Note 3 - Business Segment and Major Customers Information

3 Months Ended

Mar. 31, 2012

Segment Reporting Disclosure [Text Block]

NOTE 3  -  BUSINESS SEGMENT AND MAJOR CUSTOMERS INFORMATION

ASC Topic 280, “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 interim 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) in making decisions on how to allocate resources and assess performance. While the Company has twelve operating segments, it has only three reportable operating business segments (Lighting, Graphics, and Electronic Components), an All Other Category, and Corporate and Eliminations.

In fiscal 2012, a change was made to reclassify net sales of LED solid-state digital sports and video screens from the Graphics Segment to the Lighting Segment. The change was made to reflect the transfer of the sales effort related to the LED video screens to the Lighting Segment sales team. As a result of the transfer of the LED video screen product line, the assets (primarily intangible assets) and liabilities required to support the product line were transferred from the Graphics Segment to the Lighting Segment. Fiscal year 2011 segment information was reclassified to reflect the transfer of these responsibilities. The changes described in this paragraph were made for all periods reported in these financial statements and they had no impact on the Company’s consolidated results.  Also in fiscal year 2012, the Company implemented a policy whereby operating companies are charged for the usage of research and development resources located in the Company’s Montreal facility in the All Other Category. In previous fiscal years, these same research and development costs were charged entirely to corporate administrative expense.

The Lighting Segment includes outdoor, indoor, and landscape lighting that has been fabricated and assembled for the commercial, industrial and multi-site retail lighting markets, the Company’s primary niche markets (petroleum/convenience store market, automotive dealership market, and quick service restaurant market), and LED solid state digital sports video screens.  LED video screens are designed and manufactured by the Company’s Lighting Segment and by LSI Saco in the All Other Category. The Lighting Segment includes the operations of LSI Ohio Operations, LSI Metal Fabrication, LSI MidWest Lighting, LSI Lightron and LSI Greenlee Lighting.   These operations have been integrated, have similar economic characteristics and meet the other requirements for aggregation in segment reporting.   The LSI Greenlee facility in Dallas, Texas was consolidated into the Company’s main lighting facility in Ohio in the second quarter of fiscal 2011.  

The Graphics Segment designs, manufactures and installs exterior and interior visual image elements related to graphics. These products are used in visual image programs in several markets, including the petroleum/convenience store market and multi-site retail operations. The Graphics Segment includes the operations of Grady McCauley, LSI Retail Graphics and LSI Integrated Graphic Systems, which have been aggregated as such facilities manufacture two-dimensional graphics with the use of screen and digital printing, fabricate three-dimensional structural graphics sold in the multi-site retail and petroleum/convenience store markets, and each exhibit similar economic characteristics and meet the other requirements for aggregation in segment reporting.

The Electronic Components Segment designs, engineers and manufactures custom designed electronic circuit boards, assemblies and sub-assemblies, and various products used in various applications including the control of solid-state LED lighting and metal halide lighting.  Products produced by this segment may have applications in the Company’s other LED product lines such as digital scoreboards, advertising ribbon boards and billboards.  The Electronic Components Segment includes the operations of LSI ADL Technology as well as LSI Virticus (see Note 13).

The All Other Category includes the Company’s operating segments that neither meet the aggregation criteria, nor the criteria to be a separate reportable segment.  Operations of LSI Images (menu board systems) and LSI Adapt (implementation, installation and program management services related to products of the Graphics and Lighting Segments) are combined in the All Other Category.  Additionally, operations of LSI Saco Technologies (designs and produces high-performance light engines, large format video screens using solid-state LED technology, and certain specialty LED lighting) are included in the All Other Category.

The Company’s corporate administration activities are reported in a line item titled Corporate and Eliminations.  This primarily includes intercompany profit in inventory eliminations, expense related to certain corporate officers and support staff, the Company’s internal audit staff, the Company’s Board of Directors, stock option expense, certain consulting expenses, investor relations activities, a portion of the Company’s legal, auditing and professional fee expenses, and certain research and development expense.  Corporate identifiable assets primarily consist of cash, invested cash (if any), refundable income taxes, and deferred income tax assets.

The Company’s Lighting Segment and Graphics Segment net sales to 7-Eleven, Inc. represented approximately $38,639,000 or 18% of consolidated net sales, in the nine months ended March 31, 2011.  There was no concentration of consolidated net sales in the three months ended March 31, 2011 or in the three or nine months ended March 31, 2012.  There was no concentration of accounts receivable at March 31, 2012 or 2011, or June 30, 2011.

Summarized financial information for the Company’s reportable business segments is provided for the indicated periods and as of March 31, 2012 and June 30, 2011:

	Three Months Ended						Nine Months Ended
(In thousands)	March 31						March 31
	2012			2011			2012			2011
Net Sales:
Lighting Segment	$	46,714		$	46,748		$	149,411		$	142,700
Graphics Segment		8,940			10,500			29,519			56,383
Electronic Components Segment		4,609			6,212			13,228			16,053
All Other Category		2,674			1,168			5,048			4,148
	$	62,937		$	64,628		$	197,206		$	219,284
Operating Income (Loss):
Lighting Segment	$	2,555		$	1,534		$	8,691		$	7,150
Graphics Segment		(767	)		581			(2,216	)		8,403
Electronic Components Segment		1,057			3,120			2,811			5,963
All Other Category		(680	)		(522	)		(1,047	)		(889	)
Corporate and Eliminations		(2,071	)		(2,230	)		(4,748	)		(6,873	)
	$	94		$	2,483		$	3,491		$	13,754
Capital Expenditures:
Lighting Segment	$	376		$	697		$	1,315		$	2,854
Graphics Segment		48			49			494			137
Electronic Components Segment		228			242			339			658
All Other Category		29			11			163			39
Corporate and Eliminations		188			89			235			313
	$	869		$	1,088		$	2,546		$	4,001
Depreciation and Amortization:
Lighting Segment	$	1,251		$	1,213		$	3,709		$	3,631
Graphics Segment		221			238			661			734
Electronic Components Segment		274			238			804			702
All Other Category		55			60			165			189
Corporate and Eliminations		107			194			513			630
	$	1,908		$	1,943		$	5,852		$	5,886

	March 31,		June 30,
	2012		2011
Identifiable Assets:
Lighting Segment	$	90,666	$	103,395
Graphics Segment		24,559		26,780
Electronic Components Segment		31,448		31,072
All Other Category		9,236		9,963
Corporate and Eliminations		17,393		4,811
	$	173,302	$	176,021

The segment net sales reported above represent sales to external customers. Inter-segment revenues were eliminated in consolidation as follows:

	Three Months Ended				Nine Months Ended
	March 31				March 31
(In thousands)	2012		2011		2012		2011
Lighting Segment inter-segment net sales	$	522	$	1,290	$	1,690	$	2,753
Graphics Segment inter-segment net sales	$	576	$	200	$	901	$	746
Electronic Components inter-segment net sales	$	7,117	$	9,873	$	16,854	$	18,701
All Other Category inter-segment net sales	$	783	$	1,150	$	4,274	$	4,280

Segment operating income, which is used in management’s evaluation of segment performance, represents net sales less all operating expenses including impairment of goodwill and intangible assets, but excluding interest expense and interest income.

Identifiable assets are those assets used by each segment in its operations.  Corporate assets consist primarily of cash and cash equivalents, short-term investments and refundable income taxes.

The Company considers its geographic areas to be:  1) the United States, and 2) Canada.  The majority of the Company’s operations are in the United States, with one operation in Canada.  The geographic distribution of the Company’s net sales and long-lived assets are as follows:

	Three Months Ended				Nine Months Ended
(In thousands)	March 31				March 31
	2012		2011		2012		2011
Net Sales (a):
United States	$	62,457	$	64,256	$	196,057	$	217,619
Canada		480		372		1,149		1,665
	$	62,937	$	64,628	$	197,206	$	219,284

	March 31,		June 30,
	2012		2011
Long-lived Assets (b):
United States	$	45,385	$	46,343
Canada		344		298
	$	45,729	$	46,641

a. Net sales are attributed to geographic areas based upon the location of the operation making the sale.

b. Long-lived assets include property, plant and equipment, and other long term assets.  Goodwill and intangible assets are not included in long-lived assets.