First Quarter Summary
- Sales increased 4% compared to Q1 of the prior year
- Adjusted Operating Income increased 41%, with adjusted operating margin improving 90 basis points
- Adjusted Net Income increased 7% versus Q1 prior year (see reconciliation in Non-GAAP items below)
- Adjusted EPS
$0.07compared to $0.06in Q1 prior year. GAAP reported EPS was a loss of $(0.61)versus $0.03prior year Q1, reflecting a $28 milliongoodwill impairment charge
Net sales in the first quarter of fiscal 2018 were
Management Comments and Outlook
“Our focus and investment in key growth initiatives continue. Market interest in Smart Lighting is expanding, with the Airlink™ wireless control solution adoption rate continuing to increase. We are also excited about the SmartVision® platform officially launched at the NACS/PEI show last week. Our core portfolio of LED products will be strengthened with a significant number of new product launches scheduled over the next several quarters. This includes a new range of under-canopy fixtures, maintaining our industry leading position in this segment.
“The Atlas acquisition delivered sales and EBITDA above Q1 prior year on a comparable pro forma basis. The distribution side of the lighting business is also impacted by the soft market; as a result, while above prior year, Q1 somewhat lagged internal expectations. Significant integration activities continue across multiple areas of the business, most notably in the product and sales channel areas. Since the acquisition, we have added 223 new distributor branch locations, of which 38 are new distributor partners. Channel expansion activity will continue to be a major emphasis and a platform for future growth.
“I want to highlight the Graphics Segment as this business delivered a solid quarter, with sales above prior year and measurably improved earnings. The SOAR digital signage initiative again generated sales growth over 100% for the quarter. We are adding sales resources to the SOAR business and project strong growth rates to continue. The Graphics business continues to realize growth outside of the petroleum and convenience store segments. Our quotes backlog is very strong, and working to convert quotes to orders is a key priority.
“From an operations and infrastructure view, we continue to generate substantial cost savings and many process improvement initiatives are in-progress under our LSI business system framework. Key purchased commodities costs remain stubbornly high, and in some cases continue to increase. In response, selling price realization continues to increase, although still lagging the commodity increases. New sourcing and design initiatives are also contributing to mitigate these cost increases. Driven by plant closure activity, lean manufacturing efforts, and strategic outsourcing, our productivity continues to increase. Our comparable Q1 direct labor and overhead spending was 22% below last year, and sales per employee increased 12%. On a comparable basis, our total square footage has decreased 17% since June, 2014. All these improvements contributed to our improved operating margin.
“Let me address the lighting segment goodwill impairment. Several quarters of lower sales and earnings in the Lighting Segment caused a sustained drop in our stock price. With this drop in stock price, management reviewed the goodwill asset on the balance sheet, which upon completion, resulted in a reduction to the value of the asset. This non-cash adjustment represents a more current valuation, and we are confident the Lighting Segment will return to previous growth and profitability levels.
“Our financial position remains strong. Our debt position at the end of Q1 was down 21% from the date of the Atlas transaction in February. We are continuing to maintain our dividend at a
“On a reporting note, the Technology Segment results have been consolidated and are now included in the Lighting Segment for all periods reported. The decision is consistent with the current management model, as the majority of products and components produced by this segment already feed into our lighting products. Following the combination, the Company’s reportable segments consist of a Lighting Segment and a Graphics Segment.
“As we enter Q2, our focus will continue to be: targeting higher margin sales growth opportunities; improving our operating margins; and maintaining a cost efficient manufacturing and supply chain infrastructure ready to capitalize on any change in market level requirements. We’re very pleased to have our new Lighting Segment president on board,
|(In thousands, except per||Three Months Ended|
|share data; unaudited)||September 30|
|Operating Income (Loss)|
|Restructuring costs and|
|plant closure costs||--||1,056||n/m|
|as adjusted (a)||$||3,186||$||2,267||41%|
|Net Income (Loss) as reported||$||(15,629||)||$||829||n/m|
|Net Income as adjusted||$||1,734||$||1,621||7%|
|Earnings (loss) per share|
|(diluted) as reported||$||(0.61||)||$||0.03||n/m|
|Earnings per share|
|(diluted) as adjusted||$||0.07||$||0.06||17%|
(a) The Company recorded pre-tax goodwill impairment of
First Quarter Fiscal 2018 Results
Net sales in the first quarter of fiscal 2018 were
The balance sheet at
Cash Dividend Actions
The Board of Directors declared a regular quarterly cash dividend of
Non-GAAP Financial Measures
This press release includes adjustments to GAAP net income and earnings per share for the three months ended
|(in thousands, except per share data; unaudited)||First Quarter|
|FY 2018||EPS||FY 2017||EPS|
|Reconciliation of net income to adjusted net income:|
|Net income (loss) and earnings (loss) per share as reported||$||(15,629||)||$||(0.61||)||$||829||$||0.03|
|Adjustment for goodwill impairment, inclusive of the income tax effect||17,361||0.67||--||--|
|Adjustment for restructuring and plant closure costs, inclusive of the income tax effect||--||--||695||0.03|
|Adjustment for other severance costs, inclusive of the income tax effect||--||--||97||--|
|Adjusted net income and earnings per share||$||1,734||$||0.07||$||1,621||$||0.06|
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995
This document contains certain forward-looking statements that are subject to numerous assumptions, risks or uncertainties. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. Forward-looking statements may be identified by words such as “estimates,” “anticipates,” “projects,” “plans,” “expects,” “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. Such statements, whether expressed or implied, are based upon current expectations of the Company and speak only as of the date made. Actual results could differ materially from those contained in or implied by such forward-looking statements as a result of a variety of risks and uncertainties over which the Company may have no control. These risks and uncertainties include, but are not limited to, the impact of competitive products and services, product demand and market acceptance risks, potential costs associated with litigation and regulatory compliance, reliance on key customers, financial difficulties experienced by customers, the cyclical and seasonal nature of our business, the adequacy of reserves and allowances for doubtful accounts, fluctuations in operating results or costs whether as a result of uncertainties inherent in tax and accounting matters or otherwise, failure of an acquisition or acquired company to achieve its plans or objectives generally, unexpected difficulties in integrating acquired businesses, the ability to retain key employees, unfavorable economic and market conditions, the results of asset impairment assessments, the ability to maintain an effective system of internal control over financial reporting, the ability to remediate any material weaknesses in internal control over financial reporting and any other risk factors that are identified herein. You are cautioned to not place undue reliance on these forward-looking statements. In addition to the factors described in this paragraph, the risk factors identified in our Form 10-K and other filings the Company may make with the
About the Company
We are a customer-centric company that positions itself as a value-added, trusted partner in developing superior image solutions through our world-class lighting, graphics, and technology capabilities. Our core strategy of "Lighting + Graphics + Technology = Complete Image Solutions" differentiates us from our competitors.
We are committed to advancing solid-state LED technology to make affordable, high performance, energy-efficient lighting and custom graphic products that bring value to our customers. We have a vast offering of innovative solutions for virtually any lighting or graphics application. In addition, we provide sophisticated lighting and energy management control solutions to help customers manage their energy performance. Further, we provide a full range of design support, engineering, installation and project management services to our customers.
We are a vertically integrated U.S.-based manufacturer concentrating on serving customers in
For further information, contact either
Additional note: Today’s news release, along with past releases from
|Condensed Consolidated Statements of Operations|
|Three Months Ended|
|(in thousands, except per||September 30|
|share data; unaudited)||2017||2016|
|Cost of products and services sold||63,763||62,821|
|Restructuring costs – cost of sales||--||503|
|Selling and administrative expenses||20,517||19,616|
|Goodwill Impairment 28,000||--|
|Restructuring costs – SG&A expense||--||153|
|Operating income (loss)||(24,814||)||1,066|
|Interest expense (income), net||403||(14||)|
|Income (loss) before income taxes||(25,217||)||1,080|
|Income tax (benefit) expense||(9,558||)||251|
|Net income (loss)||$||(15,629||)||$||829|
|Income (loss) per common share|
|Weighted average common shares outstanding|
|Condensed Consolidated Balance Sheets|
|(in thousands, unaudited)||September 30,||June 30,|
|Property, Plant and Equipment, net||45,982||47,354|
|Other Long-Term Liabilities||1,587||1,479|
Source: LSI Industries Inc.