LSI Industries (LYTS)

(Year End June 30th)

Apr. 21, 2009
(based on 2008 and Q3 2009 data)

Check list:

1.Major Business.

(1) Lighting Segment: 62% in 2008, 60% in 2007, 70% in 2006.


(2) Graphics Segment: 38% in 2008, 40% in 2007, 30% in 2006.
The two segments are related and is helpful for the business. Their business is kind of contract oriented, especially the graphic segment. The revenue may vary from year to year. This make it harder to trace its grows.
Major customer: BP, Chrysler, CVS Caremark and Burger King. Petroleum store sale: 28% in 2008, 26% in 2007, 24% in 2006.
Business are seasonal, generally Q3(end Mar. 31st) is lower affected by weather condition for outdoor operation.
Solid state lighting is one very interesting new product.

2.Price/Book ratio.

Shares: 21.8m. Current Price $5.55. Book value $5.87.

3.Current ratio. Debt/Current Asset ratio. Inventory level.

Current asset: $91.4m. Current liability $19.8m. Total Debt: $3.0m. Inventory: $44m. Less than $60m(revenue of Q2 2009).

4.P/E ratio.Deficit check.Revenue/price ratio.

Real 2008 earning around $0.63 per share. For past five years average earning $0.69 per share.
No deficit for past 10 years.


2008 Revenue $305m. Revenue/Price = 2.5.
First 3 quarter 2009 Revenue down 25%. Graphic segment down more than Lighting segment.

5.Dividend.

Has paid dividend since 1987. Average $0.44 for past five years. Up to 0.63 in 2008. Current dividend rate $0.20 per year. Dividend policy is to payout 50%-70% of net income.

6.Cash flow

Average FCF for past 5 years are around $14m($0.64/share). Average dividend payment around $9.6m for past 5 years.


7.Grows related.
Revenue grow from $240m to over $300 in last 5 years. But this includes acquisition of SACO.
Earning grow from $8m to $20m in 2007 and back to around $14m in 2008.

8.Management SG&A, Marketing, R&D

First 3 quart of 2009 SG&A decreased $6m compare to 2008. 2008 SG&A increase 3m over 2007. 2007 is 7m higher than 2006 after bough SACO.
Marketing 0.5m flat for 3 years.


R&D: 2008 $4.1m, 2007 $2.6m, 2006 $1.3m


9.Management compensation.
Options: 1.5m outstanding, average price $13.2
2008 issued no bonus.
2009 no increase on salary over 2008. Don't know how much options granted, but the price should around $8.0 based on Aug. 22th 2008 price.


2008 top 5 officer compensation: $3.4m.
2007 top 5 officer compensation: $3.8m

10.Industry comparison.

Hubbell Inc (HUBa.N) (HUBb.N), ???


ImagePoint: Private company. Direct competitor on graphic. more than 450 employees. Private company. Bankrupted and closed at Jan. 09, 2009.


Marketing Displays (MDI): Seems a private company. Graphic company, don't know what relationship with ImagePoint.


Acuity Brands (AYI): lighting company. 2b revenue. Seems doing OK.


Cooper Industries (CBE): 6b revenue. include lighting division.


Keyser Industries, Inc: Seems a private company. Graphic. Don't know how big it is.

11.Buy back, insider holding and trading info.

Top ten insider hold 2.8m shares. Around 12.5% of total shares. CEO hold 1m share. around 5% of total shares.
Fred D. Jalbout (President of LSI Saco) sold around 0.6m of his 1.4m share during last year. He is still holding 0.8m of common share.


No stock buy back right now.


12.Major events.
June 2006, bought SACO technologies in Montreal with $23m cash + 1.4m share.
Charged $29m goodwill in 2008 and $16.7m goodwill in Q2 2009.
Settled a lawsuit with Marketing Displays(MDI) with $3m at Q2 2009. $2.8m is recorded at Q4 2008 and $0.2m is recorded in Q2 2009.

13.Others
By end of 2008, it has 1460 full time and 140 temp employees. Average $200K revenue per employee.
Their conference calls are very detailed( more than 90 minutes).




Feb. 5, 2010
(Q4 2009, Q1&Q2 2010)
Failed to bought at $4.0 level. It climbed to over $8 and now price comes back around $5.7.


Check list:

1.Major Business.

(1) Lighting Segment:  69% in 2009, 62% in 2008, 60% in 2007, 70% in 2006.

(2) Graphics Segment: 26% in 2009, 38% in 2008, 40% in 2007, 30% in 2006.

Added two small segment in accounting: 

Technology Segment: 2% in 2009
Electronic Segment: 

All Other :                  3% in 2009

2.Price/Book ratio.

Shares: 24.3m. Current Price $5.56. Book value $4.91. The book value change is related to the goodwill increase in acquisition of ADL Technology.

3.Current ratio. Debt/Current Asset ratio. Inventory level.

Current asset: $93.5m. Current liability $17.1m. Total Debt: $1.1m. Inventory: $41.8m. Less than $69.4m(revenue of Q2 2010).

4.P/E ratio.Deficit check.Revenue/price ratio.

Real 2009 earning close to zero. Real 2008 earning around $0.63 per share. For past 6 years average earning $0.58 per share.

No deficit for past 10 years.

2009 Revenue $234m. Revenue/Price = 1.73.

First 2 quarter 2009 Revenue flat compare to first 2 quarter of 2008.

5.Dividend.

Has paid dividend since 1987. Average $0.44 for past five years. Up to 0.63 in 2008. Current dividend rate $0.20 per year. Dividend policy is to payout 50%-70% of net income.

6.Free Cash flow

2009: 13.5m
2008: 9m
2007: 34.8m
2006: -0.4m (Bought SACO $22m cash).
2005:
Average FCF for past 5 years are around $14m($0.64/share). Average dividend payment around $9.6m for past 5 years.

7.Grows related.

Revenue grow from $240m to over $300m from 2003-2008, 2009 go back to $240m level. 

Earning grow from $8m to $20m in 2007 and back to around $14m in 2008. Down to $0 at 2009.

8.Management SG&A, Marketing, R&D

SG&A:
2009:
First 3 quarter of 2009 SG&A decreased $6m compare to 2008. 2008 SG&A increase 3m over 2007. 2007 is 7m higher than 2006 after bough SACO.

Marketing 0.5m flat for 3 years.

R&D: 2009 $4.05m, 2008 $4.1m, 2007 $2.6m, 2006 $1.3m

9.Management compensation.

Options:
640k granted Q1+Q2 2010 from $5.93 to $8.40.


2.0m outstanding at Dec. 2009($10.54) 

2.1m outstanding at June 2009($13.07), 

1.5m outstanding at June 2008($13.20),

2008 issued no bonus.

2009 no increase on salary over 2008. Total 360k $8.98 options granted at Aug. 2008. Among of which 130k are to officers.
Aug. 2009:  245K options at $8.40 to officers.

2009 top 5 officers compensation: $2.8m. CEO $800K compare his 1m share ($6m-$7m in value)

2008 top 5 officers compensation: $3.4m.

2007 top 5 officers compensation: $3.8m

10.Industry comparison.

Hubbell Inc (HUBa.N) (HUBb.N), ???

ImagePoint: Private company. Direct competitor on graphic. more than 450 employees. Private company. Bankrupted and closed at Jan. 09, 2009.

Marketing Displays (MDI): Seems a private company. Graphic company, don't know what relationship with ImagePoint.

Acuity Brands (AYI): lighting company. 2b revenue. Seems doing OK.

Cooper Industries (CBE): 6b revenue. include lighting division.

Keyser Industries, Inc: Seems a private company. Graphic. Don't know how big it is.

11.Buy back, insider holding and trading info.

Top ten insider hold 2.8m shares. Around 12.5% of total shares. CEO hold 1m share. around 5% of total shares.

Fred D. Jalbout (President of LSI Saco) sold around 0.6m of his 1.4m share during last year. He is still holding 0.8m of common share.

No stock buy back right now.

12.Major events.

July 2009, bought ADL Technologies with $15.8m ($1.3m cash + 2.45m share). Record Goodwill $9m.  Actually intangible added around 14m.


June 2006, bought SACO technologies in Montreal with $23m cash + 1.4m share.

Charged $14.5m goodwill in 2009. $29m goodwill in 2008.

Settled a lawsuit with Marketing Displays(MDI) with $3m at Q2 2009. $2.8m is recorded at Q4 2008 and $0.2m is recorded in Q2 2009.

13.Others

By end of 2009, it has 1160 full time and  80  temp employees. Average $190K revenue per employee.
By end of 2008, it has 1460 full time and 140 temp employees. Average $200K revenue per employee.

June 01, 2010
Q3 2010


Recent price go down around $5.80.


1. Book value around $4.79.


2. Q3 lost $0.10 per share.


3. LED counts around 25% of revenue for first 3 quarters of 2010.




LED article:

http://seekingalpha.com/article/160929-expect-a-lot-of-acquisitions-in-lighting




Aug 19, 2010
Q4 2010
Bought at $4.84. Recent price $5.20.


1. Q4 revenue increased by 27%. Income 0.03 per share.


2. Whole 2010 revenue $254m. 9% higher compare to 2009. Income 0.12 per share.


3. State that made in U.S. instead of import from China.




Oct. 22, 2010
Q1 2011


Recent price $8.50
1. Q1 sales up 18% compare to last year. Profit more than doubled compare to same quarter last year.


2. Awarded 104k options at August 19, 2010. The price should be $5.21. (This is from the 8-k at Aug 24th 2010).


3. Previous owner of ADL David T. Feeney (371,913 shares); Kevin A. Kelly (998,882 shares); and Craig A. Miller (1,047,481 shares) are very likely to sell their shares.


Others:
The biggest concern is that the CEO owns quite a few shares 5% and he likes to dilute it.


Nov. 1 2011


Sold all shares of LYTS at $9.42.

On the upside, the stock have very good growing potential especially for the LED technologies. I won't be surprised if it goes up to $15 or $20. 

On the downside, 

1. Now it is fairly priced based on 15 times P/E of past 5 years average earning. 

2. The most important, I don't feel comfortable with the CEO. Historically he very generous of issuing new shares of the company to fuel acquisitions and he never increase his stake in the company. That's as the creator of the company, he now only owns 5% of shares of the company. I think he care more for how much he can make from the company than share holders' value.