LSI Industries, Inc. ( LYTS)

F1Q2011 (Qtr End 09/30/10) Earnings Conference Call

October 21, 2010 3 PM ET


Steve Brucker – CIO

Bob Ready – President & CEO

Ron Stowell – VP, CFO & Treasurer

David McCauley – President, LSI Graphic Solutions Plus

Scott Ready – President, LSI Lighting Solutions Plus

Jonathan Labbee – SVP, Commercial and Industrial Lighting Group

Sean Tony – EVP, Commercial Industrial Federal Lighting Business


Josh Bravo

Davis McCauley

Jim Ricchiuti

Rick D’Auteuil

Glenn Wortman

Dick Ryan



Good afternoon and welcome to the LSI Industries First Quarter 2011 Earnings Conference Call. Today’s host will be Mr. Steve Brucker, the Chief Information Officer of LSI. During the discussion, all participant lines are placed on mute to prevent any background noises. (Operator Instructions)

Now, without further delays, I will turn your call over to Mr. Brucker.

Steve Brucker

Good afternoon everyone and let me add my welcome as well. Today’s presentation will not have any accompanying online graphics. But you will be able to find supporting materials available on our website after the conference is concluded. You can go to our website at

And you’ll find the Investor Relations button at the lower left. And now, let me introduce Mr. Bob Ready, the President and Chief Executive Officer of LSI Industries.

Bob Ready

Thanks, Steve. Good afternoon everybody. Welcome. I’m not going to get into a lot of detail in my opening remarks. I think the press release covered it all. As we have shared with you in the past conferences, especially over the last 12 months, we’re going through a major cultural and structural change in the way we do business.

We’re still, obviously, very focused on our niche markets which we’ll talk about in more detail on the oncoming hour. But the important thing to recognize is that all of the conversations that we’ve had over the past 12 months related to the economy and what we’ve done to improve the direction of our company is obviously in place.

And as I shared with you just three months ago, I knew that we were in that – headed in that direction. LED technology is definitely taking the right route system, not only in the U.S. but throughout the international markets. I’ve invited to sit in this conference my key marketing and sales folks, Scott Ready, the President of the Lighting Group; David McCauley; Ron Stowell, Chief Financial Officer; and Steve Brucker is on board as he made the introduction; Sean Tony, our Executive Vice President of the Commercial Industrial Federal Lighting Business; and I quite left off David McCauley, good to meet you. And Jonathan Labbee, of course, coming out of Montreal office is online as well.

I know that there are going to be a lot of questions in reference to probably this quarter really worked its way through and what the future is. As I said, we’re very optimistic about where we are. And certainly, our penetration in the commercial industrial market, with a number of changes that we made in our regional sales force, as well as just the overall acceptance of the LSI product line as it relates to total energy saving products, not just LED.

And I know Scott will make a comment or two on that. Those are my opening remarks. Ron Stowell is going to kind of hit a few of the highlights here and then Ron will switch it back to me. And then we’ll open up to Q&A.

Ron, if you would please.

Ron Stowell

Yes, thank you, Bob and good afternoon everybody. I will briefly cover our Safe Harbor statement that will point you to the recently filed 10-K and our previous 10-Qs that is to our forward-looking statements. And importantly today, we will not have any material non-public information that will be discussed.

Now to our net sales for the quarter and nearly $80 as our press release indicated. We’re up 18% and I’ll give you just a couple of the segments numbers of lighting was about 47,500,000. That was up 19.8%. Graphics $26.1 million, up 18.1%. Our electronic components $4.6 million, up 41%. And you’ll note that I did not talk about a technology segment and the differences of sales there.

We have reclassified the technology segment into the all other category. The technology segment is really the operations of LSI Seiko and that’s really our LED R&D center. And as a result of the size that that represents of our total, we felt it appropriate to reclassify into the all other category.

When it comes to looking at operating income by segment, we have made another change and that is that we are breaking out corporate administration from the all other category and onto its own line item in that segment reporting. We think that will give better clarity to the segment reporting, specifically with operating income, which I will also give some of the numbers there.

Lighting operating income was $3.7 million and that was up 6.8%. Graphics $4.6 million, actually up a hundred and sixty-one percent. Electronic components was a little over a million. And let’s just say that’s a huge percent as compared to $56,000 last year. Of course, last year was influenced by some purchase accounting requirements and inventory reserves that had been booked at the time of purchase.

And then so our total of $6.6 million, on the face of it, was up a hundred and sixty-five percent from last year. However, in our press release, I do want to point out here, to reiterate that, we made some non-GAAP financial measure. Adjustments to last year’s number related to, yes, related to the purchase accounting effects last year and so we’re – our net income is up really 88%.

Rate increase on an 18% sales increase. Quickly just over to the balance sheet. You’ll notice that we had $12.1 million of cash that is down from June but we have invested, if you will, invested in working capital. Our inventories are up a couple of million dollars and our receivables are up almost $7 million due to the size of the sales in the quarter.

They’re in good shape. Our DSOs are 47 days now and at the end of December versus 48 days at June. And we’ll point out, too, that our – something everybody is interested in. Our total LED product sales – sales related to LED products, $16.7 million this quarter and that’s about 21% of our total net sales.

Last year in the first quarter was with lower total net sales and with more sport sports sales last year than we had this year. Our LED sales were actually 27 percent of total net sales.

Bob, I think those are the highlights of our point of views.

Bob Ready

Yes, and if I may kind of add to that Ron, we could sit and see in the LED sales as it relates primarily to our lighting products are definitely pretty consistent. And we’ll address more of that when we get into Scott’s dialogue as it relates to the lighting side of it. I’m not sure David has a couple of comments in reference to that as well.

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