GlobeNewswire Inc | Aug 20, 2020 06:30AM EDT

August 20, 2020

CINCINNATI, Aug. 20, 2020 (GLOBE NEWSWIRE) -- LSI Industries Inc. (NASDAQ: LYTS, or the Company) a leading U.S. based manufacturer of indoor/outdoor lighting and graphics solutions, today announced results for the fourth quarter and full-year fiscal 2020.

Fourth Quarter 2020 Summary

-- Net Income of $1.5 million compared to $0.9 million last year -- EPS of $0.06 versus $0.03 prior year -- EBITDA of $3.9 million; Adjusted EBITDA $4.5 million -- Free Cash Flow of $11.5 million; Reduced outstanding debt to zero as of June 30, 2020 -- Completed Graphics facility relocation to Akron, OH

Fiscal Year 2020 Summary

-- Net Income of $9.6 million versus loss of ($16.3) million last year -- EPS of $0.36 versus ($0.63) in fiscal 2019 -- EBITDA of $21.7 million; Adjusted EBITDA of $15.0 million -- Free Cash Flow of $47.1 million

LSI achieved improved fourth quarter profitability despite the disruptive impact of the pandemic on our markets and customers during this period. For the three months ended June 30, 2020, LSI reported net income of $1.5 million, or $0.06 per diluted share, versus $0.9 million or $0.03 per diluted share in the prior-year fourth quarter. Adjusted EPS was $0.06 versus $0.00 for the prior-year fourth quarter. Sales for the period declined 22%.

Total free cash flow increased to $11.5 million in the fourth quarter, resulting in the elimination of all long-term debt as of June 30, 2020. For the full fiscal year, LSI generated free cash flow of $47.1 million, versus $8.9 million in fiscal 2019. Excluding $20.0 million in non-recurring cash proceeds resulting from the sale of non-core assets; free cash flow was $27.1 million in fiscal 2020.

For the twelve months ending June 30, 2020, LSI reported net income of $9.6 million, or $0.36 per diluted share versus a net loss of ($16.3) million or ($0.63) per share in the prior year, which included a pre-tax, non-cash goodwill impairment charge of $20.2 million. On an adjusted basis, the Company reported net income of $3.2 million, or $0.12 per share in fiscal 2020, versus $1.0 million, or $0.04 per share in fiscal 2019.

LSI incurred approximately $0.6 million in restructuring and severance costs in the fourth quarter. A schedule reconciling GAAP and non-GAAP financial results is included in this press release.

The Company declared a regular cash dividend of $0.05 per share payable September 8, 2020 to shareholders of record on August 31, 2020.

Management Commentary

James A. Clark, President and Chief Executive Officer commented, Performance by the LSI team was exceptional during the challenging fourth quarter operating environment attributable to the pandemic. The level of collaboration, flexibility and willingness to adapt to new operating protocols by our workforce was terrific. The health, safety and welfare of our workforce has been and will remain our number one priority.

Our fourth quarter performance of increased earnings, gross margin rate expansion, lower operating costs, strong cash generation and elimination of long-term debt reflect not just actions taken in the fourth quarter, but the collective impact of our transformation actions we undertook eighteen months ago. As Ive mentioned previously, we needed to focus on building a better business before building a bigger business. During the last eighteen months, our management team implemented a series of initiatives that have transformed LSI into a leaner, more competitive organization. Weve strengthened the balance sheet, eliminating nearly $40 million in debt over the last twelve months. Within sales, weve made significant progress in transitioning to higher value market applications, achieving growth in our target verticals including Petroleum, Parking and Automotive. We streamlined the innovation process, doubling the number of new products launched compared to the number of products launched in the last several years. In manufacturing, we closed non-core facilities, reducing costs and increasing capacity utilization. With improved operating capabilities, a stronger balance sheet and enhanced liquidity, the company is in a position to accelerate investment in profitable growth opportunities.

Lighting segment adjusted operating income was $2.9 million in the fourth quarter, or 5% above the prior year period. The segment gross margin rate improved 520 bps to 28.6% for the quarter, and 310 bps for the year, reflecting the progress in transitioning toward a higher-value sales mix, reductions to our manufacturing footprint, successful new products and additional actions to reduce operating costs. Fourth quarter sales declined, impacted by the COVID disruption to construction markets, as well as inventory de-stocking by distributors, which compounded the impact to our stock and flow product sales. Most recently, our book-to-bill ratio has exceeded 1.0, an indication that construction market activity is gradually recovering. Given the actions weve taken in lighting to consolidate infrastructure, reduce costs and improve our focus on end-customer markets, Im confident in our ability to manage through pandemic related headwinds and profitably grow our business as markets recover.

Graphics Segment fourth quarter adjusted operating income improved to $2.2 million, an increase of $1.4 million versus income of $0.8 million last year. Graphics project installation schedules were also interrupted by the various COVID restrictions, limiting construction activity in many states. Operating expenses declined 41%, sales declined 6% and the gross margin rate was flat to prior year. Lower operating costs are the result of an organizational realignment executed earlier in the fiscal year, as well as prudent overall cost management. We successfully completed the relocation project moving from our North Canton, OH facility to a smaller, nearby facility in Akron, OH. We do not expect any significant changes to our large, multi-year petroleum and quick serve restaurant customer program commitments. However, in the near-term we do anticipate project installation schedules may be extended due to pandemic related disruptions.

As a result of our actions in fiscal 2020, we enter fiscal 2021 as a stronger business. We intend to grow our investments in new market vertical applications, strengthen and diversify our channels to market and end-user reach, increase our existing service capabilities and explore alternative growth opportunities, all while continuing to maintain financial discipline.

CONFERENCE CALL

A conference call will be held today at 11:00 A.M. ET to review the Companys financial results and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of LSI Industries website at www.lsi-industries.com. Individuals can also participate by teleconference dial-in. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

Details of the conference call are as follows:

Call Dial-In: 877-407-4018Conference ID: 13706227 Call Replay: 844-512-2921Replay Passcode: 13706227

A replay of the conference call will be available between August 20, 2020 and September 3, 2020. To listen to a replay of the teleconference via webcast, please visit the Investor Relations section of LSI Industries website at www.lsi-industries.com.

ABOUT LSI INDUSTRIES

Headquartered in Blue Ash, Ohio (Greater Cincinnati), LSI Industries is a leading producer of high-performance, American-made lighting solutions. The Companys strength in outdoor lighting applications creates opportunities for it to introduce additional solutions to its valued customers. LSIs indoor and outdoor products and services, including its digital and print graphics capabilities, are valued by architects, engineers, distributors and contractors for their quality, reliability and innovation. The Companys products are used extensively in automotive dealerships, petroleum stations, quick service restaurants, grocery stores and pharmacies, retail establishments, sports complexes, parking lots and garages, and commercial and industrial buildings. LSI has approximately 1,200 employees at seven manufacturing plants in the United States, including its corporate headquarters. Additional information about LSI is available at www.lsi-industries.com.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements. Forward-looking statements may be identified by words such as estimates, anticipates, encourage, projects, plans, expects, can, intends, believes, seeks, may, will, should, or the negative versions of those words and similar expressions and by the context in which they are used. For details on the uncertainties that may cause our actual results to be materially different than those expressed in our forward-looking statements, visit http://www.lsi-industries.com/fls as well as our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q which contain risk factors.

INVESTOR CONTACT

Noel Ryan, IRC720.778.2415LYTS@vallumadvisors.com

MEDIA CONTACT

Mike Wallner513.372.3417mike.wallner@lsi-industries.com

Financial Highlights

Three Months Ended Twelve Months EndedJune 30 (Unaudited) June 30 (In2020 2019 % thousands, 2020 2019 % Change except per Change share data)$ 63,470 $ 81,522 -22 % Net Sales $ 305,558 $ 328,852 -7 % Operating1,846 (280 ) n/m Income (Loss) 13,076 (19,890 ) n/m as reported Restructuring329 1,082 and plant (7,038 ) 3,073 closure costs (gains)273 26 Severance 346 560 costs- - Goodwill - 20,165 Impairment Transition- - and - 120 re-alignment costs Operating$ 2,448 $ 828 n/m Income as $ 6,384 $ 4,028 58 % adjusted Net Income$ 1,513 $ 862 76 % (Loss) as $ 9,592 $ (16,339 ) n/m reported $ 1,676 $ 77 n/m Net Income as $ 3,212 $ 985 n/m adjusted Earnings (Loss) per$ 0.06 $ 0.03 100 % share $ 0.36 $ (0.63 ) n/m (diluted) as reported Earnings per$ 0.06 $ - n/m share $ 0.12 $ 0.04 n/m (diluted) as adjusted

(amounts in thousands) June 30 June 30, 2020 2019Working Capital $ 51,209 $ 71,105Total Assets $ 172,263 $ 201,100Long-Term Debt $ - $ 39,541Other Long-Term Liabilities $ 11,914 $ 1,747Shareholders' Equity $ 125,700 $ 119,937

Three Months Ended June 30, 2020 Results

Net sales for the three months ended June 30, 2020 were $63.5 million, down 22% from the three months ended June 30, 2019 net sales of $81.5 million. Lighting Segment net sales of $40.6 million decreased 29% and Graphics Segment net sales of $22.9 million decreased 6% from last years fourth quarter net sales. The Company recorded pre-tax restructuring and plant closure costs of $0.3 million and severance costs of $0.3 million. Net income for the three months ended June 30, 2020 was $1.5 million, or $0.06 per share, compared to $0.9 million or $0.03 per share for the three months ended June 30, 2019. Earnings per share represents diluted earnings per share.

Twelve Months Ended June 30, 2020 Results

Net sales for the twelve months ended June 30, 2020 were $305.6 million, down 7% from the twelve months ended June 30, 2019 net sales of $328.9 million. Lighting Segment net sales of $206.2 million decreased 12% while Graphics Segment net sales of $99.4 million increased 6% from last years net sales. The Company recorded pre-tax restructuring and plant closure net (gains) of ($7.1) million related to the sale of its North Canton, Ohio facility and the closure of its New Windsor, New York facility, as well as costs incurred related to the realignment of its manufacturing footprint at its Houston, Texas facility. The realignment occurred as the result of the movement of equipment related to the closure of the New Windsor facility along with preparations to receive additional equipment resulting from the relocation of its North Canton, Ohio facility. The Company also recorded $0.3 million of severance costs. Net income for the twelve months ended June 30, 2020 was $9.6 million or $0.36 per share, compared to net (loss) of ($16.3) million or $(0.63) per share for the twelve months ended June 30, 2019. Earnings per share represents diluted earnings per share.

Balance Sheet

The balance sheet at June 30, 2020 included current assets of $85.8 million, current liabilities of $34.6 million and working capital of $51.2 million, which includes cash of $3.5 million. The current ratio was 2.5 to 1. The balance sheet also included shareholders equity of $125.7 million and no long-term debt. It is the Companys priority to continuously generate sufficient cash flow, coupled with an approved credit facility, to adequately fund operations.

Cash Dividend Actions

The Board of Directors declared a regular quarterly cash dividend of $0.05 per share in connection with the fourth quarter of fiscal 2020 payable September 8, 2020 to shareholders of record as of the close of business on August 31, 2020. The indicated annual cash dividend rate is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which provides that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings both on a GAAP and non-GAAP basis, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant by the Board.

Non-GAAP Financial Measures

This press release includes adjustments to GAAP operating income, net income and earnings per share for the three and twelve months ended June 30, 2020 and 2019. Operating income, net income and earnings per share, which exclude the impact of restructuring and plant closure (gains) costs, severance costs, goodwill impairment charges and transition and re-alignment costs are non-GAAP financial measures. We exclude these non-recurring items because they are not representative of the ongoing results of operations of our business. Also included in this press release are non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and 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. In addition, the non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP. Therefore, these measures should only be used to evaluate our results in conjunction with corresponding GAAP measures. Below is a reconciliation of these non-GAAP financial measures to the net income and earnings per share reported for the periods indicated along with the calculation of EBIDTA, Adjusted EBITDA and Free Cash Flow.

Three Months Ended Twelve Months EndedJune 30 June 30 (In thousands,2020 2019 except per 2020 2019 share data) Reconciliation Diluted Diluted of net income Diluted Diluted EPS EPS (loss) to EPS EPS adjusted net income Net Income$ 1,513 $ 0.06 $ 862 $ 0.03 (Loss) as $ 9,592 $ 0.36 $ (16,339 ) $ (0.63 ) reported Restructuring221 0.01 1,025 0.04 and plant (5,774 ) (0.22 ) 2,410 0.09 closure (gains) costs 184 0.01 54 - Severance 245 0.01 426 0.02 costs - - (36 ) - Goodwill - - 15,325 0.59 Impairment Transition and- - (3 ) - re-alignment - - 91 - costs Tax impact from the (1,825 ) (0.07 ) anticipated - - (928 ) (0.04 ) sale of New Windsor assets Tax impact due to the change in the(242 ) (0.01 ) - - estimated (851 ) (0.03 ) - - annual tax rate used for GAAP reporting purposes $ 1,676 $ 0.06 $ 77 $ - Net Income $ 3,212 $ 0.12 $ 985 $ 0.04 adjusted NOTE: All adjustments are net of tax except for the adjustment of the tax impact from the change in the estimated annual tax rate



Three Months Ended (Unaudited; Twelve Months Ended In thousands)June 30 EBITDA and June 302020 2019 % Adjusted 2020 2019 % Change EBITDA Change Operating$ 1,846 $ (280 ) n/m Income (Loss) $ 13,076 $ (19,890 ) n/m as reported Depreciation2,023 2,434 and 8,654 10,221 Amortization$ 3,869 $ 2,154 80 % EBITDA $ 21,730 $ (9,669 ) n/m Restructuring329 1,082 and plant (7,038 ) 3,073 closure costs (gains)273 26 Severance 346 560 costs- - Goodwill - 20,165 impairment Transition- - and - 120 re-alignment costs$ 4,471 $ 3,262 37 % Adjusted $ 15,038 $ 14,249 6 % EBITDA (Unaudited;Three Months Ended In thousands) Twelve Months Ended June 30 Free Cash June 302020 2019 % Flow 2020 2019 % Change Change Cash Flow$ 12,613 $ 5,106 n/m From $ 29,710 $ 11,490 n/m Operations Proceeds from118 - Sale of 20,150 - Assets (1,201 ) (270 ) Capital (2,739 ) (2,618 ) Expenditures$ 11,530 $ 4,836 n/m Free Cash $ 47,121 $ 8,872 n/m Flow

Condensed Consolidated Statement of Operations

Three Months Ended Twelve Months EndedJune 30 (Unaudited) June 30 (In thousands,2020 2019 except per share 2020 2019 data)$ 63,470 $ 81,522 Net Sales $ 305,558 $ 328,852 47,386 63,414 Cost of Products 230,944 253,621 Sold222 649 Restructuring 980 1,441 Costs93 - Severance Costs 104 77 15,769 17,459 Gross Profit 73,530 73,713 Selling and13,738 17,480 Administrative 68,783 72,470 Costs5 233 Restructuring (8,571 ) 365 Costs (Gains)180 26 Severance Costs 242 483 - - Goodwill - 20,165 Impairment Transition and- - re-alignment - 120 costs 1,846 (280 ) Operating Income 13,076 (19,890 ) (Loss) (120 ) (45 ) Other (Income) 513 138 Expense78 528 Interest Expense, 870 2,240 net 1,888 (763 ) Income (Loss) 11,693 (22,268 ) Before Taxes 375 (1,625 ) Income Tax 2,101 (5,929 ) $ 1,513 $ 862 Net Income (Loss) $ 9,592 $ (16,339 ) Weighted Average Common Shares Outstanding26,355 26,187 Basic 26,274 26,109 26,649 26,219 Diluted 26,473 26,109 Earnings (Loss) Per Share$ 0.06 $ 0.03 Basic $ 0.37 $ (0.63 )$ 0.06 $ 0.03 Diluted $ 0.36 $ (0.63 )



Condensed Balance Sheet

(amounts in thousands) June 30, June 30, 2020 2019Current Assets (Less Assets Held for Sale) $ 85,858 $ 103,468Assets Held for Sale - 7,512Property, Plant and Equipment, net 26,535 31,976Other Assets 59,870 58,144Total Assets $ 172,263 $ 201,100 Current Liabilities $ 34,649 $ 39,875Long-Term Debt - 39,541Other Long-Term Liabilities 11,914 1,747Shareholders' Equity 125,700 119,937 $ 172,263 $ 201,100