cash Flow Information:

Six Months Ended

Nine Months Ended

(In thousands)

23 unchanged sentences

Maturities of Lease Liability:

Finance Lease

Finance Lease Liabilities

Operating Subleases

Net Lease Commitments

Total lease payments

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Reconciliation of effective tax rate:

1 unchanged sentence

Uncertain tax positions

Deferred Income Tax Adjustment

Share-based compensation

Effective tax rate

NOTE 15 – SUBSEQUENT EVENTS

On April 18, 2024, the Company announced the acquisition of privately held EMI Industries (“EMI”) for an all-cash purchase price of $ 50 million.

LSI funded the acquisition with cash and availability under its existing credit facility.

Florida-based EMI is a metal and millwork manufacturer of standard and customized fixtures, displays, and food equipment for the convenience store, grocery, and restaurant industries.

EMI designs and manufactures products from five production facilities located across the United States.

EMI reported total revenue of $ 87.0 million in calendar 2023.

Upon closing, the transaction will be immediately accretive to LSI on an adjusted earnings per share basis.

EMI will become part of LSI’s display solutions segment on a reporting basis moving forward.

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

13 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

1 unchanged sentence

Display Solutions Segment

Operating Income (Loss) by Business Segment

Operating Income by Business Segment

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

2 unchanged sentences

Corporate and Eliminations

Net sales of $109.0 million for the three months ended December 31, 2023, decreased $19.8 million or 15% as compared to net sales of $128.8 million for the three months ended December 31, 2022.

Net sales of $108.2 million for the three months ended March 31, 2024, decreased $9.3 million or 8% as compared to net sales of $117.5 million for the three months ended March 31, 2023.

The decrease in net sales was attributed to a $1.8 million decrease in net sales of the Lighting Segment, while the remainder of the decrease in net sales was attributable to the Display Solutions Segment.

Despite what we believe is a temporary delay in project demand primarily affecting the grocery market of the Display Solutions Segment related to the pending merger of two large grocery industry participants, the Company maintained its focus with ongoing execution in the key markets it serves.

Net sales of $232.4 million for the six months ended December 31, 2023, decreased $23.4 million or 9% as compared to net sales of $255.9 million for the six months ended December 31, 2022.

Net sales were driven by decreased net sales of the Lighting Segment (a decrease of $1.9 million or 1%) and decreased net sales of the Display Solutions Segment (a decrease of $21.5 million or 18%).

Operating income of $7.8 million for the three months ended December 31, 2023, represents a $1.2 million or 14% decrease from a record operating income of $9.0 million in the three months ended December 31, 2022.

Adjusted operating income, a Non-GAAP measure, was $8.7 million in the three months ended December 31, 2023, compared to $10.6 million in the three months ended December 31, 2022.

In our Display Solutions segment, recent program awards generated strong growth in the refueling/c-store and QSR verticals, partially offsetting delayed activity in the grocery vertical.

Our diverse end-market exposure and solid execution was key during the third quarter, as certain verticals demonstrated robust or stable demand strength, while the grocery vertical remains unfavorably impacted by the proposed merger of two industry participants, and longer than expected regulatory review.

Net sales of $340.6 million for the nine months ended March 31, 2024, decreased $32.7 million or 9% as compared to net sales of $373.3 million for the nine months ended March 31, 2023.

Net sales in the Lighting Segment decreased ($3.8 million or 2%) from the prior year.

Net sales in the Display Solutions Segment decreased ($29.0 million or 17%) from the prior year.

The challenges previously addressed above in the grocery market have been the primary cause of the decline in total sales year-over-year.

Operating income of $7.7 million for the three months ended March 31, 2024, remained stable from the same period in fiscal 2023.

Adjusted operating income, a Non-GAAP measure, was $8.8 million in the three months ended March 31, 2024, and was also unchanged from the period in fiscal 2023.

Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S.

GAAP measures.

The decline in sales contributed to the decline in operating profit which was partially offset by a 240 basis point increase in gross margin driven by a higher value sales mix, continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Operating income of $18.8 million for the six months ended December 31, 2023, represents a $0.2 million or 1% decrease from operating income of $19.1 million in the six months ended December 31, 2022.

Adjusted operating income, a Non-GAAP financial measure, was $21.4 million in the six months ended December 31, 2023, compared to same adjusted operating income of $21.4 million in the six months ended December 31, 2022.

The Company was able to maintain the same level of operating income despite a 9% decline in sales with continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Despite an 8% decrease in sales, operating income remained consistent from prior year which reflects the Company’s focus in higher-value, solutions-based sales mix, continued sales discipline, and moderating input costs.

Operating income of $26.5 million for the nine months ended March 31, 2024, declined slightly from $26.8 million operating income for the nine months ended March 31, 2023.

Adjusted operating income, a Non-GAAP financial measure, was $30.2 million in the nine months ended March 31, 2024, and remained equal to the same period in fiscal 2023.

Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S.

GAAP measures.

Similar to the third quarter results, the Company was able to maintain the same level of operating income despite a 9% decline in sales.

Non-GAAP Financial Measures

28 unchanged sentences

Severance costs and Restructruing costs

Tax rate difference between reported and adjusted net income

Net Income adjusted

1 unchanged sentence

Reconciliation of operating income to adjusted operating income:

Six Months Ended

Nine Months Ended

(In thousands)

Operating Income as reported

Stock compensation expense

Long-Term Performance Based Compensation

Consulting expense:

3 unchanged sentences

Reconciliation of net income to adjusted net income

Six Months Ended

Nine Months Ended

(In thousands, except per share data)

Net Income as reported

Stock compensation expense

Long-Term Performance Based Compensation

Consulting expense:

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

10 unchanged sentences

Results of Operations

THREE MONTHS ENDED DECEMBER 31, 2023, COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2022

THREE MONTHS ENDED MARCH 31, 2024, COMPARED TO THREE MONTHS ENDED MARCH 31, 2023

Lighting Segment

2 unchanged sentences

Operating Income

Lighting Segment net sales of $64.8 million in the three months ended December 31, 2023, decreased 3% from net sales of $66.8 million in the same period in fiscal 2023.

Despite softness in the non-residential construction market, which contributed to the small decline in sales, the Company was able to outperform the broader market and gain market share.

Gross profit of $22.7 million in the three months ended December 31, 2023, increased $2.2 million or 11% from the same period of fiscal 2023.

Gross profit as a percentage of net sales was 35.0% in the three months ended December 31, 2023, compared to 30.6% in the same period of fiscal 2023.

Lighting Segment net sales of $64.9 million in the three months ended March 31, 2024, decreased 3% from net sales of $66.7 million in the same period in fiscal 2023.

Demand levels for the non-residential construction market have decreased slightly, and while our quotation pipeline remains highly active, the order conversion period continues to lengthen, specifically for larger projects.

Gross profit of $21.6 million in the three months ended March 31, 2024, increased $1.3 million or 6% from the same period of fiscal 2023.

Gross profit as a percentage of net sales was 33.2% in the three months ended March 31, 2024, compared to 30.4% in the same period of fiscal 2023.

The improvement in gross profit as a percentage of sales on a 3% decrease in net sales was driven by stable pricing, a higher-value sales mix, continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Operating expenses of $13.9 million in the three months ended December 31, 2023, increased marginally from the same period of fiscal 2023, driven by continued investments in the agent network and the sales team.

Lighting Segment operating income of $8.9 million for the three months ended December 31, 2023, increased $2.1 million from operating income of $6.8 million in the same period of fiscal 2023 primarily driven by an improvement in gross profit as a percentage of sales on lower net sales, and continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Operating expenses of $14.3 million in the three months ended March 31, 2024, increased $0.6 million or 4% from the same period of fiscal 2023, primarily driven by driven by continued investments in the agent network and commercial sales initiatives.

Lighting Segment operating income of $7.3 million for the three months ended March 31, 2024, increased $0.8 million or 11% from operating income of $6.5 million in the same period of fiscal 2023 primarily driven by an improvement in gross profit as a percentage of sales on lower net sales, and continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Display Solutions Segment

2 unchanged sentences

Operating Income

Display Solutions Segment net sales of $44.2 million in the three months ended December 31, 2023, decreased $17.8 million or 29% from net sales of $62.0 million in the same period in fiscal 2023.

Sales in the Display Solutions segment were unfavorably impacted by a temporary pause in projected demand within the grocery market vertical related to the pending merger of two larger grocery chains.

Gross profit of $8.8 million in the three months ended December 31, 2023, decreased $4.8 million or 35% from the same period of fiscal 2023.

Gross profit as a percentage of net sales in the three months ended December 31, 2023, was 20.0% compared to 22.1% in the same period of fiscal 2023.

Display Solutions Segment net sales of $43.3 million in the three months ended March 31, 2024, decreased $7.5 million or 15% from net sales of $50.8 million in the same period in fiscal 2023.

Despite growth in the refueling/c-store and QSR verticals, sales in the Display Solutions segment continue to be unfavorably impacted by a temporary pause in projected demand within the grocery market vertical related to the pending merger of two larger grocery chains.

Gross profit of $9.6 million in the three months ended March 31, 2024, decreased $2.3 million or 19% from the same period of fiscal 2023.

Gross profit as a percentage of net sales in the three months ended March 31, 2024, was 22.3% compared to 23.5% in the same period of fiscal 2023.

The reduction in gross profit as a percentage of sales was primarily driven by the decrease in net sales partially offset by favorable program pricing and prudent cost management.

Operating expenses of $5.5 million in the three months ended December 31, 2023, decreased $0.4 million from $5.9 million in the same period of fiscal 2023.

Operating expenses of $5.6 million in the three months ended March 31, 2024, decreased $0.8 million from $6.4 million in the same period of fiscal 2023.

The decrease in operating expenses was primarily driven by efforts to manage costs in line with the decline in net sales.

Display Solutions Segment operating income of $3.3 million in the three months ended December 31, 2023, decreased $4.5 million from operating income of $7.8 million in the same period of fiscal 2023.

Display Solutions Segment operating income of $4.1 million in the three months ended March 31, 2024, decreased $1.4 million from operating income of $5.5 million in the same period of fiscal 2023.

The decrease in operating income was primarily driven by the decrease in net sales.

2 unchanged sentences

(In thousands)

Gross Profit (Loss)

Operating (Loss)

The gross profit (loss) relates to the change in the intercompany profit in inventory elimination.

Operating expenses of $4.3 million in the three months ended December 31, 2023, decreased $1.1 million from the same period of fiscal 2023.

Operating expenses of $3.7 million in the three months ended March 31, 2024, decreased $0.6 million or 15% for operating expenses of $4.3 million in the same period of fiscal 2023.

The decrease was primarily the result of cost containment initiatives across several of the Company’s cost categories.

Consolidated Results

The Company reported $0.5 million and $1.3 million of net interest expense in the three months ended December 31, 2023, and December 31, 2022, respectively.

The decrease in interest expense was the result of the Company’s ability to paydown it’s debt from cash generated by operations.

The Company also recorded a nominal amount of other income which is related to net foreign exchange currency transaction net gains through the Company’s Mexican and Canadian subsidiaries.

The $1.5 million of income tax expense in the three months ended December 31, 2023, represents a consolidated effective tax rate of 20.1%.

The $1.4 million of income tax expense in the three months ended December 31, 2022, represents a consolidated effective tax rate of 18.1%.

Impacting the effective tax rate of both fiscal years was the favorable tax treatment of the Company’s long-term performance based compensation.

The Company reported net income of $5.9 million in the three months ended December 31, 2023, compared to net income of $6.4 million in the three months ended December 31, 2022.

Non-GAAP adjusted net income was $6.4 million for the three months ended December 31, 2023, compared to adjusted net income of $7.6 million for the three months ended December 31, 2022 (Refer to the Non-GAAP tables above).

The decrease in Non-GAAP adjusted net income is primarily the net result of a decrease in net sales partially offset by an increase in the gross profit as a percentage of sales and a decrease in operating expenses.

Diluted earnings per share of $0.20 was reported in the three months ended December 31, 2023, as compared to $0.22 diluted earnings per share in the same period of fiscal 2023.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended December 31, 2023, were 30,043,000 shares compared to 29,024,000 shares in the same period last fiscal year.

SIX MONTHS ENDED DECEMBER 31, 2023, COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2022

The Company reported $0.1 million and $0.9 million of net interest expense in the three months ended March 31, 2024, and March 31, 2023, respectively.

The decrease in interest expense was the result of the Company’s ability to paydown its debt from cash generated by operations.

The Company also recorded a nominal amount of other income which is related to net foreign exchange currency transaction net gains and (losses) through the Company’s Mexican and Canadian subsidiaries.

The $2.1 million of income tax expense in the three months ended March 31, 2024, represents a consolidated effective tax rate of 27.9%.

The income tax rate for the $2.3 million of income tax expense in the three months ended March 31, 2023, represents a consolidated effective tax rate of 32.6%.

The decrease in the effective tax rate is primarily driven by a decrease in pre-tax profits in the higher taxing jurisdictions outside of the United States where the Company conducts business.

The Company reported net income of $5.4 million in the three months ended March 31, 2024, compared to net income of $4.6 million in the three months ended March 31, 2023.

Non-GAAP adjusted net income was $6.2 million for the three months ended March 31, 2024, compared to adjusted net income of $5.5 million for the three months ended March 31, 2023 (Refer to the Non-GAAP tables above).

The increase in Non-GAAP adjusted net income is primarily the net results result of a decrease in net sales more than offset by an increase in the gross profit as a percentage of sales, a decrease in operating expenses primarily driven by efforts to manage costs in line with the decline in net sales, and a decrease in interest expense resulting from a reduction in debt.

Diluted earnings per share of $0.18 was reported in the three months ended March 31, 2024, as compared to $0.16 diluted earnings per share in the same period of fiscal 2023.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended March 31, 2024, were 30,122,000 shares compared to 29,611,000 shares in the same period last year.

NINE MONTHS ENDED MARCH 31, 2024, COMPARED TO NINE MONTHS ENDED MARCH 31, 2023

Lighting Segment

Six Months Ended

Nine Months Ended

(In thousands)

Operating Income

Lighting Segment net sales of $132.4 million in the six months ended December 31, 2023, decreased 1% from net sales of $134.4 million in the same period in fiscal 2023.

Despite softness in the non-residential construction market, which contributed to the small decline in sales, the Company was able to outperform the broader market and gain market share.

Gross profit of $46.0 million in the six months ended December 31, 2023, increased $3.2 million or 8% from the same period of fiscal 2023.

Gross profit as a percentage of net sales was 34.7% in the six months ended December 31, 2023, compared to 31.8% in the same period of fiscal 2023.

The improvement in gross profit as a percentage of sales on a small decline in net sales was driven by stable pricing, a higher-value sales mix, continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Operating expenses of $28.4 million in the six months ended December 31, 2023, increased $1.5 million from the same period of fiscal 2023, driven by continued investments in the agent network and the sales team.

Lighting Segment operating income of $17.6 million for the six months ended December 31, 2023, increased $1.7 million from operating income of $15.9 million in the same period of fiscal 2023 primarily driven by an improvement in gross profit as a percentage of sales on lower net sales, and by effectively managing operating expenses.

Lighting Segment net sales of $197.3 million in the nine months ended March 31, 2024, decreased 2% from net sales of $201.1 million in the same period in fiscal 2023.

Despite continued softness in the non-residential construction market, which contributed to the small decline in sales, the Company continues to outperform the broader market and gain market share.

Gross profit of $67.5 million in the nine months ended March 31, 2024, increased $4.5 million or 7% from the same period of fiscal 2023.

Gross profit as a percentage of net sales was 34.2% in the nine months ended March 31, 2024, compared to 31.3% in the same period of fiscal 2023.

The improvement in gross profit as a percentage of sales on a 2% decrease in net sales was driven by stable pricing, a higher-value sales mix, continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Operating expenses of $42.7 million in the nine months ended March 31, 2024, increased $2.1 million from the same period of fiscal 2023, primarily driven by driven by continued investments in the agent network and the sales team.

Lighting Segment operating income of $24.9 million for the nine months ended March 31, 2024, increased $2.5 million or 11% from operating income of $22.4 million in the same period of fiscal 2023 primarily driven by an improvement in gross profit as a percentage of sales on lower net sales, and continued sales price disciplines, favorable material input costs, and improved manufacturing productivity.

Display Solutions Segment

Six Months Ended

Nine Months Ended

(In thousands)

Operating Income

Display Solutions Segment net sales of $100.0 million in the six months ended December 31, 2023, decreased 21.5 million or 18% from net sales of $121.5 million in the same period in fiscal 2023.

Gross profit of $22.1 million in the six months ended December 31, 2023, decreased $4.0 million or 15% from the same period of fiscal 2023.

Gross profit as a percentage of net sales in the six months ended December 31, 2023, was 22.1% compared to 21.5% in the same period of fiscal 2023.

The reduction in gross profit as a percentage of sales was primarily driven by the decrease in net sales partially offset by favorable program pricing and prudent cost management.

Operating expenses of $11.6 million in the six months ended December 31, 2023, decreased slightly the same period of fiscal 2022.

Display Solutions Segment net sales of $143.3 million in the nine months ended March 31, 2024, decreased $29.0 million or 17% from net sales of $172.3 million in the same period in fiscal 2023.

Despite recent growth in the refueling/c-store and QSR verticals, sales in the Display Solutions segment continue to be unfavorably impacted by a temporary pause in projected demand within the grocery market vertical related to the pending merger of two larger grocery chains.

Gross profit of $31.8 million in the nine months ended March 31, 2024, decreased $6.3 million or 17% from the same period of fiscal 2023.

Gross profit as a percentage of net sales in the nine months ended March 31, 2024, was 22.2% compared to 22.1% in the same period of fiscal 2023.

The small improvement in gross profit as a percentage of sales was driven improved program pricing, and favorable sales mix on lower sales.

Operating expenses of $17.2 million in the nine months ended March 31, 2024, decreased $1.1 million or 6% from $18.3 million in the same period of fiscal 2023.

The decrease in operating expenses was primarily driven by efforts to manage costs in line with the decline in net sales.

Display Solutions Segment operating income of $10.5 million in the six months ended December 31, 2023, decreased $3.7 million or 26% from operating income of $14.3 million in the same period of fiscal 2023.

The decrease in operating income was driven by the net effect of a decrease in sales partially offset by an improvement of gross profit as a percentage of sales.

Display Solutions Segment operating income of $14.6 million in the nine months ended March 31, 2024, decreased $5.2 million or 26% from operating income of $19.8 million in the same period of fiscal 2023.

The decrease in operating income was primarily driven by the decrease in net sales.

Corporate and Eliminations

Six Months Ended

Nine Months Ended

(In thousands)

Gross Profit (Loss)

Operating (Loss)

The gross profit relates to the change in the intercompany profit in inventory elimination.

Operating expenses of $9.3 million in the six months ended December 31, 2023, decreased $1.8 million from the same period of fiscal 2023.

Operating expenses of $13.0 million in the nine months ended March 31, 2024, decreased $2.6 million from the same period of fiscal 2023.

The decrease was primarily the result of cost containment initiatives across several of the Company’s cost categories.

Consolidated Results

The Company reported $1.0 million and $2.0 million of net interest expense in the six months ended December 31, 2023, and December 31, 2022, respectively.

The Company reported $1.2 million and $2.9 million of net interest expense in the nine months ended March 31, 2024, and March 31, 2023, respectively.

The decrease in interest expense was the result of the Company’s ability to paydown its debt from cash generated by operations.

The Company also recorded other expense of $0.1 million and $0.2 million in the six months ended December 31, 2023, and December 31, 2022, respectively, related to net foreign exchange currency transaction losses through the Company’s Mexican and Canadian subsidiaries.

The $3.8 million of income tax expense in the six months ended December 31, 2023, represents a consolidated effective tax rate of 21.5%.

Impacting the effective tax rate was the favorable tax treatment of the Company’s long-term performance based compensation.

The $4.2 million income tax expense in the six months ended December 31, 2022, represents a consolidated effective tax rate of 24.8%.

The Company reported net income of $13.9 million in the six months ended December 31, 2023, compared to net income of $12.7 million in the six months ended December 31, 2022.

Non-GAAP adjusted net income was $15.1 million for the six months ended December 31, 2023, compared to adjusted net income of $14.7 million for the six months ended December 31, 2022 (Refer to the Non-GAAP tables above).

The increase in Non-GAAP adjusted net income is primarily the net result of a decrease in net sales, an increase in the gross profit as a percentage of sales, lower interest expense, and a favorable effective tax rate in fiscal 2024 compared to fiscal 2023.

Diluted earnings per share of $0.47 was reported in the six months ended December 31, 2023, as compared to $0.44 diluted earnings per share in the same period of fiscal 2023.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in the six months ended December 31, 2023, were 29,949,000 shares compared to 28,766,000 shares in the same period last year.

The Company also recorded a nominal amount of other income which is related to net foreign exchange currency transaction net gains through the Company’s Mexican and Canadian subsidiaries.

The $5.9 million of income tax expense in the nine months ended March 31, 2024, represents a consolidated effective tax rate of 23.4%.

The $6.4 million income tax expense in the nine months ended March 31, 2023, represents a consolidated effective tax rate of 27.0%.

The decrease in the effective tax rate is primarily driven by the favorable tax treatment of the Company’s long-term performance based compensation in fiscal 2024 with no comparable favorable tax treatment in fiscal 2023.

The Company reported net income of $19.3 million in the nine months ended March 31, 2024, compared to net income of $17.3 million in the nine months ended March 31, 2023.

Non-GAAP adjusted net income was $21.3 million for the nine months ended March 31, 2024, compared to adjusted net income of $20.2 million for the nine months ended March 31, 2023 (Refer to the Non-GAAP tables above).

Diluted earnings per share of $0.64 was reported in the nine months ended March 31, 2024, as compared to $0.60 diluted earnings per share in the same period of fiscal 2023.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in the nine months ended March 31, 2024, were 30,005,000 shares compared to 29,055,000 shares in the same period last year.

Liquidity and Capital Resources

1 unchanged sentence

For long-term liquidity indicators, the Company believes its 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 December 31, 2023, the Company had working capital of $75.8 million compared to $73.3 million at June 30, 2023.

The ratio of current assets to current liabilities was 2.2 to 1 at December 31, 2023, and 2.0 at June 30, 2023.

The marginal increase in working capital from June 30, 2023, to December 31, 2023, is primarily driven by a $5.5 million decrease in net accounts receivable and a $3.6 million decrease in net inventory more than offset by a combined decrease of $11.8 million decrease in accounts payable and accrued expenses.

Net accounts receivable was $72.2 million and $77.7 million at December 31, 2023, and June 30, 2023, respectively.

DSO increased marginally to 58 days at December 31, 2023, from 57 days at June 30, 2023.

Net inventories of $60.2 million at December 31, 2023, decreased $3.5 million from $63.7 million at June 30, 2023.

The decrease of $3.5 million is the result of a decrease in net inventory of $3.0 million in the Lighting Segment and a $0.5 decrease in net inventory in the Display Solutions Segment.

At March 31, 2024, the Company had working capital of $77.2 million compared to $73.3 million at June 30, 2023.

Non-cash working capital for the period ending March 31, 2024, was $70.0 million which represents a drop of $1.4 million from $71.4 million non-cash working capital as of June 30, 2023.

The ratio of current assets to current liabilities was 2.2 to 1.0 at March 31, 2024, and 2.0 at June 30, 2023.

The decrease in non-cash working capital from June 30, 2023, to March 31, 2024, is primarily driven by a $9.0 million decrease in net accounts receivable and a $3.4 million decrease in net inventory partially offset by $10.0 million decrease in accounts payable and accrued expenses.

Net accounts receivable was $68.7 million and $77.8 million at March 31, 2024, and June 30, 2023, respectively.

DSO was 58 days at March 31, 2023, slightly higher than 57 days at June 30, 2023.

Net inventories of $60.3 million at March 31, 2024, decreased $3.4 million from $63.7 million at June 30, 2023.

The decrease of $3.4 million is the net result of a decrease in net inventory of $4.2 million in the Lighting Segment partially offset by a $0.8 million increase in net inventory in the Display Solutions Segment.

Cash generated from operations and borrowing capacity under the Company’s line of credit is its primary source of liquidity.

In September 2021, the Company amended its existing $100 million secured line of credit, to a $25 million term loan and $75 million remaining as a secured revolving line of credit.

In September 2021, the Company amended its existing $100 million credit facility, to a $25 million term loan and $75 million remaining as a secured revolving line of credit.

Both facilities expire in the third quarter of fiscal 2026.

As of December 31, 2023, $70.7 million of the credit line was available.

As of March 31, 2024, the entire $75 million of the revolving credit line was available.

The Company is in compliance with all of its loan covenants.

The $100 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2024.

The Company generated $19.9 million of cash from operating activities in the six months ended December 31, 2023, compared to a generation of cash of $20.1 million in the six months ended December 31, 2022.

The Company continues to effectively manage its working capital while generating increasing cash flow from earnings in both fiscal years, resulting in continued strong cash flow from operations.

The Company used $3.3 million and $1.0 million of cash related to investing activities in the six months ended December 31, 2023, and December 31, 2022, respectively.

The Company has increased its investment in equipment and tooling year-over-year to support sales growth.

The Company had a use of cash of $15.7 million and $18.8 million related to financing activities in the six months ended December 31, 2023, and December 31, 2022, respectively.

The Company generated $32.3 million of cash from operating activities in the nine months ended March 31, 2024, compared to a similar generation of cash of $32.5 million in the nine months ended March 31, 2023.

The Company continues to effectively manage its working capital while generating increasing cash flow from earnings in both fiscal years, resulting in strong cash flow from operations.

The Company used $4.6 million and $1.8 million of cash related to investing activities to support the Company’s various capital initiatives, in the nine months ended March 31, 2024, and March 31, 2023, respectively.

The Company has increased its investment in equipment and tooling year-over-year to support sales growth and new products.

The Company used cash of $22.4 million and $32.0 million related to financing activities in the nine months ended March 31, 2024, and March 31, 2023, respectively.

The use of cash in both fiscal years was primarily the result of cash generated from improved earnings and effective working capital management, which in turn was used to pay down the Company’s line of credit.

1 unchanged sentence

This influx of cash also contributed to the pay down of the Company’s line of credit.

On or about April 18, 2024, the Company borrowed $44.0 million, net of available cash, under the credit facility for the purposes of financing the acquisition of EMI.

The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, short-term investments, revolving lines of credit, and long-term debt.

3 unchanged sentences

Cash Dividends

In January 2024, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 13, 2024, to shareholders of record as of February 5, 2024.

In April 2024, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable May 14, 2024, to shareholders of record as of May 6, 2024.

The indicated annual cash dividend rate for fiscal 2024 is $0.20 per share.

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements