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LSI Industries Inc. Reports Operating Results (10-Q)

October 29, 2010 | About:
10qk

10qk

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LSI Industries Inc. (LYTS) filed Quarterly Report for the period ended 2010-09-30.

Lsi Industries Inc. has a market cap of $199.7 million; its shares were traded at around $9.02 with a P/E ratio of 41.5 and P/S ratio of 0.8. The dividend yield of Lsi Industries Inc. stocks is 2.4%.LYTS is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Fiscal 2011 first quarter net sales of $79,851,000 increased $12.2 million or 18.0% as compared to fiscal 2010. See Note 4 to the financial statements for discussion of the retroactive reclassification of the Company s reportable business segments. Net sales were favorably influenced by increased net sales of the Lighting Segment (up $7.8 million or 19.8%), Graphics Segment (up $4.0 million or 18.1%), and the Electronic Components Segment (up $1.3 million or 41.0%). Net sales were unfavorably influenced by decreased All Other Category net sales (down $1.0 million or 36.1%). In the first quarter of fiscal 2010, the Company recorded certain pre-tax acquisition deal costs and acquisition-related fair value inventory adjustments totaling $1,039,000 -- see the paragraph below regarding Non-GAAP Financial Measures. Net sales to the Petroleum / Convenience Store market, the Company s largest niche market, were $34,968,000 or 44% of total net sales and $20,965,000 or 31% of total net sales in the first quarter of fiscal 2011 and 2010, respectively. The $14.0 million or 67% increase is primarily due to a program with 7-Eleven, Inc., who is replacing traditional canopy, site and sign lighting with solid-state LED lighting ($11.8 million increase). The Company expects to substantially complete the conversion to solid-state LED lighting at the remaining approximately 1,200 non-petroleum retail sites by the end of calendar 2010, with some sites flowing over to the Company s third fiscal quarter. Net sales to this petroleum / convenience store customer are reported in both the Lighting and Graphics segments.

LED net sales includes sales of LED lighting products, certain graphics products containing LEDs, and LED video and sports screens. First quarter fiscal 2011 LED net sales of $16,673,000 were down $1.3 million or 7.4% from the same period of the prior year. The $16,673,000 total LED net sales and the $1.3 million reduction are primarily the result of Lighting Segment LED net sales of $12,657,000 (up $5.3 million or 73%), Graphics Segment LED net sales of $3,125,000 (down $6.5 million or 67%, primarily due to lower LED sports screen sales) and All Other Category LED net sales of $891,000 (down $0.2 million or 16%).

Lighting Segment net sales of $47,475,000 in the first quarter of fiscal 2011 increased 19.8% from fiscal 2010 same period net sales of $39,641,000. The $7.8 million increase in Lighting Segment net sales is primarily the net result of a $5.6 million or 31.2% net increase in lighting sales to our niche markets (petroleum / convenience store market net sales were up 37%, net sales to the automotive dealership market were up 22%, and net sales to the quick service restaurant market were up 22%) and national retail accounts, and an $2.3 million or 10.4% increase in commissioned net sales to the commercial / industrial lighting market. Sales of lighting to the petroleum / convenience store market represented 33% and 29% of Lighting Segment net sales in the first quarter of fiscal years 2011 and 2010 respectively. Lighting Segment net sales of lighting to this, the Company s largest niche market, were up 37% from last year to $15,760,000, with approximately $4.7 million related to a program with 7-Eleven, Inc., who is replacing traditional canopy, site and sign lighting with solid-state LED lighting. The Company expects to continue to make sales to this particular customer pursuant to new orders received for their non-petroleum convenience stores to be converted in the nine months of fiscal 2011. The petroleum / convenience store market has been, and will continue to be, a very important niche market for the Company. The Lighting Segment s net sales of light fixtures having solid-state LED technology totaled $12.7 million in the first quarter of fiscal 2011, representing a 73% increase from fiscal 2010 first quarter net sales of solid-state LED light fixtures of $7.3 million.

Gross profit of $11,657,000 in the first quarter of fiscal 2011 increased $1.1 million or 10.1% from the same period of fiscal 2010, and increased from 23.7% to 24.2% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales). The increase in amount of gross profit is due to the net effect of increased net sales at increased margins, increased overhead absorption and increased freight costs ($0.4 million). The following items also influenced the Lighting Segment s gross profit margin: competitive pricing pressures; $0.3 million decreased benefits and compensation; $0.3 million increased warranty costs; $0.1 million increased utilities; $0.1 million increased manufacturing supplies expense.

Graphics Segment net sales of $26,087,000 in the first quarter of fiscal 2011 increased 18.1% from fiscal 2010 same period net sales of $22,097,000. The $4.0 million increase in Graphics Segment net sales is primarily the net result of image conversion programs and sales to seven petroleum / convenience store customers ($10.2 million net increase), a grocery retailer ($0.2 million increase), the LED video sports screen market ($5.0 million decrease), a national drug store retailer ($1.5 million decrease), and changes in volume or completion of several other graphics programs. Sales of graphics products and services to the petroleum / convenience store market represented 74% and 43% of Graphics Segment net sales in the first quarter of fiscal years 2011 and 2010, respectively. Graphics Segment net sales of graphics to this, the Company s largest niche market, were up 103% from last year to $19,208,000, with approximately $14.8 million related to a program with 7-Eleven, Inc., who is replacing traditional sign lighting with solid-state LED lighting. The Company expects to continue to make sales to this particular customer pursuant to orders received for their non-petroleum convenience stores to be converted primarily in the first nine months of fiscal year 2011. The petroleum / convenience store market has been, and will continue to be, a very important niche market for the Company. The Graphics Segment net sales of products and services related to solid-state LED video screens and LED lighting for signage totaled $3.1 million in the first quarter of fiscal 2011 as compared to $9.6 million in the same period of the prior year.

Gross profit of $7,191,000 in the first quarter of fiscal 2011 increased $2.5 million or 55% from the same period fiscal 2010, and increased from 20.9% to 27.1% as a percentage of Graphics Segment net sales (customer plus inter-segment net sales). The increase in amount of gross profit is due to the net effect of increased net sales at increased margins, increased overhead absorption, increased installation costs ($2.6 million) and increased freight costs ($0.6 million). The following items also influenced the Graphics Segment s gross profit margin: competitive pricing pressures; $0.2 million increased benefits and compensation; $0.2 million increased warranty costs.

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