LSI(LYTS) - 2020 Q1 - Quarterly Report

PART I. Financial Information Financial Statements (Unaudited) The company's Q1 net income rose to $4.5 million, driven by a facility sale gain and improved operations Condensed Consolidated Statements of Operations Net sales grew to $88.7 million, with a $4.8 million restructuring gain boosting net income to $4.5 million Consolidated Statements of Operations Highlights (Q1 FY2020 vs Q1 FY2019) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net Sales | $88,701 thousand | $84,957 thousand | | Gross Profit | $21,855 thousand | $21,261 thousand | | Operating Income | $6,839 thousand | $2,934 thousand | | Net Income | $4,475 thousand | $1,749 thousand | | Diluted EPS | $0.17 | $0.07 | - A significant restructuring gain of $4.8 million was recognized in the quarter, which was the primary driver for the substantial increase in operating income[12] Condensed Consolidated Balance Sheets Total assets grew to $203.5 million while long-term debt was significantly reduced to $23.2 million Balance Sheet Summary | Metric | September 30, 2019 | June 30, 2019 | | :--- | :--- | :--- | | Total Current Assets | $107,538 thousand | $110,980 thousand | | Total Assets | $203,521 thousand | $201,100 thousand | | Total Current Liabilities | $45,172 thousand | $39,875 thousand | | Long-Term Debt | $23,181 thousand | $39,541 thousand | | Total Shareholders' Equity | $123,158 thousand | $119,937 thousand | Condensed Consolidated Statements of Cash Flows Operating cash flow improved to $6.4 million, with asset sales funding significant debt repayment Cash Flow Summary (Three Months Ended Sep 30) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $6,359 thousand | $2,188 thousand | | Net Cash from Investing Activities | $11,983 thousand | ($648) thousand | | Net Cash from Financing Activities | ($17,729) thousand | ($556) thousand | | Increase in Cash | $613 thousand | $984 thousand | - The company received $12.3 million from the sale of assets, which was the primary driver of positive cash flow from investing activities[25] Notes to Condensed Consolidated Financial Statements Notes detail new accounting standards adoption and segment performance, highlighting a facility sale gain - The company adopted ASU 2016-02, "Leases," effective July 1, 2019, resulting in the recognition of right-of-use assets of $10.4 million and lease liabilities of $10.8 million on the balance sheet[41][42] Segment Performance (Three Months Ended Sep 30, 2019) | Segment | Net Sales | Operating Income | | :--- | :--- | :--- | | Lighting | $63,191 thousand | $9,159 thousand | | Graphics | $25,510 thousand | $1,017 thousand | | Corporate & Eliminations | N/A | ($3,337) thousand | - In Q1 FY2020, the company sold its New Windsor, New York facility, resulting in net proceeds of $12.3 million and a gain of $4.8 million, which is classified under restructuring activities[69] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Net sales grew 4.4%, with a facility sale gain masking flat adjusted operating income Results of Operations Lighting segment income surged from a facility sale, while Graphics income fell despite sales growth - Lighting Segment sales increased by 2.9% to $63.2 million, with operating income surging to $9.2 million from $3.9 million, mainly due to the $4.8 million gain on the sale of the New Windsor facility[85][88] - Graphics Segment sales grew 8.4% to $25.5 million, but operating income decreased by 57.4% to $1.0 million, impacted by unfavorable customer program mix and costs related to the transition from print to digital[89][90][92] - On an adjusted basis, excluding the facility sale gain and other one-time costs, the company's operating income was $2.3 million, compared to $3.5 million in the prior-year period[84] Liquidity and Capital Resources Liquidity improved with stronger operating cash flow and debt reduction, maintaining ample credit availability - Cash from operating activities increased by $4.2 million YoY to $6.4 million, driven by strategies to reduce accounts receivable DSO, increase inventory turns, and manage supplier payment terms[99] - The company has a $75 million revolving line of credit expiring in Q3 of fiscal 2022, with $23.2 million borrowed and $51.8 million available as of September 30, 2019[59][102] - A regular quarterly cash dividend of $0.05 per share was declared in November 2019, continuing the indicated annual rate of $0.20 per share[107] Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure remained materially unchanged from the previous fiscal year-end - There have been no material changes in the Company's exposure to market risk since June 30, 2019[109] Controls and Procedures Management confirmed the effectiveness of disclosure controls and procedures as of the quarter-end - The Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2019, the company's disclosure controls and procedures were effective[111] - During the quarter, the company enacted additional controls related to the adoption of the new lease accounting standard (ASU 2016-02)[112] PART II. Other Information Unregistered Sales of Equity Securities and Use of Proceeds The company did not conduct any unregistered sales of equity securities during the quarter - There were no unregistered sales of equity securities or use of proceeds to report for the quarter[114] Other Information Details key outcomes from the Annual Shareholders Meeting, including director elections and plan approvals - At the Annual Meeting on November 5, 2019, shareholders approved the 2019 Omnibus Award Plan, which authorizes up to 2,650,000 new shares for equity awards[114][115] - Shareholders elected all six director nominees, ratified the appointment of Grant Thornton LLP as the independent auditor, and approved the company's executive compensation on an advisory basis[117][118][119][122] Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and XBRL data - The exhibits filed with this report include incentive plan agreements, CEO and CFO certifications (Rule 13a-14(a) and Section 1350), and XBRL interactive data files[123]