10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

X	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2018.
	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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  YES    X     NO ____

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES    X      NO ____

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [    ]	Accelerated filer [ X ]
Non-accelerated filer [    ]	Smaller reporting company [    ]
Emerging growth company[    ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ____  NO    X

As of October 25, 2018 there were 26,025,256 shares of the registrant's common stock, no par value per share, outstanding.

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2018

INDEX

			Begins on Page
PART I.  Financial Information
	ITEM 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Balance Sheets	4
		Condensed Consolidated Statements of Cash Flows	6
		Notes to Condensed Consolidated Financial Statements	7
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	22
	ITEM 4.	Controls and Procedures	23
PART II.  Other Information
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
	ITEM 6.	Exhibits	24
Signatures			24

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995

This Form 10-Q 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, unexpected difficulties in integrating acquired businesses, the ability to retain key employees of acquired businesses, unfavorable economic and market conditions, the results of asset impairment assessments and the 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 SEC constitute risks and uncertainties that may affect the financial performance of the Company and are incorporated herein by reference.  The Company does not undertake and hereby disclaims any duty to update any forward-looking statements to reflect subsequent events or circumstances.

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PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended
	September 30
(In thousands, except per share data)	2018			2017
Net sales	$	84,957		$	87,466
Cost of products and services sold		63,541			63,763
Restructuring costs		155			--
Gross profit		21,261			23,703
Selling and administrative expenses		18,327			20,517
Impairment of goodwill		--			28,000
Operating income (loss)		2,934			(24,814	)
Interest (income)		(14	)		(8	)
Interest expense		532			411
Income (loss) before income taxes		2,416			(25,217	)
Income tax expense (benefit)		667			(9,588	)
Net income (loss)	$	1,749		$	(15,629	)
Earnings (Loss) per common share (see Note 4)
Basic	$	0.07		$	(0.61	)
Diluted	$	0.07		$	(0.61	)
Weighted average common shares outstanding
Basic		26,032			25,791
Diluted		26,365			25,791

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 3

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except shares)	September 30,			June 30,
	2018			2018
ASSETS
Current Assets
Cash and cash equivalents	$	4,162		$	3,178
Accounts receivable, less allowance for doubtful accounts of  $363 and $409, respectively		59,781			50,609
Inventories		49,580			50,994
Refundable income taxes		1,197			1,784
Other current assets		3,625			3,516
Total current assets		118,345			110,081
Property, Plant and Equipment, at cost
Land		6,718			6,470
Buildings		35,984			35,961
Machinery and equipment		77,658			77,108
Construction in progress		1,261			1,340
		121,621			120,879
Less accumulated depreciation		(79,098	)		(77,176	)
Net property, plant and equipment		42.523			43,703
Goodwill		30,538			30,538
Other Intangible Assets, net		34,718			35,409
Other Long-Term Assets, net		9,420			9,786
Total assets	$	235,544		$	229,517

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 4

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			June 30,
(In thousands, except shares)	2018			2018
LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	23,774		$	17,927
Accrued expenses		21,949			24,272
Total current liabilities		45,723			42,199
Long-Term Debt		46,152			45,360
Other Long-Term Liabilities		2,606			2,707
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued		--			--
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 25,799,257 and 25,641,913 shares, respectively		124,871			124,104
Treasury shares, without par value;		(1,845	)		(2,110	)
Deferred compensation plan		1,869			2,133
Retained earnings		16,168			15,124
Total shareholders’ equity		141,063			139,251
Total liabilities & shareholders’ equity	$	235,544		$	229,517

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 5

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)	Three Months Ended
	September 30
	2018			2017
Cash Flows from Operating Activities
Net income (loss)	$	1,749		$	(15,629	)
Non-cash items included in net income:
Depreciation and amortization		2,643			2,572
Deferred income taxes		85			(10,815	)
Impairment of goodwill		--			28,000
Deferred compensation plan		127			160
Stock compensation expense		551			984
Issuance of common shares as compensation		90			78
Loss on disposition of fixed assets		--			(31	)
Allowance for doubtful accounts		(19	)		49
Inventory obsolescence reserve		766			143
Changes in certain assets and liabilities
Accounts receivable		(4,218	)		(5,421	)
Inventories		(3,519	)		683
Refundable income taxes		587			775
Accounts payable		5,723			(1,559	)
Accrued expenses and other		(3,172	)		(3,133	)
Customer prepayments		795			419
Net cash flows provided by (used in) operating activities		2,188			(2,725	)
Cash Flows from Investing Activities
Proceeds from the sale of assets		--			1,527
Purchases of property, plant and equipment		(648	)		(498	)
Net cash flows (used in) provided by investing activities		(648	)		1,029
Cash Flows from Financing Activities
Payments of long-term debt		(23,039	)		(22,247	)
Borrowings of long-term debt		23,831			24,411
Cash dividends paid		(1,296	)		(1,286	)
Shares withheld for employees taxes		(52	)		(110	)
Purchase of treasury shares		--			(106	)
Exercise of stock options		--			115
Net cash flows (used in) provided by financing activities		(556	)		777
Increase (Decrease) in cash and cash equivalents		984			(919	)
Cash and cash equivalents at beginning of period		3,178			3,039
Cash and cash equivalents at end of period	$	4,162		$	2,120

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these financial statements.

Page 6

 LSI INDUSTRIES INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and 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 September 30, 2018, the results of its operations for the three month periods ended September 30, 2018 and 2017, and its cash flows for the three month periods ended September 30, 2018 and 2017. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2018 Annual Report on Form 10-K.  Financial information as of June 30, 2018 has been derived from the Company’s audited consolidated financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2018 Annual Report on Form 10-K.  Significant changes to our accounting policies as a result of adopting ASU-2014-09 “Revenue from Contracts with Customers” (Topic 606) are discussed below.

Revenue Recognition: 

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within 30 to 90 days from the shipping date, depending on our terms with the customer. The Company offers standard warranties that do not represent separate performance obligations.

Installation is a separate performance obligation, except for our digital signage products.  For digital signage products, installation is not a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is not always responsible for installation of products it sells and has no post-installation responsibilities other than standard warranties. 

A number of the Company's products are highly customized. As a result, these customized products do not have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does not accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is no alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

● Customer specific printed graphic branding

● Electrical components based on customer specifications

● Digital signage and related media content

The Company also offers installation services. Installation revenue is recognized over time as our customer simultaneously receives and consumes the benefits provided through the installation process.

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the contract.

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Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because we believe it best depicts the nature, amount, and timing of our revenue and cash flows. The table presents a reconciliation of the disaggregation by reportable segments.

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	54,249	$	17,694
Products and services transferred over time		7,183		5,831
	$	61,432	$	23,525

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Type of Product and Services
New Technology Products	$	51,305	$	2,402
Legacy Products		9,076		15,964
Turnkey Services and Other		1,051		5,159
	$	61,432	$	23,525

New technology products include LED lighting and controls, electronic circuit boards, and digital signage solutions. Legacy products include lighting fixtures utilizing light sources other than LED technology and printed two and three dimensional graphic products. Turnkey services and other includes installation services along with shipping and handling charges.

Practical Expedients and Exemptions

● The Company’s contracts with customers have an expected duration of one year or less, as such we apply the practical expedient to expense sales commissions as incurred, and have omitted disclosures on the amount of remaining performance obligations.

● Shipping costs that are not material in context of the delivery of products are expensed as incurred.

● The Company’s accounts receivable balance represents the Company’s unconditional right to receive consideration from its customers with contracts. Payments are due within 30 to 90 days of completion of the performance obligation and invoicing, therefore, does not contain significant financing components.

● The Company collects sales tax and other taxes concurrent with revenue-producing activities and are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

New Accounting Pronouncements:

On July 1, 2018, the Company adopted ASU 2014-09. “Revenue from Contracts with Customers,” (Topic 606) using the modified retrospective adoption method which requires a cumulative effect adjustment to the opening balance of retained earnings. This approach was applied to contracts that were not completed as of June 30, 2018. Results for reporting periods beginning July 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to beginning retained earnings of $591,000 on July 1, 2018 due to the cumulative impact of adopting Topic 606, as described below.

	Balance as of June 30, 2018		Adjustments			Opening Balance as of July 1, 2018
Assets:
Accounts receivable, net		50,609		4,935			55,544
Inventories, net		50,994		(4,167	)		46,827
Other long-term assets, net		9,786		(177	)		9,609
Stockholders' Equity:
Retained earnings		15,124		591			15,715

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, “Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after December 15, 2018, or the Company’s fiscal year 2020, with early adoption permitted. The Company is currently evaluating the impact the amended guidance will have on its financial statements.  

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.  No items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements other than noted below.

On October 29, 2018, The Company announced that it will permanently close its New Windsor, New York manufacturing facility. The facility manufactures indoor lighting products and is included in the results of the Lighting Segment. Production will be transferred to the Company’s Erlanger, Kentucky and Blue Ash, Ohio facilities, also included in the Lighting Segment. The New Windsor facility has a workforce of 140 employees.

On October 15, 2018, the Board of Directors of the Company appointed James A. Clark as the Company’s Chief Executive Officer and President. Mr. Clark entered into an Employment Agreement as of October 16, 2018 which provides that his employment with the Company shall begin on November 1, 2018. The Employment Agreement also defines his compensation and benefit package.

Page 8

Reclassifications:

Certain prior year amounts have been reclassified to conform to the current year presentation within the cash flows from operating activities section and cash flows from financing activities section of the statement of cash flows. These reclassifications have no impact on net income or earnings per share.

NOTE 3 - SEGMENT REPORTING INFORMATION

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s two operating segments are Lighting and Graphics, with one executive team under the new organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

The Lighting Segment includes outdoor and indoor lighting utilizing both traditional and LED light sources that have been fabricated and assembled for the Company’s markets, primarily petroleum / convenience stores, automotive dealerships, quick-service restaurants, grocery and pharmacy store, and retail/national accounts. The Company also addresses lighting product customers through the commercial industrial, stock and flow, and renovation channels. The Lighting Segment also includes the design, engineering, and manufacturing of electronic circuit boards, assemblies and sub-assemblies used to manufacture certain LED light fixtures and sold directly to customers.

Segment also includes the design, engineering, and manufacturing of electronic circuit boards, assemblies and sub-assemblies used to manufacture certain LED light fixtures and sold directly to customers.

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements such as traditional graphics, interior branding, electrical and architectural signage, active digital signage along with the management of media content related to digital signage, LED video screens, and menu board systems that are either digital or traditional by design. These products are used in visual image programs in several markets including, but not limited to the petroleum / convenience store market, multi-site retail operations, banking, and restaurants. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item.  These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

There was no concentration of consolidated net sales in the three months ended September 30, 2018 or 2017.  There was no concentration of accounts receivable at September 30, 2018 or June 30, 2018.

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Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of September 30, 2018 and September 30, 2017:

	Three Months Ended
(In thousands)	September 30
	2018			2017
Net Sales:
Lighting Segment	$	61,432		$	68,428
Graphics Segment		23,525			19,038
	$	84,957		$	87,466
Operating Income (Loss):
Lighting Segment	$	3,850		$	(22,930	)
Graphics Segment		2,387			1,476
Corporate and Eliminations		(3,303	)		(3,360	)
	$	2,934		$	(24,814	)
Capital Expenditures:
Lighting Segment	$	276		$	261
Graphics Segment		266			182
Corporate and Eliminations		106			55
	$	648		$	498
Depreciation and Amortization:
Lighting Segment	$	1,990		$	1,901
Graphics Segment		395			379
Corporate and Eliminations		258			292
	$	2643		$	2,572

	September 30, 2018		June 30, 2018
Identifiable Assets:
Lighting Segment	$	173,254	$	172,799
Graphics Segment		45,493		39,881
Corporate and Eliminations		16,797		16,837
	$	235,544	$	229,517

The segment net sales reported above represent sales to external customers.  Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses. Identifiable assets are those assets used by each segment in its operations.

The Company records a 10% mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

	Three Months Ended
	September 30
(In thousands)	2018		2017
Lighting Segment inter-segment net sales	$	409	$	715
Graphics Segment inter-segment net sales	$	31	$	31

The Company’s operations are located solely within the United States. As a result, the geographic distribution of the Company’s net sales and long-lived assets originate within the United States.

Page 10

NOTE 4 - EARNINGS PER COMMON SHARE

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data):

	Three Months Ended
	September 30
	2018		2017
BASIC EARNINGS (LOSS) PER SHARE
Net income (loss)	$	1,749	$	(15,629	)
Weighted average shares outstanding, net of treasury shares (a)		25,752		25,505
Weighted average vested restricted stock units outstanding		53		41
Weighted average shares outstanding in the Deferred Compensation Plan		227		245
Weighted average shares outstanding		26,032		25,791
Basic earnings (loss) per share	$	0.07	$	(0.61	)
DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss)	$	1,749	$	(15,629	)
Weighted average shares outstanding
Basic		26,032		25,791
Effect of dilutive securities (b):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		333		--
Weighted average shares outstanding (c)		26,365		25,791
Diluted earnings (loss) per share	$	0.07	$	(0.61	)

(a) Includes shares accounted for like treasury stock.

(b) Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

(c) Options to purchase 3,146,466 common shares and 3,791,936 common shares at September 30, 2018 and 2017, respectively, were not included in the computation of the three month period for diluted earnings (loss) per share, respectively, because the exercise price was greater than the average fair market value of the common shares. For the three months ended September 30, 2017, the effect of dilutive securities was not included in the calculation of diluted earnings (loss) per share because there was a net operating loss for the period.

Page 11

NOTE 5 - INVENTORIES

The following information is provided as of the dates indicated:

	September 30,		June 30,
(In thousands)	2018		2018
Inventories:
Raw materials	$	33,131	$	31,795
Work-in-process		1,937		3,833
Finished goods		14,512		15,366
Total Inventories	$	49,580	$	50,994

NOTE 6 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	September 30,		June 30,
(In thousands)	2018		2018
Accrued Expenses:
Compensation and benefits	$	5,668	$	9,394
Customer prepayments		1,865		1,070
Accrued sales commissions		1,776		2,274
Accrued warranty		7,095		6,876
Other accrued expenses		5,545		4,658
Total Accrued Expenses	$	21,949	$	24,272

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company may first assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than not that goodwill and indefinite-lived assets are not impaired, no further testing is required. If it is determined more likely than not that goodwill and indefinite-lived assets are impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.  Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities may signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of three reporting units that contain goodwill. There are two reporting units within the Lighting Segment and one reporting unit within the Graphics Segment. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but not limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

Page 12

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

Goodwill
(In thousands)	Lighting			Graphics
	Segment			Segment			Total
Balance as of June 30, 2018
Goodwill	$	94,564		$	28,690		$	123,254
Accumulated impairment losses		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of June 30, 2018	$	29,373		$	1,165		$	30,538
Balance as of September 30, 2018
Goodwill	$	94,564			28,690			123,254
Accumulated impairment losses		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of September 30, 2018	$	29,373		$	1,165		$	30,538

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

	September 30, 2018
Other Intangible Assets	Gross
(In thousands)	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	10,525	$	25,038
Patents		338		226		112
LED technology firmware, software		16,066		11,941		4,125
Trade name		2,658		637		2,021
Total Amortized Intangible Assets		54,625		23,329		31,296
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	58,047	$	23,329	$	34,718

	June 30, 2018
Other Intangible Assets	Gross
(In thousands)	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	10,011	$	25,552
Patents		338		217		121
LED technology firmware, software		16,066		11,801		4,265
Trade name		2,658		609		2,049
Total Amortized Intangible Assets		54,625		22,638		31,987
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	58,047	$	22,638	$	35,409

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(In thousands)	Amortization Expense of Other Intangible Assets
	September 30, 2018		September 30, 2017
Three Months Ended	$	691	$	690

The Company expects to record annual amortization expense as follows:

(In thousands)
2019	$	2,069
2020	$	2,687
2021	$	2,682
2022	$	2,460
2023	$	2,412
After 2023	$	18,986

NOTE 8 - REVOLVING LINE OF CREDIT

In February 2017, the Company amended its secured line of credit to a $100 million facility. The line of credit expires in the third quarter of fiscal 2022. Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, or at the bank’s base lending rate, at the Company’s option.  The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between 125 and 250 basis points depending upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the line of credit agreement. The increment over LIBOR borrowing rate will remain at 175 basis points for the next twelve months.  The fee on the unused balance of the $100 million committed line of credit is 20 basis points.  Under the terms of this line of credit, the Company has agreed to a negative pledge of real estate assets and is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum fixed charge coverage ratio. As of September 30, 2018, there was $46.2 million borrowed against the line of credit, and $53.8 million was available as of that date. Based on the terms of the line of credit and the maturity date, the debt has been classified as long term.

The Company is in compliance with all of its loan covenants as of September 30, 2018.

NOTE 9 - CASH DIVIDENDS

The Company paid cash dividends of $1,296,000 and $1,286,000 in the three months ended September 30, 2018 and 2017, respectively. Dividends on restricted stock units in the amount of $31,553 and $29,106 were accrued as of September 30, 2018 and 2017, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In November 2018, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 27, 2018 to shareholders of record as of November 16, 2018. The indicated annual cash dividend rate is $0.20 per share.

NOTE 10 - EQUITY COMPENSATION

The Company’s equity compensation plan, the 2012 Stock Incentive Plan (“the 2012 Plan”), was approved by shareholders in November 2012. The 2012 Plan covers all of the Company’s full-time employees, outside directors and certain advisors and replaced all previous equity compensation plans. In November 2016, the Company’s shareholders approved an amendment to the 2012 Plan that added 1,600,000 shares to the plan and implemented the use of a fungible share ratio that consumes 2.5 available shares for every full value share awarded by the Company as stock compensation. The 2012 Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, performance stock units, and other stock-based awards. Stock option grants or stock awards made pursuant to the 2012 Plan are granted at fair market value at the date of option grant or stock award.  

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Stock option grants may be service-based or performance-based.  Service-based options granted during fiscal year 2017 and prior fiscal years generally have a four year ratable vesting period beginning one year after the date of grant. Service-based options granted during fiscal year 2018 have a three year ratable vesting period beginning one year after the date of grant. The maximum exercise period of stock options granted under the 2012 Plan is ten years. Restricted Stock Units (RSUs) granted prior to fiscal year 2018 have a four year ratable vesting period. RSUs granted during fiscal year 2018 have a three year ratable vesting period. The RSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. If a stock option or RSU holder’s employment with the Company terminates by reason of death, disability or retirement, as defined in the Plan, the Plan generally provides for acceleration of vesting.  

In the first quarter of fiscal 2019, the Company granted Performance Stock Units (PSUs). PSUs are full value awards and consume the pool of available shares at the fungible rate of 2.5 for every full share awarded. The vesting of the PSUs is subject to the achievement of Return on Net Assets (RONA) and EBITDA objectives over a three year performance cycle. If certain one year performance objectives are met, one-third of the PSU’s will vest and be released. If the one year performance objectives are not met, the entire PSU awards may be earned over the remaining three-year performance cycle.

The Company has a non-qualified deferred compensation plan providing for both Company contributions and participant deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in shares of common stock of the Company. The Company also awards its directors shares of common stock as part of their compensation.  Stock compensation awards are made in the form of newly issued common shares of the Company.   

In the first quarter of fiscal 2019, the Company granted 422,900 serviced-based stock options with an exercise price of $4.94 and 134,350 PSUs at a fair value of $4.94. In the first quarter of fiscal 2018, the Company granted 724,037 service-based and performance-based stock options with an exercise price of $5.92 and 91,490 Restricted Stock Units with a fair value of $5.92. Stock compensation expense was $551,000 and $984,000 in the first quarter of fiscal 2019 and 2018, respectively.

NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION

(In thousands)	Three Months Ended September 30
	2018			2017
Cash payments:
Interest	$	518		$	382
Income taxes	$	(39	)	$	--
Non-cash investing and financing activities:
Issuance of common shares as compensation	$	90		$	78
Issuance of common shares to fund deferred compensation plan	$	127		$	191

NOTE 12 - COMMITMENTS AND CONTINGENCIES

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

The Company may occasionally issue a standby letter of credit in favor of third parties. As of September 30, 2018, there were no such standby letters of credit issued.

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NOTE 13 – SEVERANCE COSTS

The activity in the Company’s Accrued Severance Liability is as follows for the periods indicated:

	Three			Three			Fiscal
	Months Ended			Months Ended			Year Ended
(In thousands)	September 30,			September 30,			June 30,
	2018			2017			2018
Balance at beginning of the period	$	1,772		$	235		$	235
Accrual of expense		--			--			1,900
Payments		(197	)		(159	)		(363	)
Adjustments		--			--			—
Balance at end of the period	$	1,575		$	76		$	1,772

On April 23, 2018, the Company’s Board of Directors announced the appointment of an interim Chief Executive Officer (CEO) and Chief Operating Officer in connection with the departure of Dennis Wells, the Company’s former CEO. The $1,772,000 severance liability reported as of June 30, 2018 represents the severance benefits Mr. Wells is entitled to receive under his employment agreement. Of the total $1,575,000 reported as of September 30, 2018, $590,000 has been classified as a current liability and will be paid out over the next twelve months. The remaining $985,000 has been classified as a long-term liability.

NOTE 14 – RESTRUCTURING COSTS

In the first quarter of fiscal 2018, management approved the closure of its 12,000 square foot leased facility in Hawthorne, California. The facility was used as a warehouse and for light assembly of light fixtures. The Company will move the light assembly to its Blue Ash, Ohio facility. The restructuring charges consist primarily of transportation costs to move inventory to Blue Ash, the impairment of equipment, costs to restore the leased facility, and severance benefits. The Company also incurred $435,000 related to the write-down of inventory which is not included in the table below. All restructuring costs are reported in cost of sales in the Lighting Segment.

The following table presents information about restructuring costs for the periods indicated:

	Three		Three
	Months Ended		Months Ended
(In thousands)	September 30,		September 30,
	2018		2017
Severance benefits	$	19	$	--
Moving Costs		53		--
Impairment of fixed assets and accelerated depreciation		43		--
Facility Repairs		40		--
Total	$	155	$	--

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The following table presents a roll forward of the beginning and ending liability balances related to the restructuring costs:

(In thousands)
	Balance as of June 30, 2018		Restructuring Expense		Payments		Adjustments		Balance as of September 30, 2018
Severance and termination benefits	$	--	$	19	$	--	$	--	$	19
Other		--		93		9		--		84
Total	$	--	$	112	$	9	$	--	$	103

NOTE 15 – INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. In the first quarter of fiscal 2018, a deferred tax asset of $10.7 million was created as a result of the impairment of goodwill in the Lighting reporting unit.

The Tax Cuts and Jobs Act (the “Act”) was signed into law in December 2017 and makes numerous changes to the Internal Revenue Code. Among other changes, the Act reduces the U.S. corporate income tax rate to 21% effective January 1, 2018. Because the Act became effective mid-way through the Company’s fiscal 2018 tax year, the Company had a U.S. statutory income tax rate of 34% in the first quarter of fiscal 2018, before the new tax law was enacted, and will have a 21% U.S statutory income tax rate for fiscal years 2019 and after.

	Three Months Ended
	September 30
	2018			2017
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate		23.0	%		33.7	%
Uncertain tax positions		1.3			(0.2	)
Difference between deferred and current tax rate related to the impairment of goodwill		--			4.8
Shared based compensation		3.3			--
Other		--			(0.3	)
Effective tax rate		27.6	%		38.0	%

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s condensed consolidated financial statements, accompanying notes and the “Safe Harbor” Statement, each as appearing earlier in this report, should be referred to in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Net Sales by Business Segment

(In thousands)	Three Months Ended
	September 30
	2018		2017
Lighting Segment	$	61,432	$	68,428
Graphics Segment		23,525		19,038
	$	84,957	$	87,466

Operating Income (Loss) by Business Segment

(In thousands)	Three Months Ended
	September 30
	2018			2017
Lighting Segment	$	3,850		$	(22,930	)
Graphics Segment		2,387			1,476
Corporate and Eliminations		(3,303	)		(3,360	)
	$	2,934		$	(24,814	)

Summary Comments

Fiscal 2019 first quarter net sales of $84,957,000 decreased $2.5 million or 2.9% as compared to first quarter fiscal 2018. Net sales were favorably influenced by increased net sales of the Graphics Segment (up $4.5 million or 23.6%) more than offset by decreased net sales of the Lighting Segment (down $7.0 million or 10.2%).

Fiscal 2019 first quarter operating income of $2.9 million increased $27.7 million from an operating loss of $(24,814,000) in the first quarter of fiscal 2018. The $27.7 million change from an operating loss in fiscal 2018 to operating income in fiscal 2019 was mostly the result of a pre-tax $28 million goodwill impairment charge in the Lighting Segment in fiscal 2018. Adjusted fiscal 2019 operating income of $3.5 million (which reflects the removal of plant closure costs) increased 10.6% from adjusted fiscal 2018 operating income of $3.2 (which reflects the removal of the goodwill impairment). Refer to “Non-GAAP Financial Measures” below. The increase in adjusted operating income was the result of decreased net sales and decreased gross profit more than offset by a decrease in selling and administrative expenses. Also contributing to the period-over-period results is a one-time adjustment to the Company’s paid-time-off policy in fiscal 2019 which resulted in a favorable pre-tax adjustment to earnings of $1.2 million.

On October 29, 2018, The Company announced that it will permanently close its New Windsor, New York manufacturing facility. The facility manufactures indoor lighting products and is included in the results of the Lighting Segment. Production will be transferred to the Company’s Erlanger, Kentucky and Blue Ash, Ohio facilities, also included in the Lighting Segment. The New Windsor facility has a workforce of 140 employees. The closure is part of ongoing actions to align the Company’s supply chain to more cost effectively serve the changing requirements of the lighting market. The closure will also allow the Company to improve utilization of existing manufacturing capacity. The transfer of production is expected to be completed by June 30, 2019.

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Non-GAAP Financial Measures

The Company believes it is appropriate to evaluate its performance after making adjustments to the as-reported U.S. GAAP operating income, net income, and earnings per share. Adjusted operating income, net income and earnings per share, which exclude the impact of goodwill impairment and restructuring and plant closure costs, are non-GAAP financial measures. We believe that these adjusted supplemental measures are useful in assessing the operating performance of our business. These supplemental measures are used by our management, including our chief operating decision maker, to evaluate business results. We exclude these items because they are not representative of the ongoing results of operations of our business. Below is a reconciliation of these non-GAAP measures to operating income, net income, and earnings per share for the periods indicated.

(in thousands, unaudited)
	FY 2019		FY 2018
Reconciliation of operating income to adjusted operating income:
Operating income (loss) as reported	$	2,934	$	(24,814	)
Adjustment for goodwill impairment		--		28,000
Adjustment for restructuring, plant closure costs, and related inventory write-downs		590		--
Adjusted operating income	$	3,524	$	3,186

(in thousands, except per share data; unaudited)	First Quarter
	FY 2019			Diluted EPS		FY 2018				Diluted EPS
Reconciliation of net income to adjusted net income:
Net income (loss) and earnings (loss) per share as reported	$	1,749		$	0.07	$	(15,629	)		$	(0.61	)
Adjustment for goodwill impairment, inclusive of the income tax effect		--			--		17,363		(2)	$	0.67
Adjustment for restructuring, plant closure costs, and related inventory write-downs inclusive of the income tax effect		454	(1)		0.01		--				--
Adjusted net income and earnings per share	$	2,203		$	0.08	$	1,734			$	0.07

The income tax effects of the adjustments in the tables above were calculated using the estimated U.S. effective income tax rates for the periods indicated. The income tax effects were as follows (in thousands):

⁽¹⁾ 136

⁽²⁾ 10,637

Results of Operations

THREE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2017

Lighting Segment

(In thousands)	Three Months Ended
	September 30
	2018		2017
Net Sales	$	61,432	$	68,428
Gross Profit	$	15,475	$	18,673
Operating Income (loss)	$	3,850	$	(22,930	)

Lighting Segment net sales of $61,432,000 in the first quarter of fiscal 2019 decreased 10.2% from fiscal 2018 same period net sales of $68,428,000. The Lighting Segment’s net sales of light fixtures having solid-state LED technology totaled $49.7 million in the first quarter of fiscal 2019 which represent 91% of total lighting product net sales. There continues to be a reduction in the Company’s traditional lighting sales (metal halide and fluorescent light sources) as customers convert from traditional lighting to light fixtures having solid-state LED technology.

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Gross profit of $15,475,000 in the first quarter of fiscal 2019 decreased $3.2 million or 17.1% from the same period of fiscal 2018, and decreased from 27.0% to 25.0% as a percentage of Lighting Segment net sales (customer plus inter-segment net sales). The Company incurred restructuring and plant closure costs that were recorded in cost of sales related to the closure of its Hawthorne, California facility of $590,000 in fiscal 2019 with no comparable costs in fiscal 2018. The remaining decrease in amount of gross profit is due to the effect of reduced sales volume, competitive pricing pressures, and inflationary pressures of certain commodities, partially offset by manufacturing efficiencies as a result of the Company’s lean initiatives.

Selling and administrative expenses of $11,625,000 in the first quarter of fiscal year 2019 decreased $30 million from the same period of fiscal 2018 selling and administrative expenses of $41,603,000, primarily due to the $28 million goodwill impairment charge in fiscal 2018. When the goodwill impairment charge is removed from fiscal 2018 results, there was a $2.0 million or 14.4% reduction in selling and administrative expenses. The reduction in selling and administrative expenses is mostly driven by lower commission expense which is due to lower sales volume and a reduction of wage and benefit expense.

The Lighting Segment first quarter fiscal 2019 operating income of $3,850,000 increased $26.8 million from an operating loss of $(22,930,000) in the same period of fiscal 2018 primarily due to a $28 million pre-tax goodwill impairment charge. When the impact of the goodwill charge is removed from fiscal 2018 results and the restructuring and plant closure costs of $590,000 are removed from the fiscal 2019 results, fiscal 2019 adjusted operating income of $4,440,000 was $630,000 lower than fiscal 2018 adjusted operating income of $5,070,000. The reduction in sales volume and gross profit was partially offset by lower selling and administrative expenses.   

Graphics Segment

(In thousands)	Three Months Ended
	September 30
	2018		2017
Net Sales	$	23,525	$	19,038
Gross Profit	$	5,782	$	5,063
Operating Income	$	2,387	$	1,476

Graphics Segment net sales of $23,525,000 in the first quarter of fiscal 2019 increased $4.5 million or 23.6% from fiscal 2018 same period net sales of $19,038,000. Most of the increase in sales is from growth in sales to the Petroleum and Quick Service Restaurant markets including digital technology.

Gross profit of $5,782,000 in the first quarter of fiscal 2019 increased $0.7 million or 14.2% from the same period of fiscal 2018. Gross profit as a percentage of segment net sales (customer plus inter-segment net sales) decreased from 26.6% in the first quarter of fiscal 2018 to 24.5% in the first quarter of fiscal 2019. The change in amount of gross profit is due to the net effect of increased net sales (customer plus inter-segment net sales) partially offset by a change in product mix. Also contributing to the year-over-year change in gross profit was a $0.6 million increase in overhead spending mostly driven by an increase in wage expense.

Selling and administrative expenses of $3,395,000 in the first quarter of fiscal 2019 decreased $0.2 million or 5.4% from the same period of fiscal 2018 primarily as a result of decreased wage and benefit expense.

The Graphics Segment first quarter fiscal 2019 operating income of $2,387,000 increased $0.9 million or 61.7% from operating income of $1,476,000 in the same period of fiscal 2018. The net increase of $0.9 million was primarily the net result of increased net sales, increased gross profit, decreased gross profit margin as a percentage of sales, and decreased selling and administrative expenses.

Corporate and Eliminations

(In thousands)	Three Months Ended
	September 30
	2018			2017
Gross Profit (Loss)	$	4		$	(33	)
Operating (Loss)	$	(3,303	)	$	(3,360	)

The gross profit or loss relates to the elimination of intercompany profit in inventory.

Page 20

Administrative expenses of $3,307,000 in the first quarter of fiscal 2019 decreased slightly from the same period of the prior year. The change is primarily the result of a decrease in employee compensation and benefit expense ($0.6 million) offset by an equal an increase in outside service expense ($0.4 million), and a net increase in various other expense categories ($0.2 million).

Consolidated Results

The Company reported $518,000 net interest expense in the first quarter of fiscal 2019 compared to $403,000 net interest expense in the first quarter of fiscal 2019. The change from interest expense from fiscal 2018 to fiscal 2019 is the result of higher interest rates on the Company’s line of credit and higher commitment fees on its unused portion of the line of credit.

The $667,000 income tax expense in the first quarter of fiscal 2019 represents a consolidated effective tax rate of 27.6% influenced by certain permanent book-tax differences and by an expense related to uncertain income tax positions. The $9,588,000 income tax benefit in the first quarter of fiscal 2018 represents a consolidated effective tax rate of 38% influenced by the goodwill impairment.

The Company reported a net income of $1,749,000 in the first quarter of fiscal 2019 compared to a net loss of $(15,629,000) in the same period of the prior year. The change between a net loss in fiscal 2018 to net income in fiscal 2019 is mostly driven by the $28 million pre-tax goodwill impairment charge in fiscal 2018 with no comparable event in fiscal 2019. When the impact of the fiscal 2018 goodwill impairment charge and the fiscal 2019 restructuring and plant costs are removed from the reported results, the fiscal 2019 adjusted net income of $2,203,000 increased $0.5 million or 27% from fiscal 2018 adjusted net income of $1,734,000. The change in adjusted net income is primarily the net result of decreased net sales, decreased gross profit, decreased selling and administrative expenses, increased interest expense, and a lower tax rate. Diluted earnings per share of $0.07 was reported in the first quarter of fiscal 2019 as compared to $(0.61) diluted loss per share in the same period of fiscal 2018. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the first quarter of fiscal 2019 were 26,365,000 shares as compared to 25,791,000 shares in the same period last year.

Liquidity and Capital Resources 

The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be its most important measures of short-term liquidity. For long-term liquidity indicators, the Company believes its ratio of long-term debt to equity and its historical levels of net cash flows from operating activities to be the most important measures.

At September 30, 2018, the Company had working capital of $72.6 million, compared to $67.9 million at June 30, 2018. The ratio of current assets to current liabilities was 2.59 to 1 as compared to a ratio of 2.61 to 1 at June 30, 2018. The $4.7 million increase in working capital from June 30, 2018 to September 30, 2018 was primarily related to the net effect of increased cash and cash equivalents ($1.0 million), increased net accounts receivable ($9.2 million), decreased net inventory ($1.4 million), an increase in accrued expenses ($2.3 million), a decrease in refundable income taxes ($0.6 million), and an increase in accounts payable ($5.8 million). The $4.1 million of the increase in accounts receivable is the result of the adoption of the new revenue guidance. The Company has a strategy of aggressively managing working capital, including reduction of the accounts receivable days sales outstanding (DSO) and reduction of inventory levels, without reducing service to its customers.

The Company generated $2.2 million of cash from operating activities in the first quarter of fiscal 2019 as compared to a use of cash of $2.7 million in the same period of the prior year. This $4.9 million increase in net cash flows from operating activities is primarily the net result of an increase rather than a decrease in accounts payable (favorable change of $7.3 million), a smaller increase in net accounts receivable (favorable change of $1.2 million), an increase rather than a decrease in net inventory (unfavorable change of $4.2 million), a smaller decrease in refundable income taxes (favorable change of $0.2 million), an increase in customer prepayments (favorable change of $0.4 million), and an increase in net income in fiscal 2019 from a net loss in fiscal 2018 offset by several non-cash add-backs (favorable change of $0.4 million).

Net accounts receivable were $59.8 million and $50.6 million at September 30, 2018 and June 30, 2018, respectively. DSO increased to 59 days at September 30, 2018 from 53 days at June 30, 2018. The Company believes that its receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate.

Page 21

Net inventories of $49.6 million at September 30, 2018 decreased $1.4 million from $51.0 million at June 30, 2018. The decrease of $1.4 million is the result of a decrease in gross inventory of $0.9 million and an increase in obsolescence reserves of $0.5 million. Based on a strategy of balancing inventory reductions with customer service and the timing of shipments, net inventory increased 1.8 million in the first quarter of fiscal 2019 in the Graphics Segment which was more than offset by a decrease in net inventory in the Lighting Segment of $3.2 million.

Cash generated from operations and borrowing capacity under the Company’s line of credit is the Company’s primary source of liquidity. The Company has a secured $100 million revolving line of credit with its bank, with $46.1 million of the credit line available as of October 29, 2018. This line of credit is a $100 million five year credit line expiring in the third quarter of fiscal 2022. The Company believes that its $100 million line of credit plus cash flows from operating activities are adequate for the Company’s fiscal 2019 operational and capital expenditure needs. The Company is in compliance with all of its loan covenants.

The Company used cash of $0.7 million related to investing activities in the first quarter of fiscal 2019 as compared to a source of $1.0 million in the same period of the prior year, resulting in an unfavorable change of $1.7 million. Capital expenditures for the first quarter of fiscal 2019 increased $0.2 million to $0.6 million from the same period in fiscal 2018. The Company sold its Woonsocket manufacturing facility for $1.5 million in the first quarter of fiscal 2018 which contributed to the change in cash flow from investing activities from fiscal 2018 to fiscal 2019.

The Company used $0.6 million of cash related to financing activities in the first quarter of fiscal 2019 compared to a source of cash of $0.8 million in the first quarter of fiscal 2018. The $1.3 million unfavorable change in cash flow was the net result of borrowings in excess of payments of long term debt of $1.4 million.

The Company has, or could have, on its balance sheet financial instruments consisting primarily of cash and cash equivalents, short-term investments, revolving lines of credit, and long-term debt. The fair value of these financial instruments approximates carrying value because of their short-term maturity and/or variable, market-driven interest rates.

Off-Balance Sheet Arrangements

The Company has no financial instruments with off-balance sheet risk and has no off-balance sheet arrangements, except for various operating leases. However, none of these operating leases, individually or in the aggregate have or are reasonably likely to have a current effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material.

Cash Dividends

In November 2018, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable November 27, 2018 to shareholders of record as of November 16, 2018. The indicated annual cash dividend rate for fiscal 2019 is $0.20 per share. The Board of Directors has adopted a policy regarding dividends which indicates that dividends will be determined by the Board of Directors in its discretion based upon its evaluation of earnings, cash flow requirements, financial condition, debt levels, stock repurchases, future business developments and opportunities, and other factors deemed relevant.

Critical Accounting Policies and Estimates

A summary of the Company’s significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2018 Annual Report on Form 10-K.

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board issued ASU 2016-02, “Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal and interim periods within those years, beginning after December 15, 2018, or the Company’s fiscal 2020, with early adoption permitted. The Company has not yet determined the impact the amended guidance will have on its financial statements.  

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the Company’s exposure to market risk since June 30, 2017.  Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 13 of the Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

Page 22

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as such term is defined Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We conducted, under the supervision of our management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2018, our disclosure controls and procedures were effective. Management believes that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly presented in all material respects in accordance with GAAP for interim financial statements, and the Company’s Chief Executive Officer and Chief Financial Officer have certified that, based on their knowledge, the condensed consolidated financial statements included in this report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for each of the periods presented in this report.

Changes in Internal Control

During the quarter ended September 30, 2018, the Company enacted additional controls related to the adoption of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, except as otherwise described in this Item 4.

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PART II.  OTHER INFORMATION

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

NONE

ITEM 6.  EXHIBITS

Exhibits:

10.1	Nonqualified Stock Option Agreement for Inducement Awards between the Company and James A. Clark dated November 1, 2018
10.2	Restrictive Covenant and Confidentiality Agreement executed by James A. Clark dated November 1, 2018
31.1	Certification of Principal Executive Officer and Principal Financial Officer required by Rule 13a-14(a)

32.1 Section 1350 Certification of Principal Executive Officer and Principal Financial Officer

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

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:	/s/ James E. Galeese
	James E. Galeese
	Executive Vice President and Chief Financial Officer
	(Principal Executive Officer and Principal Financial Officer)

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EX-10.1

Exhibit 10.1

LSI INDUSTRIES INC.
NONQUALIFIED STOCK OPTION AGREEMENT / INDUCEMENT AWARDS

Summary of Nonqualified Stock Option Grant

LSI Industries Inc., an Ohio corporation (the "Company"), grants to the Grantee named below, in accordance with the terms of this Nonqualified Stock Option Agreement (the "Agreement"), an option to purchase shares of common stock (“Shares”) of the Company at an exercise price per share as described below:

Name of Grantee:	James A. Clark
Number of Underlying Shares:	500,000
Exercise Price Per Share:	$4.40
Grant Date:	November 1, 2018
Expiration Date:	November 1, 2028

Terms of Agreement

1.     Grant of Nonqualified Stock Option. Subject to and upon the terms, conditions, and restrictions set forth in this Agreement, the Company hereby grants to the Grantee as of the Grant Date, an option to purchase Shares at the exercise price per share as set forth above (the “Option”). It is the intent of the Company and the Grantee that the Option will not qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended from time to time. Even though the Option is not granted pursuant to the LSI Industries Inc. Amended and Restated 2012 Stock Incentive Plan, as of November 17, 2016 (the "Plan"), the terms and conditions of the Plan apply to the Option to the same extent as if the Option was awarded pursuant to the Plan, except that the authorized number of Shares provision under Section 5(a) of the Plan and the award limitation provisions under Section 5(c) of the Plan shall not apply to the Option. The applicable terms of the Plan are incorporated by reference in this Agreement. In the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of this Agreement will control. The Grantee acknowledges and agrees that, in addition to continued employment as Chief Executive Officer by the Company, the grant of the Option is additional consideration for, and conditioned upon, Grantee’s execution and delivery of the Restrictive Covenant and Confidentiality Agreement attached hereto as Exhibit I (the “RCCA”). In the event the Company determines that the Grantee has breached any of the covenants or agreements set forth in the RCCA, in addition to any other remedy under the RCCA, the Company shall be entitled, at its option, to cancel and cause the forfeiture of any outstanding unexercised portion of the Option (whether vested or unvested) and any other outstanding awards under the Plan, by written notice to the Grantee.

2.     Vesting of Option.

(a)     Except as otherwise provided in this Agreement, the Option shall vest as follows: (i) 250,000 Shares shall vest in full on November 1, 2021 if Grantee is employed by the Company as the Company’s Chief Executive Officer on such date; (ii) 125,000 Shares shall vest upon (A) satisfaction of the condition that the Grantee shall be employed by the Company as the Company’s Chief Executive Officer on November 1, 2021 (the “CEO Employment Condition”) and (B) the closing price per share of the Company’s common stock on the NASDAQ Global Select Market at any time prior to the Expiration Date shall be equal to or greater than $9.50 per share; and (iii) 125,000 Shares shall vest upon (A) satisfaction of the CEO Employment Condition, and (B) the closing price per share of the Company’s common stock on the NASDAQ Global Select Market at any time prior to the Expiration Date shall be equal to or greater than $15.00 per share. The portion of the Option described in Section 2(a)(i) shall be referred to herein as the “Time Portion.” The portion of the Option described in Sections 2(a)(ii) and 2 (a)(iii) shall be referred to herein as the “Performance Portion.”

(b)     The Time Portion of the Option (but not the Performance Portion of the Option) shall vest in full prior to the date or satisfaction of the conditions in Section 2(a)(i) if: (i) the Grantee satisfies the requirements for Retirement, as defined in the Plan, including separation from employment with the Company; (ii) the Company terminates Grantee’s employment with the Company without Cause (as defined in Grantee’s Employment Agreement with the Company dated October 16, 2018 (the “Employment Agreement”); or (iii) Grantee terminates his employment with the Company for Good Reason (as defined in the Employment Agreement). The Time Portion of the Option shall be exercisable for ninety (90) days following the occurrence of the conditions described in this Section 2(b) or the remaining term of the Option, if shorter.

(c)     The Time Portion of the Option (but not the Performance Portion of the Option) shall vest in full prior to the date or satisfaction of the conditions in Section 2(a)(i), Section 2(a)(ii) and Section 2(a)(iii) upon the occurrence of any of the following: (i) the Grantee dies while in the employ of the Company; (ii) the Grantee has a Disability, as defined in the Plan; or (iii) there is a Change in Control event described in Section 2(g) of the Plan. The Time Portion of the Option shall be exercisable for one year following the occurrence of the conditions described in Section 2(c)(i) and 2(c)(ii) or the remaining term of the Option, if shorter.

(d)     The Committee may, in its sole discretion, accelerate the time at which the Option becomes vested and non-forfeitable to a time prior to the date or satisfaction of the conditions in Section 2(a) or to a time other than provided in Section 2(b) or Section 2(c)(i), (ii) or (iii) on such terms and conditions as it deems appropriate in accordance with the terms and conditions of the Plan.

3.     Forfeiture of Option. Any portion of the Option that has not yet vested pursuant to Section 2 shall be forfeited automatically without further action or notice if the Grantee ceases to be employed by the Company for Cause (as defined in the Employment Agreement) or if such termination of employment is other than as provided in Section 2(b), 2(c) or 2(d) hereof. For the avoidance of doubt, except in connection with a Change of Control event described Section 2(g) of the Plan, the Performance Portion of the Option shall be forfeited automatically without further action or notice if the Grantee ceases to be employed by the Company at a time when neither of the per share closing price conditions set forth in Section 2(a)(ii) and Section 2(a)(iii) have been met.

4.     Exercise and Payment.

(a)     The Option granted under this Agreement shall be exercisable on the date or satisfaction of the conditions in Section 2(a). The Option granted under this Agreement may not be exercised as to less than one hundred (100) Shares at any time.

(b)     The Option may be exercised for the number of Shares specified by Grantee’s delivery of instructions through and in accordance with the procedures maintained on behalf of the Company, accompanied by full payment in the manner and subject to the conditions set forth pursuant to the terms of the Plan for the number of Shares in respect of which it is exercised.  If any applicable law or regulation requires the Company to take any action with respect to the Shares specified in such notice, or if any action remains to be taken under the Articles of Incorporation or Code of Regulations of the Company to effect due issuance of the Shares, then the Company shall take such action and the day for delivery of such stock shall be extended for the period necessary to take such action.

5.     Transferability. The Option may not be transferred and shall not be subject in any manner to assignment, alienation, pledge, encumbrance or charge, unless otherwise provided under the Plan. Any purported transfer or encumbrance in violation of the provisions of this Section 5 shall be void, and the other party to any such purported transaction shall not obtain any rights to or interest in the Option.

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6.     Voting and Other Rights. The Grantee will not have any rights of a shareholder of the Company with respect to the Option until the delivery of the underlying Shares into which the Option is exercised.

7.     Continuous Employment. Unless otherwise specified by the Plan, for purposes of this Agreement, the continuous employment of the Grantee with the Company shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company, by reason of a leave of absence approved by the Committee.

8.     No Employment Contract. Nothing contained in this Agreement shall confer upon the Grantee any right with respect to continuance of employment by the Company, nor limit or affect in any manner the right of the Company to terminate the employment or adjust the compensation of the Grantee.

9.     Relation to Other Benefits. Any economic or other benefit to the Grantee under this Agreement or the Plan shall not be taken into account in determining any benefits to which the Grantee may be entitled under any profit-sharing, retirement, disability or other benefit or compensation plan maintained by the Company and shall not affect the amount of any life insurance coverage available to any beneficiary under any life insurance plan covering employees of the Company.   

10.     Taxes and Withholding. By his acceptance of this Agreement, the Grantee agrees to reimburse the Company for any taxes required by any government to be withheld or otherwise deducted and paid by the Company with respect to the issuance or disposition of the Shares subject to the Option. In lieu thereof, the Company shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Company to the Grantee. The Company may, in its discretion, hold the stock certificate or certificates to which the Grantee is entitled upon the exercise of the Option as security for the payment of such withholding tax liability, until cash sufficient to pay that liability has been accumulated. In addition, at any time that the Company becomes subject to a withholding obligation under applicable law with respect to the exercise of the Option (the “Tax Date”), except as set forth below, the Grantee may elect to satisfy, in whole or in part, the Grantee’s related personal tax liabilities (an “Election”) by (a) directing the Company to withhold from the Shares issuable in the related exercise either a specified number of Shares or Shares having a specified value (in each case not in excess of the maximum required tax withholding amount), (b) tendering Shares previously issued pursuant to the exercise of an Award or other Shares owned by the Grantee or (c) combining any or all of the foregoing Elections in any fashion. An Election shall be irrevocable. The withheld Shares and other Shares tendered in payment shall be valued at their fair market value on the Tax Date. The Committee may disapprove of any Election, suspend or terminate the right to make Elections or provide that the right to make Elections shall not apply to particular Shares or exercises. The Committee may impose any additional conditions or restrictions on the right to make an Election as it shall deem appropriate, including any limitations necessary to comply with Section 16 of the Exchange Act.

11.     Adjustments. The number and kind of Shares deliverable pursuant to the Option are subject to adjustment as provided in Section 8 of the Plan.   

12.     Compliance with Law. While the Company shall make reasonable efforts to comply with all applicable federal and state securities laws and listing requirements with respect to the Shares that may be delivered pursuant hereto, the Company shall not be obligated to deliver any Shares pursuant to this Agreement if the delivery thereof would result in a violation of any such law or listing requirement.

13.     Amendments. Subject to the terms of the Plan, the Committee may modify this Agreement upon written notice to the Grantee. Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto.

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14.     Severability. In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

15.     Relation to Plan and Employment Agreement. This Agreement is subject to the terms and conditions of the Plan as specified in Section 1. However, in the event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of this Agreement will control. Specifically, without limitation, Sections 2 and 3 of this Agreement shall supersede Section 10(a) of the Plan. This Agreement and the Plan contain the entire agreement and understanding of the parties with respect to the subject matter contained in this Agreement, and supersede all prior written or oral communications, representations and negotiations in respect thereto. For the avoidance of doubt, in the event of any inconsistency between the Employment Agreement and this Agreement, the terms of this Agreement shall govern. Capitalized terms used herein without definition shall have the meanings assigned to them in the Plan. The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of the Option.

16.     Successors and Assigns. Without limiting Section 5, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

17.     No Advice Regarding Award. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the acquisition or sale of the underlying securities. The Grantee is hereby advised to consult with the Grantee’s personal tax, legal or financial advisors regarding the decision to enter into this Agreement before taking any action related to this Agreement.

18.     Governing Law.

(a)     The interpretation, performance, and enforcement of this Agreement, including tort claims, shall be governed by the laws of the State of Ohio, without giving effect to the principles of conflict of laws thereof.

(b)     Any party bringing a legal action or proceeding against another party arising out of or relating to this Agreement may bring the legal action or proceeding only in the United States District Court for the Southern District of Ohio and any of the courts of the State of Ohio, in each case sitting in Cincinnati, Ohio.

(c)     Each of the Company and the Grantee waives, to the fullest extent permitted by law, (i) any objection which it may now or later have to the laying of venue of any legal action or proceeding arising out of or relating to this Agreement brought in any court of the State of Ohio sitting in Cincinnati, Ohio or the United States District Court for the Southern District of Ohio sitting in Cincinnati, Ohio, including, without limitation, a motion to dismiss on the grounds of forum non conveniens or lack of subject matter jurisdiction; and (ii) any claim that any action or proceeding brought in any such court has been brought in an inconvenient forum.

(d)     Each of the Company and the Grantee submits to the exclusive jurisdiction (both personal and subject matter) of (i) the United States District Court for the Southern District of Ohio sitting in Cincinnati, Ohio and its appellate courts, and (ii) any court of the State of Ohio sitting in Cincinnati, Ohio and its appellate courts, for the purposes of all legal actions and proceedings arising out of or related to this Agreement.

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19.     Electronic Delivery. The Grantee hereby consents and agrees to electronic delivery of any documents that the Company may elect to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports, and all other forms of communications) in connection with this Agreement. The Grantee understands that, unless earlier revoked by the Grantee by giving written notice to the Secretary of the Company, this consent shall be effective for the duration of the Agreement. The Grantee also understands that he or she shall have the right at any time to request that the Company deliver written copies of any and all materials referred to above at no charge. The Grantee hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may elect to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature. The Grantee consents and agrees that any such procedures and delivery may be affected by a third party engaged by the Company to provide administrative services related to the Plan. By accepting this award, Grantee acknowledges that a copy of the Plan, Plan Summary and Prospectus, and the Company's most recent Annual Report and Proxy Statement (the "Prospectus Information") either have been received by Grantee or are available for viewing on the Company's intranet site or internet site at www.lsi-industries.com, and consents to receiving this Prospectus Information electronically, or, in the alternative, agrees to contact Debi Lauber at (513) 372-3008 to request a paper copy of the Prospectus Information at no charge. Grantee also represents that she or he is familiar with the terms and provisions of the Prospectus Information. These terms and conditions constitute a legal contract that will bind both Grantee and the Company as soon as Grantee accepts the Award as described above.

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on its behalf by its duly authorized officer and the Grantee has also executed this Agreement, as of the Grant Date.

LSI INDUSTRIES INC.
By:	/S/ Howard E. Japlon
	Name: Howard E. Japlon
	Title: EVP, HR & Legal

GRANTEE
By:	/S/ James A. Clark
	Name: James A. Clark

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Exhibit I

Restrictive Covenant and Confidentiality Agreement

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EX-10.2

Exhibit 10.2

RESTRICTIVE COVENANT and
confidentiality AGREEMENT

November 1, 2018

As a condition of my employment with LSI Industries Inc. (“LSI”), and in consideration of my employment with LSI and the inducement award of stock options by LSI to me, I, James A. Clark, agree to the following provisions of this Restrictive Covenant and Confidentiality Agreement concerning my employment with LSI (“the Agreement”):

1.     AT-WILL EMPLOYMENT

I understand and acknowledge that my employment with LSI is for no specified term and constitutes “At Will” employment. I also understand that any representation to the contrary is unauthorized and not valid unless in writing and signed by the chief human resources officer of LSI. Accordingly, I acknowledge that my employment relationship may be terminated at any time, with or without good cause or for any or no cause, or for any reason or no reason at my option or at the option of LSI, with or without notice. I further acknowledge that LSI may modify job titles, salaries, and benefits from time to time as it deems appropriate or necessary.

2.     CONFIDENTIALITY

A.     “Confidential Information” means any data, information or material (whether in written, oral, graphic, electronic or other form) with respect to LSI’s past, current or anticipated business that is not generally known by the public or in the industry, including confidential or proprietary business information and trade secrets, whether or not such information is marked or otherwise designated as confidential or restricted. Confidential Information does not include any information that: (a) is or becomes part of the public domain or is or becomes publicly available without breach of this agreement by me; (b) I lawfully acquire from a source not under any non-use or confidentiality obligation regarding such information; (c) is disclosed to any third party by or with the permission of LSI without confidentiality restrictions; or, (d) is independently developed by a person who has not received, directly or indirectly, any Confidential Information from any source. Confidential Information does include, but is not limited to:

(i)       Products and processes and their development and performance;

(ii)      Any scientific, engineering, or technical information used during the course of my employment at LSI;

(iii)     Computer software and firmware;

(iv)     Business and financial information, including names of and contact information for customers, prospective customers and suppliers;

(v)     Information relating to manufacturing, purchasing, sourcing, inventories, data processing, personnel, marketing, sales, pricing, costs and quotations; and

(vi)     Information regarding third parties or provided by third parties and known to LSI which LSI is obligated by statute, regulation, license or other agreement not to disclose or to only use for limited purposes.

B.     Nonuse and Nondisclosure. I agree that during and after my employment with LSI, I will hold in the strictest confidence, and take all reasonable precautions to prevent any unauthorized use or disclosure of Confidential Information, and I will not (i) use the Confidential Information for any purpose whatsoever other than for the benefit of LSI in the course of my employment, or (ii) disclose Confidential Information to any third party without the prior written authorization of my supervisor and in compliance with LSI policy regarding the transmittal of Confidential Information. Upon termination of my assignment, my employment, or as requested by my supervisor, I will promptly return all materials containing Confidential Information and copies thereof to LSI. If compelled to produce Confidential Information by applicable law, I shall provide prior written notice of at least seven business days to my supervisor. I agree that I obtain no license, copyright, title or any other ownership rights to any Confidential Information, and that as between LSI and me, LSI retains all Confidential Information as its sole property. I understand that my unauthorized use or disclosure of Confidential Information during my employment may lead to disciplinary action, up to and including immediate termination and legal action by LSI. I understand that my obligations under this section survive the termination of my employment.

C.     Notice of Immunity from Liability for Confidential Disclosure of a Trade Secret to the Government or in a Court Filing. Notwithstanding anything herein to the contrary, pursuant to the Federal Defend Trade Secrets Act of 2016, an individual may not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding if the individual files any document containing the trade secret under seal and does not disclose the trade secret except pursuant to court order. Nothing herein is intended, or should be construed, to affect the immunities created by the Defend Trade Secrets Act of 2016.

D.     Former Employer. I agree that I will not, during my employment with LSI, improperly use or disclose any proprietary information of any former or concurrent employer or other person or entity, and that I will not bring onto the premises of LSI any unpublished document or proprietary information belonging to any such employer, person or entity unless consented to in writing by such employer, person or entity. I also represent and warrant that I am not subject to any agreements with any third person or entity that would limit or affect my ability to work for and on behalf of LSI; provided, however, that if I am subject to such an agreement, then I will strictly abide by such agreement.

3.     NON-COMPETITION AND NON-SOLICITATION

In consideration for LSI’s agreement to employ and compensate me, and/or continue to employ and compensate me, and LSI’s granting of access to me to Confidential Information, and for other good and valuable consideration, the sufficiency of which I acknowledge, I agree as follows:

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A.     By virtue of my employment with LSI, I acquired Confidential Information, as defined by this Agreement, and but for my association with LSI, I would not have had access to the Confidential Information. The Confidential Information allows for LSI to have a competitive advantage. I acknowledge that if I disclose or use the Confidential Information, I will cause irreparable harm to LSI.

B.     For purposes of this Agreement, the “Non-Compete and Non-Solicit Period” means a period of 12 months following the termination of my employment with LSI.

C.     For purposes of this Agreement, “Competitor” means any person or entity with which LSI competes in the lighting and lighting controls industries (including but not limited to Acuity Brands, Eaton / Cooper Lighting, Hubbell Lighting, Philips Lighting, Cree, General Electric, H.E. Williams, Legrand, Leviton and Lutron) or graphics or digital signage industries (including but not limited to Federal Heath, YESCO, Blair, Everbrite, ICON, Vomeal, Miller Zell, Persona, Sign Resource, Stratacache, AVI, Whitlock, Diversified, Tech Innovations, CCS, HB Comm, Sicom and Four Winds) and each of their affiliates, subsidiaries and related businesses operating in such industries.

D.     For purposes of this Agreement, “Customer” means any person or entity with which LSI has an ongoing business relationship or a prospective business relationship for the 12 months prior to the date of this Agreement, including vendors, representatives or suppliers.

E.     For purposes of this Agreement, “Competitive Activity” means directly or indirectly, individually or in combination with others, engaging in any one or more of the following acts:

(i)       accepting employment with a Competitor;

(ii)      calling on, contacting, communicating with, or soliciting any Customer for the purpose of inducing them to divert their business to another entity or business;

(iii)     interfering with any contract or other agreement that LSI may now or hereafter have, including, that would or could in any way be injurious or detrimental to LSI’s image, business relationships or its business; or

(iv)     encouraging or soliciting any of LSI’s employees or agents to terminate or modify their relationships with LSI or hiring or engaging such persons for any purpose whatsoever. I acknowledge that this covenant is necessary to enable LSI to maintain a stable workforce.

F.     I agree to refrain from directly or indirectly engaging in any Competitive Activity, including assisting another to engage in any Competitive Activity, at all times during my employment with LSI and during the Non-Compete and Non-Solicit Period.

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G.     Recognizing that irreparable injury will result to LSI, its business and property if I were to breach any of the foregoing covenants or my obligations as set forth in this Agreement, I agree that in the event of any such breach or threatened breach, LSI is entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation or continued violation of this Agreement by me. In the event any provision, restriction or part of this section of the Agreement shall be invalidated, the remainder thereof shall nevertheless continue to be valid and fully enforceable.

H.     I understand and agree that this agreement is in addition to and does not limit my obligations under any LSI policy, or any statute, regulation or common law, regarding the matters covered above. I understand that a breach or violation of this agreement could subject me to disciplinary action, including termination or legal action, or both. I further understand that nothing in this agreement prevents me from giving truthful testimony or otherwise complying with applicable legal requirements.

I.     In the event any provision, restriction or part of this section of the Agreement shall be invalidated, the remainder thereof shall nevertheless continue to be valid and fully enforceable, and in the event any claims of any invalidity or unenforceability shall be predicated upon the temporal and/or geographic area covered thereby, it is expressly agreed that such provision shall thereby be deemed modified to the maximum geographic area and the maximum temporal duration.

4.     INTELLECTUAL PROPERTY

I acknowledge and agree that all plans, designs, processes, research and development, original works of authorship, product know-how and show-how, methodologies, techniques, inventions, discoveries, improvements, modifications, derivative works, computer programs, computer hardware and software, including source code and object code, algorithms and any other intellectual property, whether or not subject to patent or copyright protection, relating to the LSI’s business are the sole and exclusive property of LSI (“LSI Intellectual Property”). I shall promptly disclose all LSI Intellectual Property that I make, create, author, originate, conceive, develop or reduce to practice, either alone or jointly with others, at any time during my employment with LSI, which are within or in any way related to the existing or contemplated scope of LSI’s business (all of which LSI Intellectual Property shall be deemed made during the employment relationship if made or conceived within twelve (12) months following termination of my employment). I shall assign, without additional consideration, and hereby irrevocably assign to LSI any and all rights, title and interest that I may have or acquire in LSI Intellectual Property and all patents, copyrights, trademarks and other rights associated therewith.

I shall cooperate with and assist LSI, as is reasonably required, to protect its interests in LSI Intellectual Property, including but not limited to executing and filing any document requested by the LSI if it deems necessary to apply for any patent, copyright, trademark or other proprietary right in any and all countries, or to convey any rights, title or interest therein to any of its nominees, successors or assigns. Notwithstanding anything herein to the contrary, nothing is intended to assign any of my rights titles or interests in or to any patents, copyrights or trademarks, or applications therefor that was developed entirely outside of the employment relationship with LSI, unless the patents, copyrights or trademarks, or applications therefor, or any other intellectual property: (i) relates to the business of LSI or to LSI’s actual or demonstrably anticipated research and development; or (ii) results from any work performed by me for LSI.

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5.     RETURN OF LSI MATERIALS

Upon separation from employment with LSI, on LSI’s earlier request during my employment, or at any time subsequent to my employment upon demand from LSI, I will immediately deliver to LSI, and will not keep in my possession, recreate, or deliver to anyone else, any and all LSI property, including, but not limited to, Confidential Information, all devices and equipment belonging to LSI (including computers, handheld electronic devices, telephone equipment, and other electronic devices), all tangible embodiments of the Inventions, all electronically stored information and passwords to access such property, LSI credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any of the foregoing items. I also consent to an exit interview to confirm my compliance with the terms of this Agreement.

6.     NOTIFICATION OF NEW EMPLOYER

In the event that I leave the employ of LSI, I hereby grant consent to notification by LSI to my new employer about my rights and obligations under this Agreement. I also agree to disclose the existence and terms of this Agreement to any subsequent potential employer or principal who competes in any way with LSI for business, customers and/or employees no later than fourteen (14) days prior to the commencement of employment with that employer.

7.     MISCELLANEOUS

A.     Governing Law; Consent to Personal Jurisdiction. This Agreement will be governed by the laws of the State of Ohio without regard to Ohio conflicts of law rules that may result in the application of the laws of any jurisdiction other than Ohio. To the extent that any lawsuit is permitted under this Agreement, I hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Hamilton County, Ohio for any lawsuit filed against me by LSI.

B.     Assignability. This Agreement will be binding upon my heirs, executors, assigns, administrators, and other legal representatives, and will be for the benefit of LSI, its successors, and its assigns. There are no intended third-party beneficiaries to this Agreement, except as may be expressly otherwise stated. Notwithstanding anything to the contrary herein, LSI may assign this Agreement and its rights and obligations under this Agreement to any successor to all or substantially all of LSI’s relevant assets, whether by merger, consolidation, reorganization, reincorporation, conversion, sale of assets, sale of membership interests, stock or other equity interests, or otherwise.

C.    Entire Agreement. This Agreement sets forth the entire agreement and understanding between LSI and me with respect to the subject matter herein and supersedes all prior written and oral agreements, discussions, or representations between us, including, but not limited to, any representations made during my interview(s). I represent and warrant that I am not relying on any statement or representation not contained in this Agreement. Any subsequent change or changes in my duties, salary, or compensation will not affect the validity or scope of this Agreement.

5

D.     Headings. Headings are used in this Agreement for reference only and shall not be considered when interpreting this Agreement.

E.    Severability. If a court or other body of competent jurisdiction finds, or the Parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to affect the intent of the Parties, and the remainder of this Agreement will continue in full force and effect.

F.     Modification, Waiver. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in a writing signed by a manager or officer of LSI and me. Waiver by LSI of a particular breach of any provision of this Agreement will not operate as a waiver of any other provision or subsequent breach.

G.    Survivorship. The rights and obligations of the parties to this Agreement will survive termination of my employment with LSI.

	/s/ James A. Clark
	Signature
	James A. Clark
	November 1, 2018
LSI INDUSTRIES INC.
/s/ Howard E. Japlon
Signature
Howard E. Japlon
EVP, Human Resources & General Counsel
November 1, 2018

6

EX-31.1

EXHIBIT 31.1

Certification of ​​​​​​ Principal Executive Officer and Principal Financial Officer

Pursuant to Rule 13a-14(a)

I, James E. Galeese, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of LSI Industries Inc.;

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.       The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.         The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

(a)         All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)         Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 7, 2018	/s/ James E. Galeese
	Principal Executive Officer and
	Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF JAMES E. GALEESE

Pursuant to Section 1350 of Chapter 63 of the

United States Code and Rule 13a-14b

In connection with the filing with the Securities and Exchange Commission of the Quarterly Report of LSI Industries Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018 (the “Report”), I, James E. Galeese, Principal Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James E. Galeese

James E. Galeese

Executive Vice President and Chief Financial Officer

Date: November 7, 2018

A signed original of this written statement required by Section 906 has been provided to LSI Industries Inc. and will be retained by LSI Industries Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	3 Months Ended
	Sep. 30, 2018	Oct. 25, 2018
Document Information [Line Items]
Entity Registrant Name	LSI INDUSTRIES INC
Entity Central Index Key	0000763532
Trading Symbol	lyts
Current Fiscal Year End Date	--06-30
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Common Stock, Shares Outstanding (in shares)		26,025,256
Document Type	10-Q
Document Period End Date	Sep. 30, 2018
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended
		Sep. 30, 2018	Sep. 30, 2017
Net sales		$ 84,957	$ 87,466
Cost of products and services sold		63,541	63,763
Restructuring costs		155
Gross profit		21,261	23,703
Selling and administrative expenses		18,327	20,517
Impairment of goodwill			28,000
Operating income (loss)		2,934	(24,814)
Interest (income)		(14)	(8)
Interest expense		532	411
Income (loss) before income taxes		2,416	(25,217)
Income tax expense (benefit)		667	(9,588)
Net income (loss)		$ 1,749	$ (15,629)
Earnings (Loss) per common share (see Note 4)
Basic (in dollars per share)		$ 0.07	$ (0.61)
Diluted (in dollars per share)		$ 0.07	$ (0.61)
Weighted average common shares outstanding
Basic (in shares)		26,032	25,791
Diluted (in shares)	[1]	26,365	25,791

[1] Options to purchase 3,146,466 common shares and 3,791,936 common shares at September 30, 2018 and 2017, respectively, were not included in the computation of the three month period for diluted earnings (loss) per share, respectively, because the exercise price was greater than the average fair market value of the common shares. For the three months ended September 30, 2017, the effect of dilutive securities was not included in the calculation of diluted earnings (loss) per share because there was a net operating loss for the period.

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
ASSETS
Cash and cash equivalents	$ 4,162	$ 3,178
Accounts receivable, less allowance for doubtful accounts of $363 and $409, respectively	59,781	50,609
Inventories	49,580	50,994
Refundable income taxes	1,197	1,784
Other current assets	3,625	3,516
Total current assets	118,345	110,081
Property, Plant and Equipment, at cost
Land	6,718	6,470
Buildings	35,984	35,961
Machinery and equipment	77,658	77,108
Construction in progress	1,261	1,340
	121,621	120,879
Less accumulated depreciation	(79,098)	(77,176)
Net property, plant and equipment	42,523	43,703
Goodwill	30,538	30,538
Other Intangible Assets, net	34,718	35,409
Other Long-Term Assets, net	9,420	9,786
Total assets	235,544	229,517
LIABILITIES & SHAREHOLDERS’ EQUITY
Accounts payable	23,774	17,927
Accrued expenses	21,949	24,272
Total current liabilities	45,723	42,199
Long-Term Debt	46,152	45,360
Other Long-Term Liabilities	2,606	2,707
Commitments and Contingencies (Note 12)
Shareholders’ Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 25,799,257 and 25,641,913 shares, respectively	124,871	124,104
Treasury shares, without par value;	(1,845)	(2,110)
Deferred compensation plan	1,869	2,133
Retained earnings	16,168	15,124
Total shareholders’ equity	141,063	139,251
Total liabilities & shareholders’ equity	$ 235,544	$ 229,517

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ / shares in Thousands, $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Allowance for doubtful accounts	$ 363	$ 409
Preferred shares, par value (in dollars per share)	$ 0	$ 0
Preferred shares, authorized shares (in shares)	1,000,000	1,000,000
Preferred shares, issued (in shares)	0	0
Common shares, par value (in dollars per share)	$ 0	$ 0
Common shares, authorized shares (in shares)	40,000,000	40,000,000
Common shares, outstanding (in shares)	25,799,257	25,641,913

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Cash Flows from Operating Activities
Net income (loss)	$ 1,749,000	$ (15,629,000)
Non-cash items included in net income:
Depreciation and amortization	2,643,000	2,572,000
Deferred income taxes	85,000	(10,815,000)
Impairment of goodwill		28,000,000
Deferred compensation plan	127,000	160,000
Stock compensation expense	551,000	984,000
Issuance of common shares as compensation	90,000	78,000
Loss on disposition of fixed assets		(31,000)
Allowance for doubtful accounts	(19,000)	49,000
Inventory obsolescence reserve	766,000	143,000
Changes in certain assets and liabilities
Accounts receivable	(4,218,000)	(5,421,000)
Inventories	(3,519,000)	683,000
Refundable income taxes	587,000	775,000
Accounts payable	5,723,000	(1,559,000)
Accrued expenses and other	(3,172,000)	(3,133,000)
Customer prepayments	795,000	419,000
Net cash flows provided by (used in) operating activities	2,188,000	(2,725,000)
Cash Flows from Investing Activities
Proceeds from the sale of assets		1,527,000
Purchases of property, plant and equipment	(648,000)	(498,000)
Net cash flows (used in) provided by investing activities	(648,000)	1,029,000
Cash Flows from Financing Activities
Payments of long-term debt	(23,039,000)	(22,247,000)
Borrowings of long-term debt	23,831,000	24,411,000
Cash dividends paid	(1,296,000)	(1,286,000)
Shares withheld for employees taxes	(52,000)	(110,000)
Purchase of treasury shares		(106,000)
Exercise of stock options		115,000
Net cash flows (used in) provided by financing activities	(556,000)	777,000
Increase (Decrease) in cash and cash equivalents	984,000	(919,000)
Cash and cash equivalents at beginning of period	3,178,000	3,039,000
Cash and cash equivalents at end of period	$ 4,162,000	$ 2,120,000

XML

Note 1 - Interim Condensed Consolidated Financial Statements

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Condensed Financial Statements [Text Block]

NOTE

1

 - 

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The interim condensed consolidated financial statements are unaudited and are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information, and 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

September 30, 2018,

the results of its operations for the

three

month periods ended

September 30, 2018

and

2017,

and its cash flows for the

three

month periods ended

September 30, 2018

and

2017.

These statements should be read in conjunction with the financial statements and footnotes included in the fiscal

2018

Annual Report on Form

10

-K.  Financial information as of

June 30, 2018

has been derived from the Company’s audited consolidated financial statements.

XML

Note 2 - Summary of Significant Accounting Policies

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

NOTE

2

 

-

 SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the Company’s significant accounting policies is included in Note

1

to the audited consolidated financial statements of the Company’s fiscal

2018

Annual Report on Form

10

-K.  Significant changes to our accounting policies as a result of adopting ASU-

2014

-

09

“Revenue from Contracts with Customers” (Topic

606

) are discussed below.

Revenue Recognition:

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within

30

to

90

days from the shipping date, depending on our terms with the customer. The Company offers standard warranties that do

not

represent separate performance obligations.

Installation is a separate performance obligation, except for our digital signage products.  For digital signage products, installation is

not

a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is

not

always responsible for installation of products it sells and has

no

post-installation responsibilities other than standard warranties. 

A number of the Company's products are highly customized. As a result, these customized products do

not

have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does

not

accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is

no

alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

● Customer specific printed graphic branding

● Electrical components based on customer specifications

● Digital signage and related media content

The Company also offers installation services. Installation revenue is recognized over time as our customer simultaneously receives and consumes the benefits provided through the installation process.

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the contract.

Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because we believe it best depicts the nature, amount, and timing of our revenue and cash flows. The table presents a reconciliation of the disaggregation by reportable segments.

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	54,249	$	17,694
Products and services transferred over time		7,183		5,831
	$	61,432	$	23,525

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Type of Product and Services
New Technology Products	$	51,305	$	2,402
Legacy Products		9,076		15,964
Turnkey Services and Other		1,051		5,159
	$	61,432	$	23,525

New technology products include LED lighting and controls, electronic circuit boards, and digital signage solutions. Legacy products include lighting fixtures utilizing light sources other than LED technology and printed

two

and

three

dimensional graphic products. Turnkey services and other includes installation services along with shipping and handling charges.

Practical Expedients and Exemptions

● The Company’s contracts with customers have an expected duration of one year or less, as such we apply the practical expedient to expense sales commissions as incurred, and have omitted disclosures on the amount of remaining performance obligations.

● Shipping costs that are not material in context of the delivery of products are expensed as incurred.

● The Company’s accounts receivable balance represents the Company’s unconditional right to receive consideration from its customers with contracts. Payments are due within 30 to 90 days of completion of the performance obligation and invoicing, therefore, does not contain significant financing components.

● The Company collects sales tax and other taxes concurrent with revenue-producing activities and are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

New Accounting Pronouncements:

On

July 1, 2018,

the Company adopted ASU

2014

-

09.

“Revenue from Contracts with Customers,” (Topic

606

) using the modified retrospective adoption method which requires a cumulative effect adjustment to the opening balance of retained earnings. This approach was applied to contracts that were

not

completed as of

June 30, 2018.

Results for reporting periods beginning

July 1, 2018

are presented under Topic

606,

while prior period amounts are

not

adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to beginning retained earnings of

$591,000

on

July 1, 2018

due to the cumulative impact of adopting Topic

606,

as described below.

	Balance as of June 30, 2018		Adjustments			Opening Balance as of July 1, 2018
Assets:
Accounts receivable, net		50,609		4,935			55,544
Inventories, net		50,994		(4,167	)		46,827
Other long-term assets, net		9,786		(177	)		9,609
S tockholders' Equity:
Retained earnings		15,124		591			15,715

In

February 2016,

the Financial Accounting Standards Board issued ASU

2016

-

02,

“Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after

December 15, 2018,

or the Company’s fiscal year

2020,

with early adoption permitted. The Company is currently evaluating the impact the amended guidance will have on its financial statements.  

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.  

No

items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements other than noted below.

On

October 29, 2018,

The Company announced that it will permanently close its New Windsor, New York manufacturing facility. The facility manufactures indoor lighting products and is included in the results of the Lighting Segment. Production will be transferred to the Company’s Erlanger, Kentucky and Blue Ash, Ohio facilities, also included in the Lighting Segment. The New Windsor facility has a workforce of

140

employees.

On

October 15, 2018,

the Board of Directors of the Company appointed James A. Clark as the Company’s Chief Executive Officer and President. Mr. Clark entered into an Employment Agreement as of

October 16, 2018

which provides that his employment with the Company shall begin on

November 1, 2018.

The Employment Agreement also defines his compensation and benefit package.

Reclassifications:

Certain prior year amounts have been reclassified to conform to the current year presentation within the cash flows from operating activities section and cash flows from financing activities section of the statement of cash flows. These reclassifications have

no

impact on net income or earnings per share.

XML

Note 3 - Segment Reporting Information

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

NOTE

3

-

SEGMENT

REPORTING

INFORMATION

The accounting guidance on Segment Reporting establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s Chief Executive Officer or “CODM”) in making decisions on how to allocate resources and assess performance. The Company’s

two

operating segments are Lighting and Graphics, with

one

executive team under the new organizational structure reporting directly to the CODM with responsibilities for managing each segment. Corporate and Eliminations, which captures the Company’s corporate administrative activities, is also reported in the segment information.

The Lighting Segment includes outdoor and indoor lighting utilizing both traditional and LED light sources that have been fabricated and assembled for the Company’s markets, primarily petroleum / convenience stores, automotive dealerships, quick-service restaurants, grocery and pharmacy store, and retail/national accounts. The Company also addresses lighting product customers through the commercial industrial, stock and flow, and renovation channels. The Lighting Segment also includes the design, engineering, and manufacturing of electronic circuit boards, assemblies and sub-assemblies used to manufacture certain LED light fixtures and sold directly to customers.

Segment also includes the design, engineering, and manufacturing of electronic circuit boards, assemblies and sub-assemblies used to manufacture certain LED light fixtures and sold directly to customers.

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements such as traditional graphics, interior branding, electrical and architectural signage, active digital signage along with the management of media content related to digital signage, LED video screens, and menu board systems that are either digital or traditional by design. These products are used in visual image programs in several markets including, but

not

limited to the petroleum / convenience store market, multi-site retail operations, banking, and restaurants. The Graphics Segment implements, installs and provides program management services related to products sold by the Graphics Segment and by the Lighting Segment.

The Company’s corporate administration activities are reported in the Corporate and Eliminations line item.  These activities primarily include intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, expense related to the Company’s Board of Directors, equity compensation expense for various equity awards granted to corporate administration employees, certain consulting expenses, investor relations activities, and a portion of the Company’s legal, auditing and professional fee expenses. Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes (if any), and deferred income taxes.

There was

no

concentration of consolidated net sales in the

three

months ended

September 30, 2018

or

2017.

  There was

no

concentration of accounts receivable at

September 30, 2018

or

June 30, 2018.

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of

September 30, 2018

and

September 30, 2017:

	Three Months Ended
( In thousands)	September 30
	2018			2017
Net Sales:
Lighting Segment	$	61,432		$	68,428
Graphics Segment		23,525			19,038
	$	84,957		$	87,466
Operating Income (Loss):
Lighting Segment	$	3,850		$	(22,930	)
Graphics Segment		2,387			1,476
Corporate and Eliminations		(3,303	)		(3,360	)
	$	2,934		$	(24,814	)
Capital Expenditures:
Lighting Segment	$	276		$	261
Graphics Segment		266			182
Corporate and Eliminations		106			55
	$	648		$	498
Depreciation and Amortization:
Lighting Segment	$	1,990		$	1,901
Graphics Segment		395			379
Corporate and Eliminations		258			292
	$	2643		$	2,572

	September 30, 2018		June 30, 2018
Identifiable Assets:
Lighting Segment	$	173,254	$	172,799
Graphics Segment		45,493		39,881
Corporate and Eliminations		16,797		16,837
	$	235,544	$	229,517

The segment net sales reported above represent sales to external customers.  Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses. Identifiable assets are those assets used by each segment in its operations.

The Company records a

10%

mark-up on intersegment revenues. Any intersegment profit in inventory is eliminated in consolidation. Intersegment revenues were eliminated in consolidation as follows:

	Three Months Ended
	September 30
(In thousands)	2018		2017
Lighting Segment inter-segment net sales	$	409	$	715
Graphics Segment inter-segment net sales	$	31	$	31

The Company’s operations are located solely within the United States. As a result, the geographic distribution of the Company’s net sales and long-lived assets originate within the United States.

XML

Note 4 - Earnings Per Common Share

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Earnings Per Share [Text Block]

NOTE

4

-

 EARNINGS PER COMMON SHARE

The following table presents the amounts used to compute basic and diluted earnings per common share, as well as the effect of dilutive potential common shares on weighted average shares outstanding (in thousands, except per share data):

	Three Months Ended
	September 30
	2018		2017
BASIC EARNINGS (LOSS) PER SHARE
Net income (loss)	$	1,749	$	(15,629	)
Weighted average shares outstanding, net of treasury shares (a)		25,752		25,505
Weighted average vested restricted stock units outstanding		53		41
Weighted average shares outstanding in the Deferred Compensation Plan		227		245
Weighted average shares outstanding		26,032		25,791
Basic earnings (loss) per share	$	0.07	$	(0.61	)
DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss)	$	1,749	$	(15,629	)
Weighted average shares outstanding
Basic		26,032		25,791
Effect of dilutive securities (b):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		333		--
Weighted average shares outstanding (c)		26,365		25,791
Diluted earnings (loss) per share	$	0.07	$	(0.61	)

(a) Includes shares accounted for like treasury stock.

(b) Calculated using the “Treasury Stock” method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

(c) Options to purchase  3,146,466  common shares and 3,791,936 common shares at September 30, 2018 and 2017, respectively, were not included in the computation of the three month period for diluted earnings (loss) per share, respectively, because the exercise price was greater than the average fair market value of the common shares. For the three months ended September 30, 2017, the effect of dilutive securities was not included in the calculation of diluted earnings (loss) per share because there was a net operating loss for the period.

XML

Note 5 - Inventories

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Inventory Disclosure [Text Block]

NOTE

5

-

INVENTORIES

The following information is provided as of the dates indicated:

	September 30,		June 30,
(In thousands)	2018		2018
Inventories:
Raw materials	$	33,131	$	31,795
Work-in-process		1,937		3,833
Finished goods		14,512		15,366
Total Inventories	$	49,580	$	50,994

XML

Note 6 - Accrued Expenses

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Accounts Payable, Accrued Liabilities, and Other Liabilities Disclosure, Current [Text Block]

NOTE

6

-

ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	September 30,		June 30,
(In thousands)	2018		2018
Accrued Expenses:
Compensation and benefits	$	5,668	$	9,394
Customer prepayments		1,865		1,070
Accrued sales commissions		1,776		2,274
Accrued warranty		7,095		6,876
Other accrued expenses		5,545		4,658
Total Accrued Expenses	$	21,949	$	24,272

XML

Note 7 - Goodwill and Other Intangible Assets

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Goodwill and Intangible Assets Disclosure [Text Block]

NOTE

7

 - 

GOODWILL AND OTHER INTANGIBLE ASSETS

The carrying values of goodwill and other intangible assets with indefinite lives are reviewed at least annually for possible impairment. The Company

may

first

assess qualitative factors in order to determine if goodwill and indefinite-lived intangible assets are impaired. If through the qualitative assessment it is determined that it is more likely than

not

that goodwill and indefinite-lived assets are

not

impaired,

no

further testing is required. If it is determined more likely than

not

that goodwill and indefinite-lived assets are impaired, or if the Company elects

not

to

first

assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting unit level. The estimation of the fair value of reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and the selection and use of an appropriate discount rate.  The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment.  The use of different assumptions would increase or decrease estimated discounted future operating cash flows and could increase or decrease an impairment charge.  Company management uses its judgment in assessing whether assets

may

have become impaired between annual impairment tests.  Indicators such as adverse business conditions, economic factors and technological change or competitive activities

may

signal that an asset has become impaired.

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of

three

reporting units that contain goodwill. There are

two

reporting units within the Lighting Segment and

one

reporting unit within the Graphics Segment. The Company relies upon a number of factors, judgments and estimates when conducting its impairment testing including, but

not

limited to, the Company’s stock price, operating results, forecasts, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and judgments in applying them to the analysis of goodwill impairment.

The following table presents information about the Company's goodwill on the dates or for the periods indicated:

Goodwill
(In thousands)	Lighting			Graphics
	Segment			Segment			Total
Balance as of June 30, 2018
Goodwill	$	94,564		$	28,690		$	123,254
Accumulated impairment losses		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of June 30, 2018	$	29,373		$	1,165		$	30,538
Balance as of September 30, 2018
Goodwill	$	94,564			28,690			123,254
Accumulated impairment losses		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of September 30, 2018	$	29,373		$	1,165		$	30,538

The gross carrying amount and accumulated amortization by major other intangible asset class is as follows:

	September 30, 2018
Other Intangible Assets	Gross
(In thousands)	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	10,525	$	25,038
Patents		338		226		112
LED technology firmware, software		16,066		11,941		4,125
Trade name		2,658		637		2,021
Total Amortized Intangible Assets		54,625		23,329		31,296
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	58,047	$	23,329	$	34,718

	June 30, 2018
Other Intangible Assets	Gross
(In thousands)	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	10,011	$	25,552
Patents		338		217		121
LED technology firmware, software		16,066		11,801		4,265
Trade name		2,658		609		2,049
Total Amortized Intangible Assets		54,625		22,638		31,987
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	58,047	$	22,638	$	35,409

(In thousands)	Amortization Expense of Other Intangible Assets
	September 30, 2018		September 30, 2017
Three Months Ended	$	691	$	690

The Company expects to record annual amortization expense as follows:

(In thousands)
2019	$	2,069
2020	$	2,687
2021	$	2,682
2022	$	2,460
2023	$	2,412
After 2023	$	18,986

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Note 8 - Revolving Line of Credit and Long-term Debt

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

NOTE

8

 - REVOLVING

LINE OF CREDIT

In

February 2017,

the Company amended its secured line of credit to a

$100

million facility. The line of credit expires in the

third

quarter of fiscal

2022.

Interest on the revolving line of credit is charged based upon an increment over the LIBOR rate as periodically determined, or at the bank’s base lending rate, at the Company’s option.  The increment over the LIBOR borrowing rate, as periodically determined, fluctuates between

125

and

250

basis points depending upon the ratio of indebtedness to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the line of credit agreement. The increment over LIBOR borrowing rate will remain at

175

basis points for the next

twelve

months.  The fee on the unused balance of the

$100

million committed line of credit is

20

basis points.  Under the terms of this line of credit, the Company has agreed to a negative pledge of real estate assets and is required to comply with financial covenants that limit the ratio of indebtedness to EBITDA and require a minimum fixed charge coverage ratio. As of

September 30, 2018,

there was

$46.2

million borrowed against the line of credit, and

$53.8

million was available as of that date. Based on the terms of the line of credit and the maturity date, the debt has been classified as long term.

The Company is in compliance with all of its loan covenants as of

September 30, 2018.

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Note 9 - Cash Dividends

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

NOTE

9

 - 

CASH DIVIDENDS

The Company paid cash dividends of

$1,296,000

and

$1,286,000

in the

three

months ended

September 30, 2018

and

2017,

respectively. Dividends on restricted stock units in the amount of

$31,553

and

$29,106

were accrued as of

September 30, 2018

and

2017,

respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In

November 2018,

the Board of Directors declared a regular quarterly cash dividend of

$0.05

per share payable

November 27, 2018

to shareholders of record as of

November 16, 2018.

The indicated annual cash dividend rate is

$0.20

per share.

XML

Note 10 - Equity Compensation

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE

10

-

EQUITY COMPENSATION

The Company’s equity compensation plan, the

2012

Stock Incentive Plan (“the

2012

Plan”), was approved by shareholders in

November 2012.

The

2012

Plan covers all of the Company’s full-time employees, outside directors and certain advisors and replaced all previous equity compensation plans. In

November 2016,

the Company’s shareholders approved an amendment to the

2012

Plan that added

1,600,000

shares to the plan and implemented the use of a fungible share ratio that consumes

2.5

available shares for every full value share awarded by the Company as stock compensation. The

2012

Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, performance stock units, and other stock-based awards. Stock option grants or stock awards made pursuant to the

2012

Plan are granted at fair market value at the date of option grant or stock award.  

Stock option grants

may

be service-based or performance-based.  Service-based options granted during fiscal year

2017

and prior fiscal years generally have a

four

year ratable vesting period beginning

one

year after the date of grant. Service-based options granted during fiscal year

2018

have a

three

year ratable vesting period beginning

one

year after the date of grant. The maximum exercise period of stock options granted under the

2012

Plan is

ten

years. Restricted Stock Units (RSUs) granted prior to fiscal year

2018

have a

four

year ratable vesting period. RSUs granted during fiscal year

2018

have a

three

year ratable vesting period. The RSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. If a stock option or RSU holder’s employment with the Company terminates by reason of death, disability or retirement, as defined in the Plan, the Plan generally provides for acceleration of vesting.  

In the

first

quarter of fiscal

2019,

the Company granted Performance Stock Units (PSUs). PSUs are full value awards and consume the pool of available shares at the fungible rate of

2.5

for every full share awarded. The vesting of the PSUs is subject to the achievement of Return on Net Assets (RONA) and EBITDA objectives over a

three

year performance cycle. If certain

one

year performance objectives are met,

one

-

third

of the PSU’s will vest and be released. If the

one

year performance objectives are

not

met, the entire PSU awards

may

be earned over the remaining

three

-year performance cycle.

The Company has a non-qualified deferred compensation plan providing for both Company contributions and participant deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in shares of common stock of the Company. The Company also awards its directors shares of common stock as part of their compensation.  Stock compensation awards are made in the form of newly issued common shares of the Company.   

In the

first

quarter of fiscal

2019,

the Company granted

422,900

serviced-based stock options with an exercise price of

$4.94

and

134,350

PSUs at a fair value of

$4.94.

In the

first

quarter of fiscal

2018,

the Company granted

724,037

service-based and performance-based stock options with an exercise price of

$5.92

and

91,490

Restricted Stock Units with a fair value of

$5.92.

Stock compensation expense was

$551,000

and

$984,000

in the

first

quarter of fiscal

2019

and

2018,

respectively.

XML

Note 11 - Supplemental Cash Flow Information

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

NOTE

1

1

 - SUPPLEMENTAL

CASH FLOW INFORMATION

(In thousands)	Three Months Ended September 30
	2018			2017
Cash payments:
Interest	$	518		$	382
Income taxes	$	(39	)	$	--
Non-cash investing and financing activities:
Issuance of common shares as compensation	$	90		$	78
Issuance of common shares to fund deferred compensation plan	$	127		$	191

XML

Note 12 - Commitments and Contingencies

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

NOTE

1

2

-

COMMITMENTS AND CONTINGENCIES

The Company is party to various negotiations, customer bankruptcies, and legal proceedings arising in the normal course of business. The Company provides reserves for these matters when a loss is probable and reasonably estimable. The Company does

not

disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will

not

have a material adverse effect on the Company’s financial position, results of operations, cash flows or liquidity.

The Company

may

occasionally issue a standby letter of credit in favor of

third

parties. As of

September 30, 2018,

there were

no

such standby letters of credit issued.

XML

Note 13 - Severance Costs

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Compensation and Employee Benefit Plans [Text Block]

NOTE

1

3

– SEVERANCE COSTS

The activity in the Company’s Accrued Severance Liability is as follows for the periods indicated:

	Three			Three			Fiscal
	Months Ended			Months Ended			Year Ended
(In thousands)	September 30,			September 30,			June 30,
	2018			2017			2018
Balance at beginning of the period	$	1,772		$	235		$	235
Accrual of expense		--			--			1,900
Payments		(197	)		(159	)		(363	)
Adjustments		--			--			—
Balance at end of the period	$	1,575		$	76		$	1,772

On

April 23, 2018,

the Company’s Board of Directors announced the appointment of an interim Chief Executive Officer (CEO) and Chief Operating Officer in connection with the departure of Dennis Wells, the Company’s former CEO. The

$1,772,000

severance liability reported as of

June 30, 2018

represents the severance benefits Mr. Wells is entitled to receive under his employment agreement. Of the total

$1,575,000

reported as of

September 30, 2018,

$590,000

has been classified as a current liability and will be paid out over the next

twelve

months. The remaining

$985,000

has been classified as a long-term liability.

XML

Note 14 - Restructuring Costs

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Restructuring and Related Activities Disclosure [Text Block]

NOTE

1

4

– RESTRUCTURING COSTS

In the

first

quarter of fiscal

2018,

management approved the closure of its

12,000

square foot leased facility in Hawthorne, California. The facility was used as a warehouse and for light assembly of light fixtures. The Company will move the light assembly to its Blue Ash, Ohio facility. The restructuring charges consist primarily of transportation costs to move inventory to Blue Ash, the impairment of equipment, costs to restore the leased facility, and severance benefits. The Company also incurred

$435,000

related to the write-down of inventory which is

not

included in the table below. All restructuring costs are reported in cost of sales in the Lighting Segment.

The following table presents information about restructuring costs for the periods indicated:

	Three		Three
	Months Ended		Months Ended
(In thousands)	September 30,		September 30,
	2018		2017
Severance benefits	$	19	$	--
Moving Costs		53		--
Impairment of fixed assets and accelerated depreciation		43		--
Facility Repairs		40		--
Total	$	155	$	--

The following table presents a roll forward of the beginning and ending liability balances related to the restructuring costs:

(In thousands)
	Balance as of June 30, 2018		Restructuring Expense		Payments		Adjustments		Balance as of September 30, 2018
Severance and termination benefits	$	--	$	19	$	--	$	--	$	19
Other		--		93		9		--		84
Total	$	--	$	112	$	9	$	--	$	103

XML

Note 15 - Income Taxes

3 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE

15

– INCOME TAXES

The Company's effective income tax rate is based on expected income, statutory rates and tax planning opportunities available in the various jurisdictions in which it operates. For interim financial reporting, the Company estimates the annual income tax rate based on projected taxable income for the full year and records a quarterly income tax provision or benefit in accordance with the anticipated annual rate. The Company refines the estimates of the year's taxable income as new information becomes available, including actual year-to-date financial results. This continual estimation process often results in a change to the expected effective income tax rate for the year. When this occurs, the Company adjusts the income tax provision during the quarter in which the change in estimate occurs so that the year-to-date provision reflects the expected income tax rate. Significant judgment is required in determining the effective tax rate and in evaluating tax positions. In the

first

quarter of fiscal

2018,

a deferred tax asset of

$10.7

million was created as a result of the impairment of goodwill in the Lighting reporting unit.

The Tax Cuts and Jobs Act (the “Act”) was signed into law in

December 2017

and makes numerous changes to the Internal Revenue Code. Among other changes, the Act reduces the U.S. corporate income tax rate to

21%

effective

January 1, 2018.

Because the Act became effective mid-way through the Company’s fiscal

2018

tax year, the Company had a U.S. statutory income tax rate of

34%

in the

first

quarter of fiscal

2018,

before the new tax law was enacted, and will have a

21%

U.S statutory income tax rate for fiscal years

2019

and after.

	Three Months Ended
	September 30
	2018			2017
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate		23.0	%		33.7	%
Uncertain tax positions		1.3			(0.2	)
Difference between deferred and current tax rate related to the impairment of goodwill		--			4.8
Shared based compensation		3.3			--
Other		--			(0.3	)
Effective tax rate		27.6	%		38.0	%

XML

Significant Accounting Policies (Policies)

3 Months Ended

Sep. 30, 2018

Accounting Policies [Abstract]

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition:

The Company recognizes revenue when it satisfies the performance obligation in its customer contracts or purchase orders. Most of the Company’s products have a single performance obligation which is satisfied at a point in time when control is transferred to the customer. Control is generally transferred at time of shipment when title and risk of ownership passes to the customer. For customer contracts with multiple performance obligations, the Company allocates the transaction price and any discounts to each performance obligation based on relative standalone selling prices. Payment terms are typically within

30

to

90

days from the shipping date, depending on our terms with the customer. The Company offers standard warranties that do

not

represent separate performance obligations.

Installation is a separate performance obligation, except for our digital signage products.  For digital signage products, installation is

not

a separate performance obligation as the product and installation is the combined item promised in digital signage contracts. The Company is

not

always responsible for installation of products it sells and has

no

post-installation responsibilities other than standard warranties. 

A number of the Company's products are highly customized. As a result, these customized products do

not

have an alternative use. For these products, the Company has a legal right to payment for performance to date and generally does

not

accept returns on these items. The measurement of performance is based upon cost plus a reasonable profit margin for work completed. Because there is

no

alternative use and there is a legal right to payment, the Company transfers control of the item as the item is being produced and therefore, recognizes revenue over time. The customized product types are as follows:

● Customer specific printed graphic branding

● Electrical components based on customer specifications

● Digital signage and related media content

The Company also offers installation services. Installation revenue is recognized over time as our customer simultaneously receives and consumes the benefits provided through the installation process.

For these customized products and installation services, revenue is recognized using a cost-based input method: recognizing revenue and gross profit as work is performed based on the relationship between the actual cost incurred and the total estimated cost for the contract.

Disaggregation of Revenue

The Company disaggregates the revenue from contracts with customers by the timing of revenue recognition because we believe it best depicts the nature, amount, and timing of our revenue and cash flows. The table presents a reconciliation of the disaggregation by reportable segments.

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	54,249	$	17,694
Products and services transferred over time		7,183		5,831
	$	61,432	$	23,525

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Type of Product and Services
New Technology Products	$	51,305	$	2,402
Legacy Products		9,076		15,964
Turnkey Services and Other		1,051		5,159
	$	61,432	$	23,525

New technology products include LED lighting and controls, electronic circuit boards, and digital signage solutions. Legacy products include lighting fixtures utilizing light sources other than LED technology and printed

two

and

three

dimensional graphic products. Turnkey services and other includes installation services along with shipping and handling charges.

Practical Expedients and Exemptions

● The Company’s contracts with customers have an expected duration of one year or less, as such we apply the practical expedient to expense sales commissions as incurred, and have omitted disclosures on the amount of remaining performance obligations.

● Shipping costs that are not material in context of the delivery of products are expensed as incurred.

● The Company’s accounts receivable balance represents the Company’s unconditional right to receive consideration from its customers with contracts. Payments are due within 30 to 90 days of completion of the performance obligation and invoicing, therefore, does not contain significant financing components.

● The Company collects sales tax and other taxes concurrent with revenue-producing activities and are excluded from revenue. Shipping and handling costs are treated as fulfillment activities and included in cost of products and services sold on the Consolidated Statements of Operations.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements:

On

July 1, 2018,

the Company adopted ASU

2014

-

09.

“Revenue from Contracts with Customers,” (Topic

606

) using the modified retrospective adoption method which requires a cumulative effect adjustment to the opening balance of retained earnings. This approach was applied to contracts that were

not

completed as of

June 30, 2018.

Results for reporting periods beginning

July 1, 2018

are presented under Topic

606,

while prior period amounts are

not

adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to beginning retained earnings of

$591,000

on

July 1, 2018

due to the cumulative impact of adopting Topic

606,

as described below.

	Balance as of June 30, 2018		Adjustments			Opening Balance as of July 1, 2018
Assets:
Accounts receivable, net		50,609		4,935			55,544
Inventories, net		50,994		(4,167	)		46,827
Other long-term assets, net		9,786		(177	)		9,609
S tockholders' Equity:
Retained earnings		15,124		591			15,715

In

February 2016,

the Financial Accounting Standards Board issued ASU

2016

-

02,

“Leases.” The amended guidance requires an entity to recognize assets and liabilities that arise from leases. The amended guidance is effective for financial statements issued for fiscal years and interim periods within those years, beginning after

December 15, 2018,

or the Company’s fiscal year

2020,

with early adoption permitted. The Company is currently evaluating the impact the amended guidance will have on its financial statements.  

Subsequent Events, Policy [Policy Text Block]

Subsequent Events:

The Company has evaluated subsequent events for potential recognition and disclosure through the date the consolidated financial statements were filed.  

No

items were identified during this evaluation that required adjustment to or disclosure in the accompanying financial statements other than noted below.

On

October 29, 2018,

The Company announced that it will permanently close its New Windsor, New York manufacturing facility. The facility manufactures indoor lighting products and is included in the results of the Lighting Segment. Production will be transferred to the Company’s Erlanger, Kentucky and Blue Ash, Ohio facilities, also included in the Lighting Segment. The New Windsor facility has a workforce of

140

employees.

On

October 15, 2018,

the Board of Directors of the Company appointed James A. Clark as the Company’s Chief Executive Officer and President. Mr. Clark entered into an Employment Agreement as of

October 16, 2018

which provides that his employment with the Company shall begin on

November 1, 2018.

The Employment Agreement also defines his compensation and benefit package.

Reclassification, Policy [Policy Text Block]

Reclassifications:

Certain prior year amounts have been reclassified to conform to the current year presentation within the cash flows from operating activities section and cash flows from financing activities section of the statement of cash flows. These reclassifications have

no

impact on net income or earnings per share.

XML

Note 2 - Summary of Significant Accounting Policies (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Disaggregation of Revenue [Table Text Block]

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	54,249	$	17,694
Products and services transferred over time		7,183		5,831
	$	61,432	$	23,525

	Three Months Ended September 30
	Lighting Segment		Graphics Segment
Type of Product and Services
New Technology Products	$	51,305	$	2,402
Legacy Products		9,076		15,964
Turnkey Services and Other		1,051		5,159
	$	61,432	$	23,525

Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block]

	Balance as of June 30, 2018		Adjustments			Opening Balance as of July 1, 2018
Assets:
Accounts receivable, net		50,609		4,935			55,544
Inventories, net		50,994		(4,167	)		46,827
Other long-term assets, net		9,786		(177	)		9,609
S tockholders' Equity:
Retained earnings		15,124		591			15,715

XML

Note 3 - Segment Reporting Information (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended
( In thousands)	September 30
	2018			2017
Net Sales:
Lighting Segment	$	61,432		$	68,428
Graphics Segment		23,525			19,038
	$	84,957		$	87,466
Operating Income (Loss):
Lighting Segment	$	3,850		$	(22,930	)
Graphics Segment		2,387			1,476
Corporate and Eliminations		(3,303	)		(3,360	)
	$	2,934		$	(24,814	)
Capital Expenditures:
Lighting Segment	$	276		$	261
Graphics Segment		266			182
Corporate and Eliminations		106			55
	$	648		$	498
Depreciation and Amortization:
Lighting Segment	$	1,990		$	1,901
Graphics Segment		395			379
Corporate and Eliminations		258			292
	$	2643		$	2,572

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	September 30, 2018		June 30, 2018
Identifiable Assets:
Lighting Segment	$	173,254	$	172,799
Graphics Segment		45,493		39,881
Corporate and Eliminations		16,797		16,837
	$	235,544	$	229,517

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Three Months Ended
	September 30
(In thousands)	2018		2017
Lighting Segment inter-segment net sales	$	409	$	715
Graphics Segment inter-segment net sales	$	31	$	31

XML

Note 4 - Earnings Per Common Share (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended
	September 30
	2018		2017
BASIC EARNINGS (LOSS) PER SHARE
Net income (loss)	$	1,749	$	(15,629	)
Weighted average shares outstanding, net of treasury shares (a)		25,752		25,505
Weighted average vested restricted stock units outstanding		53		41
Weighted average shares outstanding in the Deferred Compensation Plan		227		245
Weighted average shares outstanding		26,032		25,791
Basic earnings (loss) per share	$	0.07	$	(0.61	)
DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss)	$	1,749	$	(15,629	)
Weighted average shares outstanding
Basic		26,032		25,791
Effect of dilutive securities (b):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		333		--
Weighted average shares outstanding (c)		26,365		25,791
Diluted earnings (loss) per share	$	0.07	$	(0.61	)

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Note 5 - Inventories (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Inventory, Current [Table Text Block]

	September 30,		June 30,
(In thousands)	2018		2018
Inventories:
Raw materials	$	33,131	$	31,795
Work-in-process		1,937		3,833
Finished goods		14,512		15,366
Total Inventories	$	49,580	$	50,994

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Note 6 - Accrued Expenses (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	September 30,		June 30,
(In thousands)	2018		2018
Accrued Expenses:
Compensation and benefits	$	5,668	$	9,394
Customer prepayments		1,865		1,070
Accrued sales commissions		1,776		2,274
Accrued warranty		7,095		6,876
Other accrued expenses		5,545		4,658
Total Accrued Expenses	$	21,949	$	24,272

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Note 7 - Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Goodwill [Table Text Block]

Goodwill
(In thousands)	Lighting			Graphics
	Segment			Segment			Total
Balance as of June 30, 2018
Goodwill	$	94,564		$	28,690		$	123,254
Accumulated impairment losses		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of June 30, 2018	$	29,373		$	1,165		$	30,538
Balance as of September 30, 2018
Goodwill	$	94,564			28,690			123,254
Accumulated impairment losses		(65,191	)		(27,525	)		(92,716	)
Goodwill, net as of September 30, 2018	$	29,373		$	1,165		$	30,538

Schedule of Intangible Assets and Goodwill [Table Text Block]

	September 30, 2018
Other Intangible Assets	Gross
(In thousands)	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	10,525	$	25,038
Patents		338		226		112
LED technology firmware, software		16,066		11,941		4,125
Trade name		2,658		637		2,021
Total Amortized Intangible Assets		54,625		23,329		31,296
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	58,047	$	23,329	$	34,718

	June 30, 2018
Other Intangible Assets	Gross
(In thousands)	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	35,563	$	10,011	$	25,552
Patents		338		217		121
LED technology firmware, software		16,066		11,801		4,265
Trade name		2,658		609		2,049
Total Amortized Intangible Assets		54,625		22,638		31,987
Indefinite-lived Intangible Assets
Trademarks and trade names		3,422		--		3,422
Total Indefinite-lived Intangible Assets		3,422		--		3,422
Total Other Intangible Assets	$	58,047	$	22,638	$	35,409

Finite-lived Intangible Assets Amortization Expense [Table Text Block]

(In thousands)	Amortization Expense of Other Intangible Assets
	September 30, 2018		September 30, 2017
Three Months Ended	$	691	$	690

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

(In thousands)
2019	$	2,069
2020	$	2,687
2021	$	2,682
2022	$	2,460
2023	$	2,412
After 2023	$	18,986

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Note 11 - Supplemental Cash Flow Information (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

(In thousands)	Three Months Ended September 30
	2018			2017
Cash payments:
Interest	$	518		$	382
Income taxes	$	(39	)	$	--
Non-cash investing and financing activities:
Issuance of common shares as compensation	$	90		$	78
Issuance of common shares to fund deferred compensation plan	$	127		$	191

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Note 13 - Severance Costs (Tables)

3 Months Ended

Sep. 30, 2018

Employee Severance [Member]

Notes Tables

Schedule of Accrued Severance Liability [Table Text Block]

	Three			Three			Fiscal
	Months Ended			Months Ended			Year Ended
(In thousands)	September 30,			September 30,			June 30,
	2018			2017			2018
Balance at beginning of the period	$	1,772		$	235		$	235
Accrual of expense		--			--			1,900
Payments		(197	)		(159	)		(363	)
Adjustments		--			--			—
Balance at end of the period	$	1,575		$	76		$	1,772

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Note 14 - Restructuring Costs (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Restructuring and Related Costs [Table Text Block]

	Three		Three
	Months Ended		Months Ended
(In thousands)	September 30,		September 30,
	2018		2017
Severance benefits	$	19	$	--
Moving Costs		53		--
Impairment of fixed assets and accelerated depreciation		43		--
Facility Repairs		40		--
Total	$	155	$	--

Schedule of Liability Balances Related to Restructuring Costs [Table Text Block]

(In thousands)
	Balance as of June 30, 2018		Restructuring Expense		Payments		Adjustments		Balance as of September 30, 2018
Severance and termination benefits	$	--	$	19	$	--	$	--	$	19
Other		--		93		9		--		84
Total	$	--	$	112	$	9	$	--	$	103

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Note 15 - Income Taxes (Tables)

3 Months Ended

Sep. 30, 2018

Notes Tables

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three Months Ended
	September 30
	2018			2017
Reconciliation to effective tax rate:
Provision for income taxes at the anticipated annual tax rate		23.0	%		33.7	%
Uncertain tax positions		1.3			(0.2	)
Difference between deferred and current tax rate related to the impairment of goodwill		--			4.8
Shared based compensation		3.3			--
Other		--			(0.3	)
Effective tax rate		27.6	%		38.0	%

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Note 2 - Summary of Significant Accounting Policies (Details Textual)	Jul. 01, 2018 USD ($)
Accounting Standards Update 2014-09 [Member]
Cumulative Effect on Retained Earnings, Net of Tax, Total	$ 591,000

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Note 2 - Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Revenue	$ 84,957	$ 87,466
Lighting Segment [Member]
Revenue	61,432	68,428
Lighting Segment [Member] | New Technology Products [Member]
Revenue	51,305
Lighting Segment [Member] | Legacy Products [Member]
Revenue	9,076
Lighting Segment [Member] | Turnkey Services and Other [Member]
Revenue	1,051
Graphics Segment [Member]
Revenue	23,525	$ 19,038
Graphics Segment [Member] | New Technology Products [Member]
Revenue	2,402
Graphics Segment [Member] | Legacy Products [Member]
Revenue	15,964
Graphics Segment [Member] | Turnkey Services and Other [Member]
Revenue	5,159
Transferred at Point in Time [Member] | Lighting Segment [Member]
Revenue	54,249
Transferred at Point in Time [Member] | Graphics Segment [Member]
Revenue	17,694
Transferred over Time [Member] | Lighting Segment [Member]
Revenue	7,183
Transferred over Time [Member] | Graphics Segment [Member]
Revenue	$ 5,831

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Note 2 - Summary of Significant Accounting Policies - New Accounting Pronouncements (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jul. 01, 2018	Jun. 30, 2018	Jun. 30, 2017
Accounts receivable, net	$ 59,781	$ 55,544	$ 50,609
Inventories, net	49,580	46,827	50,994	$ 50,994
Other long-term assets, net	9,420	9,609	9,786
Retained earnings	$ 16,168	15,715	$ 15,124
Restatement Adjustment [Member]
Accounts receivable, net		4,935
Inventories, net		(4,167)
Other long-term assets, net		(177)
Retained earnings		$ 591

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Note 3 - Segment Reporting Information (Details Textual)	3 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018
Number of Operating Segments	2
Sales Revenue, Net [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage	0.00%	0.00%
Accounts Receivable [Member] | Customer Concentration Risk [Member]
Concentration Risk, Percentage	0.00%		0.00%

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Note 3 - Segment Reporting Information - Summarized Financial Information by Reportable Business Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Net Sales:
Net sales	$ 84,957	$ 87,466
Operating Income (Loss):
Operating income (loss)	2,934	(24,814)
Capital Expenditures:
Capital expenditures	648	498
Depreciation and Amortization:
Depreciation and amortization	2,643	2,572
Corporate and Eliminations [Member]
Operating Income (Loss):
Operating income (loss)	(3,303)	(3,360)
Capital Expenditures:
Capital expenditures	106	55
Depreciation and Amortization:
Depreciation and amortization	258	292
Lighting Segment [Member]
Net Sales:
Net sales	61,432	68,428
Lighting Segment [Member] | Operating Segments [Member]
Operating Income (Loss):
Operating income (loss)	3,850	(22,930)
Capital Expenditures:
Capital expenditures	276	261
Depreciation and Amortization:
Depreciation and amortization	1,990	1,901
Graphics Segment [Member]
Net Sales:
Net sales	23,525	19,038
Graphics Segment [Member] | Operating Segments [Member]
Operating Income (Loss):
Operating income (loss)	2,387	1,476
Capital Expenditures:
Capital expenditures	266	182
Depreciation and Amortization:
Depreciation and amortization	$ 395	$ 379

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Note 3 - Segment Reporting Information - Identifiable Assets by Segment (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Identifiable assets	$ 235,544	$ 229,517
Corporate and Eliminations [Member]
Identifiable assets	16,797	16,837
Lighting Segment [Member] | Operating Segments [Member]
Identifiable assets	173,254	172,799
Graphics Segment [Member] | Operating Segments [Member]
Identifiable assets	$ 45,493	$ 39,881

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Note 3 - Segment Reporting Information - Intersegment Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Inter-segment Revenues	$ 84,957	$ 87,466
Lighting Segment [Member]
Inter-segment Revenues	61,432	68,428
Graphics Segment [Member]
Inter-segment Revenues	23,525	19,038
Intersegment Eliminations [Member] | Lighting Segment [Member]
Inter-segment Revenues	409	715
Intersegment Eliminations [Member] | Graphics Segment [Member]
Inter-segment Revenues	$ 31	$ 31

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Note 4 - Earnings Per Common Share (Details Textual) - shares	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,146,466	3,791,936

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Note 4 - Earnings Per Common Share - Basic and Diluted Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Sep. 30, 2018	Sep. 30, 2017
BASIC EARNINGS (LOSS) PER SHARE
Net income (loss)		$ 1,749	$ (15,629)
Weighted average shares outstanding, net of treasury shares (a) (in shares)	[1]	25,752	25,505
Weighted average vested units and shares outstanding (in shares)		227	245
Weighted average shares outstanding (in shares)		26,032	25,791
Basic earnings (loss) per share (in dollars per share)		$ 0.07	$ (0.61)
DILUTED EARNINGS (LOSS) PER SHARE
Net income (loss)		$ 1,749	$ (15,629)
Basic (in shares)		26,032	25,791
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any (in shares)	[2]	333
Weighted average shares outstanding (c) (in shares)	[3]	26,365	25,791
Diluted earnings (loss) per share (in dollars per share)		$ 0.07	$ (0.61)
Restricted Stock Units (RSUs) [Member]
BASIC EARNINGS (LOSS) PER SHARE
Weighted average vested units and shares outstanding (in shares)		53	41

[1] Includes shares accounted for like treasury stock.

[2] Calculated using the "Treasury Stock" method as if dilutive securities were exercised and the funds were used to purchase common shares at the average market price during the period.

[3] Options to purchase 3,146,466 common shares and 3,791,936 common shares at September 30, 2018 and 2017, respectively, were not included in the computation of the three month period for diluted earnings (loss) per share, respectively, because the exercise price was greater than the average fair market value of the common shares. For the three months ended September 30, 2017, the effect of dilutive securities was not included in the calculation of diluted earnings (loss) per share because there was a net operating loss for the period.

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Note 5 - Inventories - Inventories (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jul. 01, 2018	Jun. 30, 2018	Jun. 30, 2017
Inventories:
Raw materials	$ 33,131			$ 31,795
Work-in-process	1,937			3,833
Finished goods	14,512			15,366
Total Inventories	$ 49,580	$ 46,827	$ 50,994	$ 50,994

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Note 6 - Accrued Expenses - Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018	Jun. 30, 2017
Accrued Expenses:
Compensation and benefits	$ 5,668		$ 9,394
Customer prepayments	1,865		1,070
Accrued sales commissions	1,776		2,274
Accrued warranty	7,095		6,876
Other accrued expenses	5,545		4,658
Total Accrued Expenses	$ 21,949	$ 24,272	$ 24,272

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Note 7 - Goodwill and Other Intangible Assets (Details Textual)	3 Months Ended
	Sep. 30, 2018
Number of Reporting Units	3
Lighting Segment [Member]
Number of Reporting Units	2
Graphics Segment [Member]
Number of Reporting Units	1

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Note 7 - Goodwill and Other Intangible Assets - Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Balance as of June 30, 2018
Goodwill, net	$ 30,538	$ 30,538
Lighting Segment [Member]
Balance as of June 30, 2018
Goodwill	94,564	94,564
Accumulated impairment losses	(65,191)	(65,191)
Goodwill, net	29,373	29,373
Graphics Segment [Member]
Balance as of June 30, 2018
Goodwill	28,690	28,690
Accumulated impairment losses	(27,525)	(27,525)
Goodwill, net	1,165	1,165
Technology Segment [Member]
Balance as of June 30, 2018
Goodwill	123,254	123,254
Accumulated impairment losses	(92,716)	(92,716)
Goodwill, net	$ 30,538	$ 30,538

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Note 7 - Goodwill and Other Intangible Assets - Other Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2018	Jun. 30, 2018
Amortized intangible assets, gross	$ 54,625	$ 54,625
Accumulated amortization	23,329	22,638
Amortized intangible assets, net	31,296	31,987
Indefinite-lived intangible assets, gross	3,422	3,422
Total other intangible assets, gross	58,047	58,047
Total other intangible assets, net	34,718	35,409
Trademarks and Trade Names [Member]
Indefinite-lived intangible assets, gross	3,422	3,422
Customer Relationships [Member]
Amortized intangible assets, gross	35,563	35,563
Accumulated amortization	10,525	10,011
Amortized intangible assets, net	25,038	25,552
Patents [Member]
Amortized intangible assets, gross	338	338
Accumulated amortization	226	217
Amortized intangible assets, net	112	121
Technology-Based Intangible Assets [Member]
Amortized intangible assets, gross	16,066	16,066
Accumulated amortization	11,941	11,801
Amortized intangible assets, net	4,125	4,265
Trade Names [Member]
Amortized intangible assets, gross	2,658	2,658
Accumulated amortization	637	609
Amortized intangible assets, net	$ 2,021	$ 2,049

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Note 7 - Goodwill and Other Intangible Assets - Amortization Expense of Other Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Amortization expense of other intangible assets	$ 691	$ 690

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Note 7 - Goodwill and Other Intangible Assets - Future Amortization Expense (Details) $ in Thousands	Sep. 30, 2018 USD ($)
2019	$ 2,069
2020	2,687
2021	2,682
2022	2,460
2023	2,412
After 2023	$ 18,986

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Note 8 - Revolving Line of Credit and Long-term Debt (Details Textual) - USD ($) $ in Millions	1 Months Ended	3 Months Ended
	Feb. 28, 2017	Sep. 30, 2018
Long-term Line of Credit, Total		$ 46.2
Line of Credit Facility, Remaining Borrowing Capacity		$ 53.8
London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument, Basis Spread on Variable Rate	2.50%
London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Debt Instrument, Basis Spread on Variable Rate	1.25%
London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Debt Instrument, Basis Spread on Variable Rate		1.75%
UNITED STATES
Line of Credit Facility, Maximum Borrowing Capacity	$ 100.0
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage		0.20%

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Note 9 - Cash Dividends (Details Textual) - USD ($)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Nov. 07, 2018
Payments of Ordinary Dividends, Common Stock	$ 1,296,000	$ 1,286,000
Dividends Accrued	$ 31,553	$ 29,106
Subsequent Event [Member]
Quarterly Indicated Per Share Dividend Rate			$ 0.05
Annual Indicated per Share Dividend Rate			$ 0.20

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Note 10 - Equity Compensation (Details Textual)	1 Months Ended	3 Months Ended		12 Months Ended		18 Months Ended
	Nov. 30, 2016 shares	Sep. 30, 2018 USD ($) $ / shares shares	Sep. 30, 2017 USD ($) $ / shares shares	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross			724,037
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares			$ 5.92
Allocated Share-based Compensation Expense, Total | $		$ 551,000	$ 984,000
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		10 years
Service-based Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				3 years	4 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		422,900
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares		$ 4.94
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period					4 years	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			91,490
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares			$ 5.92
Performance Shares [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Fungible Share Ratio		2.5
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		134,350
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value | $ / shares		$ 4.94
Performance Shares [Member] | Share-based Compensation Award, Tranche One [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage		33.00%
The 2012 Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Additional Shares Authorized	1,600,000
Share-based Compensation Arrangement by Share-based Payment Award, Fungible Share Ratio	2.5

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Note 11 - Supplemental Cash Flow Information - Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash payments:
Interest	$ 518	$ 382
Income taxes	(39)
Issuance of common shares as compensation	90	78
Issuance of common shares to fund deferred compensation plan	$ 127	$ 191

XML

Note 12 - Commitments and Contingencies (Details Textual) $ in Thousands	Sep. 30, 2018 USD ($)
Standby Letters of Credit [Member]
Letters of Credit Outstanding, Amount	$ 0

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Note 13 - Severance Costs (Details Textual) - USD ($)	Sep. 30, 2018	Apr. 23, 2018
Postemployment Benefits Liability, Current	$ 590,000
Postemployment Benefits Liability, Noncurrent	985,000
Former CEO [Member]
Postemployment Benefits Liability, Total	$ 1,575,000	$ 1,772,000

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Note 13 - Severance Costs - Accrued Severance Liability Activity (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2018
Balance	$ 1,772	$ 235	$ 235
Accrual of expense			1,900
Payments	(197)	(159)	(363)
Adjustments
Balance	$ 1,575	$ 76	$ 1,772

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Note 14 - Restructuring Costs (Details Textual)	3 Months Ended
	Sep. 30, 2018 USD ($) a	Sep. 30, 2017 USD ($)
Inventory Write-down	$ 766,000	$ 143,000
Closure of Leased Facility in Hawthorne, California [Member]
Area of Real Estate Property | a	12,000
Inventory Write-down	$ 435,000

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Note 14 - Restructuring Costs - Summary of Restructuring Costs for the Period (Details) - USD ($) $ in Thousands	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Restructuring and related costs	$ 155
Employee Severance [Member]
Restructuring and related costs	19
Employee Relocation [Member]
Restructuring and related costs	53
Restructuring Impairment of Fixed Assets and Accelerated Depreciation [Member]
Restructuring and related costs	43
Facility Repairs [Member]
Restructuring and related costs	$ 40

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Note 14 - Restructuring Costs - Liability Balances Related to Restructuring Costs (Details) $ in Thousands	3 Months Ended
	Sep. 30, 2018 USD ($)
Balance, beginning	$ 0
Restructuring Expense	112
Payments	9
Adjustments
Balance, ending	103
Severance and Other Termination Benefits [Member]
Balance, beginning	0
Restructuring Expense	19
Payments
Adjustments
Balance, ending	19
Other Restructuring [Member]
Balance, beginning	0
Restructuring Expense	93
Payments	9
Adjustments
Balance, ending	$ 84

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Note 15 - Income Taxes (Details Textual) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Jun. 30, 2019
Deferred Tax Assets, Goodwill and Intangible Assets	$ 10.7
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	23.00%	33.70%
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%

XML

Note 15 - Income Taxes - Reconciliation of Income Tax Rate (Details)	3 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
Provision for income taxes at the anticipated annual tax rate	23.00%	33.70%
Uncertain tax positions	1.30%	(0.20%)
Difference between deferred and current tax rate related to the impairment of goodwill		4.80%
Shared based compensation	3.30%
Other		(0.30%)
Effective tax rate	27.60%	38.00%