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What changed in LSI INDUSTRIES INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of LSI INDUSTRIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+83 added−71 removedSource: 10-K (2024-09-11) vs 10-K (2023-09-08)

Top changes in LSI INDUSTRIES INC's 2024 10-K

83 paragraphs added · 71 removed · 59 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeResearch and development costs related to both product and software development totaled $3.4 million and $3.6 million for the fiscal years ended June 30, 2023, and 2022, respectively. - 6 - Competition We experience competition in both segments and in all markets we serve based on numerous factors, including price, brand name recognition, product quality, product design, prompt delivery, energy efficiency, customer relationships, reputation, and service capabilities.
Biggest changeCompetition We experience competition in both segments and in all markets we serve based on numerous factors, including price, brand name recognition, product quality, product design, prompt delivery, energy efficiency, customer relationships, reputation, and service capabilities.
Our management teams and all of our employees are expected to exhibit the principles of fairness, honesty, and integrity in the actions we undertake. Our employees must adhere to a code of conduct that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting, and stopping any type of unlawful discrimination or unethical actions.
Our management teams and all of our employees are expected to exhibit the principles of fairness, honesty, and integrity in the actions we undertake. Our employees must adhere to a code of conduct and ethics that sets standards for appropriate behavior and includes required annual training on preventing, identifying, reporting, and stopping any type of unlawful discrimination or unethical actions.
The Company offers a nonqualified deferred compensation plan, an equity-based incentive plan and an incentive plan that is based upon the achievement of the Company’s business plan goals, for certain employees. Information Concerning the Company We file reports with the Securities and Exchange Commission (“SEC”) on Forms 10-K, 10-Q and 8-K.
The Company offers a nonqualified deferred compensation plan, an equity-based incentive plan and an incentive plan that is based upon the achievement of the Company’s business plan goals, for certain employees. 7 Information Concerning the Company We file reports with the Securities and Exchange Commission (“SEC”) on Forms 10-K, 10-Q and 8-K.
It is possible that the information we post on social media could be deemed to be material to investors. We encourage investors, the media, and others interested in LSI to review the information we post on the social media channels listed on our Investor Relations website. - 7 -
It is possible that the information we post on social media could be deemed to be material to investors. We encourage investors, the media, and others interested in LSI to review the information we post on the social media channels listed on our Investor Relations website.
Our display solution elements and related services, which in many instances are program-driven, are sold primarily through our own sales force. This revenue stream is from more significant program initiatives that often represent multiple sites over a period of time. These customers are usually established and have a long-term relationship with LSI.
Our display solution elements and related services, which in many instances are program-driven, are sold primarily through our direct sales force. This revenue stream is from more significant program initiatives that often represent multiple sites over a period of time. These customers are usually established and have a long-term relationship with LSI.
Focusing on key vertical applications allows us to deliver unique product solutions, which in turn provide differentiated value to our customers. Our lighting fixtures, poles and accessories are produced in a variety of design, aesthetics, and finishes. Application of our lighting fixtures vary to include surface, pole, and pendant mounted applications.
Focusing on key vertical applications allows us to deliver unique product solutions, which in turn provide differentiated value to our customers. Our lighting fixtures, poles and accessories are produced in a variety of designs, aesthetics, and finishes. Application of our lighting fixtures vary to include surface, pole, and pendant mounted applications.
Our marketing approach and means of distribution vary by product line and by market. Manufacturing and Distribution We currently operate out of eleven manufacturing facilities located within six U.S. states and one province in Ontario, Canada. We design, engineer and manufacture most of our lighting and visual display products through the utilization of lean manufacturing principles.
Our marketing approach and means of distribution vary by product line and by market. Manufacturing and Distribution We currently operate out of sixteen manufacturing facilities located within eleven U.S. states and one province in Ontario, Canada. We design, engineer, and manufacture most of our lighting and display products through the utilization of lean manufacturing principles.
An example is our digital signage business, where customers require us to carry an inventory of digital screens to meet the demands of a large rollout program. Research and Development : We invest in the development of new products and solutions as well as the enhancement of existing product offerings to meet the needs of our customers.
An example is our digital signage business, where customers require us to carry an inventory of digital screens to meet the demands of a large rollout programs. 6 Research and Development : We invest in the development of new products and solutions as well as the enhancement of existing product offerings to meet the needs of our customers.
Our investment in our production facilities is focused primarily on improving capabilities, product quality, and manufacturing efficiency, as well as environmental, health, and safety compliance. The majority of products we sell are engineered, designed, and assembled by the Company, while a small portion of the products and components we sell are purchased from select qualified vendors.
Our investment in our production facilities focuses primarily on improving capabilities, product quality, manufacturing efficiency, and environmental, health, and safety compliance. The majority of products we sell are engineered, designed, and assembled by the Company, while a small portion of the products and components we sell are purchased from select qualified vendors.
We also provide a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage. We also manage and execute the implementation of large rollout programs with our professional services group.
We also provide a variety of project management services to complement our display elements, such as installation management, site surveys, permitting, and content management which are offered to our customers to support our digital signage. Our professional services group manages and executes the implementation of large rollout programs.
Our business is organized as follows: the Lighting Segment, which represented 55% of our fiscal 2023 net sales and the Display Solutions Segment, which represented 45% of our fiscal 2023 net sales. See Note 2 of Notes to Consolidated Financial Statements beginning on page 44 of this Form 10-K for additional information on business segments.
Our business is organized as follows: the Lighting Segment, which represented 56% of our fiscal 2024 net sales and the Display Solutions Segment, which represented 44% of our fiscal 2024 net sales. See Note 3 of Notes to Consolidated Financial Statements beginning on page 48 of this Form 10-K for additional information on business segments.
The major products and services offered within our Display Solutions Segment include signage and canopy graphics, pump dispenser graphics, building fascia graphics, decals, interior signage and marketing graphics, aisle markers, wall mural graphics, and refrigerated and non-refrigerated merchandising displays.
The major products and services offered by our Display Solutions Segment include signage and canopy graphics, pump dispenser graphics, building fascia graphics, decals, interior signage and marketing graphics, aisle markers, wall mural graphics, and refrigerated food and beverage displays, check-out counters, and non-refrigerated merchandising displays.
We have 1,540 full-time employees and 87 agency employees as of June 30, 2023. We offer a comprehensive compensation and benefits program to our employees, including competitive wages, medical and dental insurance, and a 401(k)-retirement savings plan.
We have approximately 1,900 full-time and part-time employees and approximately 70 agency employees as of June 30, 2024. We offer a comprehensive compensation and benefits program to our employees, including competitive wages, medical and dental insurance, and a 401(k)-retirement savings plan.
Net sales by segment are as follows (in thousands): 2023 2022 Lighting Segment $ 272,451 $ 233,449 Display Solutions Segment 224,528 221,671 Total Net Sales $ 496,979 $ 455,120 Lighting Segment Our Lighting Segment manufactures, markets, and sells outdoor and indoor lighting fixture and controls solutions in the following vertical markets: refueling and convenience store, parking lot and garage, quick-service restaurant, retail, grocery and pharmacy, automotive dealership, sports court and field, and warehouse.
Net sales by segment are as follows (in thousands): 2024 2023 Lighting Segment $ 262,413 $ 272,451 Display Solutions Segment 207,225 224,528 Total Net Sales $ 469,638 $ 496,979 Lighting Segment Our Lighting Segment manufactures, markets, and sells outdoor and indoor lighting fixture and controls solutions in the following vertical markets: refueling and convenience store, parking lot and garage, quick-service restaurant, retail, grocery and pharmacy, automotive dealership, sports court and field, and warehouse.
Utilizing LED light sources, our products are designed for energy efficiency, reliability, performance, ease of installation and service while providing a high degree of overall aesthetic appeal. We focus on providing performance based, energy efficient lighting solutions implemented across all key vertical markets served.
Utilizing LED light sources, our products are designed for energy efficiency, reliability, performance, ease of installation and service while providing a high degree of overall aesthetic appeal. We focus on providing performance based, energy efficient lighting solutions implemented across all key vertical markets served. Display Solutions Segment We acquired EMI Industries, LLC (EMI) in the fourth quarter of fiscal 2024.
Display Solutions Segment 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, store display fixtures, refrigerated displays, and custom display elements.
In addition to the products manufactured by EMI, the Display Solutions Segment also manufactures, sells and installs exterior and interior visual image and display elements, including printed graphics, structural graphics, digital signage, menu board systems, refrigerated displays, and custom display elements.
We believe our expertise with the products and services we offer in the markets we serve represents a significant competitive advantage. We work with our customers and design firms to establish and implement cost-effective corporate visual image programs to advance our customer’s brands and deliver value to their customers.
It is our belief that our expertise with the products and services we offer in the markets we serve represents a significant competitive advantage. We work with our customers and design firms to establish and implement cost-effective corporate visual image programs to advance our customers’ brands and to improve the consumer experience.
ITEM 1. BUSINESS Overview LSI Industries Inc. (LSI) is a leading producer of non-residential lighting and retail display solutions. Non-residential lighting consists of high-performance, American-made lighting solutions. The Company’s strength in indoor and outdoor lighting applications creates opportunities for LSI to introduce additional solutions to its valued customers.
ITEM 1. BUSINESS Overview LSI Industries Inc. (LSI) is a leading producer of non-residential lighting and retail display solutions. Non-residential lighting consists of American-made fixtures and services for both indoor and outdoor applications satisfying the specific performance requirements of our customers.
The Company utilizes the latest technology to track sales leads and customer quotes with the goal to turn them into orders from our customers. Our sales are partially seasonal as installation of our non-residential outdoor lighting and visual display solutions in the northern states decreases during the winter months.
The Company utilizes the latest technology to track sales leads and customer quotes with the goal of turning them into orders from our customers. As the Company grows both organically and through acquisition, the products, services and technologies the Company offers its customers also grows.
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Retail display solutions consist of graphics solutions, digital signage, and technically advanced food display equipment for strategic vertical markets. LSI’s team of internal specialists also provide comprehensive project management services in support of large-scale product rollouts.
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Retail display solutions consist of multiple custom products and services which enhance our customer’s brand image and improve the customer shopping experience. We offer customers in target vertical markets a package solution set of both lighting and display solutions, providing value for the customer by working with one partner to manage their regional and national location programs, versus multiple suppliers.
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EMI is a metal and millwork manufacturer of standard and customized fixtures, displays, and food equipment for the convenience store, grocery, and restaurant industries. Due to the similarity and complimentary nature of the products manufactured by EMI with our other current product offerings, we consolidated EMI with our Display Solutions Segment.
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These offerings provide significant cross-selling opportunities between the segments that enable the Company to be a single-source provider to existing and new customers.
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Research and development costs related to both product and software development totaled $3.5 million and $3.4 million for the fiscal years ended June 30, 2024, and 2023, respectively.
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Seasonality Our business in both lighting and display solutions segments is subject to some seasonality, with net sales being affected by weather and seasonal demand on construction and installation programs, particularly during the winter months, as well as the annual budget cycles of some major customers.
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Certain market verticals, grocery and QSR for example, restrict renovation activity during the November and December holiday season, as these are the high consumer traffic and sales periods. Sales in our Lighting Segment are to customers in both the new construction and renovation and retrofit markets.
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The construction market is cyclical in nature and subject to changes in general economic conditions and fiscal policies. Intellectual Property We own or have rights with respect to various domestic patents, trademarks, and other intellectual property related to our lighting products. These intellectual property rights are important to our businesses.
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We rely on copyright, patent, trade secret, and trademark laws to protect certain proprietary rights. Despite these protections, unauthorized parties may attempt to infringe on our intellectual property. While patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is individually material to us.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks Related to Financial Matters ● A significant decline in our stock price could adversely affect our ability to raise additional capital. ● Recent increases in inflation and interest rates in the United States and elsewhere could adversely affect our business. ● Anti-takeover provisions in our organizational documents and in Ohio law could make difficult or delay a change in management or negatively impact our share price. - 8 - RISKS RELATED TO OUR STRATEGY Lower levels of economic activity in our end markets could adversely affect our operating results.
Biggest changeRisks Related to Legal and Regulatory Matters ● Potential changes in U.S. trade policies could have a material adverse effect on the Company. ● Changes in our tax rates and exposures to additional income tax liabilities could have an unfavorable effect on the Company’s reported results. ● Emphasis on environmental, social, and governance (“ESG”) matters by various stakeholders could negatively affect our business. 8 Risks Related to Financial Matters ● A significant decline in our stock price could adversely affect our ability to raise additional capital. ● Recent increases in inflation and interest rates in the United States and elsewhere could adversely affect our business. ● Anti-takeover provisions in our organizational documents and in Ohio law could make difficult or delay a change in management or negatively impact our share price. ● Due to inherent limitations, there can be no assurance that our system of disclosure and internal controls and procedures will be successful in preventing all errors, theft, and fraud, or in informing management of all material information in a timely manner.
Risks Related to our Operations ● Sudden or unexpected changes in a customer’s creditworthiness could result in significant accounts receivable write-offs. ● Price increases, significant shortages of raw materials and components, shortages in transportation and an increase in fuel prices could adversely affect our operating margin. ● Our information technology systems are subject to certain cyber risks and could be subject to interruptions that are beyond our control . ● Labor shortages or increases in labor costs could adversely impact our business and results of operations. ● If the Company’s products are improperly designed, manufactured, packaged, or labeled, the Company may need to recall those items, may have increased warranty costs, and could be the target of product liability claims. ● Changes in a customer’s demands and commitment to proprietary inventory could result in significant inventory write-offs. ● The turnover of independent commissioned sales representatives could cause a significant disruption in sales volume. ● The Company may be unable to sustain significant customer and/or channel partner relationships. ● A loss of key personnel or inability to attract qualified personnel could have an adverse effect on our operating results. ● Changes in a shift in product mix can have a significant impact on our gross margins. ● We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts.
Risks Related to our Operations ● Sudden or unexpected changes in a customer’s creditworthiness could result in significant accounts receivable write-offs. ● Price increases in, and significant shortages of, raw materials and components; and shortages in transportation and increased fuel prices could adversely affect our operating margin. ● Our information technology systems are subject to certain cyber risks and could be subject to interruptions that are beyond our control . ● Labor shortages or increases in labor costs could adversely impact our business and results of operations. ● If the Company’s products are improperly designed, manufactured, packaged, or labeled, the Company may need to recall those items, may have increased warranty costs, and could be the target of product liability claims. ● Changes in a customer’s demands and commitment to proprietary inventory could result in significant inventory write-offs. ● The turnover of independent commissioned sales representatives could cause a significant disruption in sales volume. ● The Company may be unable to sustain significant customer and/or channel partner relationships. ● A loss of key personnel or inability to attract qualified personnel could have an adverse effect on our operating results. ● Changes in a shift in product mix can have a significant impact on our gross margins. ● We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts.
On the other hand, these sales representative changes can be widespread as a result of the competitive nature of the lighting industry as LSI and its competition vie for the strongest sales agency in a particular region. - 12 - The Company may be unable to sustain significant customer and/or channel partner relationships.
On the other hand, these sales representative changes can be widespread as a result of the competitive nature of the lighting industry as LSI and its competition vie for the strongest sales agency in a particular region. The Company may be unable to sustain significant customer and/or channel partner relationships.
If the markets in which we participate experience further economic downturns, as well as a slow recovery period, this could negatively impact our sales and revenue generation, margins, and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations.
If the markets in which we participate experience economic downturns, as well as a slow recovery period, this could negatively impact our sales and revenue generation, margins, and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations.
Additionally, shareholders may act by written consent without a meeting only if such written consent is signed by all shareholders. - 14 -
Additionally, shareholders may act by written consent without a meeting only if such written consent is signed by all shareholders.
Risk Factor Summary Risks Related to Our Strategy ● Lower levels of economic activity in our end markets could adversely affect our operating results. ● Our operating results may be adversely affected by unfavorable economic, political and market conditions. ● The inability to effectively execute our business strategies could adversely affect our financial condition and results of operations. ● The markets in which we operate are subject to competitive pressures that could affect selling prices, and therefore could adversely affect our operating results. ● We have a concentration of net sales to the refueling and convenience store and grocery markets, and any substantial change in these markets could have an adverse effect on our business. ● The Company may pursue future growth through strategic acquisitions and investments, which may not yield anticipated benefits. ● If we do not develop the appropriate new products or if customers do not accept new products, we could experience a loss of competitive position which could adversely affect future revenues. ● If we are unable to adequately protect our intellectual property, we may lose some of our competitive advantage.
Risk Factor Summary Risks Related to Our Strategy ● Lower levels of economic activity in our end markets could adversely affect our operating results. ● The inability to effectively execute our business strategies could adversely affect our financial condition and results of operations. ● The markets in which we operate are subject to competitive pressures that could affect selling prices, and therefore could adversely affect our operating results. ● Two of our largest market verticals are to the refueling and convenience store and grocery markets, and any substantial change in these markets could have an adverse effect on our business. ● The Company may pursue future growth through strategic acquisitions and investments, which may not yield anticipated benefits. ● If we do not develop the appropriate new products or if customers do not accept new products, we could experience a loss of competitive position which could adversely affect future revenues. ● If we are unable to adequately protect our intellectual property, we may lose some of our competitive advantage.
Accordingly, information security and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for us. We have been, and in the future may be, targeted by malicious cyber activity.
Accordingly, information security and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for us. We could be targeted by malicious cyber activity.
The Company takes a conservative approach when extending credit to its customers. Customers are granted an appropriate credit limit based upon the due diligence performed on the customer which includes, among other things, the review of the company’s financial statements and banking information, various credit checks, and payment history the customer has with the Company.
Customers are granted an appropriate credit limit based upon the due diligence performed on the customer which includes, among other things, the review of the company’s financial statements and banking information, various credit checks, and payment history the customer has with the Company.
The Company’s management philosophy of cost-control results in a lean workforce. Future success of the Company will depend on, among other factors, the ability to attract and retain other qualified personnel, particularly executive management, research and development engineers, and sales professionals.
The Company’s management philosophy of selecting and empowering high levels of talent could result in a lean workforce. Future success of the Company will depend on, among other factors, the ability to attract and retain other qualified personnel, particularly executive management, research and development engineers, and sales professionals.
The Company has a concentration of sales in the refueling and convenience store and grocery markets. Sales to the refueling and convenience store market are dependent upon the general conditions prevailing in and the profitability of the Petroleum industry and general market conditions.
Sales to the refueling and convenience store market are dependent upon the general conditions prevailing in and the profitability of the Petroleum industry and general market conditions.
Our operating results may be adversely affected by unfavorable economic, political and market conditions. Economic and political conditions worldwide have from time to time contributed to slowdowns in our industry at large, as well as to the specific markets in which we operate.
In addition, economic and political conditions worldwide have from time to time contributed to slowdowns in our industry at large, as well as to the specific markets in which we operate.
Future downturns in any of the markets we serve could adversely affect our overall sales, profitability, and cash flow.
Operating results can be negatively impacted by volatility in these markets. Future downturns in any of the markets we serve could adversely affect our overall sales, profitability, and cash flow.
The operating environment for the grocery market continues to be characterized by the fragmentation of local, regional, and national retailers, including both retail and digital formats, market consolidation, intense competition, and entry of non-traditional competitors. Customer behavior shifted quickly and considerably during the pandemic, including a shift from dining away from home to food at home.
The operating environment for the grocery market continues to be characterized by the fragmentation of local, regional, and national retailers, including both retail and digital formats, market consolidation, intense competition, and entry of non-traditional competitors.
We have significantly enhanced and will continue to improve our cybersecurity controls in order to minimize the likelihood or impact of a malicious cyber activity. - 11 - Our information systems are protected through physical and software security as well as redundant backup systems, however, as cyber-attacks continue to evolve, we are committed to investing in our cyber defenses in order to mitigate the risks.
Our information systems are protected through physical and software security as well as redundant backup systems, however, as cyber-attacks continue to evolve, we are committed to investing in our cyber defenses in order to mitigate the risks.
We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts. Our customers have the right under some circumstances to terminate contracts or defer the timing of our shipments or installments and their payments to us. We may not receive all of the revenues from our backlog.
Our customers have the right under some circumstances to terminate contracts or defer the timing of our shipments or installments and their payments to us. We may not receive all of the revenues from our backlog. If we do not receive all of the revenues we currently expect to receive, our future operating results could be adversely affected.
If the Company ’ s products are improperly designed, manufactured, packaged, or labeled, the Company may need to recall those items, may have increased warranty costs, and could be the target of product liability claims The Company may need to recall products if they are improperly designed, manufactured, packaged, or labeled, and the Company’s insurance may not provide full coverage for such recall events.
Rising wages across an improving economy can increase the competition among employers for a scarce labor force and make it difficult for us to attract and retain key personnel. 11 If the Company ’ s products are improperly designed, manufactured, packaged, or labeled, the Company may need to recall those items, may have increased warranty costs, and could be the target of product liability claims The Company may need to recall products if they are improperly designed, manufactured, packaged, or labeled, and the Company’s insurance may not provide full coverage for such recall events.
The Company may pursue future growth through strategic acquisitions and investments, which may not yield anticipated benefits The Company has grown and strengthened its business through strategic acquisitions and will continue to do so as opportunities arise in the future in order to meet the Company’s growth objectives.
In addition, actions by our competitors, our customer’s financial constraints, and industry factors or otherwise, could have an adverse effect on our business in either of these markets. 9 The Company may pursue future growth through strategic acquisitions and investments, which may not yield anticipated benefits The Company has grown and strengthened its business through strategic acquisitions and will continue to do so as opportunities arise in the future in order to meet the Company’s growth objectives.
At any given time, the Company can have a significant amount of credit exposure with its larger customers. While the Company is frequently monitoring its outstanding receivables with its customers, the risk does exist that a customer with large credit exposure is unable to make payment on its outstanding receivables which could result in a significant write-off of accounts receivable.
While the Company is frequently monitoring its outstanding receivables with its customers, the risk does exist that a customer with large credit exposure is unable to make payment on its outstanding receivables which could result in a significant write-off of accounts receivable. 10 Price increases in, and significant shortages of, raw materials and components; and shortages in transportation and increased fuel prices could adversely affect our operating margin.
These measures could also result in increased costs for goods imported into the U.S. or may cause us to adjust our foreign supply chain.
These measures could also result in increased costs for goods imported into the U.S. or may cause us to adjust our foreign supply chain. Either of these could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.
Our businesses operate in several market segments including the 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 market. Operating results can be negatively impacted by volatility in these markets.
RISKS RELATED TO OUR STRATEGY Lower levels of economic activity in our end markets could adversely affect our operating results. Our businesses operate in several vertical market segments including the 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 market.
The Company’s strategic sourcing plans include mitigating supply chain risk by utilizing multiple suppliers for a commodity to avoid significant dependence on any single supplier. Although an interruption of these supplies and components could disrupt our operations, we believe generally that alternative sources of supply exist and could be readily arranged.
The Company’s operating results could be affected by the availability and price fluctuations of these materials. The Company’s strategic sourcing plans include mitigating supply chain risk by utilizing multiple suppliers for a commodity to avoid significant dependence on any single supplier.
To remain competitive, we will need to invest continuously in research and development, manufacturing, marketing, and customer service and support.
To remain competitive, we will need to invest continuously in research and development, manufacturing, marketing, and customer service and support. We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position.
In addition, our trade secrets and proprietary know-how may otherwise become known or be independently discovered by others.
In addition, our trade secrets and proprietary know-how may otherwise become known or be independently discovered by others. No guarantee can be given that others will not independently develop substantially equivalent proprietary information or techniques, or otherwise gain access to our proprietary technology.
We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position. - 9 - We have a concentration of net sales to the refueling and convenience store and grocery markets, and any substantial change in these markets could have an adverse effect on our business.
Two of our largest market verticals are to the refueling and convenience store and grocery markets, and any substantial change in these markets could have an adverse effect on our business. The Company has a concentration of sales in the refueling and convenience store and grocery markets.
Risks Related to Legal and Regulatory Matters ● Potential changes in U.S. trade policies could have a material adverse effect on the Company.
In addition, a delay in the receipt of revenues, even if such revenues are eventually received, may cause our operating results for a particular quarter to fall below our expectations. RISKS RELATED TO LEGAL AND REGULATORY MATTERS Potential changes in U.S. trade policies could have a material adverse effect on the Company.
Further, the difference in gross margin of the products sold within the Lighting and Display Solutions Segments can also vary significantly. Consequently, changes in the product mix of our sales from quarter-to-quarter or from year-to-year can have a significant impact on our reported gross profit margins.
Further, the difference in gross margin of the products sold within the Lighting and Display Solutions Segments can also vary significantly.
Either of these could require us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold. - 13 - We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impacts on our business.
We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impacts on our business.
RISKS RELATED TO FINANCIAL MATTERS A significant decline in our stock price could adversely affect our ability to raise additional capital. The market price of our common stock can experience significant fluctuations.
The market price of our common stock can experience significant fluctuations.
No guarantee can be given that others will not independently develop substantially equivalent proprietary information or techniques, or otherwise gain access to our proprietary technology. - 10 - RISKS RELATED TO OUR OPERATIONS Sudden or unexpected changes in a customer ’ s creditworthiness could result in significant accounts receivable write-offs.
RISKS RELATED TO OUR OPERATIONS Sudden or unexpected changes in a customer ’ s creditworthiness could result in significant accounts receivable write-offs. The Company takes a conservative approach when extending credit to its customers.
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When combined with ongoing customer consolidation activity, an uncertain macro-economic and political climate, including but not limited to a recession or inflationary pressures, and the effects of possible weakness in domestic and foreign financial and credit markets, could lead to reduced demand from our customers and increased price competition for our products, increased risk of excess and obsolete inventories and uncollectible receivables, and higher overhead costs as a percentage of revenue.
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At any given time, the Company can have a significant amount of credit exposure with its larger customers.
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In addition, actions by our competitors, our customer’s financial constraints, and industry factors or otherwise, could have an adverse effect on our business in either of these markets.
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Although an interruption of these supplies and components could disrupt our operations, we believe generally that alternative sources of supply exist and could be readily arranged.
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Price increases, significant shortages of raw materials and components, shortages in transportation and an increase in fuel prices could adversely affect our operating margin.
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We have significantly enhanced and will continue to improve our cybersecurity controls in order to minimize the likelihood or impact of a malicious cyber activity.
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Materials comprise the largest component of costs, representing approximately 63% and 66% of the cost of sales in 2023 and 2022, respectively. The Company’s operating results could be affected by the availability and price fluctuations of these materials.
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Consequently, changes in the product mix of our sales from quarter-to-quarter or from year-to-year can have a significant impact on our reported gross profit margins. 12 We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts.
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To mitigate the risk of disruptions in the supply chain, we have on occasion increased our safety stock in certain components in order to mitigate a potential disruption to our operations resulting from an anticipated shortage of these same components.
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Changes in our tax rates and exposures to additional income tax liabilities could have an unfavorable effect on the Company ’ s reported results. The Company is subject to income and other taxes in the United States federal jurisdiction and various local, state and foreign jurisdictions.
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Rising wages across an improving economy can increase the competition among employers for a scarce labor force and make it difficult for us to attract and retain key personnel.
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The Company’s future effective income tax rates could be unfavorably affected by various factors, including changes in the tax rates as well as rules and regulations in relevant jurisdictions. In addition, the amount of income taxes paid is subject to ongoing audits by U.S. federal, state and local tax authorities and by non-U.S. authorities.
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If we do not receive all of the revenues we currently expect to receive, our future operating results could be adversely affected. In addition, a delay in the receipt of revenues, even if such revenues are eventually received, may cause our operating results for a particular quarter to fall below our expectations.
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If these audits result in assessments different from amounts recorded, the Company’s future financial results may include unfavorable adjustments. Emphasis on environmental, social, and governance ( “ ESG ” ) matters by various stakeholders could negatively affect our business. Customer, investor and employee expectations relating to ESG have been rapidly evolving and increasing.
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RISKS RELATED TO LEGAL AND REGULATORY MATTERS Potential changes in U.S. trade policies could have a material adverse effect on the Company.
Added
In addition, government organizations are enhancing or advancing legal and regulatory requirements specific to ESG matters. The heightened stakeholder focus on ESG issues related to our business requires the continuous monitoring of various and evolving laws, regulations, standards and expectations and the associated reporting requirements.
Added
A failure to adequately meet stakeholder expectations may result in noncompliance, the loss of business, reputational impacts, diluted market valuation, an inability to attract customers and an inability to attract and retain top talent. In addition, our adoption of certain standards or mandated compliance to certain requirements could necessitate additional investments that could impact our profitability.
Added
Climate changes, such as extreme weather conditions, create financial risk to our business. Global physical climate changes, including unseasonable weather conditions, could result in reduced demand or product obsolescence for certain of our customers’ products and/or price modifications for our customers’ products and the resources needed to produce them.
Added
This could in turn put pressure on our manufacturing costs and result in reduced profit margin associated with certain of our customer programs, or loss of customer programs that we may not be able to replace. 13 RISKS RELATED TO FINANCIAL MATTERS A significant decline in our stock price could adversely affect our ability to raise additional capital.
Added
Due to inherent limitations, there can be no assurance that our system of disclosure and internal controls and procedures will be successful in preventing all errors, theft, and fraud, or in informing management of all material information in a timely manner.
Added
Management does not expect that our disclosure controls and procedures and internal controls over financial reporting will prevent all errors or fraud. A control system is designed to give reasonable, but not absolute, assurance that the objectives of the control system are met.
Added
In addition, any control system reflects resource constraints and the benefits of controls must be considered relative to their costs. Inherent limitations of a control system may include judgments in decision making may be faulty, breakdowns can occur simply because of error or mistake and controls can be circumvented by collusion or management override.
Added
Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected. 14

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(includes 4,000 sq. ft. of office space) Bangor, ME Leased 10) Display Solutions manufacturing 77,000 sq. ft. Collingwood, ON Leased 11) Display Solutions office 1,000 sq. ft. Gloucester, MA Leased 12) Display Solutions manufacturing 68,000 sq. ft. Payson, UT Leased 13) Display Solutions warehouse 5,400 sq. ft. Queretaro, Mexico Leased
Biggest change(includes 4,000 sq. ft. of office space) Bangor, ME Leased 10) Display Solutions manufacturing 77,000 sq. ft. Collingwood, ON Leased 11) Display Solutions office 1,000 sq. ft. Gloucester, MA Leased 12) Display Solutions manufacturing 68,000 sq. ft. Payson, UT Leased 13) Display Solutions office and manufacturing 124,000 sq. ft. Tampa, FL Leased 14) Display Solutions manufacturing 61,000 sq. ft.
(includes 5,000 sq. ft. of office space Independence, KY Owned 4) Display Solutions office and manufacturing 183,000 sq. ft. (includes 34,000 sq. ft. of office space) Houston, TX Leased 5) Display Solutions office and manufacturing 46,000 sq. ft. (includes 10,000 sq. ft. of office space Akron, OH Leased 6) Lighting office and manufacturing 57,000 sq. ft.
(includes 5,000 sq. ft. of office space Independence, KY Owned 4) Display Solutions office and manufacturing 183,000 sq. ft. (includes 34,000 sq. ft. of office space) Houston, TX Leased 5) Display Solutions office 46,000 sq. ft. (includes 10,000 sq. ft. of office space Akron, OH Leased 6) Lighting office and manufacturing 57,000 sq. ft.
(includes 5,000 sq. ft. of office space) Columbus, OH Owned 7) Lighting office and manufacturing 336,000 sq. ft. (includes 60,000 sq. ft. of office space) Burlington, NC Leased 8) Display Solutions office and manufacturing 77,000 sq. ft. (includes 8,000 sq. ft. of office space Milo, ME Owned 9) Display Solutions office and manufacturing 42,000 sq. ft.
(includes 5,000 sq. ft. of office space) Columbus, OH Owned 7) Lighting office and manufacturing 336,000 sq. ft. (includes 60,000 sq. ft. of office space) Burlington, NC Leased 8) Display Solutions office and manufacturing 77,000 sq. ft. (includes 8,000 sq. ft. of office space Milo, ME Owned 9) Display Solutions office and manufacturing 106,000 sq. ft.
Added
Arlington, TX Leased 15) Display Solutions office and manufacturing 110,000 sq. ft. Cranston, RI Leased 16) Display Solutions manufacturing 37,000 sq. ft. Boonton, NJ Leased 17) Display Solutions manufacturing 62,000 sq. ft. Alpharetta, GA Leased 18) Display Solutions warehouse 5,400 sq. ft. Queretaro, Mexico Leased

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES LSI’s shares of common stock are traded on the NASDAQ Global Select Market under the symbol “LYTS.” At August 31, 2023, there were approximately 550 registered holders of record of our common stock.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES LSI’s shares of common stock are traded on the NASDAQ Global Select Market under the symbol “LYTS.” At August 31, 2024, there were approximately 530 registered holders of record of our common stock.
The Company has paid annual cash dividends beginning in fiscal 1987 through fiscal 1994, and quarterly cash dividends since fiscal 1995. The Company’s indicated annual rate for payment of a cash dividend at the end of fiscal 2023 was $0.20 per share.
The Company has paid annual cash dividends beginning in fiscal 1987 through fiscal 1994, and quarterly cash dividends since fiscal 1995. The Company’s indicated annual rate for payment of a cash dividend at the end of fiscal 2024 was $0.20 per share.
The repurchase program may be suspended or discontinued at any time. The Company did not repurchase any shares in the fiscal year ended June 30, 2023. ITEM 6. . [RESERVED]
The repurchase program may be suspended or discontinued at any time. The Company did not repurchase any shares in the fiscal year ended June 30, 2024. ITEM 6. . [RESERVED]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeITEM 6. [RESERVED] 16 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 16 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 17 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 17 ITEM 9A. CONTROLS AND PROCEDURES 18 ITEM 9B.
Biggest changeITEM 6. [RESERVED] 17 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 17 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 18 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 18 ITEM 9A. CONTROLS AND PROCEDURES 19 ITEM 9B.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company has not experienced any significant supply chain problems in recent years. With regard to price fluctuations of our raw material and component purchases, the price risk for materials the Company purchases is related to price increases in commodity items that affect all users of the materials, including the Company’s competitors.
Biggest changeThe price risk for materials the Company purchases is related to price increases in commodity items that affect all users of the materials, including the Company’s competitors. For the fiscal year ended June 30, 2024, the purchased material component of cost of goods sold subject to price risk was approximately $198.2 million.
The Company’s Display Solutions Segment generally establishes new sales prices, reflective of the then current raw material prices, for each program as it begins with further price increases throughout the life of the program when warranted. - 16 - Foreign Currency Translation Risk The Company has minimal foreign currency risk with respect to its Mexican and Canadian subsidiaries.
The Company’s Display Solutions Segment generally establishes new sales prices, reflective of the then current raw material prices, for each program as it begins with further price increases throughout the life of the program when warranted. 17 Foreign Currency Translation Risk The Company has minimal foreign currency risk with respect to its Mexican and Canadian subsidiaries.
The sales transacted by these subsidiaries in pesos and Canadian dollars combined represents approximately 4% of the Company’s fiscal 2022 consolidated net sales. All other business conducted by the Company is in U.S. dollars.
The sales transacted by these subsidiaries in pesos and Canadian dollars combined represents approximately3% of the Company’s fiscal 2024 consolidated net sales. All other business conducted by the Company is in U.S. dollars.
The Company does, however, seek and qualify new suppliers, negotiate with existing suppliers, and arranges stocking agreements to mitigate risk of supply and price increases. The Company’s Lighting Segment has implemented price increases with customers to offset raw material price increases.
The Company does not actively hedge or use derivative instruments to manage its risk in this area. The Company does, however, seek and qualify new suppliers, negotiate with existing suppliers, and arranges stocking agreements to mitigate risk of supply and price increases. The Company’s Lighting Segment has historically implemented price increases with customers to offset raw material price increases.
Removed
The Company’s operating results could be affected by the availability and price fluctuations of these materials. The Company’s strategic sourcing plans include mitigating supply chain risk by utilizing multiple suppliers for a commodity to avoid significant dependence on any single supplier.
Removed
Although an interruption of these supplies and components could disrupt our operations, we believe generally that alternative sources of supply exist and could be readily arranged. We have, on occasion, increased our safety stock in certain components in order to mitigate a potential disruption to our operations resulting from an anticipated shortage of these same components.
Removed
For the fiscal year ended June 30, 2023, the raw material component of cost of goods sold subject to price risk was approximately $226.3 million. The Company does not actively hedge or use derivative instruments to manage its risk in this area.

Other LYTS 10-K year-over-year comparisons