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LSI Reports Fourth Quarter and Full Year Fiscal 2020 Results

CINCINNATI — LSI Industries Inc. today announced results for the fourth quarter and full-year fiscal 2020.

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 I’ve 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. We’ve strengthened the balance sheet, eliminating nearly $40 million in debt over the last twelve months. Within sales, we’ve 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 we’ve taken in lighting to consolidate infrastructure, reduce costs and improve our focus on end-customer markets, I’m 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.”

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
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