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

May 10, 2010 | About:
10qk

10qk

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LSI Industries Inc. (LYTS) filed Quarterly Report for the period ended 2010-03-31.

Lsi Industries Inc. has a market cap of $158.21 million; its shares were traded at around $6.58 with a P/E ratio of 82.25 and P/S ratio of 0.68. The dividend yield of Lsi Industries Inc. stocks is 3.04%.LYTS is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Third quarter fiscal 2010 net sales of $53,466,000 increased $6.5 million or 13.8% as compared to the third quarter of fiscal 2009. Net sales were favorably influenced by increased net sales of the Lighting Segment (up $1.9 million or 5.6%), of the Technology Segment (up $0.8 million or 192%), of the All Other Category (up $0.2 million or 9.1%), and the addition of the Electronic Components Segment (effective with the July 22, 2009 acquisition of AdL Technology) which added $4.0 million of net sales. Net sales were unfavorably influenced by decreased Graphics Segment net sales (down $0.4 million or 3.8%). The Company sold its wire harness business in the third quarter of fiscal 2010 and incurred a pre-tax loss of $639,000 which is included in the operating loss of the All Other Category. In fiscal 2009, the All Other Category recorded a pre-tax goodwill impairment of $957,000 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 Companys largest niche market, were $16,512,000 or 31% of total net sales and $11,329,000 or 24% of total net sales in the third quarter of fiscal 2010 and 2009, respectively. The $5.2 million or 46% 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 ($6.8 million increase). About 93% of the retail petroleum sites scheduled to be involved in this customers program to convert to solid-state LED lighting are completed as of the end of Companys 2010 third fiscal quarter with the remaining 7% expected to be completed in the Companys fourth fiscal quarter. The Company recently received purchase orders from this customer to continue the conversion to solid-state LED lighting at over 3,400 non-petroleum retail sites over the next twelve to eighteen months. Net sales to this petroleum / convenience store customer are reported in both the Lighting and Graphics segments.

Fiscal 2010 nine month net sales of $190,516,000, as compared to the first nine months of fiscal 2009, were favorably influenced by increased net sales of the Graphics Segment (up 12.9%), and the addition of the Electronic Components Segment (effective with the July 22, 2009 acquisition of AdL Technology) which added $11.6 million of net sales. Net sales were unfavorably influenced by decreased Lighting Segment, Technology Segment and All Other Category net sales (down 6.1%, 41.8% and 18.5%, respectively, totaling $10.7 million unfavorable). The Company sold its wire harness business in the third quarter of fiscal 2010 and incurred a pre-tax loss of $639,000 which is included in the operating loss of the All Other Category. In the first nine months of fiscal 2009, the Company recorded pre-tax goodwill impairments totaling $14,207,000 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 Companys largest niche market, were $69,402,000 or 36% of total net sales and $40,012,000 or 22% of total net sales in the first nine months of fiscal 2010 and 2009, respectively. The $29.4 million or 73% 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 ($30.9 million increase). Net sales to this petroleum / convenience store customer are reported in both the Lighting and Graphics segments.

The Company recorded significant goodwill impairment expenses in the first nine months of fiscal 2009, totaling $14,207,000 ($11.2 million in the Lighting Segment, $0.7 million in the Graphics Segment and $2.3 million in the All Other Category). The Company recorded a $1.0 million goodwill impairment in the third quarter of fiscal 2009 in the All Other Category. These expenses are included in the $(3,795,000) and $(13,586,000) operating losses reported in the third quarter and first nine months of fiscal 2009, respectively. There were no such goodwill impairment expenses in the third quarter or first nine months of fiscal 2010.

Lighting Segment net sales of $35,458,000 in the third quarter of fiscal 2010 increased 5.6% from third quarter fiscal 2009 net sales of $33,562,000. The $1.9 million increase in Lighting Segment net sales is primarily the net result of a $6.0 million or 47% net increase in lighting sales to our niche markets (petroleum / convenience store market net sales were up significantly, net sales to the automotive dealership market were up 10%, and net sales to the quick service restaurant market were down 3%) and national retail accounts, and a $4.1 million or 19.6% decrease in commissioned net sales to the commercial / industrial lighting market. Sales of lighting to the petroleum / convenience store market represented 30% and 20% of Lighting Segment net sales in the third quarter of fiscal years 2010 and 2009, respectively. Net sales of lighting to this, the Companys largest niche market, were up 58.4% from last year to $10,621,000, with approximately $4.2 million 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. The Company expects to continue to make sales to this particular customer pursuant to new orders recently received for their non-petroleum convenience stores 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 Segments net sales of light fixtures having solid-state LED technology totaled $8.4 million in the third quarter of fiscal 2010, representing a 459% increase from third quarter fiscal 2009 net sales of solid-state LED light fixtures of $1.5 million.

Selling and administrative expenses of $6,678,000 in the third quarter of fiscal year 2010 decreased $0.1 million primarily as the net result of: increased employee compensation and benefits expense ($0.2 million); decreased sales commission expense ($0.1 million); increased research and development expense ($0.2 million); decreased outside services expense ($0.1 million); decreased customer relations expense ($0.1 million); and increased bad debt expense ($0.1 million).

Graphics Segment net sales of $10,900,000 in the third quarter of fiscal 2010 decreased 3.8% from third quarter fiscal 2009 net sales of $11,327,000. The $0.4 million decrease in Graphics Segment net sales is primarily the result of image conversion programs and sales to seven petroleum / convenience store customers ($2.0 million net increase), the LED video sports screen market ($1.1 million decrease), a national drug store retailer ($0.5 million decrease), a lawn care company ($0.4 million decrease) and a grocery retailer ($0.3 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 54% and 41% of Graphics Segment net sales in the third quarter of fiscal years 2010 and 2009, respectively. Net sales of graphics to this, the Companys largest niche market, were up 27% from last year to $5,891,000, with approximately $3.0 million related to a program with one national petroleum / convenience store customer 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 new orders recently received for their non-petroleum convenience stores 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 $1.9 million in the third quarter of fiscal 2010 as compared to $1.2 million in last years third quarter.

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