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 ~~MARCH 31,~~SEPTEMBER 30, 2022, 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~~NASDAQGlobal 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 ~~April 29,~~October 28, 2022, there were ~~26,654,990~~27,777,410 shares of the registrant's common stock, no par value per share, outstanding.

LSI INDUSTRIES INC.

FORM 10-Q

FOR THE QUARTER ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022

INDEX

PART I. FINANCIAL INFORMATION			3
			~~Begins on Page~~
~~PART I. Financial Information~~

	ITEM 1.		~~Financial Statements (Unaudited)~~

		~~Condensed Consolidated Statements of Operations~~FINANCIAL STATEMENTS	3
			~~Condensed Consolidated Statements of Comprehensive Income~~	4
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS			~~Condensed Consolidated Balance Sheets~~	5 3
			~~Condensed Consolidated Statements of Shareholders’ Equity~~	7
		~~Condensed Consolidated Statements of Cash Flows~~	8

		~~Notes to Condensed Consolidated Financial Statements~~	9

	~~ITEM 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	23

	~~ITEM 3.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~	31

	~~ITEM 4.~~	~~Controls and Procedures~~	31

~~PART II. Other Information~~

	~~ITEM 5.~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME		4

	CONDENSED CONSOLIDATED BALANCE SHEETS		5

	CONDENSED CONSOLIDATED BALANCE SHEETS		6

	CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY		~~Other Information~~	327

	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS		8

	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS		9

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	26

ITEM 4.		CONTROLS AND PROCEDURES	26

PART II. OTHER INFORMATION			27

ITEM 5.		OTHER INFORMATION	27

ITEM 6.		~~Exhibits~~EXHIBITS	3227

	~~Signatures~~SIGNATURES		33 28

Page 2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LSI INDUSTRIES INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended					Three Months Ended
	March 31						March 31					September 30
(In thousands, except per share data)	2022			2021			2022		2021			2022		2021

Net Sales	$	110,111		$	72,204		$	327,651	$	218,597		$	127,069	$	106,397

Cost of products and services sold		83,318			54,112			250,900		162,519			92,319		81,887

Severance costs		0			0			0		5			12		-

Restructuring costs		0			0			0		3

Gross profit		26,793			18,092			76,751		56,070			34,738		24,510

Selling and administrative expenses		21,627			15,996			62,719		49,070			24,717		20,066

Severance costs		5			0			5		16

Operating income		5,161			2,096			14,027		6,984			10,021		4,444

Interest (income)		0			(2	)		0		(4	)

Interest expense		524			54			1,287		175			788		234

Other (income) expense		(55	)		43			33		(197	)
Other expense													213		79

Income before income taxes		4,692			2,001			12,707		7,010			9,020		4,131

Income tax expense		1,074			529			2,851		1,340			2,758		998

Net income	$	3,618		$	1,472		$	9,856	$	5,670		$	6,262	$	3,133


Earnings per common share (see Note 5)
Earnings per common share (see Note 4)
Basic	$	0.13		$	0.05		$	0.36	$	0.21		$	0.23	$	0.12
Diluted	$	0.13		$	0.05		$	0.35	$	0.21		$	0.22	$	0.11


Weighted average common shares outstanding
Basic		27,378			26,771			27,220		26,642			27,641		26,996
Diluted		28,083			27,727			27,945		27,352			28,664		27,743

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					Nine Months Ended				Three Months Ended
	March 31					March 31				September 30
(In thousands)	2022		2021			2022		2021		2022		2021

Net Income	$	3,618	$	1,472		$	9,856	$	5,670	$	6,262	$	3,133

Foreign currency translation adjustment		46		(54	)		11		93		7		(44	)

Comprehensive Income	$	3,664	$	1,418		$	9,867	$	5,763	$	6,269	$	3,089

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)

	March 31,			June 30,			September 30,			June 30,
(In thousands, except shares)	2022			2021			2022			2022

ASSETS

Current assets

Cash and cash equivalents	$	1,248		$	2,282		$	9,028		$	2,462

Accounts receivable, less allowance for credit losses of $421 and $256, respectively		73,618			57,685
Accounts receivable, less allowance for credit losses of $508 and $499, respectively								75,449			77,750

Inventories		78,364			58,941			80,457			74,421

Refundable income taxes		1,029			1,275			1,118			1,041

Other current assets		4,299			4,825			4,355			3,243

Total current assets		158,558			125,008			170,407			158,917

Property, Plant and Equipment, at cost
Land		4,010			3,984			4,010			4,010
Buildings		24,454			24,393			24,469			24,495
Machinery and equipment		67,446			65,928			67,115			66,762
Buildings under finance leases		2,033			2,033			2,033			2,033
Construction in progress		665			933			563			618
		98,608			97,271			98,190			97,918
Less accumulated depreciation		(70,626	)		(66,719	)		(71,913	)		(70,760	)
Net property, plant and equipment		27,982			30,552			26,277			27,158

Goodwill		44,388			43,788			45,030			45,030

Other intangible assets, net		69,162			72,773			66,774			67,964

Operating lease right-of-use assets		9,464			11,579			7,826			8,664

Other long-term assets, net		3,001			3,121			3,187			3,347

Total assets	$	312,555		$	286,821		$	319,501		$	311,080

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)

	March 31,			June 30,			September 30,			June 30,
(In thousands, except shares)	2022			2021			2022			2022

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities
Current maturities of long-term debt	$	3,571		$	0		$	3,571		$	3,571
Accounts payable		38,697			32,977			41,133			34,783
Accrued expenses		32,903			37,918			35,231			36,264

Total current liabilities		75,171			70,895			79,935			74,618

Long-term debt		81,387			68,178			73,975			76,025

Finance lease liabilities		1,316			1,521			1,174			1,246

Operating lease liabilities		9,068			10,890			7,381			8,240

Other long-term liabilities		3,068			4,167			3,307			3,182

Commitments and contingencies (Note 13)		-			-
Commitments and contingencies (Note 12)								-			-

Shareholders' Equity
Preferred shares, without par value; Authorized 1,000,000 shares, none issued		0			0			-			-
Common shares, without par value; Authorized 50,000,000 shares; Outstanding 26,642,320 and 26,517,836 shares, respectively		138,082			132,526
Common shares, without par value; Authorized 40,000,000 shares; Outstanding 27,777,410 and 27,484,514 shares, respectively								140,599			139,500
Treasury shares, without par value		(5,457	)		(2,450	)		(6,439	)		(5,927	)
Deferred compensation plan		5,457			2,450			6,439			5,927
Retained earnings (loss)		4,403			(1,405	)
Retained earnings								13,078			8,224
Accumulated other comprehensive income		60			49			52			45

Total shareholders' equity		142,545			131,170			153,729			147,769

Total liabilities & shareholders' equity	$	312,555		$	286,821		$	319,501		$	311,080

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			Common Shares							Treasury Shares							Key Executive			Accumulated Other			Retained			Total
(In thousands, except per share data)	Number Of Shares		Amount		Number Of Shares			Amount			Compensation Amount		Comprehensive Income (Loss)			Earnings (Loss)			Shareholders' Equity			Number Of Shares							Number Of Shares							Compensation Amount			Comprehensive Income (Loss)			Earnings (Loss)			Shareholders' Equity
Balance at June 30, 2020		26,466	$	127,713		(180	)	$	(1,121	)	$	1,121	$	(93	)	$	(1,920	)	$	125,700
(In thousands, except per share data)																								Number Of Shares			Amount						Number Of Shares					Amount			Compensation Amount			Comprehensive Income (Loss)			Earnings (Loss)			Shareholders' Equity

Balance at June 30, 2021																							26,863				$	132,526				(346			)	$	(2,450	)	$	2,450		$	49		$	(1,405	)	$	131,170

Net Income		-		0		-			0			0		0			5,670			5,670			-			-				-				-			-			-			3,133			3,133
Other comprehensive income		-		0		-			0			0		93			0			93
Other comprehensive loss																							-			-				-				-			-			(44	)		-			(44	)
Stock compensation awards		35		242		0			0			0		0			0			242			10			75				-				-			-			-			-			75
Restricted stock units issued		28		0		0			0			0		0			0			0
Restricted stock units issued, net of shares withheld for tax withholdings																							79			(247	)			-				-			-			-			-			(247	)
Shares issued for deferred compensation		141		1,096		0			0			0		0			0			1,096			263			2,042				-				-			-			-			-			2,042
Activity of treasury shares, net		0		0		(128	)		(990	)		0		0			0			(990	)		-			-				(261	)			(2,021	)		-			-			-			(2,021	)
Deferred stock compensation		-		0		-			0			990		0			0			990			-			-				-				-			2,021			-			-			2,021
Stock compensation expense		-		1,317		-			0			0		0			0			1,317			-			556				-				-			-			-			-			556
Stock options exercised, net		128		962		0			0			0		0			0			962			3			16				-				-			-			-			-			16
Dividends — $0.20 per share		-		0		-			0			0		0			(4,010	)		(4,010	)
Dividends — $0.20 per share																							-			-				-				-			-			-			(1,328	)		(1,328	)

Balance at March 31, 2021		26,798	$	131,330		(308	)	$	(2,111	)	$	2,111	$	0		$	(260	)	$	131,070
Balance at September 30, 2021																							27,218		$	134,968				(607	)		$	(4,471	)	$	4,471		$	5		$	400		$	135,373

	Common Shares					Treasury Shares						Key Executive		Accumulated Other		Retained			Total
	Number Of Shares					Number Of Shares						Compensation Amount		Comprehensive Income (Loss)		Earnings (Loss)			Shareholders' Equity
	Number Of Shares		Amount			Number Of Shares			Amount			Compensation Amount		Comprehensive Income (Loss)		Earnings (Loss)			Shareholders' Equity

Balance at June 30, 2022		27,484	$	139,500			(822	)	$	(5,927	)	$	5,927	$	45	$	8,224		$	147,769

Net Income		-		-			-			-			-		-		6,262			6,262
Other comprehensive loss		-		-			-			-			-		7		-			7
Stock compensation awards		12		75			-			-			-		-		-			75
Restricted stock units issued, net of shares withheld for tax withholdings		201		(66	)		-			-			-		-		-			(66	)
Shares issued for deferred compensation		80		539			-			-			-		-		-			539
Activity of treasury shares, net		-		-			(77	)		(512	)		-		-		-			(512	)
Deferred stock compensation		-		-			-			-			512		-		-			512
Stock compensation expense		-		551			-			-			-		-		-			551
Stock options exercised, net		-		-			-			-			-		-		-			-
Dividends — $0.20 per share		-		-			-			-			-		-		(1,408	)		(1,408	)

Balance at September 30, 2022		27,777	$	140,599			(899	)	$	(6,439	)	$	6,439	$	52	$	13,078		$	153,729

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)

Equity

Balance at June 30, 2021
26,863 $ 132,526 (346 ) $ (2,450 ) $ 2,450 $ 49 $ (1,405 ) $ 131,170

Net Income
- 0 - 0 0 0 9,856 9,856
Other comprehensive income
- 0 - 0 0 11 0 11
Stock compensation awards
30 225 0 0 0 0 0 225
Restricted stock units issued, net of shares withheld for tax withholdings
80 (250 ) 0 0 0 0 0 (250 )
Shares issued for deferred compensation
412 3,089 0 0 0 0 0 3,089
Activity of treasury shares, net
0 0 (401 ) (3,007 ) 0 0 0 (3,007 )
Deferred stock compensation
- 0 - 0 3,007 0 0 3,007
Stock compensation expense
- 2,466 - 0 0 0 0 2,466
Stock options exercised, net
5 26 0 0 0 0 0 26
Dividends — $0.20 per share
- 0 - 0 0 0 (4,048 ) (4,048 )

Balance at March 31, 2022
27,390 $ 138,082 (747 ) $ (5,457 ) $ 5,457 $ 60 $ 4,403 $ 142,545

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)

	Nine Months Ended						Three Months Ended
	March 31						September 30
(In thousands)	2022			2021			2022			2021

Cash Flows from Operating Activities
Net income	$	9,856		$	5,670		$	6,262		$	3,133
Non-cash items included in net income
Depreciation and amortization		7,632			5,943			2,421			2,563
Deferred income taxes		26			332			350			(13	)
Deferred compensation plan		3,089			1,096			539			2,042
Stock compensation expense		2,466			1,317			551			556
Issuance of common shares as compensation		225			242			75			75
Loss on disposition of fixed assets		57			0			2			14
Allowance for doubtful accounts		205			(15	)		8			10
Inventory obsolescence reserve		752			1,226			250			572

Changes in certain assets and liabilities
Accounts receivable		(16,104	)		(6,867	)		2,293			(6,260	)
Inventories		(20,175	)		(2,817	)		(6,286	)		(9,578	)
Refundable income taxes		247			(444	)		(77	)		138
Accounts payable		5,695			10,450			6,350			8,359
Accrued expenses and other		(3,708	)		1,269			(1,943	)		(6,663	)
Customer prepayments		(2,931	)		7,232			(212	)		(2,837	)
Net cash flows (used in) provided by operating activities		(12,668	)		24,634
Net cash flows provided by (used in) operating activities								10,583			(7,889	)

Cash Flows from Investing Activities
Purchases of property, plant and equipment		(1,276	)		(1,517	)		(434	)		(297	)
Adjustment to JSI acquisition purchase price		500			0
Net cash flows used in investing activities		(776	)		(1,517	)
Net cash flows (used in) investing activities								(434	)		(297	)

Cash Flows from Financing Activities
Payments of long-term debt		(113,195	)		0			(47,123	)		(42,533	)
Borrowings of long-term debt		130,006			0			45,073			52,659
Cash dividends paid		(3,989	)		(3,963	)		(1,408	)		(1,326	)
Shares withheld for employees' taxes		(250	)		(28	)		(66	)		(247	)
Payments on financing lease obligations		(196	)		(178	)		(66	)		(64	)
Proceeds from stock option exercises		26			962			-			16
Net cash flows provided by (used in) financing activities		12,402			(3,207	)
Net cash flows (used in) provided by financing activities								(3,590	)		8,505

Change related to foreign currency		8			101			7			(31	)

(Decrease) increase in cash and cash equivalents		(1,034	)		20,011
Increase in cash and cash equivalents								6,566			288

Cash and cash equivalents at beginning of period		2,282			3,517			2,462			2,282

Cash and cash equivalents at end of period	$	1,248		$	23,528		$	9,028		$	2,570

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 ~~March 31,~~September 30, 2022, the results of its operations for the ~~three~~ ~~and~~ ~~nine~~~~-month~~three-month periods ended ~~March 31,~~September 30, 2022, and 2021, and its cash flows for the ~~nine~~~~-month~~three-month periods ended ~~March 31,~~September 30, 2022, and 2021. These statements should be read in conjunction with the financial statements and footnotes included in the fiscal ~~2021~~2022 Annual Report on Form 10~~-K.~~10-K. Financial information as of June 30, ~~2021~~ 2022, 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~~2022 Annual Report on Form 10~~-K.~~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 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.

~~Page~~ 9

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)(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								Three Months Ended
(In thousands)	March 31, 2022				March 31, 2021				September 30, 2022				September 30, 2021
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Timing of revenue recognition
Products and services transferred at a point in time	$	49,283	$	41,231	$	39,497	$	12,550	$	58,077	$	47,489	$	44,582	$	37,431
Products and services transferred over time		7,843		11,754		6,243		13,914		9,456		12,047		6,678		17,706
	$	57,126	$	52,985	$	45,740	$	26,464	$	67,533	$	59,536	$	51,260	$	55,137

Nine Months Ended

(In thousands)

March 31, 2022

March 31, 2021

Lighting
Segment

Display
Solutions
Segment

Lighting
Segment

Display
Solutions
Segment

Timing of revenue recognition

Products and services transferred at a point in time
$ 144,006 $ 114,099 $ 119,478 $ 42,991
Products and services transferred over time
21,656 47,890 16,793 39,335
$ 165,662 $ 161,989 $ 136,271 $ 82,326

	Three Months Ended
	September 30, 2022				September 30, 2021
	Lighting Segment		Display Solutions Segment		Lighting Segment		Display Solutions Segment
Type of Product and Services
LED lighting, digital signage solutions, electronic circuit boards	$	55,535	$	7,175	$	41,879	$	12,428
Poles, other display solution elements		11,129		41,471		8,966		33,302
Project management, installation services, shipping and handling		869		10,890		415		9,407
	$	67,533	$	59,536	$	51,260	$	55,137

Three Months Ended

(In thousands)

March 31, 2022

March 31, 2021

Lighting
Segment

Display
Solutions
Segment

Lighting
Segment

Display
Solutions
Segment

Type of Product and Services

LED lighting, digital signage solutions, electronic circuit boards
$ 47,196 $ 6,906 $ 40,298 $ 8,595
Poles, printed graphics, display fixtures
9,358 35,536 5,071 11,809
Project management, installation services, shipping and handling
572 10,543 371 6,060
$ 57,126 $ 52,985 $ 45,740 $ 26,464

Nine Months Ended

(In thousands)

March 31, 2022

March 31, 2021

Lighting
Segment

Display
Solutions
Segment

Lighting
Segment

Display
Solutions
Segment

Type of Product and Services

LED lighting, digital signage solutions, electronic circuit boards
$ 136,701 $ 31,885 $ 118,681 $ 20,546
Poles, printed graphics, display fixtures
27,403 99,965 16,299 41,526
Project management, installation services, shipping and handling
1,558 30,139 1,291 20,254
$ 165,662 $ 161,989 $ 136,271 $ 82,326

~~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,~~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.

~~Reclassifications~~

~~Certain amounts reported in the prior year in Note~~ 7 ~~have been reclassified to conform to the current year’s presentation.~~

New Accounting Pronouncements:

In October 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2021~~-~~08,~~2021-08, “Business Combinations (Topic ~~805~~)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. The Company is evaluating the impact this guidance may have on its consolidated financial statements and related disclosures.

Page 10

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, "Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740)." This guidance removes certain exceptions to the general principles in ASC 740 such as recognizing deferred taxes for equity investments, the incremental approach to performing intra-period tax allocation and calculating income taxes in interim periods. The standard also simplifies accounting for income taxes under U.S. GAAP by clarifying and amending existing guidance, including the recognition of deferred taxes for goodwill, the allocation of taxes to members of a consolidated group and requiring that an entity reflect the effect of enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The Company adopted ASC 2019-12 effective 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"),~~2021, 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~~-13did not have a material impact on ~~the~~its consolidated financial statements ~~and related~~or 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 adoption of this guidance did~~ ~~not~~ ~~have a material impact on the consolidated financial statements and related disclosures.~~

~~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.

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

~~Page~~ 11

~~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 for fiscal~~ ~~2021~~ ~~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 43 - 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 2two 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/~~refueling and convenience store 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~~court and field 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/~~refueling and convenience store 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~~court and field market. The Display Solutions Segment ~~implements, installs and~~also provides ~~program~~a variety of project management services ~~related~~ to ~~products sold by the Display Solutions Segment~~complement our display elements, such as installation management, site surveys, permitting, and ~~by the Lighting Segment.~~content management which are offered to our customers to support our digital signage.

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

There were 0no customers or customer programs representing a concentration of 10% or more of the Company’s consolidated net sales in the three or ~~nine~~ months ended ~~March 31, 2022~~ September 30, 2022. One customer program in the Display Solutions Segment represents $12.3 million or ~~March 31,~~12% of the Company’s net sales in the three months ended September 30, 2021. One customer in the Display Solutions represents $8.5 million or 11% of accounts receivable at September 30, 2022. There was 0no concentration of accounts receivable at ~~March 31, 2022~~ or ~~June~~September 30, 2021.

Page 1311

Summarized financial information for the Company’s operating segments is provided for the indicated periods and as of ~~March 31,~~September 30, 2022, and ~~March 31,~~September 30, 2021:

Three Months Ended

Nine Months Ended

(In thousands)

March 31

March 31

2022

2021

2022

2021

Net Sales:

Lighting Segment
$ 57,126 $ 45,740 $ 165,662 $ 136,271
Display Solutions Segment
52,985 26,464 161,989 82,326
$ 110,111 $ 72,204 $ 327,651 $ 218,597

Operating Income (Loss):

Lighting Segment
$ 4,959 $ 3,797 $ 13,921 $ 9,519
Display Solutions Segment
4,556 1,230 12,142 6,196
Corporate and Eliminations
(4,354 ) (2,931 ) (12,036 ) (8,731 )
$ 5,161 $ 2,096 $ 14,027 $ 6,984

Capital Expenditures:

Lighting Segment
$ 272 $ 605 $ 624 $ 1,249
Display Solutions Segment
185 17 660 84
Corporate and Eliminations
74 15 (8 ) 184
$ 531 $ 637 $ 1,276 $ 1,517

Depreciation and Amortization:

Lighting Segment
$ 1,450 $ 1,566 $ 4,361 $ 4,795
Display Solutions Segment
1,021 278 3,068 940
Corporate and Eliminations
60 76 203 208
$ 2,531 $ 1,920 $ 7,632 $ 5,943

	March 31, 2022		June 30, 2021		Three Months Ended
Identifiable Assets:
(In thousands)					September 30
					2022			2021
Net Sales:
Lighting Segment					$	67,533		$	51,260
Display Solutions Segment						59,536			55,137
					$	127,069		$	106,397

Operating Income (Loss):
Lighting Segment	$	149,062	$	132,169	$	9,158		$	4,339
Display Solutions Segment		158,415		147,354		6,496			3,749
Corporate and Eliminations		5,078		7,298		(5,633	)		(3,644	)
	$	312,555	$	286,821	$	10,021		$	4,444

Capital Expenditures:
Lighting Segment					$	249		$	180
Display Solutions Segment						162			221
Corporate and Eliminations						23			(104	)
					$	434		$	297

Depreciation and Amortization:
Lighting Segment					$	1,387		$	1,461
Display Solutions Segment						974			1,031
Corporate and Eliminations						60			71
					$	2,421		$	2,563

	September 30, 2022		June 30, 2022
Total Assets:
Lighting Segment	$	151,856	$	152,431
Display Solutions Segment		160,099		152,302
Corporate and Eliminations		7,546		6,347
	$	319,501	$	311,080

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

Nine Months Ended

(In thousands)

March 31

March 31

2022

2021

2022

2021

Lighting Segment inter-segment net sales
$ 5,683 $ 6,880 $ 27,406 $ 15,998

Display Solutions Segment inter-segment net sales
$ 54 $ 46 $ 289 $ 159

Inter-segment sales

	Three Months Ended
(In thousands)	September 30
	2022		2021
Lighting Segment inter-segment net sales	$	6,143	$	10,457

Display Solutions Segment inter-segment net sales	$	66	$	163

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 1412

NOTE 54 - 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				Nine Months Ended				Three Months Ended
	March 31				March 31				September 30
	2022		2021		2022		2021		2022		2021

BASIC EARNINGS PER SHARE

Net income	$	3,618	$	1,472	$	9,856	$	5,670	$	6,262	$	3,133

Weighted average shares outstanding during the period, net of treasury shares		26,642		26,467		26,606		26,384		26,730		26,553
Weighted average vested restricted stock units outstanding		31		20		26		16		46		17
Weighted average shares outstanding in the Deferred Compensation Plan during the period		705		284		588		242		865		426
Weighted average shares outstanding		27,378		26,771		27,220		26,642		27,641		26,996

Basic income per share	$	0.13	$	0.05	$	0.36	$	0.21
Basic earnings per common share									$	0.23	$	0.12


DILUTED EARNINGS PER SHARE

Net income	$	3,618	$	1,472	$	9,856	$	5,670	$	6,262	$	3,133

Weighted average shares outstanding:

Basic		27,378		26,771		27,220		26,642		27,641		26,996

Effect of dilutive securities (a):
Impact of common shares to be issued under stock option plans, and contingently issuable shares, if any		705		956		725		710		1,023		747
Weighted average shares outstanding		28,083		27,727		27,945		27,352		28,664		27,743

Diluted income per share	$	0.13	$	0.05	$	0.35	$	0.21
Diluted earnings per common share									$	0.22	$	0.11


Anti-dilutive securities (b)		1,427		654		1,043		1,017		213		989

(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~~ ~~nine~~ months ended ~~March 31,~~September 30, 2022, and ~~March 31,~~September 30, 2021, 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 1513

NOTE 65 – INVENTORIES, NET

The following information is provided as of the dates indicated:

	March 31,		June 30,		September 30,		June 30,
(In thousands)	2022		2021		2022		2022

Inventories:
Raw materials	$	53,534	$	40,567	$	53,962	$	51,637
Work-in-progress		2,789		4,757		6,156		3,029
Finished goods		22,041		13,617		20,339		19,755
Total Inventories	$	78,364	$	58,941	$	80,457	$	74,421

NOTE 76 - ACCRUED EXPENSES

The following information is provided as of the dates indicated:

	March 31,		June 30,		September 30,		June 30,
(In thousands)	2022		2021		2022		2022

Accrued Expenses:
Customer prepayments	$	8,421	$	11,352	$	6,204	$	6,416
Compensation and benefits		8,029		10,051		8,752		9,611
Accrued warranty		4,337		5,295		4,319		4,491
Accrued freight		3,213		1,629
Operating lease liabilities						1,187		1,274
Accrued sales commissions		2,458		2,568		2,506		4,783
Accrued Freight						4,139		3,680
Accrued FICA		1,179		1,190		1,161		1,122
Operating lease liabilities		1,070		1,424
Finance lease liabilities		272		263		280		275
Accrued income tax		0		434		1,835		109
Other accrued expenses		3,924		3,712		4,848		4,503
Total Accrued Expenses	$	32,903	$	37,918	$	35,231	$	36,264

NOTE 87 - 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~~The Company has a total of 3three reporting units that contain goodwill. One reporting unit is within the Lighting Segment and 2two 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 1614

~~As of~~ ~~March 1, 2022~~, the Company performed its annual preliminary goodwill impairment test on the 3 reporting units that contain goodwill. The preliminary goodwill impairment test of the reporting unit in the Lighting Segment passed with a business enterprise value of $31.6 million or 18% above the carrying value of the reporting unit including goodwill. The preliminary goodwill impairment test of ~~one~~ reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $12.2 million or 1,316% above the carrying value of the reporting unit including goodwill. The preliminary goodwill impairment test of the ~~second~~ reporting unit with goodwill in the Display Solutions Segment passed with an estimated business enterprise value of $100.4 million or 12% above the carrying value of the reporting unit including goodwill. The definitive impairment test is expected to be completed in the ~~fourth~~ ~~quarter of fiscal~~ ~~2022~~. ~~It is anticipated that the results of the definitive test will~~ ~~not~~ ~~change when the test is complete.~~

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 March 31, 2022

Goodwill
$ 70,971 $ 62,105 $ 133,076
Measurement period adjustment
0 600 600
Accumulated impairment losses
(61,763 ) (27,525 ) (89,288 )
Goodwill, net as of March 31, 2022
$ 9,208 $ 35,180 $ 44,388

Balance as of June 30, 2021

Goodwill
$ 70,971 $ 28,690 $ 99,661
Goodwill acquired
0 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

Goodwill
(In thousands)				Display
	Lighting			Solutions
	Segment			Segment			Total
Balance as of September 30, 2022
Goodwill	$	70,971		$	63,347		$	134,318
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of September 30, 2022	$	9,208		$	35,822		$	45,030

Balance as of June 30, 2022
Goodwill	$	70,971		$	63,347		$	134,318
Accumulated impairment losses		(61,763	)		(27,525	)		(89,288	)
Goodwill, net as of June 30, 2022	$	9,208		$	35,822		$	45,030

~~The Company has~~ ~~two~~ ~~indefinite-lived intangible assets. The Company performed its annual review of indefinite-lived intangible assets as of~~ ~~March 1, 2022~~ ~~and determined there was 0 impairment. The preliminary impairment test of the~~ ~~first~~ ~~indefinite-lived intangible asset passed with a fair market value of $17.0 million or 396% above its carrying value. The preliminary impairment test of the~~ ~~second~~ indefinite-lived intangible asset passed with a fair market value of and $10.6 million or 22% above its carrying value. The definitive indefinite-lived impairment test is expected to be completed in the ~~fourth~~ ~~quarter of fiscal~~ ~~2022~~. ~~It is anticipated that the results of the definitive test will~~ ~~not~~ ~~change when the test is complete.~~

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

Other Intangible Assets
	March 31, 2022						September 30, 2022
(In thousands)	*Gross*						Gross
	*Carrying*		*Accumulated*		*Net*		Carrying		Accumulated		Net
	*Amount*		*Amortization*		*Amount*		Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	13,546	$	48,537	$	62,083	$	15,254	$	46,829
Patents		268		260		8		268		268		-
LED technology firmware, software		20,966		14,303		6,663		20,966		14,895		6,071
Trade name		2,658		1,021		1,637		2,658		1,075		1,583
Non-compete		260		45		215		260		71		189
Total Amortized Intangible Assets		86,235		29,175		57,060		86,235		31,563		54,672

Indefinite-lived Intangible Assets
Trademarks and trade names		12,102		-		12,102		12,102		-		12,102
Total indefinite-lived Intangible Assets		12,102		-		12,102		12,102		-		12,102

Total Other Intangible Assets	$	98,337	$	29,175	$	69,162	$	98,337	$	31,563	$	66,774

Other Intangible Assets
	June 30, 2022
(In thousands)	Gross
	Carrying		Accumulated		Net
	Amount		Amortization		Amount
Amortized Intangible Assets
Customer relationships	$	62,083	$	14,400	$	47,683
Patents		268		268		-
LED technology firmware, software		20,966		14,598		6,368
Trade name		2,658		1,049		1,609
Non-compete		260		58		202
Total Amortized Intangible Assets		86,235		30,373		55,862

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	$	30,373	$	67,964

Page 1715

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

	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31				March 31				September 30
(In thousands)	2022		2021		2022		2021		2022		2021

Amortization Expense of Other Intangible Assets	$	1,198	$	671	$	3,611	$	2,012	$	1,190	$	1,215

The Company expects to record annual amortization expense as follows:

(In thousands)

2022	$	4,808
2023	$	4,760	$	3,618
2024	$	4,760		4,760
2025	$	4,760		4,760
2026	$	4,754		4,760
After 2026	$	36,829
2027				4,754
After 2027				32,020

NOTE 98 - DEBT

The Company’s long-term debt as of ~~March 31,~~September 30, 2022, and June 30, ~~2021~~ 2022, consisted of the following:

	March 31,		June 30,		September 30,		June 30,
(In thousands)	2022		2021		2022		2022

Secured line of credit	$	61,774	$	68,178	$	56,144	$	57,275
Term loan, net of debt issuance costs of $30 and $0, respectively		23,184		0
Term loan, net of debt issuance costs of $26 and $30, respectively						21,402		22,321
Total debt		84,958		68,178		77,546		79,596
Less: amounts due within one year		3,571		0		3,571		3,571
Total amounts due after one year, net	$	81,387	$	68,178	$	73,975	$	76,025

~~Page~~ 18

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 annually in the amount of $3.6 million ~~annually~~ over ~~the~~a ~~five~~five-year~~-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. As of September 30, 2022, the Company’s borrowing rate against its revolving line of credit was 4.8%. The increment over LIBOR borrowing rate will be ~~200~~175 basis points for the ~~first~~second quarter of fiscal 2023. 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 ~~March 31,~~September 30, 2022, there was ~~$13.2~~$18.9 million available for borrowing under the $75 million line of credit.

The Company is in compliance with all of its loan covenants as of ~~March 31,~~September 30, 2022.

NOTE 109 - CASH DIVIDENDS

The Company paid cash dividends of ~~$4.0~~$1.4 million and $1.3 million in both the ~~nine~~three months ended ~~March 31,~~September 30, 2022, and ~~March 31, 2021.~~ September 30, 2021, respectively. Dividends on restricted stock units in the amount of $0.2 million and $0.1 million were accrued as of both ~~March 31,~~September 30, 2022, and ~~2021.~~2021, respectively. These dividends will be paid upon the vesting of the restricted stock and performance stock units when shares are issued to the award recipients. In ~~April~~November 2022, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable ~~May 17,~~November 22, 2022,to shareholders of record as of ~~May 9, 2022~~. November 14, 2022. The indicated annual cash dividend rate is $0.20 per share.

Page 16

NOTE 1110 – EQUITY COMPENSATION

In November ~~2019,~~ 2022, the Company’s shareholders approved an amendment to the 2019 Omnibus Award Plan (“(“2019 Omnibus Plan”). which increased the number of shares authorized for issuance under the plan by 2,350,000 and to remove the Plan’s fungible share counting feature. 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 prior to the amendment of the Plan equates to ~~1,569,938~~1,253,908 as of ~~March 31,~~September 30, 2022. 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 ~~nine~~three months ended ~~March 31,~~September 30, 2022, the Company granted ~~189,980 PSUs~~164,348 PSU’s and ~~145,781 RSUs,~~196,522 RSU’s, both with a weighted average ~~fair~~ market value of ~~$8.16.~~$6.90. Stock compensation expense was ~~$0.8 million and $0.4~~$0.6 million for both the three months ended ~~March 31,~~September 30, 2022, and ~~2021,~~ ~~respectively, and $2.5 million and $1.3 million in the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2022~~ ~~and~~ ~~2021,~~ ~~respectively.~~2021.

NOTE 1211 - SUPPLEMENTAL CASH FLOW INFORMATION

	Nine Months Ended				Three Months Ended
(In thousands)	March 31				September 30
	2022		2021		2022		2021
Cash Payments:
Interest	$	1,067	$	71	$	679	$	203
Income taxes	$	3,581	$	1,473	$	664	$	1,183

Non-cash investing and financing activities
Issuance of common shares as compensation	$	225	$	242	$	75	$	75
Issuance of common shares to fund deferred compensation plan	$	3,089	$	1,096	$	539	$	2,042

NOTE 1312 - 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 ~~March 31,~~September 30, 2022, there were 0no such standby letters of credit issued.

~~Page~~ 19

NOTE 14– ~~SEVERANCE COSTS~~

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

Nine Months

Nine Months

Fiscal Year

Ended

Ended

Ended

March 31,

March 31,

June 30,

(In thousands)

2022

2021

2021

Balance at beginning of period
$ 13 $ 639 $ 639
Accrual of expense
5 21 41
Payments
(18 ) (555 ) (667 )
Balance at end of period
$ 0 $ 105 $ 13

~~NOTE~~ 1513 - 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~~ ~~nine~~ months ended ~~March 31,~~September 30, 2022, and 2021, 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

Nine Months Ended

March 31

March 31

(In thousands)

2022

2021

2022

2021

Operating lease cost
$ 868 $ 576 $ 2,617 $ 1,714
Financing lease cost:

Amortization of right of use assets
74 73 221 218
Interest on lease liabilities
19 22 61 69
Variable lease cost
22 0 65 2
Sublease income
(94 ) 0 (283 ) 0
Total lease cost
$ 889 $ 671 $ 2,681 $ 2,003

Page 2017

~~Supplemental Cash Flow Information:~~

Nine Months Ended

March 31

(In thousands)

2022

2021

Cash flows from operating leases

Fixed payments - operating cash flows
$ 2,669 $ 1,707
Liability reduction - operating cash flows
$ 2,271 $ 1,397

Cash flows from finance leases

Interest - operating cash flows
$ 61 $ 69
Repayments of principal portion - financing cash flows
$ 196 $ 178

Operating Leases:

March 31,

June 30,

2022

2021

Total operating right-of-use assets
$ 9,464 $ 11,579

Accrued expenses (Current liabilities)
$ 1,070 $ 1,424
Long-term operating lease liability
9,068 10,890
Total operating lease liabilities
$ 10,138 $ 12,314

Weighted Average remaining Lease Term (in years)
3.27 3.93

Weighted Average Discount Rate
4.81 % 4.81 %

	Three Months Ended
	September 30
(In thousands)	2022			2021

Operating lease cost	$	863		$	879
Financing lease cost:
Amortization of right of use assets		74			74
Interest on lease liabilities		18			21
Variable lease cost		22			22
Sublease income		(116	)		(94	)
Total lease cost	$	861		$	902

Finance Leases:

March 31,

June 30,

2022

2021

Buildings under finance leases
$ 2,033 $ 2,033
Equipment under finance leases
30 30
Accumulated depreciation
(561 ) (339 )
Total finance lease assets, net
$ 1,502 $ 1,724

Accrued expenses (Current liabilities)
$ 272 $ 263
Long-term finance lease liability
1,316 1,521
Total finance lease liabilities
$ 1,588 $ 1,784

Weighted Average remaining Lease Term (in years)
5.03 5.78

Weighted Average Discount Rate
4.86 % 4.86 %

Supplemental Cash Flow Information:
	Three Months Ended
	September 30
(In thousands)	2022		2021

Cash flows from operating leases
Fixed payments - operating cash flows	$	885	$	887
Liability reduction - operating cash flows	$	779	$	744

Cash flows from finance leases
Interest - operating cash flows	$	18	$	21
Repayments of principal portion - financing cash flows	$	66	$	64

Operating Leases:	September 30,			June 30,
	2022			2022

Total operating right-of-use assets	$	7,826		$	8,664

Accrued expenses (Current liabilities)	$	1,187		$	1,274
Long-term operating lease liability		7,381			8,240
Total operating lease liabilities	$	8,568		$	9,514

Weighted Average remaining Lease Term (in years)		2.83			3.05

Weighted Average Discount Rate		4.82	%		4.81	%

Finance Leases:	September 30,			June 30,
	2022			2022

Buildings under finance leases	$	2,033		$	2,033
Equipment under finance leases		30			30
Accumulated depreciation		(719	)		(634	)
Total finance lease assets, net	$	1,344		$	1,429

Accrued expenses (Current liabilities)	$	280		$	275
Long-term finance lease liability		1,174			1,246
Total finance lease liabilities	$	1,454		$	1,521

Weighted Average remaining Lease Term (in years)		4.54			4.80

Weighted Average Discount Rate		4.86	%		4.86	%

Page 2118

Maturities of Lease Liability:

Operating
Lease
Liabilities

Finance Lease
Liabilities

Operating
Subleases

Net Lease
Commitments

2022
$ 1,029 $ 105 $ (94 ) $ 1,040
2023
3,583 342 (377 ) 3,548
2024
3,280 337 (377 ) 3,240
2025
2,131 362 (31 ) 2,462
2026
829 362 0 1,191
Thereafter
221 303 0 524
Total lease payments
$ 11,073 $ 1,811 $ (879 ) $ 12,005
Less: Interest
(935 ) (223 ) (1,158 )
Present Value of Lease Liabilities
$ 10,138 $ 1,588 $ 10,847

Maturities of Lease Liability:	Operating Lease Liabilities			Finance Lease Liabilities			Operating Subleases		Net Lease Commitments
2023	$	2,792		$	275		$	377	$	3,444
2024		3,285			337			377		3,999
2025		2,136			362			31		2,529
2026		835			362			-		1,197
2027		215			303			-		518
Thereafter		4			-			-		4
Total lease payments	$	9,267		$	1,639		$	785	$	11,691
Less: Interest		(699	)		(185	)				(884	)
Present Value of Lease Liabilities	$	8,568		$	1,454				$	10,807

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.

~~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						Nine Months Ended						Three Months Ended
	March 31						March 31						September 30
	2022			2021			2022			2021			2022			2021
Reconciliation of effective tax rate:

Provision for income taxes at the anticipated annual tax rate		22.4	%		23.8	%		23.4	%		24.3	%		26.20	%		24.2	%
Uncertain tax positions		0.5			0.8			(0.8	)		(1.3	)		1.0			0.8
Tax rate changes		0			0			0			(5.0	)
Deferred Income Tax Adjustment														1.6			-
Share-based compensation		0			1.8			(0.2	)		1.1			1.8			(0.8	)
Effective tax rate		22.9	%		26.4	%		22.4	%		19.1	%		30.6	%		24.2	%

Page 2219

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,” “focus,” “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,~~2022, 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

~~Net Sales by Business Segment~~

Net Sales by Business Segment
	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31				March 31				September 30
(In thousands)	2022		2021		2022		2021		2022		2021

Lighting Segment	$	57,126	$	45,740	$	165,662	$	136,271	$	67,533	$	51,260
Display Solutions Segment		52,985		26,464		161,989		82,326		59,536		55,137
	$	110,111	$	72,204	$	327,651	$	218,597	$	127,069	$	106,397

~~Operating Income (Loss) by Business Segment~~

Operating Income (Loss) by Business Segment
	Three Months Ended						Nine Months Ended						Three Months Ended
	March 31						March 31						September 30
(In thousands)	2022			2021			2022			2021			2022			2021

Lighting Segment	$	4,959		$	3,797		$	13,921		$	9,519		$	9,158		$	4,339
Display Solutions Segment		4,556			1,230			12,142			6,196			6,496			3,749
Corporate and Eliminations		(4,354	)		(2,931	)		(12,036	)		(8,731	)		(5,633	)		(3,644	)
	$	5,161		$	2,096		$	14,027		$	6,984		$	10,021		$	4,444

Net sales of ~~$110.1~~$127.1 million for the three months ended ~~March 31,~~September 30, 2022, increased ~~$37.9~~$20.7 million or ~~53%~~19% as compared to net sales of ~~$72.2~~$106.4 million for the three months ended ~~March 31,~~September 30, 2021. Net sales were driven by increased net sales of the Lighting Segment (an increase of $16.2 million or 32%) and increased net sales of the Display Solutions Segment ~~increased $26.5~~(an increase of $4.4 million or ~~100%~~8%). Growth in both reportable segments reflects the ongoing strength in demand levels from our key vertical markets, focusing on higher-value applications where our differentiated products and ~~net sales~~solutions meet the unique requirements of ~~the Lighting Segment increased $11.4 million or 25%.~~

Net sales of $327.7 million for the nine months ended March 31, 2022 increased $109.1 million or 50% as compared to net sales of $218.6 million for the nine months ended March 31, 2021. Net sales of the Display Solutions Segment increased $80.0 million or 97% and net sales of the Lighting Segment increased $29.4 million or 22%.our customers.

Page 2320

Operating income of ~~$5.2~~$10.0 million for the three months ended ~~March 31,~~September 30, 2022, represents a ~~$3.1~~$5.6 million increase from operating income of ~~$2.1~~$4.4 million in the three months ended ~~March 31,~~September 30, 2021. Adjusted operating income, a Non-GAAP measure, was ~~$6.0~~$10.9 million in the three months ended ~~March 31,~~September 30, 2022, compared to ~~$2.5~~$5.0 million in the three months ended ~~March 31,~~September 30, 2021. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures.

~~Operating income of $14.0 million for the nine months ended March 31, 2022 represents a $7.0 million~~ The increase ~~from~~in operating income was the result of ~~$7.0 million~~increased volume leveraged by a higher-value sales mix, price realization offsetting inflation, and effective cost management.The Company continues to focus on actions which increase its value and importance to customers in verticals where the nine months ended March 31, 2021. Adjusted operating income, a Non-GAAP measure, was $16.9 million in the nine months ended March 31, 2022 compared to $8.3 million in the nine months ended March 31, 2021. Refer to “Non-GAAP Financial Measures” below for a reconciliation of Non-GAAP financial measures to U.S. GAAP measures.Company sees profitable growth.

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~~consulting expense related to commercial growth initiatives, 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, and Net Debt ~~and Organic Net Sales.~~to Adjusted EBITDA. 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, and Net Debt ~~and Organic Net Sales.~~to Adjusted EBITDA.

~~Reconciliation of operating income to adjusted operating income:~~

Three Months Ended

March 31

(In thousands)

2022

2021

Operating Income as reported
$ 5,161 $ 2,096

Stock compensation expense
780 415

Acquisition costs
21 -

Severance costs
5 -

Adjusted Operating Income
$ 5,967 $ 2,511
~~Reconciliation of net income to adjusted net income~~

Three Months Ended

March 31

(In thousands, except per share data)

2022

2021

Diluted EPS

Diluted EPS

Net Income as reported
$ 3,618 $ 0.13 $ 1,472 $ 0.05

Stock compensation expense
576 (1) 0.02 314 (4) 0.01

Acquisition costs
16 (2) - - -

Severance costs
4 (3) - - -

Tax impact due to the change in the estimated annual tax rate used for GAAP reporting purposes
- - 44 -

Net Income adjusted
$ 4,214 $ 0.15 $ 1,830 $ 0.07
~~Page 24~~

Reconciliation of net income to adjusted net income

Three Months Ended

September 30

(In thousands, except per share data)

2022

2021

Diluted EPS

Diluted EPS

Net Income as reported
$ 6,262 $ 0.22 $ 3,133 $ 0.11

Stock compensation expense
420 (1 ) 0.01 407 (5 ) 0.02

Consulting expense: Commercial Growth Initiatives
226 (2 ) 0.01 - -

Severance costs
9 (3 ) - - -

Tax rate difference between reported and adjusted net income
160 (4 ) 0.01 - -

Net Income adjusted
$ 7,077 $ 0.25 $ 3,540 $ 0.13

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⁾$~~204~~131
⁽²⁾$577
⁽³⁾$13
⁽⁴⁾$~~101~~
~~Reconciliation of operating income to adjusted operating income:~~

Nine Months Ended

March 31

(In thousands)

2022

2021

Operating Income as reported
$ 14,027 $ 6,984

Stock compensation expense
2,466 1,317

Acquisition costs
361 -

Severance costs
5 21

Restructuring costs
- 3

Adjusted Operating Income
$ 16,859 $ 8,325
~~Reconciliation of net income to adjusted net income~~

Nine Months Ended

March 31

(In thousands, except per share data)

2022

2021

Diluted EPS

Diluted EPS

Net Income as reported
$ 9,856 $ 0.35 $ 5,670 $ 0.21

Stock compensation expense
1,850 (1) 0.07 1,012 (4) 0.04

Acquisition costs
285 (2) 0.01 - -

Severance costs
4 (3) - 17 (5) -

Restructuring costs
- - 2 (6) -

Tax impact due to the change in the estimated annual tax rate used for GAAP reporting purposes
- - (254 ) (0.01 )

Net Income adjusted
$ 11,995 $ 0.43 $ 6,447 $ 0.24
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⁾~~$616~~
⁽²⁾~~$76~~
⁽³⁾$1
⁽⁴⁾~~$305~~160
⁽⁵⁾$4
⁽⁶⁾$1149

Page 2521

Reconciliation of operating income to adjusted operating income:

Three Months Ended

September 30

(In thousands)

2022

2021

Operating Income as reported
$ 10,021 $ 4,444

Stock compensation expense
551 556
��
Consulting expense: Commercial Growth Initiatives
303 -

Severance costs
12 -

Adjusted Operating Income
$ 10,887 $ 5,000
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

September 30

(In thousands)

2022

2021

Operating Income as reported
$ 10,021 $ 4,444

Depreciation and Amortization
2,421 2,563

EBITDA
$ 12,442 $ 7,007

Stock compensation expense
551 556
Consulting expense: Commercial Growth Initiatives
303 -
Severance costs
12 -

Adjusted EBITDA
$ 13,308 $ 7,563

~~Reconciliation of operating income to EBITDA and Adjusted EBITDA~~

Three Months Ended

Nine Months Ended

March 31

March 31

(In thousands)

2022

2021

2022

2021

Operating Income as reported
$ 5,161 $ 2,096 $ 14,027 $ 6,984

Depreciation and Amortization
2,531 1,920 7,632 5,943

EBITDA
$ 7,692 $ 4,016 $ 21,659 $ 12,927

Stock compensation expense
780 415 2,466 1,317

Acquisition costs
21 - 361 -

Severance costs
5 - 5 21

Restructuring costs
- - - 3

Adjusted EBITDA
$ 8,498 $ 4,431 $ 24,491 $ 14,268
Reconciliation of cash flow from operations to free cash flow

Three Months Ended

September 30

(In thousands)

2022

2021

Cash Flow from Operations
$ 10,583 $ (7,889 )

Capital expenditures
(434 ) (297 )

Free Cash Flow
$ 10,149 $ (8,186 )

~~Reconciliation of cash flow from operations to free cash flow~~

Three Months Ended

Nine Months Ended

March 31

March 31

(In thousands)

2022

2021

2022

2021

Cash Flow from Operations
$ 3,875 $ 11,217 $ (12,668 ) $ 24,634

Capital expenditures
(531 ) (637 ) (1,276 ) (1,517 )

Free Cash Flow
$ 3,344 $ 10,580 $ (13,944 ) $ 23,117
~~Reconciliation of Net Debt~~

March 31,

June 30,

(In thousands)

2022

2021

Current portion and long-term debt as reported
$ 84,958 $ 68,178

Less:

Cash and cash equivalents as reported
1,248 2,282

Net Debt
$ 83,710 $ 65,896
~~Reconciliation of net sales to organic net sales~~

Three Months Ended

Nine Months Ended

March 31

March 31

(In thousands)

2022

2021

2022

2021

Lighting Segment
$ 57,126 $ 45,740 $ 165,662 $ 136,271
Display Solutions Segment
52,985 26,464 161,989 82,326
Total net sales
110,111 72,204 327,651 218,597
Less:

JSI
29,045 - 72,952 -
Total organic net sales
$ 81,066 $ 72,204 $ 254,699 $ 218,597
Net Debt to Adjusted EBITDA

September 30,

(In thousands)

2022

2021

Current portion and long-term debt as reported
$ 3,571 $ 3,571

Long-Term Debt
73,975 76,025
Total Debt
77,546 79,596

Less: Cash and cash equivalents
9,028 2,570

Net Debt
$ 68,518 $ 77,026

Adjusted EBITDA - Trailing 12 Months
$ 40,836 $ 30,907

Net Debt to Adjusted EBITDA
1.7 2.5

Page 2622

Results of Operations

THREE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2022, COMPARED TO THREE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021

~~Lighting Segment~~
Lighting Segment

Three Months Ended

Three Months Ended

March 31

September 30

(In thousands)

2022

2021

2022

2021

Net Sales
$ 57,126 $ 45,740 $ 67,533 $ 51,260
Gross Profit
$ 16,654 $ 14,159 22,279 15,457
Operating Income
$ 4,959 $ 3,797 9,158 4,339

Lighting Segment net sales of ~~$57.1~~$67.5 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~25%~~32% from net sales of ~~$45.7~~$51.3 million in the same period ofin fiscal ~~2021.~~2022. Growth was broad-based, with sales increasing double digits in both project business and shipments to distributor stock. The ~~sales~~Company’s efforts over the last two years to strengthen its lighting offering for select vertical market applications continues to position LSI to win additional business which has resulted in a growth ~~was across all key vertical markets, with significant contributions from new and enhanced products.~~in net sales.

Gross profit of ~~$16.7~~$22.3 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$2.5~~$6.8 million or ~~18%~~44% from the same period of fiscal ~~2021.~~2022. Gross profit as a percentage of net sales was ~~29.2%~~33.0% in the three months ended ~~March 31,~~September 30, 2022, compared to ~~31.0%~~30.2% in the same period of fiscal ~~2021. Gross~~2022. The improvement in gross profit as a percentage of ~~net~~ sales ~~decreased as selling price realization lagged~~was driven by the increase in ~~input~~net sales and ~~transportation costs.~~from targeted pricing actions to offset the impact of inflation, and effective cost control.

Operating expenses of ~~$11.7~~$13.1 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$1.3~~$2.0 million from the same period of fiscal ~~2021,~~2022, primarily driven by higher commission expense as a result of higher net sales.

Lighting Segment operating income of ~~$5.0~~$9.2 million for the three months ended ~~March 31,~~September 30, 2022, increased ~~$1.2~~$4.8 million from operating income of ~~$3.8~~$4.3 million in the same period of fiscal ~~2021~~2022 primarily driven by sales ~~volume.~~volume and by an improvement in gross profit as a percentage of sales.

~~Display Solutions Segment~~
Display Solutions Segment

Three Months Ended

Three Months Ended

March 31

September 30

(In thousands)

2022

2021

2022

2021

Net Sales
$ 52,985 $ 26,464 $ 59,536 $ 55,137
Gross Profit
$ 10,171 $ 3,933 $ 12,453 $ 9,036
Operating Income
$ 4,556 $ 1,230 $ 6,496 $ 3,749

Display Solutions Segment net sales of ~~$53.0~~$59.5 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$26.5~~$4.4 million or ~~100%~~8% from net sales of ~~$26.5~~$55.1 million in the same period in fiscal ~~2021.~~2022. The sales increase is ~~driven~~ primarily by the ~~acquisition~~result of ~~JSI.~~growth in both the grocery and refueling/convenience-store verticals.

Gross profit of ~~$10.2~~$12.5 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$6.2~~$3.4 million or ~~159%~~38% from the same period of fiscal ~~2021.~~2022. Gross profit as a percentage of net sales in the three months ended ~~March 31,~~September 30, 2022, was ~~19.2%~~20.9% compared to ~~14.9%~~16.4% in the same period of fiscal ~~2021. Gross~~2022. The improvement in gross profit as a percentage of sales was driven by the increase in net sales ~~reflects both~~and from targeted pricing actions to offset the ~~accretive effect~~impact of ~~the JSI acquisition and improvements to core business margins.~~inflation, as well as favorable project mix.

Operating expenses of ~~$5.6~~$6.0 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$2.9~~$0.7 million from ~~$2.7~~$5.3 million in the same period of fiscal ~~2021,~~2022, primarily driven by ~~the inclusion of three months of results for JSI.~~investments in commercial resources.

Display Solutions Segment operating income of ~~$4.5~~$6.5 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$3.3~~$2.7 million from operating income of ~~$1.2~~$3.7 million in the same period of fiscal ~~2021.~~2022. The increase ~~in operating income~~of $2.8 million was primarily driven by an increase in sales and an improvement of gross profit as a percentage of sales.

Page 2723

~~Corporate and Eliminations~~
Corporate and Eliminations

Three Months Ended

Three Months Ended

March 31

September 30

(In thousands)

2022

2021

2022

2021

Gross (Loss) Profit
$ (32 ) $ -
Gross Profit
$ 6 $ 17
Operating (Loss)
$ (4,354 ) $ (2,931 ) $ (5,633 ) $ (3,644 )

The gross ~~(loss)~~ profit relates to the change in the intercompany profit in inventory elimination.

Operating expenses of ~~$4.3~~$5.6 million in the three months ended ~~March 31,~~September 30, 2022, increased ~~$1.4~~$2.0 million or ~~48%~~55% from the same period of fiscal ~~2021.~~2022. The ~~net~~ increase was ~~due to increased~~primarily the result of an increase in short-term and long-term performance-based incentive plan expense ~~and acquisition integration costs.~~driven by improved business performance.

Consolidated Results

WeThe Company reported ~~$0.5~~$0.8 million and ~~$0.1~~$0.2 million of net interest expense in the three months ended ~~March 31,~~September 30, 2022, and ~~March 31,~~September 30, 2021, respectively. The increase in interest expense ~~from fiscal 2021 to fiscal 2022~~ is the ~~result~~results of ~~higher levels of debt outstanding on our credit facility. We~~increased borrowing costs. The Company also recorded other ~~(income)/~~expense of $0.2 million and $0.1 million in the three months ended ~~March 31,~~September 30, 2022, and ~~March 31,~~September 30, 2021, respectively, both of which is related to net foreign exchange currency transaction ~~gains and~~ losses through our Mexican and Canadian subsidiaries.

The ~~$1.1~~$2.8 million of income tax expense in the three months ended ~~March 31,~~September 30, 2022, represents a consolidated effective tax rate of ~~22.9%~~30.6%. Impacting the effective tax rate is an increase in a valuation reserve related to the Company’s deferred tax assets and from a higher anticipated annual tax rate. The ~~$0.5~~$1.0 million of income tax expense in the three months ended ~~March 31,~~September 30, 2021, represents a consolidated effective tax rate of ~~26.4%~~24.2%.

WeThe Company reported net income of ~~$3.6~~$6.3 million in the three months ended ~~March 31,~~September 30, 2022, compared to net income of ~~$1.5~~$3.1 million in the three months ended ~~March 31,~~September 30, 2021. Non-GAAP adjusted net income was ~~$4.2~~$7.1 million for the three months ended ~~March 31,~~September 30, 2022, compared to adjusted net income of ~~$1.8~~$3.5 million for the three months ended ~~March 31,~~September 30, 2021 (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 and an increase in the gross profit as a percentage of sales. Diluted earnings per share of ~~$0.13~~$0.22 was reported in the three months ended ~~March 31,~~September 30, 2022, as compared to ~~$0.05~~$0.11 diluted earnings per share in the same period of fiscal ~~2021.~~2022. The weighted average common shares outstanding for purposes of computing diluted earnings per share in the three months ended ~~March 31,~~September 30, 2022, were ~~28,083,000~~28,664,000 shares compared to ~~27,727,000 shares in the same period last year.~~
~~NINE MONTHS ENDED MARCH 31, 2022 COMPARED TO NINE MONTHS ENDED MARCH 31, 2021~~
~~Lighting Segment~~

Nine Months Ended

March 31

(In thousands)

2022

2021

Net Sales
$ 165,662 $ 136,271
Gross Profit
$ 49,009 $ 41,689
Operating Income
$ 13,921 $ 9,519
Lighting Segment net sales of $165.7 million in the nine months ended March 31, 2022 increased 22% from net sales of $136.3 million in the same period in fiscal 2021 The sales growth was across all key vertical markets, with significant contributions from new and enhanced products.
Gross profit of $49.0 million in the nine months ended March 31, 2022 increased $7.3 million or 18% from the same period of fiscal 2021. Gross profit as a percentage of net sales was 29.6% in the nine months ended March 31, 2022 compared to 30.6% in the same period of fiscal 2021. Gross profit as a percentage of net sales decreased as selling price realization lagged the increase in input and transportation costs.
~~Operating expenses of $35.1 million~~in the nine months ended March 31, 2022 increased $2.9 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.
~~Page 28~~

Lighting Segment operating income of $13.9 million for the nine months ended March 31, 2022 increased $4.4 million from operating income of $9.5 million in the same period of fiscal 2021 primarily driven by sales volume.
~~Display Solutions Segment~~

Nine Months Ended

March 31

(In thousands)

2022

2021

Net Sales
$ 161,989 $ 82,326
Gross Profit
$ 27,766 $ 14,381
Operating Income
$ 12,142 $ 6,196
Display Solutions Segment net sales of $162.0 million in the nine months ended March 31, 2022 increased $79.7 million or 97% from net sales of $82.3 million in the same period in fiscal 2021. The increase is primarily driven by the acquisition of JSI.
Gross profit of $27.8 million in the nine months ended March 31, 2022 increased $13.4 million or 93% from the same period of fiscal 2021. Gross profit as a percentage of net sales in the nine months ended March 31, 2022 was 17.1% compared to 17.5% in the same period of fiscal 2021. Gross profit as a percentage of net sales reflects both the accretive effect of the JSI acquisition and improvements to core business margins, partially offset by the impact of input costs.
Operating expenses of $15.6 million in the nine months ended March 31, 2022 increased $7.4 million from $8.2 million in the same period of fiscal 2021, primarily driven by the inclusion of nine months of results for JSI and non-recurring cost savings due to COVID-19 in the prior year.
Display Solutions Segment operating income of $12.1 million in the nine months ended March 31, 2022 increased $5.9 million from operating income of $6.2 million in the same period of fiscal 2021. The increase of $5.9 million was primarily driven by an increase in sales.
~~Corporate and Eliminations~~

Nine Months Ended

March 31

(In thousands)

2022

2021

Gross (Loss) Profit
$ (24 ) $ -
Operating (Loss)
$ (12,036 ) $ (8,731 )
~~The gross (loss) profit relates to the change in the intercompany profit in inventory elimination.~~
Operating expenses of $12.0 million in the nine months ended March 31, 2022 increased $3.3 million or 38% from the same period of fiscal 2021. The net increase was due to increased incentive plan expense and acquisition integration costs, as well as non-recurring cost savings due to COVID-19 in the prior year.
~~Consolidated Results~~
We reported $1.3 million and $0.2 million of net interest expense in the nine months ended March 31, 2022 and March 31, 2021, 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 nine months ended March 31, 2022 and March 31, 2021, related to net foreign exchange currency transaction losses and gains through our Mexican and Canadian subsidiaries.
The $2.9 million of income tax expense in the nine months ended March 31, 2022 represents a consolidated effective tax rate of 22.4%. The $1.3 million income tax expense in the nine months ended March 31, 2021 represents a consolidated effective tax rate of 19.1% 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 $9.9 million in the nine months ended March 31, 2022 compared to net income of $5.7 million in the nine months ended March 31, 2021. Non-GAAP adjusted net income was $12.0 million for the nine months ended March 31, 2022 compared to adjusted net income of $6.4 million for the nine months ended March 31, 2021. (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 $0.35 was reported in the nine months ended March 31, 2022 as compared to $0.21 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 nine months ended March 31, 2022 were 27,945,000 shares compared to 27,352,00027,743,000 shares in the same period last year.

Page 2924

Liquidity and Capital Resources

~~We consider our~~The Company considers its level of cash on hand, borrowing capacity, current ratio and working capital levels to be ~~our~~its most important measures of short-term liquidity. For long-term liquidity indicators, ~~we believe our~~the Company believes its 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 ~~March 31,~~September 30, 2022, wethe Company had working capital of ~~$83.4~~$90.5 million compared to ~~$54.1~~$84.3 million at June 30, ~~2021.~~2022. The ratio of current assets to current liabilities was ~~2.11~~2.13 to 1 ~~compared to a ratio of 1.76 to 1 at~~for both September 30, 2022, and June 30, ~~2021.~~2022. The increase in working capital from June 30, ~~2021~~2022, to ~~March 31,~~September 30, 2022, is primarily driven by a ~~$19.4~~$6.0 million increase in net inventory, ~~$15.9 million increase in net accounts receivable, and~~ a ~~$5.0~~$1.0 million decrease in accrued expenses and a $6.6 million increase in cash and cash equivalents, partially offset by a ~~$5.7~~$6.4 million increase in accounts payable ~~a $3.5 million increase in current maturities of long-term debt,~~ and a ~~$1.8~~$2.3 million decrease in ~~cash and other current assets.~~net accounts receivable.

Net accounts receivable was ~~$73.6~~$75.5 million and ~~$57.7~~$77.8 million at ~~March 31,~~September 30, 2022, and June 30, ~~2021,~~2022, respectively. DSO ~~decreased~~increased to 55 days at ~~March 31,~~September 30, 2022, from 5654 days at June 30, ~~2021.~~2022.

Net inventories of ~~$78.4~~$80.5 million at ~~March 31,~~September 30, 2022, increased ~~$19.4~~$6.1 million from ~~$58.9~~$74.4 million at June 30, ~~2021.~~2022. The increase of ~~$19.4~~$6.1 million is the result of an increase in gross inventory of ~~$19.2~~$6.1 million and a ~~decrease~~negligible change in obsolescence ~~reserves of $0.2 million.~~reserves. Lighting Segment net inventory increased ~~$14.8~~$3.4 million ~~to support our product availability initiative to capitalize on new, short-lead time opportunities and~~as the Company continues to mitigate the ~~ongoing~~risk of any lingering supply chain challenges. Net inventory in the Display Solutions Segment increased ~~$4.6~~$2.7 million to support several ~~ongoing~~on-going programs.

Cash generated from operations and borrowing capacity under ~~our~~the Company’s line of credit ~~facility~~ is ~~our~~its primary source of liquidity. In September 2021, wethe Company amended ~~our~~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. As of ~~March 31,~~September 30, 2022, ~~$13.2~~$18.9 million of the credit line was available. ~~We are~~The Company is in compliance with all of ~~our~~its loan covenants. ~~We believe that our~~The $100 million credit facility plus cash flows from operating activities are adequate for operational and capital expenditure needs for the ~~next 12 months. However, as~~remainder of fiscal 2023. The Company also has on file with the ~~future impact~~SEC a shelf registration statement which allows it to sell any combination of ~~COVID-19 and~~common stock, preferred stock warrants, senior or subordinated debt securities or other securities in one or more offerings if it chooses to do so in the ~~escalation~~future. The Company expects to maintain the effectiveness of ~~supply chain challenges on~~this shelf registration statement for the ~~economy and our operations evolves, we will continue to assess our liquidity needs.~~foreseeable future.

~~We used $12.7~~The Company had a source of $10.6 million of cash from operating activities in the ~~nine~~three months ended ~~March 31,~~September 30, 2022, compared to a ~~source~~use of cash of ~~$24.6~~$7.9 million in the ~~nine~~three months ended ~~March 31,~~September 30, 2021. The ~~decrease~~increase in net cash flows from operating activities is primarily the result of ~~increases in inventory~~effective management of the Company’s working capital and ~~accounts receivable and decreases in accrued expense and customer prepayments, partially offset by~~from improved ~~earnings and an increase in accounts payable.~~earnings.

WeThe Company used ~~$0.8~~$0.4 million and ~~$1.5~~$0.3 million of cash related to investing activities in the ~~nine~~three months ended ~~March 31,~~September 30, 2022, and ~~March 31,~~September 30, 2021, respectively. Capital expenditures decreased from $1.5 million in the nine months ended March 31, 2021 to $1.3 million in the nine months ended March 31, 2022. We received $0.5 million of cash related to the settlement of working capital adjustments from the acquisition of JSI.

WeThe Company had a ~~source~~use of cash of ~~$12.4~~$3.6 million related to financing activities in the ~~nine~~three months ended ~~March 31,~~September 30, 2022, compared to a ~~use~~source of cash of ~~$3.2~~$8.5 million in the ~~nine~~three months ended ~~March 31,~~September 30, 2021. The ~~$15.6~~$12.1 million change in cash flow was primarily the ~~net~~ result of ~~an increase in~~cash generated from improved working capital management and from improved earnings, which was used to pay down the ~~borrowings on the~~Company’s line of credit ~~to support~~in the ~~growth in working capital. Most~~first quarter 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.~~fiscal 2023.

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

Off-Balance Sheet Arrangements

~~We have~~The Company has no financial instruments with off-balance sheet risk and have no off-balance sheet arrangements.

Cash Dividends

In ~~April~~November 2022, the Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable ~~May 17,~~November 22, 2022, to shareholders of record as of ~~May 9,~~November 14, 2022. The indicated annual cash dividend rate for fiscal ~~2022~~2023 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 3025

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~~2022 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~~There have been no material changes in our exposure to market risk since June 30, ~~2021.~~2022. Additional information can be found in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, which appears on page 1318 of the Annual Report on Form 10-K for the fiscal year ended June 30, ~~2021.~~2022.

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 ~~March 31,~~September 30, 2022, 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 ~~March 31,~~September 30, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Page 3126

PART II.OTHER INFORMATION

ITEM 5. OTHER INFORMATION

On November 2, 2021, LSI Industries Inc. (the “Company”) held its annual meeting of shareholders (the “Meeting”). One of the proposals for the shareholders to consider was an amendment to the Company’s Articles of Incorporation (the “Articles”) to increase the number of authorized shares of common stock from 40,000,000 to 50,000,000 (the “Amendment”). At the meeting the Amendment was reported as approved by shareholders. However, after the Meeting, the Company identified an inadvertent discrepancy related solely to disclosure and counting of broker non-votes and the Amendment proposal in the Meeting’s proxy statement. Although the counting of these broker non-votes would likely not have any effect on the approval of the Amendment, the Company, out of an abundance of caution, has determined to deem the Amendment not to be valid and will seek another vote and shareholder approval to amend its Articles to increase its authorized shares of common stock at a later date and subject to a new proxy statement. The Company has not issued any of the additional shares approved at the Meeting.None.

ITEM 6.EXHIBITS

Exhibits:

10.1
Fiscal Year 2023 Long-Term Incentive Plan (LTIP)*++
10.2
Fiscal Year 2023 Short-Term Incentive Plan (STIP)*++
10.3
Nonqualified Deferred Compensation Plan Amended and Restated as of August 17, 2022*
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

~~101.INS~~
~~Inline XBRL Instance Document~~104
~~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 3227

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)

~~May 6,~~November 4, 2022

Page 3328

	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

	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

	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

	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

	Nine Months			Nine Months			Fiscal Year
	Ended			Ended			Ended
	March 31,			March 31,			June 30,
(In thousands)	2022			2021			2021

Balance at beginning of period	$	13		$	639		$	639
Accrual of expense		5			21			41
Payments		(18	)		(555	)		(667	)
Balance at end of period	$	0		$	105		$	13

Reconciliation of net income to adjusted net income
	Three Months Ended
	September 30
(In thousands, except per share data)	2022						2021
					Diluted EPS						Diluted EPS

Net Income as reported	$	6,262			$	0.22	$	3,133			$	0.11

Stock compensation expense		420	(1	)		0.01		407	(5	)		0.02

Consulting expense: Commercial Growth Initiatives		226	(2	)		0.01		-				-

Severance costs		9	(3	)		-		-				-

Tax rate difference between reported and adjusted net income		160	(4	)		0.01		-				-

Net Income adjusted	$	7,077			$	0.25	$	3,540			$	0.13

Reconciliation of operating income to adjusted operating income:
	Three Months Ended
	September 30
(In thousands)	2022		2021

Operating Income as reported	$	10,021	$	4,444

Stock compensation expense		551		556
				��
Consulting expense: Commercial Growth Initiatives		303		-

Severance costs		12		-

Adjusted Operating Income	$	10,887	$	5,000

Reconciliation of operating income to EBITDA and Adjusted EBITDA
	Three Months Ended
	September 30
(In thousands)	2022		2021

Operating Income as reported	$	10,021	$	4,444

Depreciation and Amortization		2,421		2,563

EBITDA	$	12,442	$	7,007

Stock compensation expense		551		556
Consulting expense: Commercial Growth Initiatives		303		-
Severance costs		12		-

Adjusted EBITDA	$	13,308	$	7,563

Reconciliation of cash flow from operations to free cash flow
	Three Months Ended
	September 30
(In thousands)	2022			2021

Cash Flow from Operations	$	10,583		$	(7,889	)

Capital expenditures		(434	)		(297	)

Free Cash Flow	$	10,149		$	(8,186	)

Net Debt to Adjusted EBITDA
	September 30,
(In thousands)	2022		2021

Current portion and long-term debt as reported	$	3,571	$	3,571

Long-Term Debt		73,975		76,025
Total Debt		77,546		79,596

Less: Cash and cash equivalents		9,028		2,570

Net Debt	$	68,518	$	77,026

Adjusted EBITDA - Trailing 12 Months	$	40,836	$	30,907

Net Debt to Adjusted EBITDA		1.7		2.5

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~~104

~~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)

	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)
~~May 6,~~November 4, 2022