What changed in this filing

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Item 1. Financial Statements

2024-11-08 compared with 2024-05-06 · 253 added, 320 removed, 495 unchanged (54% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Nine Months Ended

(In thousands, except per share data)

Three Months Ended

Cost of products and services sold

Severance and restructuring costs

Selling and administrative expenses

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Nine Months Ended

(In thousands)

Three Months Ended

Foreign currency translation adjustment

4 unchanged sentences

(In thousands, except shares)

September 30,

Current assets

1 unchanged sentence

Accounts receivable, less allowance for credit losses of $ 860 and $ 848 , respectively

Refundable income taxes

Refundable income tax

Other current assets

6 unchanged sentences

Net property, plant and equipment

Other intangible assets, net

Intangible assets, net

Operating lease right-of-use assets

4 unchanged sentences

(In thousands, except shares)

September 30,

LIABILITIES & SHAREHOLDERS' EQUITY

16 unchanged sentences

Treasury shares, without par value

Deferred compensation plan

Key Executive Compensation

Retained earnings

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Common Shares

Treasury Shares

Key Executive

Accumulated Other

Comprehensive

Shareholders'

(In thousands, except per share data)

Balance at June 30, 2022

Other comprehensive gain

Board stock compensation

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 September 30, 2022

Other comprehensive gain

Board stock compensation

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 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

4 unchanged sentences

Shareholders'

Income (Loss)

Balance at June 30, 2023

10 unchanged sentences

Balance at September 30, 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 December 31, 2023

Other comprehensive gain

Balance at June 30, 2024

Other comprehensive (loss)

Board stock compensation

7 unchanged sentences

Dividends — $ 0.20 per share

Balance at March 31, 2024

Balance at September 30, 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

Nine Months Ended

Three Months Ended

(In thousands)

4 unchanged sentences

Deferred compensation plan

ESPP discount

Stock compensation expense

ESPP discount

Issuance of common shares as compensation

10 unchanged sentences

Cash Flows from Investing Activities

Proceeds from the sale of fixed assets

Acquisition of EMI

Purchases of property, plant, and equipment

1 unchanged sentence

Cash Flows from Financing Activities

Payments of long-term debt

Borrowings of long-term debt

Payments on long-term debt

Borrowings on long-term debt

Cash dividends paid

Shares withheld for employees' taxes

Shares withheld on employees' taxes

Payments on financing lease obligations

2 unchanged sentences

Change related to Foreign Currency

Increase (decrease) in cash and cash equivalents

Increase 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 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.

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 September 30, 2024, the results of its operations for the three-month periods ended September 30, 2024, and 2023, and its cash flows for the three-month periods ended September 30, 2024, and 2023.

These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2024 Annual Report on Form 10-K.

38 unchanged sentences

(In thousands)

March 31, 2024

March 31, 2023

Timing of revenue recognition

Products and services transferred at a point in time

Products and services transferred over time

Nine Months Ended

March 31, 2024

March 31, 2023

September 30, 2024

Display Solutions

Timing of revenue recognition

1 unchanged sentence

Products and services transferred over time

Three Months Ended

March 31, 2024

March 31, 2023

Type of Product and Services

LED lighting, digital signage solutions, electronic circuit boards

Poles, other display solution elements

Poles and other display solutions elements

Project management, installation services, shipping and handling

Nine Months Ended

March 31, 2024

March 31, 2023

Three Months Ended

(In thousands)

September 30, 2023

Lighting Segment

Display Solutions Segment

Timing of revenue recognition

Products and services transferred at a point in time

Products and services transferred over time

Type of Product and Services

LED lighting, digital signage solutions, electronic circuit boards

Poles, other display solution elements

Poles and other display solutions elements

Project management, installation services, shipping and handling

8 unchanged sentences

New Accounting Pronouncements:

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” creating an exception to the recognition and measurement principles in ASC 805.

The amendment requires that entities apply ASC 606, “Revenue from Contracts with Customers,” rather than using fair value, to recognize and measure contracts assets and contract liabilities from contracts with customers acquired in a business combination.

The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods therein.

Early adoption is permitted, including adoption in an interim period, regardless of whether a business combination occurs in that period.

The guidance should be applied prospectively;

however, an entity that elects to early adopt in an interim period should apply the amendments to all business combinations that occurred during the fiscal year that includes that interim period.

There has not been a material impact on the Company’s consolidated financial statements and related disclosures as a result of its adoption of the guidance on July 1, 2023.

In October 2023, the FASB issued ASU 2023 - 06, Disclosure Improvements:

Codification Amendments in Response to SEC's Disclosure Update and Simplification Initiative.

This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification.

The effective date for each amendment will be the date on which the SEC's removal of that related disclosure from Regulation S- X or Regulation S-K becomes effective, with early adoption prohibited.

The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but it does not anticipate that the adoption of the new guidance will have a material impact on the Company’s consolidated financial statements and related disclosures.

The Company will continue to evaluate the impact of this guidance on its consolidated financial statements.

In November 2023 , the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures.

This ASU expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The standard requires interim and annual disclosure of significant segment expenses that are regularly provided to the chief operating decision-maker ("CODM") and included within the reported measure of a segment’s profit or loss, requires interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually, requires disclosure of the position and title of the CODM, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss, and contains other disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023 - 09 , Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures.

This ASU requires additional disclosures of various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components.

The standard also requires information pertaining to taxes paid to be disaggregated for federal, state and foreign taxes, and contains other disclosure requirements.

This ASU is effective for fiscal years beginning after December 15, 2024 , and interim periods within fiscal years beginning after December 15, 2025 , with early adoption permitted.

The Company is currently evaluating the effect of this new guidance on its consolidated financial statements and related disclosures.

NOTE 3 - ACQUISITION OF EMI INDUSTRIES, LLC

On April 18, 2024, the Company entered into and consummated the transactions contemplated by an asset purchase agreement with EMI Industries, LLC (EMI), a Florida-based metal and millwork manufacturer of standard and customized fixtures, displays and equipment for the convenience store, supermarket and restaurant industries, for $ 50.0 million, of which $ 0.1 million of the purchase price was retained pending a review of the acquired working capital.

In the first quarter of fiscal 2025, the company funded an additional $ 59,000 related to the final settlement of the acquired working capital.

The Company incurred acquisition-related costs totaling $ 1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations.

The acquisition of EMI is expected to increase the Company’s total addressable markets within the grocery, quick service restaurant and convenience store verticals.

The Company funded the acquisition totaling $ 49.9 million with a combination of cash on hand and from the $ 75 million revolving line of credit.

The Company accounted for this transaction as a business combination.

The Company has preliminarily allocated the purchase price of approximately $ 49.9 million which includes an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill.

This preliminary allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2025, as well as the potential revision resulting from the finalization of pre-acquisition tax filings.

The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of April 18, 2024, is as follows:

(In thousands)

April 18, 2024 as

initially reported

April 18, 2024 as

Accounts Receivable

Property, Plant and Equipment

Operating Lease Right-Of-Use Assets

Intangible Assets

Accounts Payable

Accrued Expenses

Operating Lease Liabilities

Identifiable Assets

Net Purchase Consideration

The gross amount of accounts receivable acquired was $ 11.9 million.

Goodwill recorded from the acquisition of EMI is attributable to the impact of the positive cash flow from EMI in addition to expected synergies from the business combination.

The goodwill resulting from the acquisition is deductible for tax purposes.

The trade name and technology used an income (relief from royalty) approach, the non-compete used an income (with or without) approach, and the customer relationships used an income (excess earnings) approach.

The following table presents the details of the intangible assets acquired at the date of acquisition:

(in thousands)

Estimated Fair

Estimated Useful

Indefinite life

Technology assets

Customer relationships

EMI’s post-acquisition results of operations for the period from April 18, 2024, through June 30, 2024, are included in the Company’s Consolidated Statements of Operations.

Since the acquisition date, net sales of EMI for the period from April 18, 2024, through June 30, 2024, were $ 18.1 million and operating income was $ 0.7 million.

The operating results of EMI are included in the Display Solutions Segment.

Pro Forma Impact of the Acquisition of EMI (Unaudited)

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of EMI as if the transaction had occurred on July 1, 2022.

The unaudited pro forma results of operations have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that may occur in the future.

Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of EMI .

The unaudited pro forma financial information for the twelve months ended June 30, 2024, and June 30, 2023, is prepared using the acquisition method of accounting and has been adjusted to reflect the pro forma events that are:

(1) directly attributable to the acquisition;

(2) factually supportable;

and (3) expected to have a continuing impact on the combined results.

The fiscal 2024 unaudited pro forma operating income of $ 36.3 million excludes acquisition-related expenses of $ 1.0 million.

(in thousands;

Twelve Month Ended

Operating Income

NOTE 4 - SEGMENT REPORTING INFORMATION

1 unchanged sentence

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance.

The Company’s two operating segments are Lighting and Display Solutions (formerly known as the Graphics Segment), with one executive team under the organizational structure reporting directly to the CODM with responsibilities for managing each segment.

The Company’s two operating segments are Lighting and Display Solutions, 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.

3 unchanged sentences

The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, display fixtures, refrigerated displays, and custom display elements.

These products are used in visual image programs in several markets including the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports court and field market.

The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, millwork display fixtures, refrigerated displays, food equipment, countertops, and other custom display elements.

These products are used in visual image programs in several markets including the refueling and convenience store markets, parking lot and garage markets, quick-service and casual restaurant market, retail and grocery store, and other retail markets.

The Company accesses its customers primarily through a direct sale model utilizing its own sales force.

Sales through distribution represents a small portion of Display Solutions sales.

The Display Solutions Segment also provides a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage.

2 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 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

Nine Months Ended

There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three months ended September 30, 2024, or 2023.

There was no concentration of accounts receivable at September 30, 2024, or 2023.

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of September 30, 2024, and September 30, 2023:

(In thousands)

Three Months Ended

Lighting Segment

12 unchanged sentences

Corporate and Eliminations

Total Assets:

September 30, 2024

June 30, 2024

Identifiable Assets:

Lighting Segment

9 unchanged sentences

Three 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 5 - 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):

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

BASIC EARNINGS PER SHARE

3 unchanged sentences

Weighted average shares outstanding

Basic earnings per common share

Basic income per share

DILUTED EARNINGS PER SHARE

3 unchanged sentences

Weighted average shares outstanding

Diluted earnings per common share

Diluted income per share

Anti-dilutive securities (b)

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 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

Anti-dilutive securities were excluded from the computation of diluted net income per share for the three months ended September 30, 2024, and September 30, 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 6 – INVENTORIES, NET

The following information is provided as of the dates indicated:

(In thousands)

September 30, 2024

June 30, 2024

Raw materials

5 unchanged sentences

(In thousands)

September 30, 2024

June 30, 2024

Accrued Expenses:

2 unchanged sentences

Accrued warranty

Operating lease liabilities

Accrued sales commissions

Accrued freight

Operating lease liabilities

Finance lease liabilities

12 unchanged sentences

The Company identified its reporting units in conjunction with its annual goodwill impairment testing.

The Company has a total of three reporting units that contain goodwill.

One reporting unit is within the Lighting Segment and two reporting units are within the Display Solutions Segment.

The Company has a total of four reporting units that contain goodwill.

One reporting unit is within the Lighting Segment and three reporting units are within the Display Solutions Segment.

The tradename intangible assets have an indefinite life and are also tested separately on an annual basis.

3 unchanged sentences

(In thousands)

Balance as of March 31, 2024

Lighting Segment

Balance as of September 30, 2024

Accumulated impairment losses

Goodwill, net as of March 31, 2024

Goodwill, net as of September 30, 2024

Balance as of June 30, 2024

2 unchanged sentences

The gross carrying amount and accumulated amortization by each major intangible asset class is as follows:

Other Intangible Assets

March 31, 2024

(In thousands)

September 30, 2024

Gross Carrying

Amortized Intangible Assets

Customer relationships

LED technology firmware, software

LED technology, software

Total Amortized Intangible Assets

3 unchanged sentences

Total Other Intangible Assets

Other Intangible Assets

June 30, 2023

(In thousands)

June 30, 2024

Gross Carrying

Amortized Intangible Assets

Customer relationships

LED technology firmware, software

LED technology, software

Total Amortized Intangible Assets

3 unchanged sentences

Total Other Intangible Assets

Three Months Ended

Nine Months Ended

(In thousands)

3 unchanged sentences

NOTE 9 - DEBT

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

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

September 30,

(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 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.

As of September 30, 2024, the Company’s borrowing rate against its revolving line of credit was 6.0 %.

The increment over the SOFR borrowing rate will be 100 basis points for the second quarter of fiscal 2025.

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 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.

As of September 30, 2024, there was $ 41.6 million available for borrowing under the $ 75 million line of credit.

The Company is in compliance with all of its loan covenants as of September 30, 2024.

NOTE 10 - CASH DIVIDENDS

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 Company paid cash dividends of $ 1.5 million and $ 1.4 million for the three months ended September 30, 2024, and September 30, 2023, respectively.

Dividends on restricted stock units in the amount of $ 0.2 million and $ 0.1 million were accrued as of both September 30, 2024, and 2023, respectively.

These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients.

In November 2024, the Board of Directors declared a regular quarterly cash dividend of $ 0.05 per share payable November 26, 2024 , to shareholders of record as of November 18, 2024 .

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

NOTE 11 – EQUITY COMPENSATION

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

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 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.

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.

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 is 1,438,315 as of September 30, 2024.

In the three months ended September 30, 2024, the Company granted 160,826 PSUs and 107,217 RSUs, both with a weighted average market value of $ 14.92 .

Stock compensation expense was $ 1.1 million and $ 1.2 million for both the three months ended September 30, 2024, and 2023, 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 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.

During fiscal year 2025, employees purchased 3,000 shares.

At September 30, 2024, 239,000 shares remained available for purchase under the ESPP.

NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION

Nine Months Ended

(in thousands)

Three Months Ended

Cash Payments:

6 unchanged sentences

The Company provides reserves for these matters when a loss is probable and reasonably estimable.

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.

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

As of September 30, 2024, there were no such standby letters of credit issued.

NOTE 14 - 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 has one sublease.

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

2 unchanged sentences

The lease agreements do not contain any material residual guarantees or material variable lease payments.

The number of operating leases increased in fiscal 2024 as a result of the acquisition of EMI;

most of EMI’s operating leases are building leases.

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, 2024, and 2023, the rent expense for these leases is immaterial.

The rent expense for these leases was immaterial for September 30, 2024, and 2023.

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

Nine Months Ended

(In thousands)

6 unchanged sentences

Total lease cost

Three Months Ended

Supplemental Cash Flow Information

Nine Months Ended

(in thousands)

Cash flows from operating leases

Fixed payments - operating cash flows

Fixed payments - operating lease cash flows

Liability reduction - operating cash flows

3 unchanged sentences

Operating Leases:

September 30, 2024

June 30, 2024

Total operating right-of-use assets

Accrued expenses (Current liabilities)

Accrued Expenses

Long-term operating lease liability

2 unchanged sentences

Weighted Average Discount Rate

Finance Leases:

Financing Leases

September 30, 2024

June 30, 2024

Buildings under finance leases

8 unchanged sentences

Maturities of Lease Liability:

Operating Lease Liabilities

Finance Lease Liabilities

Operating Subleases

Net Lease Commitments

9 unchanged sentences

Three 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

Nine Months Ended

(In thousands)

1 unchanged sentence

Display Solutions Segment

Operating Income by Business Segment

Total Net Sales

Operating Income (Loss) by Business Segment

Three Months Ended

Nine Months Ended

(In thousands)

2 unchanged sentences

Corporate and Eliminations

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.

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.

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.

Total Operating Income

Net sales of $138.1 million for the three months ended September 30, 2024, increased 12% as compared to net sales of $123.4 million for the three months ended September 30, 2023.

Lighting segment net sales of $58.4 million decreased 14% compared to prior year quarter net sales of $67.6 million.

The decline in Lighting segment sales can be attributed to lower large project activity resulting from the lengthening of the conversion period for these large projects, and overall lower non-residential construction activity.

Sales growth in the Refueling and Parking market verticals was offset by declines in Warehouse and other large project applications.

Net sales in the Display Solutions segment of $79.7 million increased 43% compared to the same quarter last year sales of $55.8 million.

The increase in net sales in the Display Solutions segment is the net result of $26.2 million in sales from the acquisition of EMI partially offset by the delayed timing of orders within the Grocery vertical.

Operating income of $9.1 million for the three months ended September 30, 2024, represents a 17% decrease from operating income of $11.0 million in the three months ended September 30, 2023.

Adjusted operating income, a Non-GAAP measure, was $11.9 million in the three months ended September 30, 2024, represents a 14% decline compared to $13.9 million in the three months ended September 30, 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.

The decrease in operating income is the net result of a decrease in sales in the Lighting segment partially offset by an increase in sales in the Display Solutions segment which yield lower margins as a result of product mix.

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 long-term performance based compensation expense, severance and restructuring costs, and consulting expense related to commercial growth initiatives, 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 to Adjusted EBITDA.

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.

This report includes adjustments to GAAP operating income, net income, and earnings per share for the three months ended September 30, 2024, and 2023.

Operating income, net income, and earnings per share, which exclude the impact of long-term performance based compensation expense, the amortization expense of acquired intangible assets, commercial growth opportunity expense, acquisition costs, the lease expense on the step-up basis of acquired leases, and restructuring and severance costs, are non-GAAP financial measures.

We further note that while the amortization expense of acquired intangible assets is excluded from the non-GAAP financial measures, the revenue of the acquired companies is included in the measures and the acquired assets contribute to the generation of revenue.

We believe these non-GAAP measures will provide increased transparency to our core operating performance of the business.

Also included in this report are non-GAAP financial measures, including Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Net Debt to Adjusted EBITDA, and Free Cash Flow.

We believe that these are useful as supplemental measures in assessing the operating performance of our business.

These measures are used by our management, including our chief operating decision maker, to evaluate business results, and are frequently referenced by those who follow the Company.

These non-GAAP measures may be different from non-GAAP measures used by other companies.

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Therefore, these measures should be used only to evaluate our results in conjunction with corresponding GAAP measures.

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 to Adjusted EBITDA.

Reconciliation of operating income to adjusted operating income:

Three Months Ended

(In thousands)

Operating Income as reported

Long-Term Performance Based Compensation

Consulting expense:

Commercial Growth Initiatives

Severance costs and Restructruing costs

Adjusted Operating Income

Reconciliation of net income to adjusted net income

Below is a reconciliation of these non-GAAP measures to net income and earnings per share reported for the periods indicated along with the calculation of EBITDA, Adjusted EBITDA, Free Cash Flow, and Net Debt to Adjusted EBITDA.

Three Months Ended

(In thousands, except per share data)

Net Income as reported

Long-Term Performance Based Compensation

Consulting expense:

Commercial Growth Initiatives

Severance costs and Restructruing costs

Net Income adjusted

The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S., Canada and Mexico effective income tax rates for the periods indicated (in thousands):

Reconciliation of operating income to adjusted operating income:

Nine Months Ended

(In thousands)

Operating income as reported

Acquisition costs

Long-term performance based compensation

Amortization expense of acquired intangible assets

Lease expense on the step-up basis of acquired leases

Restructuring/severance costs

Consulting expense:

Commercial Growth Initiatives

Severance costs and Restructruing costs

commercial growth opportunities

Adjusted operating income

Reconciliation of net income to adjusted net income

Nine Months Ended

Three Months Ended

(In thousands, except per share data)

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Long-term performance based compensation

Amortization expense of acquired intangible assets

Restructuring/severance costs

Acquisition costs

Lease expense on the step-up basis of acquired leases

Consulting expense:

Commercial Growth Initiatives

Severance costs and Restructruing costs

commercial growth opportunities

Tax rate difference between reported and adjusted net income

Net income adjusted

Effective in the first quarter of fiscal 2025, LSI will include the amortization expense related to acquired intangible assets as an add-back to its non-GAAP reconciliation.

Prior quarter non-GAAP reconciliations have been adjusted accordingly.

Reconciliation of Net Income to Adjusted EBITDA

Three Months Ended

Nine Months Ended

Reconciliation of net income to EBITDA and adjusted EBITDA

(In thousands)

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Interest expense, net

Other (Income) Expense

Other expense (income)

Operating income as reported

Depreciation and amortization

Acquisition costs

Long-term performance based compensation

Restructuring/severance costs

Lease expense on the step-up basis of acquired leases

Consulting expense:

Commercial Growth Initiatives

Severance costs and Restructruing costs

commercial growth opportunities

Adjusted EBITDA

Reconciliation of cash flow from operations to free cash flow

Three Months Ended

Nine Months Ended

Reconciliation of cash flow from operations to free cash flow

(In thousands)

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Long-Term Debt

Cash and cash equivalents

Debt as reported

Cash and cash equivalents as reported

Adjusted EBITDA - Trailing 12 Months

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Results of Operations

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

Lighting Segment

Three Months Ended

(In thousands)

Operating Income

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 $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.

THREE MONTHS ENDED SEPTEMBER 30, 2024, COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2023

Display Solutions Segment

Three Months Ended

(In thousands)

Operating Income

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 $5.6 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 $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.

Corporate and Eliminations

Three Months Ended

(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 $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 $0.1 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

Display Solutions Segment net sales of $79.7 million in the three months ended September 30, 2024 increased 43% from net sales of $55.8 million in the same period in fiscal 2024.

The increase in net sales in the Display Solutions segment is the net result of $26.2 million in sales from the acquisition of EMI partially offset by the timing of orders within the Grocery vertical.

Gross profit of $15.0 million in the three months ended September 30, 2024 increased 13% from the same period of fiscal 2024.

Gross profit as a percentage of net sales in the three months ended September 30, 2024 decreased to 19% from 24% in the same period of fiscal 2024 impacted by product and vertical market mix.

The Company continues to maintain favorable program pricing and prudent cost management.

Operating expenses of $7.3 million in the three months ended September 30, 2024 increased 20% from the same period of fiscal 2024, primarily driven by the acquisition of EMI and by an investment in commercial initiatives to drive growth.

Display Solutions Segment operating income of $7.7 million in the three months ended September 30, 2024 increased 7% from the same period of fiscal 2024.

The increase of $0.5 million was driven by the net effect of an increase in net sales partially offset by the gross margin impact of product mix.

Lighting Segment

Nine Months Ended

(In thousands)

Operating Income

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

Nine Months Ended

(In thousands)

Operating Income

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 $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.

Lighting Segment net sales of $58.4 million in the three months ended September 30, 2024, decreased 14% compared to net sales of $67.6 million in the same period in fiscal 2024.

Sales growth in the Refueling and Parking market verticals was offset by declines in Warehouse and other large project applications.

Gross profit of $18.6 million in the three months ended September 30, 2024 decreased 20% from the same period of fiscal 2023.

The decline in gross profit is attributed to the decline in sales.

While overall demand levels were lower in the fiscal first quarter, selling prices and material input costs remain stable.

Operating expenses of $12.9 million in the three months ended September 30, 2024 decreased 11% from the same period of fiscal 2024, driven mostly by lower commission expense from lower sales, and effective cost management.

Lighting Segment operating income of $5.8 million for the three months ended September 30, 2024 decreased 34% from operating income of $8.8 million in the same period of fiscal 2024 primarily driven by decreased net sales.

Corporate and Eliminations

Nine Months Ended

(In thousands)

Operating (Loss)

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

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 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 September 30, 2024, decreased 12% from the same period of fiscal 2024.

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

Consolidated Results

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 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.

The Company reported $0.9 million and $0.6 million of net interest expense in the three months ended September 30, 2024, and September 30, 2023, respectively.

The increase in interest expense is the result of the funds borrowed to acquire EMI Industries, LLC in the fourth quarter of fiscal 2024 partially offset by decreased borrowing costs.

The Company also recorded other income of ($0.1) million and $0.1 million of other expense in the three months ended September 30, 2024, and September 30, 2023, respectively, both of which is related to net foreign exchange currency transaction gains and losses through the Company’s Mexican and Canadian subsidiaries.

The $1.6 million of income tax expense in the three months ended September 30, 2024 represents a consolidated effective tax rate of 19.6%.

The $2.3 million of income tax expense in the three months ended September 30, 2023 represents a consolidated effective tax rate of 22.6%.

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

The Company reported net income of $6.7 million in the three months ended September 30, 2024 compared to net income of $8.0 million in the three months ended September 30, 2023.

Non-GAAP adjusted net income was $8.0 million for the three months ended September 30, 2024, compared to adjusted net income of $9.6 million for the three months ended September 30, 2023 (Refer to the Non-GAAP tables above).

The decrease in Non-GAAP adjusted net income is primarily the net result of an increase in net sales offset by the profit margin impact of product mix.

Diluted adjusted earnings per share of $0.22 was reported in the three months ended September 30, 2024 compared to $0.27 diluted adjusted earnings per share in the same period of fiscal 2024.

The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended September 30, 2024 were 30,530,000 shares compared to 29,955,000 shares in the same period last year.

Liquidity and Capital Resources

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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 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.

At September 30, 2024, the Company had working capital of $86.8 million compared to $83.3 million at June 30, 2024.

The ratio of current assets to current liabilities was 2.1 to 1 for both September 30, 2024, and June 30, 2024.

The increase in working capital from June 30, 2024, to September 30, 2024, is primarily driven by a $2.1 million increase in net accounts receivable and a $2.9 million increase in cash partially offset by a $0.7 million decrease in refundable income taxes and a $0.9 million increase in current liabilities.

Net accounts receivable was $80.7 million and $78.6 million at September 30, 2024, and June 30, 2024, respectively.

DSO decreased to 54 days at September 30, 2024, from 58 days at June 30, 2024.

Net inventories of $71.3 million at September 30, 2024, increased $0.4 million from $70.9 million at June 30, 2024.

Lighting Segment net inventory decreased $1.1 million whereas net inventory in the Display Solutions Segment increased $1.5 million to support the growth in backlog resulting from an increase program activity.

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 credit facility, to a $25 million term loan and $75 million remaining as a secured revolving line of credit.

The Company has a $25 million term loan and $75 million remaining in a secured revolving line of credit.

Both facilities expire in the third quarter of fiscal 2026.

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

As of September 30, 2024, $41.6 million of the 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 2025.

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 generated $11.8 million of cash from operating activities in the three months ended September 30, 2024, compared to $10.6 million of cash generated from operating activities in the same period in fiscal 2024.

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.

The Company also received $1.3 million and $3.1 million of cash in fiscal 2024 and fiscal 2023, respectively, related to the exercise of stock options.

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.

The Company used $0.8 million and $1.4 million of cash related to investing activities in the three months ended September 30, 2024, and September 30, 2023, respectively.

The Company continues to invest in equipment and tooling to support sales growth.

The Company had a net use of cash of $8.1 million and $7.4 million related to financing activities in the three months ended September 30, 2024, and September 30, 2023, respectively.

The Company continues to generate positive cash flow from its operations in order to pay down its debt and fund its dividend payments to shareholders.

The Company has on its balance sheet financial instruments consisting primarily of cash and cash equivalents, 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.

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Cash Dividends

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.

In November 2024, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 26, 2024, to shareholders of record as of November 18, 2024.

The indicated annual cash dividend rate for fiscal 2025 is $0.20 per share.

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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