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

February 04, 2010 | About:
10qk

10qk

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LSI Industries Inc. (LYTS) filed Quarterly Report for the period ended 2009-12-31.

Lsi Industries Inc. has a market cap of $140.1 million; its shares were traded at around $5.83 with a P/E ratio of 64.7 and P/S ratio of 0.6. The dividend yield of Lsi Industries Inc. stocks is 3.4%. Lsi Industries Inc. had an annual average earning growth of 8% over the past 5 years.LYTS is in the portfolios of Chuck Royce of ROYCE & ASSOCIATES.

Highlight of Business Operations:

Second quarter fiscal 2010 net sales of $69,374,000 and operating income of $2,933,000, as compared to the second quarter of fiscal 2009, were favorably influenced by increased net sales and operating income of the Graphics Segment (up 39.1% and 291.3%, respectively), and the addition of the Electronic Components Segment (effective with the July 22, 2009 acquisition of AdL Technology, which added $4.4 million and $0.7 million of net sales and operating income, respectively). Net sales were unfavorably influenced by decreased Technology Segment and All Other Category net sales (down 79.9% and 29.4%, respectively, totaling $1.7 million unfavorable). Additional favorable influence on operating income were significant improvements in the Lighting Segment and All Other Category ($13.2 million and $1.6 million, respectively) -- see the paragraph below regarding goodwill impairments recorded in fiscal 2009 and the section below on Non-GAAP Financial Measures. Net sales to the Petroleum / Convenience Store market, the Company s largest niche market, were $31,925,000 or 46% of total net sales and $13,484,000 or 22% of total net sales in the second quarter of fiscal 2010 and 2009, respectively. The $18.4 million or 137% increase is primarily due to a program with one national petroleum / convenience store customer who is replacing traditional canopy, site and sign lighting with solid-state LED lighting ($17.0 million increase). Over 74% of the retail petroleum sites scheduled to be involved in this customer s program to convert to solid-state LED lighting are completed as of the end of Company s 2010 second fiscal quarter, about 26% of the retail petroleum sites are expected to be completed in the Company s third fiscal quarter, and the Company is in discussion with this customer regarding additional non-petroleum retail sites to be converted in calendar year 2010. Net sales to this petroleum / convenience store customer are reported in both the Lighting and Graphics segments.

First half fiscal 2010 net sales of $137,050,000 and operating income of $5,430,000, as compared to the first half of fiscal 2009, were favorably influenced by increased net sales and operating income of the Graphics Segment (up 18.3% and 111.1%, respectively), and the addition of the Electronic Components Segment (effective with the July 22, 2009 acquisition of AdL Technology, which added $7.6 million and $0.8 million of net sales and operating income, respectively). Net sales were unfavorably influenced by decreased Lighting Segment, Technology Segment and All Other Category net sales (down 10.3%, 67.5% and 28.3%, respectively, totaling $13.6 million unfavorable). Additional favorable influences on operating income were significant improvements in the Lighting Segment and All Other Category ($12.2 million and $0.6 million, respectively) -- see the paragraph below regarding goodwill impairments recorded in fiscal 2009 and the section below on Non-GAAP Financial Measures. Net sales to the Petroleum / Convenience Store market, the Company s largest niche market, were $52,890,000 or 39% of total net sales and $28,683,000 or 21% of total net sales in the first half of fiscal 2010 and 2009, respectively. The $24.2 million or 84% increase is primarily due to a program with one national petroleum / convenience store customer who is replacing traditional canopy, site and sign lighting with solid-state LED lighting ($24

The Company recorded significant goodwill impairment expenses in the second quarter and first half of fiscal 2009, totaling $13,250,000 ($11.2 million in the Lighting Segment, $0.7 million in the Graphics Segment and $1.3 million in the All Other Category). These expenses are included in the $(14,007,000) and $(9,791,000) operating losses reported in the second quarter and first half of fiscal 2009, respectively. There were no such goodwill impairment expenses in the second quarter or first half of fiscal 2010.

Lighting Segment net sales of $43,688,000 in the second quarter of fiscal 2010 increased 0.9% from second quarter fiscal 2009 net sales of $43,291,000. The $0.4 million increase in Lighting Segment net sales is primarily the net result of a $6.9 million or 39% net increase in lighting sales to our niche markets (petroleum / convenience store market net sales were up significantly, and net sales to the automotive dealership and quick service restaurant markets were down) and national retail accounts, and a $6.5 million or 25.1% decrease in commissioned net sales to the commercial / industrial lighting market. Sales of lighting to the petroleum / convenience store market represented 42% and 17% of Lighting Segment net sales in the second quarter of fiscal years 2010 and 2009, respectively. Net sales of lighting to this, the Company s largest niche market, were up 144.6% from last year to $18,158,000, with approximately $9.8 million of the $10.7 million increase related to a program with one national petroleum / convenience store customer who is replacing traditional canopy, site and sign lighting with solid-state LED lighting. While the Company expects to continue to make sales to this particular customer, the majority of this re-lighting program has been completed and net sales are not expected to continue at this level in future periods. The Company is in discussion with this customer regarding additional non-petroleum retail sites to be converted in calendar year 2010. 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 $14.1 million in the second quarter of fiscal 2010, representing over a 700% increase from last year s second quarter net sales of solid-state LED light fixtures of $1.7 million.

Selling and administrative expenses of $6,998,000 in the second quarter of fiscal year 2010 decreased $11.9 million primarily as a result of the $11.2 million goodwill impairment charge recorded in the second quarter of fiscal year 2009 with no similar charge in fiscal 2010. Additional changes in expense in the second quarter of fiscal 2010 as compared to last year include: increased employee compensation and benefits expense ($0.2 million); decreased sales commission expense ($0.2 million); increased research and development expense ($0.1 million); decreased customer relations expense ($0.3 million); and decreased warranty expense ($0.3 million).

Graphics Segment net sales of $19,324,000 in the second quarter of fiscal 2010 increased 39.1% from fiscal 2009 net sales of $13,891,000. The $5.4 million increase in Graphics Segment net sales is primarily the result of image conversion programs and sales to eight petroleum / convenience store customers ($7.9 million net increase), a national drug store retailer ($0.6 million increase) and a grocery retailer ($2.5 million decrease), and changes in volume or completion of other graphics programs. Sales of graphics products and services to the petroleum / convenience store market represented 71% and 44% of Graphics Segment net sales in the second quarter of fiscal years 2010 and 2009, respectively. Net sales of graphics to this, the Company s largest niche market, were up 127% from last year to $13,767,000, with approximately $7.2 million of the $7.7 million increase related to a program with one national petroleum / convenience store customer who is replacing traditional sign lighting with solid-state LED lighting. While the Company expects to continue to make sales to this particular customer, the majority of this re-lighting program has been completed and net sales are not expected to continue at this level in future periods. The Company is in discussion with this customer regarding additional non-petroleum retail sites to be converted in calendar year 2010. 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 $4.2 million in the second quarter of fiscal 2010 as compared to $0.2 million in last year s second quarter.

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