UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2021 OR
☐	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.

(Exact name of registrant as specified in its charter)

Ohio	31-0888951
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

10000 Alliance Road, Cincinnati, Ohio	45242
(Address of principal executive offices)	(Zip Code)
(513) 793-3200
Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	LYTS	NASDAQ Global Select Market

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 ☒  No ☐

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒   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 ☒	Emerging growth company ☐
Non-accelerated filer ☐	Smaller reporting 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 ☒

As of January 28, 2022, there were 26,641,808 shares of the registrant's common stock, no par value per share, outstanding.  

Page 1

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED DECEMBER 31, 2021

INDEX

			Begins on Page
PART I.  Financial Information
	ITEM 1.	Financial Statements (Unaudited)
		Condensed Consolidated Statements of Operations		3
		Condensed Consolidated Statements of Comprehensive Income		4
		Condensed Consolidated Balance Sheets		5
		Condensed Consolidated Statements of Shareholders’ Equity		7
		Condensed Consolidated Statements of Cash Flows		8
		Notes to Condensed Consolidated Financial Statements		9
		ITEM 2. of Financial Condition and Results of Operations		23
		ITEM 3. Market Risk		31
	ITEM 4.	Controls and Procedures		31
PART II.  Other Information
	ITEM 5.	Other Information		32
	ITEM 6.	Exhibits		32
Signatures				33

Page 2

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended					Six Months Ended
	December 31					December 31
(In thousands, except per share data)	2021		2020			2021		2020
Net Sales	$	111,143	$	76,387		$	217,540	$	146,393
Cost of products and services sold		85,695		56,676			167,582		108,407
Severance costs		-		5			-		5
Restructuring costs		-		-			-		3
Gross profit		25,448		19,706			49,958		37,978
Selling and administrative expenses		21,026		17,004			41,092		33,074
Severance costs		-		16			-		16
Operating income		4,422		2,686			8,866		4,888
Interest (income)		-		(1	)		-		(2	)
Interest expense		529		63			763		121
Other expense (income)		9		(135	)		88		(240	)
Income before income taxes		3,884		2,759			8,015		5,009
Income tax expense		779		551			1,777		811
Net income	$	3,105	$	2,208		$	6,238	$	4,198
Earnings per common share (see Note 5)
Basic	$	0.11	$	0.08		$	0.23	$	0.16
Diluted	$	0.11	$	0.08		$	0.22	$	0.15
Weighted average common shares outstanding
Basic		27,292		26,639			27,144		26,580
Diluted		28,067		27,360			27,895		27,161

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

Page 3

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2021		2020		2021			2020
Net Income	$	3,105	$	2,208	$	6,238		$	4,198
Foreign currency translation adjustment		9		102		(35	)		147
Comprehensive Income	$	3,114	$	2,310	$	6,203		$	4,345

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)

	December 31,			June 30,
(In thousands, except shares)	2021			2021
ASSETS
Current assets
Cash and cash equivalents	$	914		$	2,282
Accounts receivable, less allowance for credit losses of $405 and $256, respectively		69,168			57,685
Inventories		71,954			58,941
Refundable income taxes		1,194			1,275
Other current assets		3,413			4,825
Total current assets		146,643			125,008
Property, Plant and Equipment, at cost
Land		4,010			3,984
Buildings		24,433			24,393
Machinery and equipment		67,087			65,928
Buildings under finance leases		2,033			2,033
Construction in progress		347			933
		97,910			97,271
Less accumulated depreciation		(69,296	)		(66,719	)
Net property, plant and equipment		28,614			30,552
Goodwill		44,388			43,788
Other intangible assets, net		70,360			72,773
Operating lease right-of-use assets		10,185			11,579
Other long-term assets, net		3,279			3,121
Total assets	$	303,469		$	286,821

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

Page 5

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31,			June 30,
(In thousands, except shares)	2021			2021
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt	$	3,571		$	-
Accounts payable		36,737			32,977
Accrued expenses		27,483			37,918
Total current liabilities		67,791			70,895
Long-term debt		83,030			68,178
Finance lease liabilities		1,386			1,521
Operating lease liabilities		9,436			10,890
Other long-term liabilities		2,940			4,167
Commitments and contingencies (Note 13)		-			-
Shareholders' Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued		-			-
Common shares, without par value; Authorized 50,000,000 shares; Outstanding 26,630,923 and 26,517,836 shares, respectively		136,707			132,526
Treasury shares, without par value		(4,941	)		(2,450	)
Deferred compensation plan		4,941			2,450
Retained earnings (loss)		2,165			(1,405	)
Accumulated other comprehensive income		14			49
Total shareholders' equity		138,886			131,170
Total liabilities & shareholders' equity	$	303,469		$	286,821

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

Page 6

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

	Common Shares				Treasury Shares						Key Executive		Accumulated Other			Retained			Total
	Number Of				Number Of						Compensation		Comprehensive			Earnings			Shareholders'
(In thousands, except per share data)	Shares		Amount		Shares			Amount			Amount		Income (Loss)			(Loss)			Equity
Balance at June 30, 2020		26,466	$	127,713		(180	)	$	(1,121	)	$	1,121	$	(93	)	$	(1,920	)	$	125,700
Net Income		-		-		-			-			-		-			4,198			4,198
Other comprehensive income		-		-		-			-			-		147			-			147
Stock compensation awards		25		150		-			-			-		-			-			150
Restricted stock units issued		28		-		-			-			-		-			-			-
Shares issued for deferred compensation		96		679		-			-			-		-			-			679
Activity of treasury shares, net		-		-		(83	)		(571	)		-		-			-			(571	)
Deferred stock compensation		-		-		-			-			571		-			-			571
Stock compensation expense		-		902		-			-			-		-			-			902
Stock options exercised, net		33		178		-			-			-		-			-			178
Dividends — $0.20 per share		-		-		-			-			-		-			(2,681	)		(2,681	)
Balance at December 31, 2020		26,648	$	129,622		(263	)	$	(1,692	)	$	1,692	$	54		$	(403	)	$	129,273

	Common Shares					Treasury Shares						Key Executive		Accumulated Other			Retained			Total
	Number Of					Number Of						Compensation		Comprehensive			Earnings			Shareholders'
	Shares		Amount			Shares			Amount			Amount		Income (Loss)			(Loss)			Equity
Balance at June 30, 2021		26,863	$	132,526			(346	)	$	(2,450	)	$	2,450	$	49		$	(1,405	)	$	131,170
Net Income		-		-			-			-			-		-			6,238			6,238
Other comprehensive loss		-		-			-			-			-		(35	)		-			(35	)
Stock compensation awards		19		150			-			-			-		-			-			150
Restricted stock units issued, net of shares withheld for tax withholdings		80		(250	)		-			-			-		-			-			(250	)
Shares issued for deferred compensation		334		2,569			-			-			-		-			-			2,569
Activity of treasury shares, net		-		-			(324	)		(2,491	)		-		-			-			(2,491	)
Deferred stock compensation		-		-			-			-			2,491		-			-			2,491
Stock compensation expense		-		1,686			-			-			-		-			-			1,686
Stock options exercised, net		5		26			-			-			-		-			-			26
Dividends — $0.20 per share		-		-			-			-			-		-			(2,668	)		(2,668	)
Balance at December 31, 2021		27,301	$	136,707			(670	)	$	(4,941	)	$	4,941	$	14		$	2,165		$	138,886

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

Page 7

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	December 31
(In thousands)	2021			2020
Cash Flows from Operating Activities
Net income	$	6,238		$	4,198
Non-cash items included in net income
Depreciation and amortization		5,101			4,023
Deferred income taxes		(256	)		315
Deferred compensation plan		2,569			679
Stock compensation expense		1,686			902
Issuance of common shares as compensation		150			150
Loss on disposition of fixed assets		22			-
Allowance for doubtful accounts		148			96
Inventory obsolescence reserve		955			817
Changes in certain assets and liabilities
Accounts receivable		(11,608	)		(6,476	)
Inventories		(13,995	)		3,195
Refundable income taxes		77			(522	)
Accounts payable		3,747			3,933
Accrued expenses and other		(6,360	)		834
Customer prepayments		(5,017	)		1,273
Net cash flows (used in) provided by operating activities		(16,543	)		13,417
Cash Flows from Investing Activities
Purchases of property, plant and equipment		(745	)		(880	)
Adjustment to JSI acquisition purchase price		500			-
Net cash flows used in investing activities		(245	)		(880	)
Cash Flows from Financing Activities
Payments of long-term debt		(77,737	)		-
Borrowings of long-term debt		96,192			-
Cash dividends paid		(2,657	)		(2,639	)
Shares withheld for employees' taxes		(250	)		(28	)
Payments on financing lease obligations		(129	)		(118	)
Proceeds from stock option exercises		26			178
Net cash flows provided by (used in) financing activities		15,445			(2,607	)
Change related to foreign currency		(25	)		137
(Decrease) increase in cash and cash equivalents		(1,368	)		10,067
Cash and cash equivalents at beginning of period		2,282			3,517
Cash and cash equivalents at end of period	$	914		$	13,584

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

Page 8

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 December 31, 2021, the results of its operations for the three and six-month periods ended December 31, 2021 and 2020, and its cash flows for the six-month periods ended December 31, 2021 and 2020. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal 2021 Annual Report on Form 10-K. Financial information as of June 30, 2021 has been derived from the Company’s audited consolidated financial statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation:

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 2021 Annual Report on Form 10-K.

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 the terms with the customer. The Company offers standard warranties that do not represent separate performance obligations.

Installation is a separate performance obligation, except for the Company’s 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 display solutions and select lighting products are highly customized for specific customers. 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 branded print graphics

● Electrical components based on customer specifications

● Digital signage and related media content

The Company also offers installation services for its display solutions elements and select lighting products. Installation revenue is recognized over time as the 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 performance obligation.

Page 9

 

On occasion, the Company enters into bill-and-hold arrangements on a limited basis. Each bill-and-hold arrangement is reviewed and revenue is recognized only when certain criteria have been met: (1) the customer has requested delayed delivery and storage of the products by the Company because the customer wants to secure a supply of the products but lacks storage space; (ii) the risk of ownership has passed to the customer; (iii) the products are segregated from the Company’s other inventory items held for sale; (iv) the products are ready for shipment to the customer; and (v) the Company does not have the ability to use the products or direct them to another customer.

Disaggregation of Revenue

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

	Three Months Ended
(In thousands)	December 31, 2021				December 31, 2020
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	50,141	$	35,437	$	39,941	$	15,987
Products and services transferred over time		7,135		18,430		5,185		15,274
	$	57,276	$	53,867	$	45,126	$	31,261

	Six Months Ended
(In thousands)	December 31, 2021				December 31, 2020
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	94,723	$	72,868	$	79,981	$	30,441
Products and services transferred over time		13,813		36,136		10,550		25,421
	$	108,536	$	109,004	$	90,531	$	55,862

	Three Months Ended
(In thousands)	December 31, 2021				December 31, 2020
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	47,626	$	12,551	$	40,514	$	6,870
Poles, printed graphics, display fixtures		9,079		31,127		4,154		15,392
Project management, installation services, shipping and handling		571		10,189		458		8,999
	$	57,276	$	53,867	$	45,126	$	31,261

	Six Months Ended
(In thousands)	December 31, 2021				December 31, 2020
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	89,505	$	24,979	$	78,383	$	11,951
Poles, printed graphics, display fixtures		18,045		64,429		11,228		29,717
Project management, installation services, shipping and handling		986		19,596		920		14,194
	$	108,536	$	109,004	$	90,531	$	55,862

Page 10

 

Practical Expedients and Exemptions

● The Company’s contracts with customers have an expected duration of one year or less, as such, the Company applies the practical expedient to expense sales commissions as incurred, and has 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 payment from its customers with contracts. Payments are generally due within 30 to 90 days of completion of the performance obligation and invoicing, therefore, payments do not contain significant financing components.

● The Company collects sales tax and other taxes concurrent with revenue-producing activities which 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:

In October 2021, The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” creating an exception to the recognition and measurement principles in ASC 805. The amendment requires that entities apply ASC 606, “Revenue from Contracts with Customers,” rather than using fair value, to recognize and measure contracts assets and contract liabilities from contracts with customers acquired in a business combination. The ASU is effective for fiscal years beginning after December 15, 2022, and interim periods therein. Early adoption is permitted, including adoption in an interim period, regardless of whether a business combination occurs in that period. The guidance should be applied prospectively; however, an entity that elects to early adopt in an interim period should apply the amendments to all business combinations that occurred during the fiscal year that includes that interim period.

On July 1, 2020, the Company adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASC 326 or "CECL"), which amended the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. The adoption of ASU 2016-13 did not have a material impact on the consolidated financial statements and related disclosures.

In March 2020 and January 2021, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021-01, “Reference Rate Reform: Scope,” respectively. Together, the ASUs provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. The Company is currently evaluating the impact this guidance may have on its consolidated financial statements and related disclosures, if adopted.

NOTE 3 — ACQUISITION OF JSI STORE FIXTURES

On  May 21, 2021, the Company acquired 100% of the issued and outstanding shares of capital stock of JSI Store Fixtures (JSI), a Maine-based provider of retail commercial display solutions, for $93.7 million. The acquisition of JSI expands the Company’s total addressable markets within the grocery and convenience store verticals. The Company funded the acquisition with a combination of cash on hand and $71.6 million from the credit facility.

Page 11

 

The Company accounted for this transaction as a business combination. The Company preliminarily allocated the purchase price of approximately $93.7 million, which included an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values was recorded as goodwill. During the second quarter of fiscal 2022, goodwill increased by $0.6 million. The increase is the net difference between the original estimate of recovery from the pre-funded working capital and the final cash received of $0.5 million. The preliminary allocation is subject to the finalization of pre-acquisition tax filings, which are expected to be finalized in the fourth quarter of fiscal 2022. The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of  May 21, 2021, is as follows:

	May 21, 2021
	as initially					May 21, 2021
(In thousands)	reported			Adjustments		as adjusted
Cash and cash equivalents	$	4,067		$	-	$	4,067
Accounts receivable, net		9,252			-		9,252
Inventories		9,898			-		9,898
Property, plant and equipment		7,076			-		7,076
Other assets		7,440			-		7,440
Intangible assets		45,760			-		45,760
Accounts payable		(4,199	)		-		(4,199	)
Accrued liabilities		(8,434	)		-		(8,434	)
Deferred tax liability		(10,583	)		-		(10,583	)
Identifiable assets		60,277			-		60,277
Goodwill		33,415			600		34,015
Net purchase consideration	$	93,692		$	600	$	94,292

The gross amount of accounts receivable is $9.3 million.

Goodwill recorded from the acquisition of JSI is attributable to the impact of the positive cash flow from JSI in addition to expected synergies from the business combination. The intangible assets include amounts recognized for the fair value of the trade name, technology assets, non-compete agreements and customer relationships. The fair value of the intangible assets was determined based upon the income (discounted cash flow) approach. The following table presents the details of the intangible assets acquired at the date of acquisition:

	Estimated		Estimated Useful
(In thousands)	Fair Value		Life (Years)
Tradename	$	8,680	Indefinite life
Technology asset		4,900		7
Non-compete		260		5
Customer relationship		31,920		20
	$	45,760

The fair market value write-up of the property, plant, and equipment totaled $1.8 million. Transaction costs related to the acquisition totaled $2.9 million in the fourth quarter of fiscal 2021.

Pro Forma Impact of the Acquisition of JSI (unaudited)

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of JSI as if the transaction had occurred on  July 1, 2019. The unaudited pro forma results of operations have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that  may occur in the future. Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of JSI.

The unaudited pro forma financial information for the twelve months ended  June 30, 2021 and  June 30, 2020 is prepared using the acquisition method of accounting and has been adjusted to give effect to the pro forma events that are: (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined results. The unaudited pro forma operating income of $19.3 million excludes acquisition-related expenses of $2.9 million.

	Twelve Months Ended
	June 30
(In thousands, unaudited)	2021		2020
Net sales	$	391,000	$	362,541
Gross profit	$	97,947	$	86,399
Operating income	$	19,312	$	13,878

Page 12

NOTE 4 - 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 Display Solutions (formerly known as the Graphics Segment), with one executive team under the 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 non-residential outdoor and indoor lighting fixtures utilizing LED light sources that have been fabricated and assembled for the Company’s markets, primarily the petroleum/convenience markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports complex market. The Company also offers a variety of lighting controls to complement its lighting fixtures which include sensors, photocontrols, dimmers, motion detection and Bluetooth systems. The Company also services lighting product customers through the commercial and industrial project, stock and flow, and renovation channels. The Lighting Segment also includes the design, engineering and manufacturing of electronic circuit boards, assemblies and sub-assemblies which are sold directly to customers.

The Company acquired JSI in the fourth quarter of fiscal 2021, and consolidated it into the former Graphics Segment, which has been rebranded as the Display Solutions Segment, to more closely align the Company’s comprehensive product offering with the markets it serves. The Display Solutions Segment manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, display fixtures, refrigerated displays, and custom display elements. These products are used in visual image programs in several markets including the petroleum/convenience markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports complex market. The Display Solutions Segment implements, installs and provides program management services related to products sold by the Display Solutions 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.

One customer program in the Display Solutions Segment represents $11.4 million, or 10.3%, and $23.7 million, or 10.9%, of the Company’s net sales in the three and six months ended December 31, 2021, respectively. There were no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three or six months ended December 31, 2020. There was no concentration of accounts receivable at December 31, 2021 or June 30, 2021. 

Page 13

 

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of December 31, 2021 and December 31, 2020:

	Three Months Ended						Six Months Ended
(In thousands)	December 31						December 31
	2021			2020			2021			2020
Net Sales:
Lighting Segment	$	57,276		$	45,126		$	108,536		$	90,531
Display Solutions Segment		53,867			31,261			109,004			55,862
	$	111,143		$	76,387		$	217,540		$	146,393
Operating Income (Loss):
Lighting Segment	$	4,623		$	2,134		$	8,962		$	5,722
Display Solutions Segment		3,837			3,143			7,586			4,966
Corporate and Eliminations		(4,038	)		(2,591	)		(7,682	)		(5,800	)
	$	4,422		$	2,686		$	8,866		$	4,888
Capital Expenditures:
Lighting Segment	$	172		$	275		$	352		$	644
Display Solutions Segment		254			40			475			67
Corporate and Eliminations		22			160			(82	)		169
	$	448		$	475		$	745		$	880
Depreciation and Amortization:
Lighting Segment	$	1,450		$	1,610		$	2,911		$	3,229
Display Solutions Segment		1,016			304			2,047			662
Corporate and Eliminations		72			76			143			132
	$	2,538		$	1,990		$	5,101		$	4,023

	December 31, 2021		June 30, 2021
Identifiable Assets:
Lighting Segment	$	144,107	$	132,169
Display Solutions Segment		153,921		147,354
Corporate and Eliminations		5,441		7,298
	$	303,469	$	286,821

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				Six Months Ended
(In thousands)	December 31				December 31
	2021		2020		2021		2020
Lighting Segment inter-segment net sales	$	11,266	$	5,038	$	21,723	$	9,118
Display Solutions Segment inter-segment net sales	$	72	$	75	$	235	$	113

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

Page 14

NOTE 5 - 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				Six Months Ended
	December 31				December 31
	2021		2020		2021		2020
BASIC EARNINGS PER SHARE
Net income	$	3,105	$	2,208	$	6,238	$	4,198
Weighted average shares outstanding during the period, net of treasury shares		26,625		26,367		26,589		26,343
Weighted average vested restricted stock units outstanding		30		20		24		15
Weighted average shares outstanding in the Deferred Compensation Plan during the period		637		252		531		222
Weighted average shares outstanding		27,292		26,639		27,144		26,580
Basic income per share	$	0.11	$	0.08	$	0.23	$	0.16
DILUTED EARNINGS PER SHARE
Net income	$	3,105	$	2,208	$	6,238	$	4,198
Weighted average shares outstanding:
Basic		27,292		26,639		27,144		26,580
Effect of dilutive securities (a):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		775		721		751		581
Weighted average shares outstanding		28,067		27,360		27,895		27,161
Diluted income per share	$	0.11	$	0.08	$	0.22	$	0.15
Anti-dilutive securities (b)		981		1,062		984		1,101

(a) 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.

(b) Anti-dilutive securities were excluded from the computation of diluted net income per share for the three and six months ended December 31, 2021 and December 31, 2020 because the exercise price was greater than the average fair market price of the common shares or because the assumed proceeds from the award’s exercise or vesting was greater than the average fair market price of the common shares.

Page 15

NOTE 6 – INVENTORIES, NET

The following information is provided as of the dates indicated:

	December 31,		June 30,
(In thousands)	2021		2021
Inventories:
Raw materials	$	50,924	$	40,567
Work-in-progress		2,646		4,757
Finished goods		18,384		13,617
Total Inventories	$	71,954	$	58,941

NOTE 7 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	December 31,		June 30,
(In thousands)	2021		2021
Accrued Expenses:
Customer prepayments	$	6,333	$	11,352
Accrued warranty		4,686		5,295
Compensation and benefits		4,649		10,051
Accrued sales commissions		1,953		2,568
Operating lease liabilities		1,446		1,424
Accrued FICA		1,114		1,190
Finance lease liabilities		269		263
Accrued income tax		-		434
Other accrued expenses		7,033		5,341
Total Accrued Expenses	$	27,483	$	37,918

NOTE 8 - 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. Following the acquisition of JSI, the Company has a total of three reporting units that contain goodwill. One reporting unit is within the Lighting Segment and two reporting units are within the Display Solutions Segment. The tradename intangible assets have an indefinite life and are also tested separately on an annual basis. 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 16

 

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

(In thousands)				Display
	Lighting			Solutions
	Segment			Segment			Total
Balance as of December 31, 2021
Goodwill	$	70,971		$	62,105		$	133,076
Measurement period adjustment		-			600			600
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of December 31, 2021	$	9,208		$	35,180		$	44,388
Balance as of June 30, 2021
Goodwill	$	70,971		$	28,690		$	99,661
Goodwill acquired		-			33,415			33,415
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of June 30, 2021	$	9,208		$	34,580		$	43,788

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

	December 31, 2021
(In thousands)	Gross
	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	12,692	$	49,391
Patents		268		252		16
LED technology firmware, software		20,966		14,007		6,959
Trade name		2,658		994		1,664
Non-compete		260		32		228
Total Amortized Intangible Assets		86,235		27,977		58,258
Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102
Total Other Intangible Assets	$	98,337	$	27,977	$	70,360

	June 30, 2021
(In thousands)	Gross
	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	10,967	$	51,116
Patents		268		237		31
LED technology firmware, software		20,966		13,415		7,551
Trade name		2,658		939		1,719
Non-compete		260		6		254
Total Amortized Intangible Assets		86,235		25,564		60,671
Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102
Total Other Intangible Assets	$	98,337	$	25,564	$	72,773

Page 17

 

	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2021		2020		2021		2020
Amortization Expense of Other Intangible Assets	$	1,198	$	670	$	2,413	$	1,341

The Company expects to record annual amortization expense as follows:

2022	$	4,808
2023	$	4,760
2024	$	4,760
2025	$	4,760
2026	$	4,754
After 2026	$	36,829

NOTE 9 - DEBT

The Company’s long-term debt as of December 31, 2021 and June 30, 2021 consisted of the following:

	December 31,		June 30,
(In thousands)	2021		2021
Secured line of credit	$	62,525	$	68,178
Term loan, net of debt issuance costs of $31 and $0, respectively		24,076		-
Total debt		86,601		68,178
Less: amounts due within one year		3,571		-
Total amounts due after one year, net	$	83,030	$	68,178

In September 2021, the Company amended its existing $100 million secured line of credit, to a $25 million term loan and $75 million remaining as a secured revolving line of credit. Both facilities expire in the third quarter of fiscal 2026. The principal of the term loan is repaid $3.6 million annually over the five-year period with a balloon payment of the remaining balance due on the last month. Interest on both the revolving line of credit and the term loan is charged based upon an increment over the LIBOR rate or a base rate, at the Company’s option. The base rate is calculated as the highest of (a) the Prime rate, (b) the sum of the Overnight Funding Rate plus 50 basis points and (c) the sum of the Daily LIBOR Rate plus 100 basis points as long as a Daily LIBOR rate is offered, ascertainable and not unlawful. The increment over the LIBOR borrowing rate fluctuates between 100 and 225 basis points, and the increment over the Base Rate fluctuates between 0 and 125 basis points, both of which depend 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 be 200 basis points for the fourth quarter of fiscal 2022. The fee on the unused balance of the $75 million committed line of credit fluctuates between 15 and 25 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 ratio. As of December 31, 2021, there was $13.4 million available for borrowing under the $75 million line of credit.

The Company is in compliance with all of its loan covenants as of December 31, 2021.

NOTE 10 - CASH DIVIDENDS

The Company paid cash dividends of $2.7 million and $2.6 million in the six months ended December 31, 2021 and December 31, 2020, respectively. Dividends on restricted stock units in the amount of $0.1 million were accrued as of both December 31, 2021 and 2020, respectively. These dividends will be paid upon the vesting of the restricted stock units when shares are issued to the award recipients. In January 2022, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 15, 2022to shareholders of record as of February 7, 2022. The indicated annual cash dividend rate is $0.20 per share.

Page 18

NOTE 11 – EQUITY COMPENSATION

In November 2019, the Company’s shareholders approved the 2019 Omnibus Award Plan (“2019 Omnibus Plan”). The purpose of the 2019 Omnibus Plan is to provide a means through which the Company may attract and retain key personnel and to provide a means by which directors, officers, and employees can acquire and maintain an equity interest in the Company. The number of shares that remain reserved for issuance under the 2019 Omnibus Plan equates to 1,692,180 as of December 31, 2021. The 2019 Omnibus Plan implements 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 2019 Omnibus Plan allows for the grant of stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance stock units (“PSUs”) and other stock-based awards.

In the six months ended December 31, 2021, the Company granted 189,980 PSUs and 145,781 RSUs, both with a weighted average fair market value of $8.16. Stock compensation expense was $1.1 million and $0.4 million for the three months ended December 31, 2021 and 2020, respectively, and $1.7 million and $0.9 million in the six months ended December 31, 2021 and 2020, respectively.

NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION

	Six Months Ended
(In thousands)	December 31
	2021		2020
Cash Payments:
Interest	$	627	$	48
Income taxes	$	2,820	$	1,123
Non-cash investing and financing activities
Issuance of common shares as compensation	$	150	$	150
Issuance of common shares to fund deferred compensation plan	$	2,569	$	679

NOTE 13 - 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 December 31, 2021, there were no such standby letters of credit issued.

NOTE 14 – SEVERANCE COSTS

The activity in the Company’s accrued severance liability is as follows for the periods indicated:

	Six Months			Six Months			Fiscal Year
	Ended			Ended			Ended
	December 31,			December 31,			June 30,
(In thousands)	2021			2020			2021
Balance at beginning of period	$	13		$	639		$	639
Accrual of expense		-			21			41
Payments		(13	)		(392	)		(667	)
Balance at end of period	$	-		$	268		$	13

Page 19

NOTE 15 - LEASES

The Company leases certain manufacturing facilities along with a small office space, several forklifts, several small tooling items and various items of office equipment. The Company also acquired buildings, machinery and forklift leases with the acquisition of JSI, as well as one sublease. All but two of the Company’s leases are operating leases. Leases have a remaining term of one to seven years some of which have an option to renew. The Company does not assume renewals in determining the lease term unless the renewals are deemed reasonably certain. The lease agreements do not contain any material residual guarantees or material variable lease payments.

The Company has periodically entered into short-term operating leases with an initial term of twelve months or less. The Company elected not to record these leases on the balance sheet. For the three and six months ended December 31, 2021 and 2020, the rent expense for these leases is immaterial.

The Company has certain leases that contain lease and non-lease components and has elected to utilize the practical expedient to account for these components together as a single lease component.

Lease expense is recognized on a straight-line basis over the lease term. The Company used its incremental borrowing rate when determining the present value of lease payments.

	Three Months Ended					Six Months Ended
	December 31					December 31
(In thousands)	2021			2020		2021			2020
Operating lease cost	$	870		$	565	$	1,749		$	1,138
Financing lease cost:
Amortization of right of use assets		74			72		148			145
Interest on lease liabilities		20			23		41			47
Variable lease cost		22			1		44			2
Sublease income		(94	)		-		(188	)		-
Total lease cost	$	892		$	661	$	1,794		$	1,332

	Six Months Ended
	December 31
(In thousands)	2021		2020
Cash flows from operating leases
Fixed payments - operating cash flows	$	1,778	$	1,141
Liability reduction - operating cash flows	$	1,502	$	929
Cash flows from finance leases
Interest - operating cash flows	$	42	$	47
Repayments of principal portion - financing cash flows	$	129	$	118

Page 20

 

Operating Leases:

	December 31,			June 30,
	2021			2021
Total operating right-of-use assets	$	10,185		$	11,579
Accrued expenses (Current liabilities)	$	1,446		$	1,424
Long-term operating lease liability		9,436			10,890
Total operating lease liabilities	$	10,882		$	12,314
Weighted Average remaining Lease Term (in years)		3.49			3.93
Weighted Average Discount Rate		4.81	%		4.81	%

Finance Leases:

	December 31,			June 30,
	2021			2021
Buildings under finance leases	$	2,033		$	2,033
Equipment under finance leases		30			30
Accumulated depreciation		(487	)		(339	)
Total finance lease assets, net	$	1,576		$	1,724
Accrued expenses (Current liabilities)	$	269		$	263
Long-term finance lease liability		1,386			1,521
Total finance lease liabilities	$	1,655		$	1,784
Weighted Average remaining Lease Term (in years)		5.28			5.78
Weighted Average Discount Rate		4.86	%		4.86	%

Maturities of Lease Liability:

	Operating Lease Liabilities			Finance Lease Liabilities			Operating Subleases			Net Lease Commitments
2022	$	1,920		$	191		$	(189	)	$	1,922
2023		3,577			342			(377	)		3,542
2024		3,280			337			(377	)		3,240
2025		2,130			362			(31	)		2,461
2026		828			362			-			1,190
Thereafter		216			304			-			520
Total lease payments	$	11,951		$	1,898		$	(974	)	$	12,875
Less: Interest		(1,069	)		(243	)					(1,312	)
Present Value of Lease Liabilities	$	10,882		$	1,655					$	11,563

NOTE 16 – 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.

Page 21

 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March 2020. The CARES Act allowed the Company to carry back a federal net operating loss to prior tax years, offset taxable income in those earlier tax years and request a refund of income taxes that were paid at a higher statutory tax rate. The Company recognized tax benefits of $0.4 million in the first quarter of fiscal 2021 for utilizing the net operating losses in the prior tax years.

	Three Months Ended						Six Months Ended
	December 31						December 31
	2021			2020			2021			2020
Reconciliation of effective tax rate:
Provision for income taxes at the anticipated annual tax rate		23.8	%		25.0	%		24.0	%		24.5	%
Uncertain tax positions		(3.9	)		(4.8	)		(1.5	)		(2.2	)
Tax rate changes		-			-			-			(7.0	)
Share-based compensation		0.1			(0.2	)		(0.3	)		0.9
Effective tax rate		20.0	%		20.0	%		22.2	%		16.2	%

Page 22

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

Note About Forward-Looking Statements

This report includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including this section. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in in our Annual Report on Form 10-K in the following sections: “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Risk Factors.” All of those risks and uncertainties are incorporated herein by reference. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of LSI Industries Inc. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended June 30, 2021, and our financial statements and the accompanying Notes to Financial Statements (Part I, Item 1 of this Form 10-Q).

Our 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.

Summary of Consolidated Results

	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2021		2020		2021		2020
Lighting Segment	$	57,276	$	45,126	$	108,536	$	90,531
Display Solutions Segment		53,867		31,261		109,004		55,862
	$	111,143	$	76,387	$	217,540	$	146,393

	Three Months Ended						Six Months Ended
	December 31						December 31
(In thousands)	2021			2020			2021			2020
Lighting Segment	$	4,623		$	2,134		$	8,962		$	5,722
Display Solutions Segment		3,837			3,143			7,586			4,966
Corporate and Eliminations		(4,038	)		(2,591	)		(7,682	)		(5,800	)
	$	4,422		$	2,686		$	8,866		$	4,888

Net sales of $111.1 million for the three months ended December 31, 2021 increased $34.7 million or 45% as compared to net sales of $76.4 million for the three months ended December 31, 2020. Net sales were driven by increased net sales of the Display Solutions Segment (an increase of $22.6 million or 72%) and increased net sales of the Lighting Segment (an increase of $12.1 million or 27%).

Net sales of $217.5 million for the six months ended December 31, 2021 increased $71.1 million or 49% as compared to net sales of $146.4 million for the six months ended December 31, 2020. Net sales were driven by increased net sales of the Display Solutions Segment (an increase of $53.1 million or 95%) and increased net sales of the Lighting Segment (an increase of $18.0 million or 20%).

Page 23

Operating income of $4.4 million for the three months ended December 31, 2021 represents a $1.7 million increase from operating income of $2.7 million in the three months ended December 31, 2020. Adjusted operating income, a Non-GAAP measure, was $5.9 million in the three months ended December 31, 2021 compared to $3.1 million in the three months ended December 31, 2020. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures.

Operating income of $8.9 million for the six months ended December 31, 2021 represents a $4.0 million increase from operating income of $4.9 million in the six months ended December 31, 2020. Adjusted operating income, a Non-GAAP measure, was $10.9 million in the six months ended December 31, 2021 compared to $5.8 million in the six months ended December 31, 2020. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures.

Non-GAAP Financial Measures

We believe it is appropriate to evaluate our 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 stock compensation expense, acquisition costs, severance costs and restructuring costs are Non-GAAP financial measures. Also included below are Non-GAAP financial measures including Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA and Adjusted EBITDA), Free Cash Flow, Net Debt and Organic Net Sales. 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. Although the impacts of some of these items have been recognized in prior periods and could recur in future periods, we exclude these items because they provide greater comparability and enhanced visibility into our results of operations. These non-GAAP measures may be different from non-GAAP measures used by other companies.  In addition, the non-GAAP measures are not based on any comprehensive set of accounting rules or principles.  Non-GAAP measures have limitations, in that they do not reflect all amounts associated with our results as determined in accordance with U.S. GAAP.  Therefore, these measures should be used only to evaluate our results in conjunction with corresponding GAAP measures. Below is a reconciliation of these Non-GAAP measures to operating income, net income, and earnings per share for the periods indicated along with the calculation of EBITDA and Adjusted EBITDA, Free Cash Flow, Net Debt and Organic Net Sales.

Reconciliation of operating income to adjusted operating income:

	Three Months Ended
	December 31
(In thousands)	2021		2020
Operating Income as reported	$	4,422	$	2,686
Stock compensation expense		1,130		397
Acquisition costs		340		-
Severance costs		-		21
Adjusted Operating Income	$	5,892	$	3,104

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Reconciliation of net income to adjusted net income

	Three Months Ended
	December 31
(In thousands, except per share data)	2021					2020
				Diluted EPS					Diluted EPS
Net Income as reported	$	3,105		$	0.11	$	2,208		$	0.08
Stock compensation expense		867	(1)		0.03		318	(3)		0.01
Acquisition costs		269	(2)		0.01		-			-
Severance costs		-			-		17	(4)		-
Net Income adjusted	$	4,241		$	0.15	$	2,543		$	0.09

The following represents the income tax effects of the adjustments in the tables above, which were calculated using the estimated combined U.S., Canada and Mexico effective income tax rates for the periods indicated (in thousands):

⁽¹⁾ $263

⁽²⁾ $71

⁽³⁾ $79

⁽⁴⁾ $4

Reconciliation of operating income to adjusted operating income:

	Six Months Ended
	December 31
(In thousands)	2021		2020
Operating Income as reported	$	8,866	$	4,888
Stock compensation expense		1,686		902
Acquisition costs		340		-
Severance costs		-		21
Restructuring costs		-		3
Adjusted Operating Income	$	10,892	$	5,814

Reconciliation of net income to adjusted net income

	Six Months Ended
	December 31
(In thousands, except per share data)	2021					2020
				Diluted EPS						Diluted EPS
Net Income as reported	$	6,238		$	0.22	$	4,198			$	0.15
Stock compensation expense		1,274	(1)		0.05		698		(3)		0.03
Acquisition costs		269	(2)		0.01		-				-
Severance costs		-			-		17		(4)		-
Restructuring costs		-			-		2		(5)		-
Tax impact due to the change in the estimated annual tax rate used for GAAP reporting purposes		-			-		(297	)			(0.01	)
Net Income adjusted	$	7,781		$	0.28	$	4,618			$	0.17

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⁽¹⁾ $412

⁽²⁾ $71

⁽³⁾ $204

⁽⁴⁾ $4

⁽⁵⁾ $1

The reconciliation of reported net income and earnings per share to adjusted net income and earnings per share may not agree due to rounding differences and due to the difference between basic and dilutive weighted average shares outstanding in the computation of earnings per share.

Reconciliation of operating income to EBITDA and Adjusted EBITDA

	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2021		2020		2021		2020
Operating Income as reported	$	4,422	$	2,686	$	8,866	$	4,888
Depreciation and Amortization		2,538		1,990		5,101		4,023
EBITDA	$	6,960	$	4,676	$	13,967	$	8,911
Stock compensation expense		1,130		397		1,686		902
Acquisition costs		340		-		340		-
Severance costs		-		21		-		21
Restructuring costs		-		-		-		3
Adjusted EBITDA	$	8,430	$	5,094	$	15,993	$	9,837

Reconciliation of cash flow from operations to free cash flow

	Three Months Ended						Six Months Ended
	December 31						December 31
(In thousands)	2021			2020			2021			2020
Cash Flow from Operations	$	(8,654	)	$	5,778		$	(16,543	)	$	13,417
Capital expenditures		(448	)		(475	)		(745	)		(880	)
Free Cash Flow	$	(9,102	)	$	5,303		$	(17,288	)	$	12,537

Reconciliation of Net Debt

	December 31,		June 30,
(In thousands)	2021		2021
Current portion and long-term debt as reported	$	86,601	$	68,178
Less:
Cash and cash equivalents as reported		914		2,282
Net Debt	$	85,687	$	65,896

Reconciliation of net sales to organic net sales

	Three Months Ended				Six Months Ended
	December 31				December 31
(In thousands)	2021		2020		2021		2020
Lighting Segment	$	57,276	$	45,126	$	108,536	$	90,531
Display Solutions Segment		53,867		31,261		109,004		55,862
Total net sales		111,143		76,387		217,540		146,393
Less:
JSI		20,560		-		43,907		-
Total organic net sales	$	90,583	$	76,387	$	173,633	$	146,393

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Results of Operations

THREE MONTHS ENDED DECEMBER 31, 2021 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2020

Lighting Segment

	Three Months Ended
	December 31
(In thousands)	2021		2020
Net Sales	$	57,276	$	45,126
Gross Profit	$	16,898	$	13,704
Operating Income	$	4,623	$	2,134

Lighting Segment net sales of $57.3 million in the three months ended December 31, 2021 increased 27% from net sales of $45.1 million in the same period in fiscal 2021. The increase is due to increases in both our project business and sales into distributor stock, as well as the launch of new products. Project business sales improved in the warehousing, petroleum, parking, and automotive verticals.

Gross profit of $16.9 million in the three months ended December 31, 2021 increased $3.2 million or 23% from the same period of fiscal 2021. Gross profit as a percentage of net sales was 29.5% in the three months ended December 31, 2021 compared to 30.4% in the same period of fiscal 2021. Gross profit as a percentage of net sales reflects effective price management and productivity, along with mitigating continued increases from the inflationary impact of input costs.

Operating expenses of $12.3 million in the three months ended December 31, 2021 increased $0.7 million from the same period of fiscal 2021, primarily driven by higher commission expense as a result of higher sales.

Lighting Segment operating income of $4.6 million for the three months ended December 31, 2021 increased $2.5 million from operating income of $2.1 million in the same period of fiscal 2021 primarily driven by sales volume.

Display Solutions Segment

	Three Months Ended
	December 31
(In thousands)	2021		2020
Net Sales	$	53,867	$	31,261
Gross Profit	$	8,559	$	6,006
Operating Income	$	3,837	$	3,143

Display Solutions Segment net sales of $53.9 million in the three months ended December 31, 2021 increased $22.6 million or 72% from net sales of $31.3 million in the same period in fiscal 2021. The increase is driven primarily by the acquisition of JSI.

Gross profit of $8.6 million in the three months ended December 31, 2021 increased $2.5 million or 42% from the same period of fiscal 2021. Gross profit as a percentage of net sales in the three months ended December 31, 2021 was 15.9% compared to 19.2% in the same period of fiscal 2021. Gross profit as a percentage of net sales has been unfavorably impacted by inflationary input costs, partially offset by selling price increases, and project mix.

Operating expenses of $4.7 million in the three months ended December 31, 2021 increased $1.8 million from $2.9 million in the same period of fiscal 2021, primarily driven by the inclusion of three months of results for JSI.

Display Solutions Segment operating income of $3.8 million in the three months ended December 31, 2021 increased $0.7 million from operating income of $3.1 million in the same period of fiscal 2021. The increase of $0.7 million was primarily driven by an increase in sales.

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Corporate and Eliminations

	Three Months Ended
	December 31
(In thousands)	2021			2020
Gross Profit (Loss)	$	(9	)	$	(4	)
Operating (Loss)	$	(4,038	)	$	(2,591	)

The gross profit relates to the change in the intercompany profit in inventory elimination.

Operating expenses of $4.0 million in the three months ended December 31, 2021 increased $1.4 million or 56% from the same period of fiscal 2021. The net increase was due to the acceleration of long-term incentive plan compensation expense and acquisition costs.

Consolidated Results

We reported $0.5 million and $0.1 million of net interest expense in the three months ended December 31, 2021 and December 31, 2020, respectively. The increase in interest expense from fiscal 2021 to fiscal 2022 is the result of higher levels of debt outstanding on our credit facility. We also recorded other expense/(income) in the three months ended December 31, 2021 and December 31, 2020, related to net foreign exchange currency transaction losses and gains through our Mexican and Canadian subsidiaries.

The $0.8 million of income tax expense in the three months ended December 31, 2021 represents a consolidated effective tax rate of 20.0%. The $0.6 million of income tax expense in the three months ended December 31, 2020 represents a consolidated effective tax rate of 20.0%.

We reported net income of $3.1 million in the three months ended December 31, 2021 compared to net income of $2.2 million in the three months ended December 31, 2020. Non-GAAP adjusted net income was $4.2 million for the three months ended December 31, 2021 compared to adjusted net income of $2.5 million for the three months ended December 31, 2020 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an increase in sales. Diluted earnings per share of $0.11 was reported in the three months ended December 31, 2021 as compared to $0.08 diluted earnings per share in the same period of fiscal 2021. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended December 31, 2021 were 28,067,000 shares compared to 27,360,000 shares in the same period last year.

SIX MONTHS ENDED DECEMBER 31, 2021 COMPARED TO SIX MONTHS ENDED DECEMBER 31, 2020

Lighting Segment

	Six Months Ended
	December 31
(In thousands)	2021		2020
Net Sales	$	108,536	$	90,531
Gross Profit	$	32,355	$	27,530
Operating Income	$	8,962	$	5,722

Lighting Segment net sales of $108.5 million in the six months ended December 31, 2021 increased 20% from net sales of $90.5 million in the same period in fiscal 2021. The increase is due to increases in both our project business and sales into distributor stock, as well as the launch of new products. Project business sales improved in the warehousing, petroleum, parking, and automotive verticals.

Gross profit of $32.4 million in the six months ended December 31, 2021 increased $4.8 million or 17% from the same period of fiscal 2021. Gross profit as a percentage of net sales was 29.8% in the six months ended December 31, 2021 compared to 30.4% in the same period of fiscal 2021. Gross profit as a percentage of net sales reflects effective price management and productivity, along with mitigating continued increases from the inflationary impact of input costs.

Operating expenses of $23.4 million in the six months ended December 31, 2021 increased $1.6 million from the same period of fiscal 2021, primarily driven by higher commission expense as a result of higher sales and non-recurring cost savings due to COVID-19 in the prior year.

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Lighting Segment operating income of $9.0 million for the six months ended December 31, 2021 increased $3.2 million from operating income of $5.7 million in the same period of fiscal 2021 primarily driven by sales volume.

Display Solutions Segment

	Six Months Ended
	December 31
(In thousands)	2021		2020
Net Sales	$	109,004	$	55,862
Gross Profit	$	17,595	$	10,448
Operating Income	$	7,586	$	4,966

Display Solutions Segment net sales of $109.0 million in the six months ended December 31, 2021 increased $53.1 million or 95% from net sales of $55.9 million in the same period in fiscal 2021. The increase is primarily driven by the acquisition of JSI.

Gross profit of $17.6 million in the six months ended December 31, 2021 increased $7.1 million or 68% from the same period of fiscal 2021. Gross profit as a percentage of net sales in the six months ended December 31, 2021 was 16.1% compared to 18.7% in the same period of fiscal 2021. Gross profit as a percentage of net sales has been unfavorably impacted by inflationary input costs, partially offset by selling price increases, and project mix.

Operating expenses of $10.0 million in the six months ended December 31, 2021 increased $4.5 million from $5.5 million in the same period of fiscal 2021, primarily driven by the inclusion of six months of results for JSI and non-recurring cost savings due to COVID-19 in the prior year.

Display Solutions Segment operating income of $7.6 million in the six months ended December 31, 2021 increased $2.6 million from operating income of $5.0 million in the same period of fiscal 2021. The increase of $2.6 million was primarily driven by an increase in sales.

Corporate and Eliminations

	Six Months Ended
	December 31
(In thousands)	2021			2020
Gross Profit (Loss)	$	8		$	-
Operating (Loss)	$	(7,682	)	$	(5,800	)

The gross profit relates to the change in the intercompany profit in inventory elimination.

Operating expenses of $7.7 million in the six months ended December 31, 2021 increased $1.9 million or 33% from the same period of fiscal 2021. The net increase was due to the acceleration of long-term incentive plan compensation expense and acquisition costs, as well as non-recurring cost savings due to COVID-19 in the prior year.

Consolidated Results

We reported $0.8 million and $0.1 million of net interest expense in the six months ended December 31, 2021 and December 31, 2020, respectively. The increase in interest expense from fiscal 2021 to fiscal 2022 is the result of higher levels of debt outstanding on our credit facility. We also recorded other expense/(income) in the six months ended December 31, 2021 and December 31, 2020, related to net foreign exchange currency transaction losses and gains through our Mexican and Canadian subsidiaries.

The $1.8 million of income tax expense in the six months ended December 31, 2021 represents a consolidated effective tax rate of 22.2%. The $0.8 million income tax expense in the six months ended December 31, 2020 represents a consolidated effective tax rate of 16.2% and was driven by a favorable deferred tax asset adjustment related to a net operating loss carryback from the CARES Act.

We reported net income of $6.2 million in the six months ended December 31, 2021 compared to net income of $4.2 million in the six months ended December 31, 2020. Non-GAAP adjusted net income was $7.8 million for the six months ended December 31, 2021 compared to adjusted net income of $4.6 million for the six months ended December 31, 2020 (Refer to the Non-GAAP tables above). The increase in Non-GAAP adjusted net income is primarily the net result of an increase in sales. Diluted earnings per share of $0.22 was reported in the six months ended December 31, 2021 as compared to $0.15 diluted earnings per share in the same period of fiscal 2021. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the six months ended December 31, 2021 were 27,895,000 shares compared to 27,161,000 shares in the same period last year.

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Liquidity and Capital Resources

We consider our level of cash on hand, borrowing capacity, current ratio and working capital levels to be our most important measures of short-term liquidity. For long-term liquidity indicators, we believe our ratio of long-term debt to equity and our historical levels of net cash flows from operating activities to be the most important measures.

At December 31, 2021, we had working capital of $78.8 million compared to $54.1 million at June 30, 2021. The ratio of current assets to current liabilities was 2.16 to 1 compared to a ratio of 1.76 to 1 at June 30, 2021. The increase in working capital from June 30, 2021 to December 31, 2021 is primarily driven by a $13.0 million increase in net inventory, $11.5 million increase in net accounts receivable, and a $10.4 million decrease in accrued expenses, partially offset by a $3.8 million increase in accounts payable, a $3.6 million increase in current maturities of long-term debt and a $1.5 million decrease in other current assets.

Net accounts receivable was $69.2 million and $57.7 million at December 31, 2021 and June 30, 2021, respectively. DSO decreased to 54 days at December 31, 2021 from 56 days at June 30, 2021.

Net inventories of $71.9 million at December 31, 2021 increased $13.0 million from $58.9 million at June 30, 2021. The increase of $13.0 million is the result of an increase in gross inventory of $13.2 million and an increase in obsolescence reserves of $0.2 million. Lighting Segment net inventory increased $9.2 million, to support our product availability initiative to capitalize on new, short-lead time opportunities and to mitigate the ongoing supply chain challenges. Net inventory in the Display Solutions Segment increased $3.8 million, to support several ongoing programs.

Cash generated from operations and borrowing capacity under our credit facility is our primary source of liquidity. In September 2021, we amended our existing $100 million secured line of credit, to a $25 million term loan and $75 million remaining as a secured revolving line of credit. Both facilities expire in the third quarter of fiscal 2026. As of December 31, 2021, $13.4 million of the credit line was available. We are in compliance with all of our loan covenants. We believe that our $100 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the remainder of fiscal 2022. However, as the impact of COVID-19 on the economy and our operations evolves, we will continue to assess our liquidity needs.

We used $16.5 million of cash from operating activities in the six months ended December 31, 2021 compared to a source of cash of $13.4 million in the six months ended December 31, 2020. The decrease in net cash flows from operating activities is the result of increases in inventory and accounts receivable and decreases in accrued expense and customer prepayments, partially offset by improved earnings and an increase in accounts payable.

We used $0.2 million and $0.9 million of cash related to investing activities in the six months ended December 31, 2021 and December 31, 2020, respectively. Capital expenditures decreased from $0.9 million in the six months ended December 31, 2020 to $0.7 million in the six months ended December 31, 2021. We received $0.5 million of cash related to the settlement of working capital adjustments from the acquisition of JSI.

We had a source of cash of $15.4 million related to financing activities in the six months ended December 31, 2021 compared to a use of cash of $2.6 million in the six months ended December 31, 2020. The $18.0 million change in cash flow was the net result of an increase in the borrowings on the line of credit to support the growth in working capital. Most of the growth in working capital can be attributed to the increase in inventory to ensure product availability for critical sales growth initiatives and to mitigate supply chain challenges.

We have on our 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

We have no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.

Cash Dividends

In January 2022, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable February 15, 2022 to shareholders of record as of February 7, 2022. The indicated annual cash dividend rate for fiscal 2022 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.

Page 30

Critical Accounting Policies and Estimates

A summary of our significant accounting policies is included in Note 1 to the audited consolidated financial statements of the Company’s fiscal 2021 Annual Report on Form 10-K.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Except for the broad effects of the COVID-19 pandemic as a result of its negative impact on the global economy and major financial markets, there have been no material changes in our exposure to market risk since June 30, 2021. 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, 2021.

ITEM 4.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain 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 Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, 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

There have been no changes in our 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 December 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Page 31

PART II.  OTHER INFORMATION

ITEM 5. OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

Exhibits:

3.1 Amended and Restated (Consolidated) Articles of Incorporation of LSI Industries Inc.

10.1 Fiscal Year 2022 Long-Term Incentive Plan (LTIP)*++

10.2 Fiscal Year 2022 Short-Term Incentive Plan (STIP)*++

10.3 Form of 2019 Omnibus Award Plan Restricted Stock Unit Award Agreement for FY22 Grant*

10.4 Form of 2019 Omnibus Award Plan Performance Stock Unit Award Agreement for FY22 Grant*++

10.5 Employee Stock Purchase Plan (incorporated by reference from the LSI’s Registration Statement on Form S-8 (Commission File Number 333-260767) filed on November 4, 2021)

31.1 Certification of Principal Executive Officer required by Rule 13a-14(a)

31.2 Certification of Principal Financial Officer required by Rule 13a-14(a)

32.1 Section 1350 Certification of Principal Executive Officer

32.2 Section 1350 Certification of Principal Financial Officer

101.INS Inline XBRL Instance Document

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104         Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Management compensatory agreement.

++ Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby agrees to furnish a copy of any omitted portion to the SEC upon request.

Page 32

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 A. Clark
		James A. Clark
		Chief Executive Officer and President
		(Principal Executive Officer)
	By:	/s/ James E. Galeese
		James E. Galeese
		Executive Vice President and Chief
		Financial Officer
		(Principal Financial Officer)
February 4, 2022

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