-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RM9HwdIp3BP1ukkLBNQCaaMHAmK9HRGfQH8GF+HUXFwRxGq7XNaQ2KPJPvnVEfcc cFtTgZ0K+mhFsGz+YXkqQQ== 0000950152-96-000129.txt : 19960119 0000950152-96-000129.hdr.sgml : 19960119 ACCESSION NUMBER: 0000950152-96-000129 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960118 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LSI INDUSTRIES INC CENTRAL INDEX KEY: 0000763532 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 310888951 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13375 FILM NUMBER: 96505070 BUSINESS ADDRESS: STREET 1: 10000 ALLIANCE RD STREET 2: P O BOX 42728 CITY: CINCINNATI STATE: OH ZIP: 45242 BUSINESS PHONE: 5135796411 MAIL ADDRESS: STREET 1: 10000 ALLIANCE RD STREET 2: P O BOX 42728 CITY: CINCINNATI STATE: OH ZIP: 45242 FORMER COMPANY: FORMER CONFORMED NAME: LSI LIGHTING SYSTEMS INC DATE OF NAME CHANGE: 19891121 10-Q 1 LSI INDUSTRIES 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995. TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE - ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________. Commission File No. 0-13375 LSI Industries Inc. State of Incorporation - Ohio IRS Employer I.D. No. 31-0888951 10000 Alliance Road Cincinnati, Ohio 45242 (513) 793-3200 Indicate by checkmark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- Common Shares, no par value. Shares Outstanding at January 15, 1996: 7,623,782. Page 1 of 23 2 LSI INDUSTRIES INC. FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1995 INDEX
Begins on Page ---- PART I. Financial Information ITEM 1. Financial Statements Consolidated Income Statements............................ 3 Consolidated Balance Sheets............................... 4 Consolidated Statements of Cash Flows..................... 5 Notes to Financial Statements............................. 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................... 7 PART II. Other Information ITEM 4. Submission of Matters to a Vote of Securityholders........ 11 ITEM 6. Exhibits and Reports on Form 8-K.......................... 12 Signatures .......................................................... 13
Page 2 of 23 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS LSI INDUSTRIES INC. CONSOLIDATED INCOME STATEMENTS (Unaudited)
Three Months Ended Six Months Ended December 31 December 31 ----------------------- ---------------------- (In thousands, except per 1995 1994 1995 1994 ---- ---- ---- ---- share amounts) Net sales $ 45,561 $ 32,364 $ 81,443 $ 61,684 Cost of products sold 31,737 21,190 55,677 40,652 -------- -------- -------- -------- Gross profit 13,824 11,174 25,766 21,032 Selling and administrative expenses 9,315 7,688 17,627 14,593 -------- -------- -------- -------- Operating income 4,509 3,486 8,139 6,439 Interest expense 207 115 350 179 Other expenses 11 10 16 19 -------- -------- -------- -------- Income from continuing opera- tions before income taxes 4,291 3,361 7,773 6,241 Income tax expense 1,598 1,202 2,886 2,233 -------- -------- -------- -------- Income from continuing operations 2,693 2,159 4,887 4,008 Discontinued operations (Note 6) (1,500) -- (1,500) -- -------- -------- -------- -------- Net income $ 1,193 $ 2,159 $ 3,387 $ 4,008 ======== ======== ======== ======== Net income (loss) per common share Continuing operations $ .34 $ .28 $ .61 $ .52 Discontinued operations (.19) -- (.19) -- -------- -------- -------- -------- Total net income per share $ .15 $ .28 $ .42 $ .52 ======== ======== ======== ======== Average shares outstanding 8,006 7,770 7,980 7,760 ======== ======== ======== ========
The accompanying Notes to Financial Statements are an integral part of these financial statements. Page 3 of 23 4 LSI INDUSTRIES INC. CONSOLIDATED BALANCE SHEETS
(In thousands) December 31, June 30, 1995 1995 ----------- --------------------- (Unaudited) (Derived from Audited ASSETS financial statements) Current Assets Cash $ 1,917 $ 2,124 Accounts receivable 29,530 19,273 Inventories 20,862 18,584 Other current assets 1,405 1,835 ------- ------- Total current assets 53,714 41,816 Property, plant and equipment, net 20,251 19,398 Goodwill 1,319 1,339 ------- ------- $75,284 $62,553 ======= ======= LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Notes payable to bank $ 6,809 $ -- Current maturities of long-term debt 844 842 Accounts payable 17,111 10,641 Accrued expenses 10,161 12,545 ------- ------- Total current liabilities 34,925 24,028 Long-Term Debt 6,863 7,257 Other Long-Term Liabilities 1,485 1,815 Shareholders' Equity Preferred shares, without par value; -- -- Authorized 1,000,000 shares; none issued Common shares, without par value; 8,075 7,915 Authorized 30,000,000 shares; Outstanding 7,623,782 and 7,554,229 shares, respectively Retained earnings 23,936 21,538 ------- ------- Total shareholders' equity 32,011 29,453 ------- ------- $75,284 $62,553 ======= =======
The accompanying Notes to Financial Statements are an integral part of these financial statements. Page 4 of 23 5 LSI INDUSTRIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands) Six Months Ended December 31 ---------------------- 1995 1994 ---- ---- Cash Flows From Operating Activities Net income from continuing operations $ 4,887 $ 4,008 Non-cash items included in income Depreciation and amortization 1,154 938 Deferred income taxes 50 60 (Gain) on disposition of fixed assets (4) -- Changes in operating assets and liabilities Accounts receivable (10,257) (3,557) Inventories (2,278) (3,500) Accounts payable and other 3,898 (210) Loss from discontinued operations (1,500) Change in liability for discontinued operations 238 (30) -------- ------- Net cash flows from operating activities (3,812) (2,291) -------- ------- Cash Flows from Investing Activities Purchase of property, plant and equipment (1,987) (1,647) Proceeds from sale of fixed assets 4 -- -------- ------- Net cash flows from investing activities (1,983) (1,647) -------- ------- Cash Flows from Financing Activities Increase in lines of credit 6,809 303 Payment of long-term debt (392) (58) Increase in long-term debt -- 3,700 Cash dividends paid (989) (676) Exercise of stock options 160 161 -------- ------- Net cash flows from financing activities 5,588 3,430 -------- ------- Increase (decrease) in cash (207) (508) Cash at beginning of year 2,124 1,614 -------- ------- Cash at end of period $ 1,917 $ 1,106 ======== ======= Supplemental Cash Flow Information Interest paid $ 189 $ 579 Income taxes paid $ 4,162 $ 2,752
The accompanying Notes to Financial Statements are an integral part of these financial statements. Page 5 of 23 6 LSI INDUSTRIES INC. NOTES TO FINANCIAL STATEMENTS NOTE 1: INTERIM FINANCIAL STATEMENTS The interim financial statements are unaudited and are prepared in accordance with rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of Management, the interim financial statements include all normal adjustments and disclosures necessary to present fairly the Company's financial position as of December 31, 1995, and the results of its operations and its cash flows for the periods ended December 31, 1995 and 1994. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 1995 annual report. NOTE 2: NET INCOME PER COMMON SHARE The computation of net income per common share is based on the weighted average common shares outstanding for the period, including common share equivalents. Common share equivalents consist of dilutive stock options of which there were 384,000 and 257,000 shares, respectively, for the three month periods ended December 31, 1995 and 1994, and 378,000 and 264,000 shares, respectively, for the six month periods ended December 31, 1995 and 1994. NOTE 3: INVENTORIES Inventories consist of the following (in thousands):
December 31, 1995 June 30, 1995 ----------------- ------------- (unaudited) (derived from audited financial statements) Raw Materials $12,106 $ 9,821 Work-in-Process and Finished Goods 8,756 8,763 ------- ------- $20,862 $18,584 ======= =======
NOTE 4: CASH DIVIDENDS The Company paid cash dividends of $676,000 and $989,000 in the six month periods ended December 31, 1994 and 1995, respectively. In January 1996, the Company's Board of Directors declared a $.04 per share regular quarterly cash dividend ($305,000) payable on February 9, 1996 to shareholders of record February 2, 1996. Page 6 of 23 7 NOTE 5: SALES TO MAJOR CUSTOMERS The Company made sales in both the Lighting and Graphics segments to a major customer, Chevron U.S.A., representing 11% and 15%, respectively, of consolidated net sales in the three month periods ended December 31, 1995 and 1994, respectively, and 11% and 15%, respectively, for the six month periods ended December 31, 1995 and 1994. NOTE 6: INCOME TAXES The Company discontinued its European operations in 1992 and reported a $4.3 million loss, net of a $3.2 million income tax benefit. The Internal Revenue Service (IRS) has completed its audit of the Company's 1989 through 1992 federal income tax returns. The IRS questioned the tax treatment of the loss associated with the discontinued operations, specifically as to whether it should receive ordinary loss or capital loss treatment. In October 1994, the IRS proposed audit adjustments which would have resulted in a return of approximately $2 million of income taxes (plus interest) which had been refunded to the Company with the filing of its 1992 income tax return. The Company's settlement discussions with the IRS Appeals Division relating to the proposed audit assessment were concluded in December 1995. An agreement was reached that will re-characterize a portion of the 1992 loss associated with discontinued European operations as a long term capital loss. The agreement will result in payment of approximately $1.7 million (composed of taxes and interest), and in a charge to discontinued operations of $1.5 million to increase the Company's reserve for remaining liabilities associated with the discontinued operations. During the quarter ending December 31, 1995, the Company exhausted all alternatives to mitigate this issue and has recorded the $1.5 million additional reserve for discontinued operations in the second quarter of fiscal 1996. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS NET SALES BY BUSINESS SEGMENT
Three Months Ended Six Months Ended (In thousands; unaudited) December 31 December 31 --------------------- --------------------- 1995 1994 1995 1994 ---- ---- ---- ---- Lighting $30,210 $19,859 $52,741 $36,106 Graphics 15,351 12,505 28,702 25,578 ------- ------- ------- ------- $45,561 $32,364 $81,443 $61,684 ======= ======= ======= =======
Page 7 of 23 8 THREE MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 1994 Net sales of $45.6 million increased 40.8% over second quarter net sales last year of $32.4 million. Lighting segment sales increased 52.1% and Graphics segment sales increased 22.8%, as a result of strong sales increases in both the petroleum/convenience store market and the multi-site retail market. One customer, Chevron U.S.A., accounted for 11.1% of net sales in the second quarter of fiscal 1996 and 15.1% of net sales in the corresponding period of fiscal 1995. The Company believes that it continues to maintain a good business relationship with this major customer; however, the level of total sales is never assured in the future. The increase in net sales in the three months ended December 31, 1995 was primarily the result of increased volume. While sales prices were increased, inflation did not have a significant impact on sales in the second quarter of fiscal 1996 as competitive pricing pressures held price increases to a minimum. Gross profit of $13.8 million, or 30.3% of net sales, increased over last year's second quarter gross profit of $11.2 million or 34.5% of net sales. The increase in amount of gross profit is attributed primarily to the 40.8% increase in net sales. A sales mix shift in the Company's Graphics segment to somewhat lower gross margin programs in the second quarter, lower utilization of manufacturing capacity in the Graphics segment, and an increase in lighting sales to the petroleum/convenience store market provided influences that reduced the gross profit percentage. Increased capacity utilization and improved direct labor efficiencies in the Lighting segment favorably impacted gross profit. Selling and administrative expenses increased to $9.3 million primarily as a result of increased sales volume, and were reduced to 20.4% of net sales in the second quarter of fiscal 1996 from 23.8% of net sales in the comparable period last year. Interest expense increased from $115,000 to $207,000, primarily as a result of increased average borrowings on the Company's revolving lines of credit and term loan facilities in addition to increased effective borrowing rates. The Company's effective tax rate increased to 37.2% as a result of the increased provision for state income taxes. Income from continuing operations of $2.7 million or $.34 per share increased 24.7% from last year's second quarter income from continuing operations of $2.2 million or $.28 per share as a result of increased sales and gross profit, partially offset by increased selling and administrative expenses and an increased provision for taxes. As discussed in Note 6 to the financial statements and as previously discussed in the Company's prior reports on Form 10-Q, the Company had been involved in a dispute with the Internal Revenue Service (IRS) in which the IRS proposed audit adjustments which could have resulted in a payment of income taxes by the Company of approximately $2.0 million, plus interest. The proposed adjustments related to the Company's 1992 discontinued operations and were associated with income tax which had been refunded to the Company with the filing of its 1992 income tax return. During the second quarter of fiscal 1996, the Company exhausted all alternatives to mitigate this issue and reached a settlement agreement in December 1995 which re-characterized a portion of the 1992 loss associated with discontinued European operations as a long term capital loss. The agreement will result in payment of approximately Page 8 of 23 9 $1.7 million (composed of interest and taxes), of which approximately $1.2 million was paid late in the second quarter of fiscal 1996. The Company recorded a charge to discontinued operations of $1.5 million, or $.19 per share, in the second quarter of fiscal 1996 to increase the reserve for remaining liabilities associated with the discontinued operations. The Company anticipates no further charges associated with the discontinued European operations. Net income of $1.2 million, or $.15 per share, in the second quarter of fiscal 1996 compares to net income of $2.2 million, or $.28 per share, in last year's second quarter. The change results from increased income from continuing operations and the reduction associated with the discontinued operations. SIX MONTHS ENDED DECEMBER 31, 1995 COMPARED WITH SIX MONTHS ENDED DECEMBER 31, 1994 Net sales of $81.4 million increased 32.0% over first half net sales last year of $61.7 million. Lighting segment sales increased 46.1% and Graphics segment sales increased 12.2%, as a result of strong sales increases in both the petroleum/convenience store market and the multi-site retail market. One customer, Chevron U.S.A., accounted for 10.9% of net sales in the first half of fiscal 1996 and 14.9% of net sales in the corresponding period of 1995. The Company believes that it continues to maintain a good business relationship with this major customer; however, the level of total sales is never assured in the future. The increase in net sales in the six months ended December 31, 1995 was primarily the result of increased volume. While sales prices were increased, inflation did not have a significant impact on sales in the first half of fiscal 1996 as competitive pricing pressures held price increases to a minimum. Gross profit of $25.8 million, or 31.6% of net sales, increased over last year's first half gross profit of $21.0 million or 34.1% of net sales. The increase in amount of gross profit is attributed primarily to the 32.0% increase in net sales. A sales mix shift in the Company's Graphics segment to somewhat lower gross margin programs, lower utilization of manufacturing capacity in the Graphics segment, and an increase in lighting sales to the petroleum/convenience store market provided influences that reduced the gross profit percentage. Increased capacity utilization and improved direct labor efficiencies in the Lighting segment favorably impacted gross profit. Selling and administrative expenses increased to $17.6 million primarily as a result of increased sales volume, and were reduced to 21.6% of net sales in the first half of fiscal 1996 from 23.7% of net sales in the comparable period last year. Interest expense increased from $179,000 to $350,000, primarily as a result of increased average borrowings on the Company's revolving lines of credit and term loan facilities in addition to increased effective borrowing rates. The Company's effective tax rate increased to 37.1% as a result of the increased provision for state income taxes. Income from continuing operations of $4.9 million or $.61 per share increased 21.9% from last year's first half income from continuing operations of $4.0 million or $.52 per share as a result of increased sales and gross profit, partially offset by increased selling and administrative expenses and an increased provision for taxes. Page 9 of 23 10 As discussed in Note 6 to the financial statements and as previously discussed in the Company's prior reports on Form 10-Q, the Company had been involved in a dispute with the Internal Revenue Service (IRS) in which the IRS proposed audit adjustments which could have resulted in a payment of income taxes by the Company of approximately $2.0 million, plus interest. The proposed adjustments related to the Company's 1992 discontinued operations and were associated with income tax which had been refunded to the Company with the filing of its 1992 income tax return. During the second quarter of fiscal 1996, the Company exhausted all alternatives to mitigate this issue and reached a settlement agreement in December 1995 which re-characterized a portion of the 1992 loss associated with discontinued European operations as a long term capital loss. The agreement will result in payment of approximately $1.7 million (composed of interest and taxes), of which approximately $1.2 million was paid late in the second quarter of fiscal 1996. The Company recorded a charge to discontinued operations of $1.5 million, or $.19 per share, in the second quarter of fiscal 1996 to increase the reserve for remaining liabilities associated with the discontinued operations. The Company anticipates no further charges associated with the discontinued European operations. Net income of $3.4 million, or $.42 per share, in the first half of fiscal 1996 compares to net income of $4.0 million, or $.52 per share, in last year's first half. The change resulted from increased income from continuing operations and the reduction associated with the discontinued operations. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1995 the Company had working capital of $18.8 million, compared to $17.8 million at June 30, 1995. The ratio of current assets to current liabilities decreased to 1.54 to 1 from 1.74 to 1 at June 30, 1995. The increased working capital is primarily attributed to increases in accounts receivable and inventories, and to a reduction in accrued expenses, partially offset by increases in notes payable to banks, to increases in accounts payable (related to increased sales and production levels), and to decreased cash and other current assets. The Company used $3.8 million of cash for operating activities in the first half of fiscal 1996 as compared to a use of $2.3 million in the first half of fiscal 1995. The Company used more cash in the first half of fiscal 1996 primarily because of the payment of approximately $1.2 million associated with the settlement of the IRS audit related to the discontinued European operations. In fiscal 1996, the increased level of business resulted in significant increases in accounts receivable, inventories, as well as increases in notes payable from banks and accounts payable which supported the increased working capital need. As of December 31, 1995, the Company has experienced an increase in days sales outstanding to approximately 56 days, as compared to 53 days at June 30, 1995, along with the overall increase in amounts due from customers related to the increased level of sales, especially late in the quarter. The combined effect during the first half of fiscal 1996 of inventories increasing by $2.3 million with continued increased sales and production requirements, receivables increasing by $10.3 million, capital spending of $2.0 million, and cash dividend payments of $1.0 million resulted in a slight reduction in cash and in a $6.8 million increase in short term borrowings on Page 10 of 23 11 the Company's revolving lines of credit. The debt to equity ratio of .45 to 1 at December 31,1995 increased from .28 to 1 as of June 30, 1995. The Company's primary source of liquidity continues to be its lines of credit, which carried $7.1 million of available borrowing capacity as of January 12, 1996. Capital expenditures of $2.0 million in the first half of fiscal 1996 compare to $1.6 million in the comparable period last year. Spending in fiscal year 1996 is primarily related to manufacturing equipment and process improvements and is expected to total approximately $4.4 million for the full year, with funding principally out of cash flows from operations as well as from the Company's lines of credit. In January 1996, the Board of Directors declared a regular quarterly cash dividend of $.04 per share to be paid February 9, 1996 to shareholders of record February 2, 1996. The Company's third quarter ending March 31st typically produces the lowest revenue of the year due to annual budgetary cycles of many of its large customers and due to poor weather conditions. The third quarter of fiscal 1996 may be adversely affected by business interruptions associated with the recent severe winter weather conditions on the East Coast. In December 1995, the Company filed a Registration Statement with the Securities and Exchange Commission for a Public Offering 1.8 million common shares. A total of 1.1 million common shares will be offered for sale by the Company and .7 million common shares will be offered for sale by Selling Shareholders. The Company anticipates the Public Offering to occur in the third fiscal quarter, although there can be no assurance as to whether the offering will be successful. The Company has two revolving lines of credit totaling $13.0 million. After the Offering, the Company will have approximately $28.2 million in working capital and will have $13.0 million available under its two bank revolving lines of credit. The Company believes that the total of available lines of credit plus cash flows from operating activities is adequate for the Company's 1996 operational and capital expenditure needs. The Company is in compliance with all of its loan covenants. The Company continues to seek opportunities to invest in new products and markets, and in acquisitions which fit its strategic growth plans in the lighting and graphics markets. The Company believes that adequate financing for any such investments or acquisitions will be available through future borrowings due to the enhanced financial condition of the Company after the Public Offering or through the issuance of common shares in payment for acquired businesses. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS At the Company's Annual Meeting of Shareholders held November 16, 1995, the following actions were taken by shareholders: Page 11 of 23 12 4.1 All persons nominated as Class A Directors were elected with the votes for each person being:
-------------------------------------------------------------------------------------- Shares - Withheld Shares Name Shares For Authority Abstained -------------------------------------------------------------------------------------- Michael J. Burke 6,445,499 398,469 None -------------------------------------------------------------------------------------- Robert J. Ready 6,446,012 397,956 None -------------------------------------------------------------------------------------- John N. Taylor, Jr. 6,446,019 397,949 None --------------------------------------------------------------------------------------
4.2 The selection of Price Waterhouse LLP as independent public accountants for fiscal year 1996 was ratified by the following vote:
----------------------------------------------------------------------------------- Shares For Shares Against Shares Abstained Broker Non-Votes ----------------------------------------------------------------------------------- 6,717,037 16,890 110,041 None -----------------------------------------------------------------------------------
4.3 The adoption of the LSI Industries Inc. 1995 Stock Option Plan was ratified by the following vote:
----------------------------------------------------------------------------------- Shares For Shares Against Shares Abstained Broker Non-Votes ----------------------------------------------------------------------------------- 4,385,727 1,251,675 120,954 1,085,612 -----------------------------------------------------------------------------------
4.4 The adoption of the LSI Industries Inc. 1995 Directors' Stock Option Plan was ratified by the following vote:
----------------------------------------------------------------------------------- Shares For Shares Against Shares Abstained Broker Non-Votes ----------------------------------------------------------------------------------- 5,181,049 434,339 142,967 1,085,613 -----------------------------------------------------------------------------------
4.5 The Amendment of the Articles of Incorporation to increase the authorized shares was ratified by the following vote:
----------------------------------------------------------------------------------- Shares For Shares Against Shares Abstained Broker Non-Votes ----------------------------------------------------------------------------------- 5,822,740 887,405 133,823 None -----------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits 10.1 Promissory Note dated December 31, 1995 with The Provident Bank 10.2 Amended and Restated Revolving Note dated November 21, 1995 with The Fifth Third Bank 11 Statement Re Computation of Earnings Per Share Page 12 of 23 13 (b) Form 8-K No reports on Form 8-K have been filed during the quarter for which this Report is filed. [All other items required in Part II have been omitted because they are not applicable or are not required.] SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. LSI Industries Inc. BY: --------------------------------------------- Robert J. Ready President and Chief Executive Officer (Principal Executive Officer) BY: --------------------------------------------- Ronald S. Stowell Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) January 16, 1996 Page 13 of 23 EX-10.1 2 EXHIBIT 10.1 1 EXHIBIT 10.1 COMMERCIAL LOAN NOTE NO. 8 PROMISSORY NOTE $8,000,000.00 Cincinnati, Ohio December 31, 1995 The undersigned, for value received, promises to pay to the order of The Provident Bank, at any of its offices, the sum of EIGHT MILLION AND NO/100 DOLLARS ($8,000,000.00), (the "Maximum Credit") or so much thereof as is loaned by the holder pursuant to the provisions hereof, together with interest until demand or maturity AT A RATE OF BORROWER'S OPTION OF PROVIDENT BANK'S PRIME RATE OR LIBOR + 1 per year computed on the basis of a year of 360 days for the actual number of days elapsed, and after default hereunder, demand or maturity, whether at stated maturity or by acceleration, at a rate four (4) percentage points greater than the stated rate (the "Default Rate"). Interest on any prime rate borrowing shall be due and payable MONTHLY BEGINNING JANUARY 31, 1996, and at maturity. Interest on any LIBOR borrowings shall be due and payable upon it respective maturity. Principal shall be due and payable AT MATURITY, DECEMBER 30, 1996. The undersigned hereby state(s) that the purpose of the loan evidenced by this Note is WORKING CAPITAL. /X/ REVOLVING CREDIT: If this box is checked, this Note is a revolving credit subject to the terms of this paragraph. Subject to the conditions hereof and of any other agreements between the parties relating hereto and until demand, if the principal is payable on demand, or maturity (whether at scheduled or accelerated maturity), if the principal is payable other than on demand, the undersigned may borrow and reborrow from the holder and the holder may, in its sole discretion, lend and relend to the undersigned such amounts not to exceed the Maximum Credit as the undersigned may at any time and from time to time request upon satisfactory notice to the holder. Notwithstanding anything to the contrary contained herein or in any other agreement between the undersigned and the holder, if this Note provides that the principal hereof is payable on demand, then this Note is a demand Note due and owing immediately, without prior demand of the holder and immediate action to enforce its payment may be taken at any time, without notice and without reason. If any payment of principal or interest is not paid when due, or if the holder deems itself insecure for any reason, including but not limited to, the insolvency, bankruptcy, business failure, death, default in the payment of other obligations or receivership of or concerning any maker, guarantor or indorser hereof, this Note shall, if payable other than on demand, at the option of its holder, become immediately due and payable, without demand or notice. The undersigned shall promptly provide such financial information as the holder shall reasonably request from time to time. Upon this Note becoming due under any of its terms and provisions, and not being fully paid and satisfied, the total sum then due hereunder may, at any time and from time to time, be charged against any account or accounts maintained with the holder hereof by any of the undersigned or any indorser, without notice to or further consent from any of them, and the undersigned and all indorsers agree to be and remain jointly and severally liable for all remaining indebtedness represented by this Note in excess of the amount or amounts so applied. Page 14 of 23 2 Prime rate is that annual percentage rate of interest which is established by The Provident Bank from time to time as its prime rate, whether or not such rate is publicly announced, and which provides a base to which loan rates may be referenced. Prime rate is not necessarily the lowest lending rate of The Provident Bank. A rate based on the prime rate will change each time and as of the date that the prime rate changes. If any payment of principal or interest is not paid when due or if the undersigned shall otherwise default in the performance of its obligations hereunder or under any other note or agreement with the holder, the holder at its option, may charge and collect, or add to the unpaid balance hereof, a late charge up to the greater of $250 or .1% of the unpaid balance of this Note at the time of such delinquency for each such delinquency to cover the extra expense incident to handling delinquent accounts, and/or increase the interest rate on the unpaid balance to the Default Rate. The holder may charge interest at the rate provided herein on all interest and other amounts owing hereunder which are not paid when due. The undersigned, all indorsers hereof, any other party hereto, and any guarantor hereof (collectively "Obligors") each (i) waive(s) presentment, demand, notice of demand, protest, notice of protest and notice of dishonor and any other notice required to be given by law in connection with the delivery, acceptance, performance, default or enforcement of this Note, of any indorsement or guaranty of this Note or of any document or instrument evidencing any security for payment of this Note; and (ii) consent(s) to any and all delays, extensions, renewals or other modifications of this Note or waivers of any term hereof or release or discharge by the holder of any of Obligors or release, substitution or exchange of any security for the payment hereof or the failure to act on the part of the holder or any indulgence shown by the holder, from time to time and in one or more instances, (without notice to or further assent from any of Obligors) and agree(s) that no such action, failure to act or failure to exercise any right or remedy, on the part of the holder shall in any way affect or impair the obligations of any Obligors or be construed as a waiver by the holder of, or otherwise affect, any of the holder's rights under this Note, under any indorsement or guaranty of this Note or under any document or instrument evidencing any security for payment of this Note. The undersigned and all indorsers further agree to reimburse the holder for all advances, charges, costs and expenses, including reasonable attorneys' fees, incurred or paid in exercising any right, power or remedy conferred by this Note, or in the enforcement thereof. If the undersigned are more than one (1), the liability of the undersigned hereon is joint and several, and the term "undersigned", as used herein, means any one or more of them. The undersigned and all indorsers authorize any attorney at law, including an attorney engaged by the holder, to appear in any court of record in the State of Ohio or any other State or Territory of the United States, after the indebtedness evidenced hereby, or any part thereof, becomes due and waive the issuance and service of process and confess judgment against any one or more than one of the undersigned and all indorsers in favor of the holder, for the amount then appearing due, together with costs of suit and, thereupon, to release all errors and waive all rights of appeal and stay of execution, but no such judgment or judgments against any one of the undersigned shall be a bar to a subsequent judgment or judgments against any one or more than one of such persons against whom judgment has not been obtained hereon. This warrant of attorney to confess judgment is a joint and several warrant of attorney. The foregoing warrant of attorney shall survive any judgment; and if any judgment be vacated for any reason, the holder hereof nevertheless may hereafter use the foregoing warrant of attorney to obtain an additional judgment or judgments against the undersigned and all indorsers or any one or more of them. The undersigned and all indorsers hereby expressly waive any conflict of interest that the holder's attorney may have in confessing such judgment against such parties and expressly consent to the confessing attorney receiving a legal fee from the holder for confessing such judgment against such parties. THE PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF OHIO. AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE HOLDER TO EXTEND CREDIT TO BORROWER, AND AFTER HAVING THE OPPORTUNITY TO CONSULT COUNSEL, THE UNDERSIGNED AND ALL INDORSERS HEREBY EXPRESSLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR PROCEEDING RELATED TO THIS NOTE OR ARISING IN ANY Page 15 of 23 3 WAY FROM ANY INDEBTEDNESS OR OTHER TRANSACTIONS INVOLVING THE HOLDER AND THE UNDERSIGNED. THE UNDERSIGNED HEREBY DESIGNATE(S) ALL COURTS OF RECORD SITTING IN CINCINNATI, OHIO AND HAVING JURISDICTION OVER THE SUBJECT MATTER, STATE AND FEDERAL, AS FORUMS WHERE ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, MAY BE PROSECUTED AS TO ALL PARTIES, THEIR SUCCESSORS AND ASSIGNS, AND BY THE FOREGOING DESIGNATION THE UNDERSIGNED CONSENT(S) TO THE JURISDICTION AND VENUE OF SUCH COURTS. WARNING - BY SIGNING THIS PAPER, YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE, AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT OR ANY OTHER CAUSE. LSI INDUSTRIES INC. By: - --------------------------------- ----------------------------------- Ronald S. Stowell Chief Financial Officer & Treasurer - --------------------------------- Address 10000 Alliance Road - --------------------------------- Cincinnati, OH 45242 - --------------------------------- Page 16 of 23 4 LETTER AGREEMENT This agreement made this 31st day of December, 1995, by and between LSI INDUSTRIES INC., 10000 Alliance Road, Cincinnati, OH 45242 (hereinafter referred to as "LSI") and THE PROVIDENT BANK, a Banking Corporation located at One East Fourth Street, Cincinnati, OH 45202 (hereinafter referred to as "Provident"), WITNESSETH WHEREAS, Provident intends to extend an $8,000,000.00 unsecured line of credit to LSI for the purposes of funding working capital and other general corporate needs, said line of credit issued pursuant to a note of even date herewith; WHEREAS, in exchange for Provident's issuance of said line of credit, LSI has agreed to maintain certain covenants as noted below, covenants which shall remain in effect for as long as such line of credit may exist including all renewals or alterations thereof. NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements made herein, the parties hereto do agree as follows: 1. LSI shall at all times maintain a minimum net worth (per GAAP) of $20,000,000. 2. LSI shall at all times maintain a minimum level of trailing four quarter profitability of $1,000,000. 3. LSI shall not permit any liens for funded debt to exist against any of its properties other than: (a) liens limited in the aggregate principal amount of $8,000,000 in favor of Fifth Third Bank on the real estate located at 10000 and 10170 Alliance Road, Cincinnati, OH and selected items of personal property located therein. (b) liens limited in the aggregate principal amount of $2,000,000 in favor of the trustee of any industrial revenue bonds or various governmental authorities, liens encumbering the real and personal property existing now or acquired in the future located at LSI Metal Fabrication. (c) liens on specific inventory limited in the aggregate principal amount of $750,000 to secure certain trade vendors who have advanced progress payment or deposits to LSI. (d) LSI will maintain Provident as LSI's principal bank purchasing all such banking services required by LSI provided Provident's pricing remains competitive. This agreement shall inure to and bind the parties hereto, their successors and assigns. Page 17 of 23 5 THE PROVIDENT BANK LSI INDUSTRIES INC. - ------------------------------ -------------------------------- Donald U. Luthman Ronald S. Stowell Senior Vice President Chief Financial Officer & Treasurer Page 18 of 23 EX-10.2 3 EXHIBIT 10.2 1 EXHIBIT 10.2 AMENDED AND RESTATED REVOLVING NOTE $5,000,000 Cincinnati, Ohio November 21, 1994 Amended and Restated November 21, 1995 (Effective Date) On November 21, 1996 (the "Due Date"), LSI INDUSTRIES INC., an Ohio corporation (the "Borrower"), whose address is 10000 Alliance Road, Cincinnati, Ohio, for value received, promises to pay to the order of THE FIFTH THIRD BANK, an Ohio banking corporation, whose address is 38 Fountain Square Plaza, Cincinnati 45263 (hereinafter referred to as "Bank" or "Holder"), the sum of FIVE MILLION DOLLARS ($5,000,000) or such lesser amount as has been advanced to or for the benefit of Borrower hereunder (hereinafter referred to as the "Borrowing") plus interest as provided herein. The outstanding balance of this Note will appear on a supplemental bank record and is not necessarily the face amount of this Note. Such record shall be conclusive as to the balance due of this Note at any time. Prior to the Due Date, Bank may (but is not obligated to) lend Borrower such amounts as may from time to time be requested by Borrower provided that the principal amount borrowed shall not at any time exceed the Borrowing and further provided that no Event of Default, as defined herein, shall have occurred. The principal amounts outstanding hereunder shall bear interest commencing on the date of the first advance hereunder at a rate per annum equal to the LIBOR Rate (defined below) plus 100 basis points (herein the "Note Rate") and such interest rate shall remain in effect with respect to each Borrowing for the duration of the LIBOR Interest Period elected by Borrower as set forth below. On or before the date of any advance hereunder, and on or before the expiration of any LIBOR Interest Period, Borrower shall notify Bank which LIBOR Interest Period Borrower has elected regarding each Borrowing hereunder. Borrower may have Borrowings outstanding hereunder in minimum amounts of $250,000 which will bear interest at the Note Rate for different LIBOR Interest Periods so long as the last day of any LIBOR Interest Period does not exceed the maturity date hereof, and so long as no LIBOR Interest Period Election with respect to any Borrowing commences prior to the expiration of the LIBOR Interest Period in effect with respect to such Borrowing. Borrower shall notify Bank of any LIBOR Interest Period Election by telephonic notice by Borrower to Bank prior to, or on, the Effective Date. Borrower's right to make a LIBOR Interest Period Election shall be terminated automatically if Bank, by telephonic notice, shall notify Borrower that LIBOR deposits with a maturity corresponding to the maturity of the LIBOR Interest Period, in an amount equal to the Borrowings to be subject to the LIBOR Interest Period Election are not readily available in the London Inter-Bank Offered Rate Market, or that, by reason of circumstances affecting such Market, adequate and reasonable methods do not exist for ascertaining the interest rate applicable to such deposits for the proposed LIBOR Interest Period. In such event, amounts outstanding hereunder shall bear interest at a rate equal to the Bank's Prime Rate minus 50 basis points. As used herein, "Prime Rate" means the rate of interest per annum announced to be its prime rate from time to time by Bank at its principal office in Cincinnati, Ohio whether or not Bank will at times lend to borrowers at lower rates of interest or, if there is no such prime rate, then its base rate or such other rate as may be substituted by Bank for the prime rate. In addition, notwithstanding anything herein contained to the contrary, if, prior to or during any period with respect to which a LIBOR Interest Period Election is in effect, any change in any law, regulation or official directive, or in the interpretation thereof, by any governmental body charged with the administration thereof, shall make it unlawful for the Bank to find or maintain its funding in Eurodollars of any portion of the Borrowings subject to the LIBOR Page 19 of 23 2 Interest Period Election or otherwise to give effect to Bank's obligations as contemplated hereby, (i) Bank may, by written notice to Borrower, declare Bank's obligations in respect of the LIBOR Interest Period Election to be terminated forthwith, and (ii) the LIBOR Interest Period Election with respect to Bank shall forthwith cease to be in effect, and interest shall from and after such date be calculated at a rate per annum equal to the Bank's Prime Rate minus 50 basis points. If at any time during the term hereof, Borrower fails to designate a LIBOR Interest Period and Borrower has not elected another LIBOR Interest Period, Bank may assume that Borrower has elected a LIBOR Interest Period equal to 30 days. As used herein, the following terms will have the meanings set forth below: (a) "Effective Date" means the date on which a LIBOR Interest Period Election will begin. (b) "LIBOR Interest Period" means, with respect to a Borrowing, a period of 30, 60, 90 or 120 days (at Borrower's option) commencing on a business day selected by the Borrower pursuant to this Note. Such LIBOR Interest Period shall end on the day in the succeeding calendar month which corresponds numerically to the beginning day of such LIBOR Interest Period, provided, however, that if there is no such numerically corresponding day in such succeeding month, such LIBOR Interest Period shall end on the last business day of such succeeding month. If a LIBOR Interest Period would otherwise end on a day which is not a business day, such LIBOR Interest Period shall end on the next succeeding business day, provided, however, that if said next succeeding business day falls in a new month, such LIBOR Interest Period shall end on the immediately preceding business day. (c) "LIBOR Interest Period Election" means the election made by Borrower of a LIBOR Interest Period equal to any of 30, 60, 90 or 120 days as chosen by Borrower. (d) "LIBOR Rate" means the rate (adjusted for reserves if Bank is required to maintain reserves with respect to relevant advances) being asked on an amount of Eurodollar deposits equal to the amount of Borrowings subject to a LIBOR Interest Period Election on the first day of a LIBOR Interest Period and which has a maturity corresponding to the maturity of the LIBOR Interest Period, as reported by the TELERATE rate reporting system (or any successor) as determined by Bank by noon on the Effective Date of the LIBOR Interest Period. Each determination by Bank of the LIBOR Rate shall be conclusive in the absence of manifest error. Interest will be payable in immediately available funds at the principal office of the Bank set forth above, at the end of such LIBOR Interest Period. Bank may, at its option, charge such interest to the Borrower's account with the Bank. Those amounts shall thereupon constitute Obligations hereunder and shall thereafter accrue interest as provided for in this Agreement. Interest will be calculated based on a 360 day year and charged for the actual number of days elapsed. Principal shall be due and payable on the Due Date. Principal and interest payments shall be made at Bank's address set forth above unless otherwise designated by Holder in writing. The Borrower certifies that the proceeds of this loan are to be used for working capital needs and to support standby letters of credit. If this note is a renewal, in whole or in part, of a previous Obligation, the acceptance by Bank of this note shall not effectuate a payment but rather a continuation of the previous Obligation. Bank may charge and the Borrower agrees to pay a note processing fee of $25.00 on the above Effective Date. Page 20 of 23 3 Events of Default: This note shall be and become immediately due and payable at the option of the Holder, without any demand or notice whatsoever, upon the occurrence of any of the following described events, each of which shall constitute a default: 1) Any failure to make any payment when due of the principal or interest on this note or the occurrence of any event of default as therein defined on any other Obligations of the Borrower. 2) The dissolution of the Borrower. 3) Any failure to submit to Holder (a) quarterly compiled financial statements of Borrower within 45 days after the last day of each fiscal quarter of Borrower or (b) annual reviewed financial statements of Borrower within 90 days after the last day of each fiscal year of Borrower. 4) An assignment for the benefit of the creditors of, or the commencement of any bankruptcy, receivership, insolvency, reorganization, or liquidation proceedings by or against the Borrower or any endorser or guarantor hereof. Upon the occurrence of an Event of Default herein described Holder may, at its option declare this Note and all other Obligations of the Borrower, to be fully due and payable in their aggregate amount together with accrued interest plus any applicable prepayment premiums, fees, and charges. If any payment is not paid when due (whether by acceleration or otherwise) or within 10 days thereafter, the Borrower agrees to pay to Holder a late payment fee as provided for in any loan agreement or 5% of the payment amount, whichever is greater with a minimum fee of $20.00. After an Event of Default, the Borrower agrees to pay to Holder a fixed charge of $25.00, or the Borrower agrees that Holder may, without notice, increase the above stated interest rate by 6%, whichever is greater. Under no circumstances shall said interest rate be raised to a rate which shall be in excess of the maximum rate of interest allowable under the state and/or federal usury laws in force at the time of such change. Borrower may not prepay any portion of this note prior to the expiration of LIBOR Interest Period. ENTIRE AGREEMENT: The Borrower agrees that there are no conditions or understandings which are not expressed in this note and the documents referred to herein. WAIVER: No failure on the part of Holder to exercise any of its rights hereunder shall be deemed a waiver of any such rights or of any default. Demand, presentment, protest, notice of dishonor, notice of protest and notice of default are hereby waived. JURY WAIVER: THE BORROWER, AND ANY ENDORSER OR GUARANTOR HEREOF, WAIVE THE RIGHT TO A TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY. The declaration of invalidity of any provision of this note shall not affect any part of the remainder of the provisions. This Note amends and restates the terms and provisions of that certain Revolving Note, dated November 21, 1994, in the original principal amount of $5,000,000 and is delivered in substitution for and not in repayment of such Note. Page 21 of 23 4 Warrant of attorney: The Borrower, jointly and severally, authorizes any attorney-at-law to appear in any court of record after maturity of this note, whether by acceleration or otherwise, waive the issuance and service of process and to confess judgment against them in favor of the Holder for the principal sum due hereon together with interest, charges, court costs and attorney's fees, and to waive and release all errors, rights of appeal, exemptions and stays of execution. This warrant of attorney to confess judgment shall be construed under the laws of the State of Ohio. WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. LSI INDUSTRIES INC. By: ------------------------ Its: ------------------------ Page 22 of 23 EX-11 4 EXHIBIT 11 1 EXHIBIT 11 LSI INDUSTRIES INC. STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE)
Three Months Ended Six Months Ended December 31 December 31 1995 1994 1995 1994 ------- ------ ------- ------ NET INCOME Continuing operations $ 2,693 $2,159 $ 4,887 $4,008 Discontinued operations (1,500) -- (1,500) -- ------- ------ ------- ------ Net income $ 1,193 $2,159 $ 3,387 $4,008 ======= ====== ======= ====== AVERAGE SHARES OUTSTANDING Weighted average shares outstanding during the period 7,622 7,514 7,602 7,496 Common Share Equivalents: Common Shares to be issued under Stock Option Plan 384 257 378 264 ------- ------ ------- ------ Average Shares Outstanding 8,006 7,770 7,980 7,760 ======= ====== ======= ====== NET INCOME PER SHARE Continuing operations $ .34 $ .28 $ .61 $ .52 Discontinued operations (.19) -- (.19) -- ------- ------ ------- ------ Net income per share $ .15 $ .28 $ .42 $ .52 ======= ====== ======= ======
Note: Calculated using the "Treasury Stock" method as if options were exercised and the funds were used to purchase Common Shares at the average market price during the period. Page 23 of 23 EX-27 5 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q FOR THE SECOND QUARTER ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. U.S. DOLLARS 6-MOS JUN-30-1995 DEC-31-1995 1 1,917 0 29,792 262 20,862 53,714 30,344 10,093 75,284 34,925 0 0 0 8,075 23,936 75,284 81,443 81,443 55,677 17,627 16 0 350 7,773 2,886 4,887 (1,500) 0 0 3,387 0.42 0.42
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