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LSI Industries Inc. (NASDAQ:LYTS)

F4Q08 Earnings Call

August 21, 2008 3:00 pm ET

Executives

Steve Brunker - Chief Information Officer

Robert J. Ready - President and Chief Executive Officer

Scott D. Ready - President of LSI Lighting Solutions Plus

Fred D. Jalbout - President of LSI Technology Solutions Plus

David W. McCauley - President of LSI Graphic Solutions Plus

Ronald S. Stowell - Vice President, Chief Financial Officer and Treasurer

Analysts

Glenn Wortman - Sidoti & Company, LLC

Robert Kolosky

Josh Baribeau - Canaccord Adams

James Ricchiuti - Needham & Company, LLC

Lenny Bracken - Bracken Capital

Shawn Boyd

Operator

Now, without further delay, I will turn your call over to Steve Brunker.

Steve Brunker

As with our previous conference calls, supporting materials for today’s presentation will be available, or are available, on the web by visiting the LSI Industries’ website at www.LSI-Industries.com and clicking on the Investor Relations tab at the lower left. If you’re not within convenient access to the internet right now, you can access the supporting materials later after 5 PM this afternoon as well as a replay of today’s conference call. Now, it’s my pleasure to introduce Bob Ready, the Chairman and Chief Executive Officer of LSI Industries.

Robert J. Ready

I’d like to take a moment to introduce our group: Scott Ready, the President of the Lighting group is with me as is Ron Stowell, our Chief Financial Officer, and Fred Jalbout, always in Montreal is online, and David McCauley in North Canton. And all of our folks are here to answer any questions that you may have. After kind of a quick overview of what’s going on, we thought it would be interesting to share with you, especially with the new solid-state LED products, of what’s kind of in the queue and what’s coming, and Scott will address that with a lot more detail.

We’ll start off, obviously, the news that has come out in the fourth quarter which was very disappointing. It’s something that I think we were all somewhat prepared for as we started to see gasoline go through the $3 and then into the $4 mark, and certainly the effect that it had throughout our retail economy. As I’m sure most of you are aware of the fact, and we have said many, many times, the Graphics business is a project-driven business whereas our Lighting business is a product-driven business. And as you will hear from Scott and see some of the things that are going on, our Lighting business is quite solid. It is right on plan. We’re extremely pleased with where we are and certainly with some of the things that are coming in the very, very near future. As David will share with you of the disappointment is that our retail customers are basically on a hold and they are in C basis. Certainly, the dialogue continues but we really just don’t have anything strong that we can really talk about is or relates to a major roll out program. There was a little bit of good news that happened last week with the announcement of CVS buying Long’s and David will address that in his discussion with you as well.

I think my press release kind of said it all. I kind of went through that in my comments in the press release about the direction of the company. What are we going to do about it? Obviously, we recognize the fact that primarily our Graphics market has changed and I can assure you that all of our shareholders that it is in our commitment that we are working on a structure within our organizational as well as business plan to adjust and whatever that really requires us to do to meet whatever the market conditions are truly going to be. There’s certainly a lot of opportunities still out there with all the things that we’ve done and I think from my perspective, to have a quarter like we’ve had was extremely disappointing coming off of record year and all the things that we’ve had worked on to get in place in order to continue on what we felt could be a very strong future. We certainly haven’t given up that feeling. Our Lighting business, as I said, is well on its way with these new products to continue on with the direction. As most of you know, we are truly a market-driven company and our retail environment are those markets have changed accordingly because, I think, that in all essence the consumer has certainly lost some confidence and certainly, his or her buying power has been affected by the change in the pricing of food and the pricing of energy.

As we look into our continuation of our plan, we will stay focused on our Lighting and our Graphics. We feel we have all the opportunities. We certainly have all the people in place and certainly have all the capabilities to meet any kind of objective that may be thrown at us by any customer. And we’re going to keep that in that direction. Our solid-state technology is doing just what we had hoped it would do. As a matter of fact, in the last week or two, it’s even growing at greater leaps and bounds. It’s working the way we hoped it would be when we structured our marketing objective and that was to start with a petroleum industry, getting the crossover product line into the petroleum canopy applications. And from there it is beginning to grow in other segments of other markets, which Scott will go into. The fact of the matter is, is that we’re going to stay focused with our business plan and I have the confidence that our Lighting business will continue to grow. I think David’s group recognizes the challenge and those folks brought us to a record year last year. I know they haven’t given up hope and they will continue to work their hearts out in order to offset some of this softness in the retail economy.

With that, I’d like to turn it over to Scott and let him quickly kind of give you an overview. And we thought that you would find that his presentation interesting with some of the things that are going on, especially with some of the products that are right now in the marketplace or are soon to be introduced to the marketplace.

Scott D. Ready

As we have mentioned in earlier conversations, the Lighting strategy is relatively simple and it’s one that is based upon our belief that our desire to grow market share in new markets as well as maintain the market shares that we’ve had in existing markets. We’re operating in a tough environment as is all lighting opportunities, or lighting companies, I think in the marketplace today. But I think we’ve proven that with successful implementation of this strategy, we can do just what we set out to do and that is growing those areas that allow growth because of the opportunity that exists and maintain market shares there is where we have had such a strong basis in the years past. We have layered on top of that, obviously, our LED solid-state lighting product development. And that is having a major opportunity to frankly accelerate and leverage against that base strategy new opportunities that are creating a brand identity and frankly an opportunity base for LSI that grows almost daily. This applies in all markets; it applies to even the retail business, which is one of the more challenging marketplaces today.

At the very beginning, we worked very hard to develop a product that would be quickly successful and one that would give us the opportunity to have volume opportunities in both the new construction, but most importantly, the retrofit market. We built the marketing strategy that was developed on a concept called "Seeing is Believing" and it was our intention that once the marketplace got an opportunity to begin to experience solid-state lighting on a broad base, that we would quickly have opportunities develop beyond that initial base. And that’s really what is happening. We’re happy to announce that there’s been strong acceptance of the product in the petroleum market, the opportunity to present 84% savings, for instance, in a number of different locations. With a slide here, we’ll show you an before and after, a Shell location, in which that customer did experience just that, a tremendous amount of savings in energy consumption to a degree that the project is quickly paying for itself. But to take that and now roll that into a broader base of opportunities, again, in that petroleum industry on a retrofit basis. Clearly, the marketplace in the petroleum market is challenged. The opportunity for these guys and the particular dealers and retailers that are managing facilities today as the major oils move out of that responsibility on the retail segment, it’s tough. While gas prices are high, their margin on their business on a day-to-day basis is a challenge. That to see the kind of reception that we’re seeing gives us a great of confidence that the value is being recognized and that is something that, as we go through and do more and more work in this marketplace, we believe will quickly translate into other market opportunities.

The slide that you see here is another facility that actually represents the move now for prototyping into program roll outs. The facility that you see here is a prototype but what’s exciting about it is that we’re moving into that next phase with a customer. They’re so happy with what we’ve done initially that they are ready to begin to make this a standard process in upgrade and new construction on all their facilities.

Robert J. Ready

Scott, I’d like to point out for the viewers that have the ability to see this slide, if you look at the before and then the upgrade, look at the pump, which is really the merchandising part of a petroleum application as it relates to under the canopy. Look at the tremendous improvement on the lighting. And what’s really kind of neat about this slide is the one above is certainly our product of before, which is a Scottsdale product, both of you know the success of that product. But look, with the outstanding lighting, the control around the canopy and the brightness on the pump. This is what is the "Seeing is Believing" is beginning to really make its impact to our customers.

A year ago, this concept was developed and it really was in a concept stage. And I think that’s what we’ve been able to accomplish in the last nine months since we’ve gotten into production. We moved from a concept to a real solution. It works; it’s proven and it’s beginning to be adopted in more than just the prototype phase. And that’s really what’s going to generate some volume opportunities for us in the future. And Scott, how long have these been out?

Scott D. Ready

We went into production recall for even our prototype work in the March timeframe. So, the kind of exposure that we’ve been able to develop really in about six short months. It’s right along the plan that we’ve had in both in terms of market identity and market acceptance, as well as, the volume targets that we have set.

We’re doing this, again, I can’t repeat this enough, on a retrofit basis more importantly than on a new construction basis. New construction will continue to be challenged but as such, dollars are being spent in maintaining and upgrading existing facilities. And we can do it in a number of ways. The initial crossover product released in March that I just spoke of essentially has been expanded now to a larger variety of product versions, if you will. So, we’ve produced and introduced them to the market a variety of different ways to allow the customer to get the same solution regardless of the kind of facility or canopy he has. But what’s really exciting, I think, as we mentioned, the kind of press that we’re starting to get and the kind of identity that we’re starting to develop for LSI Industries in the overall solid-state lighting marketplace. And that’s what’s going to continue to generate and leverage what we’ve done so far with our technology development into more opportunities that then again present a better footprint, a better position, a better development platform for not only future solid-state lighting products, but also carrying forward the traditional metal halide fluorescent products. This is where some of our continued growth in the Lighting market is going to come from. We’re going to package, if you will, the offering as LSI in a way that we had not been able to do in the past prior to the introduction of solid-state lighting. We’ve gotten some good press here recently and as you can see the slide presentation, particular site in Easton carrying the Chevron brand, has a lot of LSI product on it, not just the crossover product. But you could see the kind of attention that it’s getting in that kind of press, tape or release, specifically with a great deal of support from the customers that are enjoying the advantages of the product and the technology.

What’s really exciting is what we do beyond canopy fallon and again, based on the platform that we’ve developed, going into other non-petroleum applications, building soffits. We have actually, not represented in this photograph, but a new rollout program developed now in the financial marketplace. Bank drive-thrus, again, using similar overhang-type installation applications but all again based on that original platform that has been extended now through a variety of other products that have been released into the marketplace.

We continue to pursue some of the original concepts that were developed. I’m sure you’ve heard me say many times that there’s market opportunities active beyond what LSI has traditionally been involved with and in this particular case, bridge lighting, is a good example. We’ve very, very close, I think, to securing some long-term business there. The city of New York is publicly published now a bid on that and we’ll close here shortly. I can’t say that we’re going to get it but I can say that we’re in a very, very strong position as a competitor for that opportunity.

Robert J. Ready

Well, I may add that slide actually shows a little bit more than just the fact of the bridge application but take a look at, again, for those folks that can look at the slide, look at the tremendous improvement in efficiency to this come in such a short period of time. If you look at the slide on the left of May 2007 and then you shift over to the right in March in 2008, then you see the tremendous advancement that’s been made in this LED technology. And of course, this is what’s really driving us as it relates to the markets that we’re going after with this high retrofit volume capability that as the efficiencies of the LEDs and the drivers are forthcoming. It is really building more value at a better ROI for our customer.

Scott D. Ready

And here’s a photograph that actually does show the bank application, if you will, but again representative of taking that basic platform, that basic technology, and using it in a number of different ways so that we generate the cost advantage and the production advantage of volume production, but apply ourselves and frankly, in this particular case, insert ourselves into opportunities that we had not participated in, in the past. Not only are we participating in this particular financial institutions upgrade program for their exterior overhang, that by virtue of the fact that we had an LED for their exterior package, we’re also invited to participate in the interior program as well.

Other non-petroleum LED applications, display case lighting, we have a current roll out program with a major retailer, involved in retrofitting their display case lighting. We’re currently involved in a number of different opportunities where cooler lighting would become a factor. And last but not least, again, on a similar platform have developed a surface mount pendant mount version of the initial crossover fixture that works well in parking garages and got a number of different opportunities now that we’re prototyping there. This all represents product variations that are currently in production, currently released and frankly, currently adding to the first quarter volume for 2009.

We continue to have products that are close to release. Specific products for in-ground applications, or conceptual applications, and indoor applications, or retail applications. One of the most exciting products that we’re very close to release now is the aerial light/street light package. This is something that the market is very hungry for. There are a number of opportunities that had been discussed in the press. The city’s municipal projects, as well as, government projects will be at a position to participate in that in the next 60 days. So, it’s a very, very bright future from that perspective. We’re very excited about what we see domestically but even more so, internationally. All of these products have international applications. All the products fit well into the international market. The lightweight, the ease of shipment, the small compact packages, frankly, the electrical characteristics are much easier to apply in the international market than previous technologies. And based on that, I’m going to ask Fred to make a comment about where he is on, not only in the entertainment side of the business, but also in our international opportunities.

Fred D. Jalbout

What was that was the entertainment business, two months ago we have introduced a new product in the video LED screen. It’s called the V-Lite and the V-Brite. And we had our first client in the US, which was a company that we worked with a long time ago. They bought a good quantity of this product. It’s a unique product, first time being introduced to entertainment. And they put it on different show. It’s going very, very well. I will just give a brief description of what’s unique about it. We have double its pixel that it’s a very smart pixel that speaks for itself contained of the LED, the driver and the logic behind it connected to each other through cabling system and flexible cable. And the cable itself is the structure. So, what it actually gives is the opportunity to the designer by [inaudible] any shape or size of the screen with the three wiring from the back so it can be seen through. They can make effect and animation behind it. They can make any shape. They can use it on the floor. They can use it on the wall. They can cover any object with it. So, it has a lot of advantages and it’s a big success. And it’s just the beginning of it and I believe that it has a huge future for the entertainment market. And not only to the entertainment, it could be used as we have discussed in many consulting in putting it on the building, in the city, many different applications. So, it’s going to be a big thing for LSI.

From the other side, we’ve been working on the overseas market. We made already two trips and as we mentioned last time, because of the economy in North America, we think that we should look about opportunities somewhere else. And because of the high value of the euro and the low US dollar, that means our cost is lower for them. We have a bigger chance to enter the market in Europe and immediately sell. We made already two trips and we’re going another one next week. Our strategy is that we meet with most of the consulting engineers that they work on large lighting and video screen projects. And we introduced LSI. They are convinced that LSI is the right company to work with for the future. We know that we are in early stage right now. We are in the department of this market and after the two visits and meeting with the different consulting engineers and designers, we find out that there is a lot of applications in the Middle East, Saudi Arabia and Dubai, even in Europe, in many places in regards to the video screen, as to high resolution digital video screens, that they would be used the same as the billboard in North America. We met with one of the largest company in France for that. We introduced it; we present the project. In addition, we present the lighting with it. And in Ukraine next week, we have different meetings set up with different retailers to introduce not only the video screen but to introduce the lighting, the placement of existing traditional lighting, turning source to LED. Opportunity is there. The market is there. They believe in LSI a lot because they way they see in that LSI is the company that is [inaudible] the product, manufacturing the product and it will be supplying the product.

The strategy is not to go directly. It’s in parallel. We are trying to double our network of introducing channel using OEM companies that we will be tending the equipment to them. They will install it; they will take care of the installation and the service up to the sale. Since those companies are far away from us, to save cost on us doing this part of the job, the best way we find out is that to deal indirectly with OEM that they have with a credibility and good [inaudible] with clients.

We see a good future for Europe and Middle East. And like I said, it’s still in the early stage but the results are very, very positive.

Robert J. Ready

I think that if I can add to that before David has a few comments, about two months ago as we were watching the price of gasoline go up, here as certainly worldwide, but here in the North American market, we had some great concerns that with the completion of those two major projects last year that we would feel this pressure that has unfortunately has come about on the retail segment of our business plan. And as Fred pointed out, in looking at the international market, we’ve had the opportunity to have some visitors that have come from Europe to Cincinnati to visit us and look at our technology. And I believe that they recognized that truly from a retrofit capability, LSI was on the cutting edge of the type of products that they could use because we were already in the prototype stage with many of these, as you have seen some of them just a few minutes ago.

So, the timing couldn’t be better. It’s going to take a little bit of work, for sure. We have to build our own image overseas. Fred and Jonathan from Montreal have a lot of contacts and this is one way that we will put the pressure on ourselves to try to offset this softness in the economy as it relates to our Graphics business.

However, with all that said, certainly other things have been moving and moving rather well. David is online and will address those now, starting with our Sports Package and discussing a few words about the billboard market. And David, if you could pick it up from there, I’d appreciate it.

David W. McCauley

On the screen now for those that can view is a sports facility. This particular one was done a number of years ago by SACO before the LSI purchase. It’s the Minnesota Timberwolves. At the end of our earnings call, our next earnings call in October, I’ll replace this slide with a major big ten university indoor program that is more spectacular than the one you see in the screen. We’re also working with another big ten school on their outdoor football stadium. That will take place, again, this quarter just like both big ten programs will.

The next slide we’ll show you is a combination of high school and soccer field. The high school’s in Texas there. There’s a lot of high schools that will be able to afford or incorporate a sign like the one in the top right-hand corner of your screen. This is not unusual for the trickle down. Started with the pros, went to the minor leagues, and now we’ll work through minor college and high school formats.

The one on the bottom left portion of your screen is a soccer field right next to one of the Olympic stadiums in Canada. Again, both of these were just recently resolved and will be built in this current quarter, our first quarter this year.

Next slide, if you would, thank you. Again, as a reminder of other type programs that we’re pursuing beyond the sports. Right now, the sports is hot for us. It helps fill the void where we weren’t getting enough participation in the billboard market. We’re very confident that we’ll be a player in this billboard market. We just haven’t got any orders into the queue like we expected this time. We are in continued talks with major people on the billboard market and do expect to enter there. It’s just a matter of time we’ll break through and become a player there.

In our next slide, excuse me, I’m on a different program than the group here. Again, you probably may have seen this one before but it’s a spectacular at an urban lifestyle center. Many of these are being developed throughout the country. Although, the pace is slowing right now because of the economy. But we expect many of these to have video boards for both advertising and entertainment. And again, this is a trend that’s going to continue.

Let’s bounce off of the LED business to Board business and go on to the next slide, which shows quick service restaurants. Although we’re really feeling the pinch in retail and because of the economy and the stall or the hold that many vendors have placed on their programs and thinking, we’re not seeing it near as much in the restaurant business. As you know, it’s a very fragmented business. Three or four players don’t make up the game like they do in office supplies or top discounters. In the restaurant business, being very fragmented, it’s a real war out there. We still have a lot of opportunities. Two of our customers are making major conceptual drawings on their facilities that we’re participating in right now. Whether those start tomorrow or a year from now, we don’t know but we are excited that two of the majors are doing that. And then we have another company that we’re working with that’s enough start to, again, they’re going to open a few facilities. And if this thing takes off, they’ll roll them out. So, we stay encouraged in that industry.

Also, another exciting part about the quick service restaurants that we have a lot of Graphics business in, we’re now introducing our lighting package to them. Because energy has become their battle cry, whether it be on their menu boards, in their grill area, just any conservation; heating, cooling, but lighting obviously gets hit hard with the challenges. And with our line of LED products, that gives us a great opportunity to present to them environmental-friendly, energy conservative, green initiatives to answer all their questions there. We’ve been asked to present many of them and we’re expanding again beyond the Graphics and showing them the whole package.

The next slide on your screen is a Stop n’ Shop. And tomorrow, Stop n’ Shop unveils their new logo. You can see this logo if you go to the internet today. They have released a lot of information but tonight, we’ll complete our 580 stops that we made throughout their chain. That’s how many stores Stop n’ Shop and Giant have together. On the East coast, involving 12 states, we visited those 10 stores. And this was kind of a surprise order because this was cupped as a well-guarded secret, this remodel program they have, and you can see this store looks very refreshing and new. And we expect to do more beyond just this initial attack with these stores. Again, this is something that we’ll be able to build in our first quarter here.

One other thing I did want to mention today: You might have seen during the Olympic events, a Smart Vision SACO LSI screen at the Raven Stadium. We upgraded that screen. They had their first Pro home football game this year, exhibition game. But after the event, they continued to let the people in the stadium view live from China the feed of Michael Phelps getting the eighth medal in the Olympics. And again, that was on that large screen that we provided over a year ago.

With that, Bob, I’ll turn it back over to you and we’ll go from there.

Robert J. Ready

Thanks, David, for the overview and we’ll be opening up to the group some Q&A here in just a moment. I think Ron Stowell would like to just touch base with some of the financials. Obviously, a lot of that was published in today’s press release and Ron, if you would quickly go through that, I would appreciate it from a timing standpoint.

Ronald S. Stowell

We have our normal Safe Harbor statement and really we have no material non-public information that will be discussed today.

Certainly, a big topic for the quarter was the impairment charges. In the first slide, and I’m only presenting a few slides available in this file, later tonight as Steve talked, will be the normal financial information that you’ve seen from us. I’m only going to touch a few of those items here. But the goodwill impairment was all in the Graphics segment, as you can see. We had some intangible assets and some trade names were in the Lighting segment and we had some intangible assets in the Graphics segment. So, as we’ve said, it was $28.9 million, total $1.8 million intangibles, $27.1 million goodwill. I had to put this balance sheet data in, again, to show you that after this goodwill impairment, we still have a very strong balance sheet. We’ve met cash; we’ve got good solid working capital. In fact, the working capital is up from what it was last year. Remember, these impairment charges were non-cash charge. We have no debt as of 6/30. We have no debt as of today and we’ve been debt-free for about 18 months that were so. Yes, our shareholder’s equity went down but it was with that non-cash impairment charge that brought the equity down to the $150 million mark. Still very strong as we indicated.

The two cash dividend actions that were taken by the Board yesterday, the Board declared a $0.15 quarterly cash dividend that’ll be payable in about two weeks from today, on the 9th. The other action was right in line with our dividend policy of initiating, or indicating rather, that next year’s annual dividend will be $0.20 per share. So, again, that policy remains the same that we would intend to pay between 50-70% of our current year net income.

The guidance that we gave, actually, last week and we reiterated yesterday, for fiscal ‘09 is our net sales between $290 million and $310 million. Diluted earnings per shares of between $0.29 and $0.36.

Robert J. Ready

Yes, my last comment in that last slide is without any acquisition or any kind of a re-imaging program. We took a very conservative approach on our guidance because of the unknown and the economy. We feel very comfortable with our guidance at this point and as a matter of fact, being conservative, that a few things starting to happen. Obviously, as we start rolling out more information, you’ll be aware of it.

I did want to address the release as is related to this acquisition. Over the years in our Lighting business as we’ve been growing our commercial and industrial direction, we have recognized that there were certain product offerings that we did not have in our line. We knew we needed them in our line. And as we have grown in recognition and market share, it’s been my hope and certainly my intent over the last year and a half to find a company that we felt would fit the culture and fill the, what as we called it a Bolt On Acquisition. There may be some questions in reference to why not a company with LED. The fact of the matter is the product line that we’re looking at, and I’m not at liberty to really go into detail yet, I don’t quite want to tip my hand until this acquisition is finalized, but the letter of intent has been signed and Ron is now in the process of now doing the due diligence. But I can assure you this: The company is a very fine company. It really fits LSI’s culture. That bolt on capability will enhance our entire lighting package. It will certainly strengthen our position in the C&I marketplace. It has all the great potential to utilize the technology that we are now developing as a company in their product offerings in the months to come. It is an important part of the long-term strategy to strengthen our company to meet the objectives of the commercial and industrial market. It also has great opportunities to expand in our Image business as it relates to our retail. So, it is a company that, as I said, we’ve had a focus on for over a year and a half. And I’m very pleased to say that it’s a privately-owned company that have recognized the importance of becoming part of LSI and that during the next 4-6 weeks, we hope to accomplish the due diligence and announce who that company is.

With that, I would like to turn it over for questions and the Q&A. I hope that this little presentation kind of gave you an overview of what’s to come. It’s an important part of the future of this company and we wanted to be sure that you started to see these things that we have been working on for the past few months, and the prototype process now starting to take root. And with that, I’d like to open up to Q&A please.

Question and Answer Session

Operator

(Operator Instructions) The first question comes from Glenn Wortman – Sidoti & Company, LLC.

Glenn Wortman - Sidoti & Company, LLC

In the fourth quarter, your Graphics sales were about $17 million. Do you think the number could fall off much further? Do you expect to see sequential growth, or what do you guys think?

David W. McCauley

Certainly, it could fall lower. Do I expect it to? No. As the saying goes, “I think we just bought them here.” With the interest in growth that we’re seeing in our video/LED screens and recently announced, we’re encouraged although we don’t have an order, this CVS acquisition of Long’s and the interest I said about the restaurant. There’s enough positive signs there to exceed that number. Not impossible not to. If we were not to get the CVS Long order, that won’t help matters but, again, as Bob said, that was not forecast in our projection numbers.

Robert J. Ready

Another thing I’d like to add, Glenn, to that is that in the forecast that we’re giving you, we’ve really looked hard at our best analysis of what’s going on in the retail segment. And it’s almost back to the basics with smaller orders rather than big roll out programs. And as I’m reinforcing my comments a few moments ago, we’re very comfortable that our forecasts are right on target.

Glenn Wortman - Sidoti & Company, LLC

Okay, can you actually break that revenue guidance between the Graphics and the Lighting?

Robert J. Ready

Well, if it stays true to form, we’ve been running around 60-65% Lighting and about 33-40% Graphics, understanding that the mix is somewhat going to be adjusted based on the efforts and the results of the digital boards and some of the things that are going on in the fast food industry, like the LCD that David relate it to.

Glenn Wortman - Sidoti & Company, LLC

And then just finally in the fourth quarter, your sales were higher but the margins narrowed. I assumed a lot of that had to do with the shift of higher percentage of Lighting versus Graphics, which highlighted the other causes for the decrease in profitability?

Robert J. Ready

Yes, I think that probably that, Glenn, is certainly the reaction to the price increases in material and specifically in some of our contracts that we have with some of our larger national accounts, specifically on the Lighting side. There’s always a tendency to be kind of following that. And I think that’s where that pressure is starting to see that. Certainly, the product mix has had a lot to do with that as well. But I think it’s more of the material side. We have initiated a price increase to the depth where that would hold. Yet, it’s a little early to tell. Most of our efforts, of course, has been to start to roll out these solid-state, which will have higher margins. It’s still a little early to tell. I don’t want people to get too anxious. As Scott said, we started rolling this stuff out in March. We really didn’t get some of this stuff in the field and get it installed until the last 60-90 days. And now, these things are starting to show the promises and certainly the capabilities that we told the customers it would. And in the last week, in some cases we just recently received $100,000 order on some crossovers. We’ve received a large order on the, what I call, the jewelry case lights, the linear displays. These are the encouraging things. We sure as hell though that we’ve got our work cut out to offset some of that softness in the retail environment and we’ve made a lot of adjustments in our work model as we’re going towards that. And hopefully, depending on things as forecasted, we’ll start to see some improvements on the bottom line.

Ronald S. Stowell

I don’t want to minimize that shift of sales, the waiting, with Graphics things was lower this quarter. They’re traditionally a higher margin business than our Lighting. And when they’re down, they’re lower, we really feel that. Compounding that were some inventory adjustments that were necessary up in Montreal and that flows up through the Graphics segment as well.

Operator

Your next question comes from Robert Kolosky.

Robert Kolosky

I was just wondering on the impairment charge. How much of the $28 million impairment charge is directly attributable to SACO, and which specific SACO business has got it?

Ronald S. Stowell

Well, what we’ll call it the LED business because we have some of the digital boards that the revenue stream is in our traditional graphics business. And so, all told that was about $21 million of the goodwill from the SACO acquisition was about $14 million from SACO. There was additional impairment in our traditional graphics business as well with the state of the retail markets that we serve being uncertain and low and holding back.

Robert J. Ready

No impairment at all on the technology side though.

Ronald S. Stowell

Bob is absolutely right. When you look at the technology itself, how we drive the LEDs, the electronics, the [high dim], the firmware, the software, or as I say, the technology itself, that is as good and better than it’s been. It’s what we’re deploying in the LED products that we’re selling and then LED boards. There’s absolutely no impairment in the actual technology itself. This is an actuarial economic, academic kind of a calculation and our base technology is very strong.

Robert Colosky

Okay, so $14 million of the SACO goodwill was impaired?

Ronald S. Stowell

Correct.

Robert Colosky

And how is the experience with the goodwill impairment kind of impacted your attitudes towards the current negotiations with the proposed acquisition?

Robert S. Stowell

Well, right now, everything is right on target. I think that the benefit of bringing the two companies together is very, very obvious to both companies. And the present owners, I can’t speak for them obviously, but from our dialogue, I don’t think it has any effect on it whatsoever. The impairment charge is really academic and the structure of the company, the strength of the company, the balance sheet, it’s certainly is positioned in the marketplace as it relates to those folks, I think, is as strong today as it was before all this happened.

Robert Colosky

Okay, and can you give a little color on the increase in SG&A, at least sequentially?

Robert S. Stowell

I’m not sure I have all the data here necessary for that. I just don’t. You’ll have to contact me, if you would, later.

Operator

Your next question comes from Josh Baribeau – Canaccord Adams.

Josh Baribeau - Canaccord Adams

I didn’t see the K yet, obviously. Could you give me the number, what cash was in the quarter please?

Ronald S. Stowell

The number that I have for you, Josh, is cash flow from operating activities for the year. Not for the quarter, for the year, was about $12.7 million.

Josh Baribeau - Canaccord Adams

Okay, but you don’t have ending cash?

Ronald S. Stowell

Ending cash, we’ve got $7 million, approximately, on the balance sheet.

Josh Baribeau - Canaccord Adams

And I noticed that, of course, the dividend if you add the payments together for this year was higher than your cash earnings this year. I think it was $0.53 and you’re paying a total of $0.60. Do you anticipate borrowing for that dividend with the acquisition coming down the line, or that’ll be paid from cash?

Ronald S. Stowell

No, the dividend that will paid in a couple of weeks will be paid from cash. It’s on the balance sheet.

Josh Baribeau - Canaccord Adams

Could you provide any more color on the situation with Wal-Mart?

Robert J. Ready

Yes, I think Scott can handle that one but from my perspective, that has been certainly one of our more challenging direction. As you’re probably are aware of the fact. It started a number of months ago when they started putting a hold on their new construction projects, but Scott there is just beginning now to release some--

Scott D. Ready

There’s two things, really, happening. Not only are they going through an initial slowdown, if you will, on their new construction but they’re also re-evaluating their store design. And I think they’ve selected this point in time to move that forward a little more aggressively because they pulled back on some of the capital expense side of that.

What we’re looking at today is a slight acceleration, if you will. I’ll categorize it that way. We’re seeing more activity; we’re seeing more store releases. We’re seeing more definite dates that would indicate product is required. The way Wal-Mart works is that their product is required several months in advance of the new store opening. So, there’s still a lot of variables to pay attention to or to consider. We’re getting indications that they will need more material this year than they do last year. Could that change? As David said, absolutely. It could change. It is a fundamental characteristic of the economy, I think, today. Our expectations are that we’ll do a little bit better. As I mentioned, our expectation is that some of the changes that they’re looking at for their overall package, specifically their exterior package, of which we are the major player and we’ll also have an impact in, potentially a positive impact, as they move more towards solid-state lighting.

Robert J. Ready

I’d like to add to that. I think it’s fair to say that certainly Wal-Mart is one of our more challenging customers. Unfortunately, we don’t get a lot of information from these folks and it really is difficult when you look forward to try to build a forecast or guidance with a customer as big as they are with the least amount of information that they really allow us to have. So, it’s very difficult to give you more information. From my perspective and looking at the account, they’re very important to us. They’re not the biggest account, as far as just the overall direction. We haven’t allowed them to do that but it’s our hope that with this LED technology and the fact that next month we are going to bring out an exterior aerial light that we feel should be interesting to them. Hopefully, we’ll stimulate their energy reduction feelings to look at this fixture as a retrofit opportunity. That’s our hope, for sure.

Josh Baribeau - Canaccord Adams

A bit more on the acquisition. I know you’re obviously withholding a lot of details but can you give us a little bit of color on when you expect it to be accretive or how you plan on funding the acquisition?

Robert J. Ready

Simply accretive immediately, as far as the funding is concerned. It would be a combination of stock and cash.

Josh Baribeau - Canaccord Adams

So, you don’t anticipate capping the $57 million credit facility?

Ronald S. Stowell

Yes, we realize the remaining cash is on the balance sheet and we will then borrow from our domestic line of credit.

Operator

And the next question comes from Jim Ricchiuti – Needham & Company, LLC.

James Ricchiuti - Needham & Company, LLC

I was wondering if you’ve had any discussions yet with Wal-Mart on this new exterior aerial light that you’re planning to introduce? Are they aware of it? Have you had any presentations to them?

Robert J. Ready

Jim, we have not necessarily had a great deal of conversation with anybody on this aerial light. It is something that we have developed that we believe is going to be very unique in the marketplace. Without going in a lot of detail on this conversation, we are scheduled, and Scott, help me on this, in September to try to bring this technology to Wal-Mart. Why don’t you fill Jim in?

Scott D. Ready

Jim, I think we’re well aware of what competition is out there. Wal-Mart knows we’re developing the product. We haven’t given a formal presentation to them yet. We’ve got a few things that we want to verify through testing before we do that but this is a product that’s expected to be available to the market in general. In the October timeframe, it will be presenting it to Wal-Mart as well as other customers through September.

Robert J. Ready

This technology that we’re talking about, and we’re being a little bit mysterious with it, in the fact that with all the information and the knowledge that we have now with solid-state and what’s going on with our competitors, we have been working on something that we believe is really going to be unique to this product, or this application of this product. And obviously, Wal-Mart would be one of the first customers that we would bring this technology to. But as the same similar marketing approach that we use with the crossover on the petroleum business. It was our intent, as you know, to develop a product that really had a statement, that could be seen by many people, and hit that market in the direction that we took. And it seems to me that, that strategy is working very, very well.

The aerial light is recognizing how LEDs are working and the fact the efficiencies of LED are improving almost monthly has given us the strong feeling that the type of technology that goes beyond the solid-state and the utilization of the white LED. It’s a more complex design that has more efficiency and more control, which aerial lighting requires. And this is the kind of lighting that we believe our big national accounts that use our type of aerial lighting are going to be looking for. Remember that we started this company 32 years ago as primarily an outdoor lighting company. We are probably recognized in the lighting industry as the major, if not one of the major players, in outdoor lighting. That was the whole concept of the design process so that when we announced that outdoor aerial light, it was going to be a lot different. And hopefully, we feel a lot better than anything anybody else has even thought about. We’ll see when we roll it out in about 4 weeks.

James Ricchiuti - Needham & Company, LLC

Now, in Q4 I wonder if you’d be able to give us a percent of your Lighting segment revenues that’s represented by solid-state lighting. It would be nice if we could start to track this progress on a quarterly basis.

Robert J. Ready

Well, without getting too detailed, we really, as you can appreciate, don’t like to put that kind of information out. Let me put it in a more direct way. It is the type of lighting that is really still in the prototype process but it’s growing. And I think what we feel comfortable and acknowledging what that is so that we’re not tipping our hands too much to our competition. It’s still in the primarily early stages. The whole key behind this was, and if you recall our strategy, is to allocate certain percentage of products by market, by agent. So, that we didn’t allow one customer or one market to pile all that production up. And we allocated by agent and gave them the opportunity, each agent to go out there and get their prototype started. And I think it’s safe to say from a utilization standpoint that every major brand in the oil industry has now got a prototype of LSI crossover product. Is that right, Scott?

Scott D. Ready

That’s pretty close. Yes, I think, Jim, we’ve always said that the first challenge is to get them to do one. The second challenge is to get them to move from a prototype experience to a commitment to do continual installations in the product. And then at that point, I think, which is still a little ways down the road, we’ll start looking at it as a percentage of our overall Lighting business. Right now, we really are in that second stage and that was a tremendous challenge. It’s easy to get somebody to try one. The real challenge is to get them to say, “Okay, I like it well enough. I’m going to do two, three, four, five, six…” Work it into their program. And that’s the phase that we’re in now with the crossover and we’ll be entering, really, on an early stage in the sign lighting and the [pole] metal lighting. We’ll be entering that prototype stage with our new introduction this fall. So, that’s kind of how we’re looking at it, Jim. I don’t think it’s ready to really track as a percentage of our overall Lighting business yet.

Robert J. Ready

But we certainly are tracking the number of units out there, as well as, the dollar value. From my perspective, as the marketing plan has been rolled out, it’s doing exactly what we had planned. Actually, it’s exceeding what we had planned based on the fact that we’re now getting press. And we’ll be releasing some other press releases that are forthcoming of customers that are now trying it and really seeing the benefit. And I think as the cost start to come down, and we are seeing the cost of LED technology starting to drop. Now the metal cost have gone up. We all know that. So, to some degree, it’s offset a little bit. But as the volume continues to grow, we feel very, very comfortable that we’ll see these costs come down as a return on investment number that our customers are looking for are well within their reach.

Certainly, starting in parts of this country, with the cost for kilowatt hours are greater. For example, the Northeast had an estimate of about $0.14. These are the areas, obviously, where we probably will see that the quickest conversion programs starting because the benefit is so obvious. And our structure is to look at our alignment two to three years, which is well within the grasp of these folks and it’s a recognized area that they’re going to be looking at.

We certainly will share with you in the oncoming months as these programs, especially if a specific large customer starts a roll out program, then we’ll be comfortable to let to you know who that is.

James Ricchiuti - Needham & Company, LLC

David, the Stop n’ Shop program, can you give us some sense? Is it right now just a handful of stores? I wasn’t quite sure.

David W. McCauley

No, it’s all 580 that have had a refresh opening days tomorrow on this. They’ll do an unveiling of their logo and then they’ll revisit stores and do major changes but not in a roll out like they did this quickly on the 580. It’s a pretty nice program.

James Ricchiuti - Needham & Company, LLC

Just in terms of what you’re contributing to this, you’re hoping to get businesses that move forward with this?

David W. McCauley

Yes. In addition to what we’ve already done, again, that was kind of a run through to get them spruced up for this announcement of their new logo. But then the stores are going to continue to be upgraded, as their press released says today to the newspapers and will release on their website tomorrow. They actually talked the numbers. I’m going to let the paper do the talking tomorrow.

Robert J. Ready

And as David, we’re comfortable about talking about this because, if I recall, the Boston Herald a week ago announced this changeover and obviously, we were comfortable with the fact, sharing it with you folks that this program was in essence rolled out by LSI.

James Ricchiuti - Needham & Company, LLC

Right, and so you see additional business potential with Stop n’ Shop over the next couple of quarters. Would you characterize it as meaningful to the Graphics business?

David W. McCauley

Yes, that’s a good adjective to use.

Operator

The next question comes from Lenny Bracken – Bracken Capital.

Lenny Bracken - Bracken Capital

Guys, first question is relating to the, again, the acquisition. Just help me understand the motivation of why you thought right now was the time to buy it. And am I correct to assume when you say converted product, some of the product line of the company you may be acquiring is going to be quickly converted to LEDs or solid-state? Or is it somewhere down the line?

Robert J. Ready

Lenny, let me address that, if I may. First of all, in recognizing our position in the marketplace is truly a lighting company and understanding that our reps have a need of a package which involves a lot of different types of products. The strength of those reps really depend on the package that they put forth. We, in our commitment to growth, have taken that industry and relate it to those agents and have been working hard at specifically providing them with products that they sell today.

The LED technology solid-state is definitely here to stay. It’s a long-term process. There’ll be a need for commodity-type lighting fixtures, what’s called of the past, but they truly are being marketed and sold today. This company that we have been looking at or the type of company that we have been looking at, regardless of the situation with the Graphics, our Lighting business is critical to the growth of this company. In selecting the right company, has the right image, the right product offering, the right acceptance in the marketplace. This company brings us that capability. With that said, we have been spending, as a much larger company, and with our investment in SACO, have all of this technology available to us that we have been developing different types of applications and how it would fit. And my comment about their product offering, they definitely have, like all companies do, have a certain product offering that would be adaptable to LED technology. And that is the direction that we will apply sooner than later.

Lenny Bracken - Bracken Capital

Okay, so that’s a gradual process. It’s not going to happen instantaneous. The second question in the Graphics business is so did I hear you, I don’t know if it was Ron or someone else, that going forward the assumption is that the Graphics business will contribute a higher percentage versus what it contributed this quarter?

Robert J. Ready

I think what was said is that historically, the Graphics business has always contributed a higher margin direction than the Lighting business. There should be no reason to believe that, that will not continue to do so. If I may finish, it is up to us to structure our business model around the conditions of the market. And that’s what we’re in the process of doing now. And what that really truly means is that we have, over the years, built a Graphics capability that nobody else could touch and our ability to roll out massive programs. And a great example is what happened just a year ago when we had our record year and that being very clean and the 7-11 program.

With all that said, we, as a company, have spent a great deal of time and effort in building our image in that ability. And there’s no reason to believe that this economy is going to sit like this for many, many, many years. I think it’s really important to realize that we’ve been through some of this type of slowdown before, is that when you go through this, that when it starts to show some kinds of improvement, the people out there are going to be going nuts to try to get programs going quickly and get them rolled out faster in order to bring that competitive edge into play. That has been a historic education of this company. We’ve adjusted our investments, our direction, to handle this and there’s no reason to believe that that’s not going to happen again. And when that does happen, maintaining our market share and growing it as we can, certainly the ability to continue on and working with all those massive-sized customers with menu boards, with graphics roll outs, with new visual boards now, with LCD boards. These are all expansions that have happened in the last three or four years. That new technology will be part of their growth plan. We want to be in a position to not only supply the product but be able to handle the project. And I think it will be a terrible mistake for this company to walk away from that because we’ve had a couple of tough quarters with an environment that we know as directly related to that softness.

Lenny Bracken - Bracken Capital

All right, so as a percent of revenue, you really didn’t make a specific comment then. I misinterpreted what you’d said earlier. The last question is pertaining to the question earlier regarding solid-state lighting, maybe as a percentage of business plan. I’m looking at your business and I’m noticing, obviously, your Graphics’ down, you’ve taken that into account in the forecast, but it seems like the solid-state lighting business is, like you said, it’s poised to grow. So, I’m wondering what mix it may be in, in looking out in the next fiscal year. If you want to take a stab at that.

Robert J. Ready

I don’t know if I can really give you a number but let me give you a kind of a strategy. The whole purpose of our LED solid-state process started with the ability to understand what solid-state really meant and do you design lighting fixtures to meet the criteria that we believe are going to be looked at and needed by our customer base. And in that strategy we spent 24 months or a little bit longer with all the technology and the education that we get that we gain from the acquisition of SACO and started developing that first platform. The crossover is nothing more than a platform of many things to come. And that was the process that we felt was the right thing to do but it also gave us an opportunity to display this technology at a very visible manner in one of the largest markets, certainly, in the world. And that’s service station lighting with as many as canopies and canopy lights that are out there that are definitely not energy-efficient today. As a result of that, with the development of the platform, we looked at other markets that had the ability from a retrofit in high volumes. And if you really look at the product and the markets that Scott discussed, service stations with 160,000 or so canopies, we estimate 1.8 million canopy fixtures.

You’ve got the fast-food industry with hundreds of thousands of stores that all have soffits and most of them have some kind of a soffit light hanging, which is an outdoor product. Then you move into the parking garages. Hundreds and thousands of parking garages, all with products that require a lot of maintenance. And last but not least, as we start to expand the ability of the banking industry. When you look at the amount of drive-thrus of ATMs. All of these markets, as specifically niche, in our approach, as a niche market-driven company, is taking our platform and adapted it with tremendous volume potential. The next step was to seed those markets with the prototypes.

“Seeing is Believing.” We’ve done that. What’s going to go is now up to our agents. The marketing strategy and the pricing based on volume. It’s too early to tell. We’re in our 26th month, which is a very short period of time to approach the volume potential but it’s all there. And now, it’s execution. And I can assure you that certainly our agents are motivated and very simply the prices built into the motivation.

If you were selling a canopy fixture yesterday for $200 and you were getting, as an example, let’s say 5% commission, and tomorrow you have a $550 fixture and a 5% commission, where are you going to go? That is strictly mathematics, where that incentive is already in place. Now that we’ve got this technology, now it’s time to execute the markets and that’s what we’re doing.

Lenny Bracken - Bracken Capital

All right, but understanding investor’s point of view is that the dividend cut, the earnings expectation cut, I mean the promise is always been here for a year and a half, but I think management’s actions aren’t matching up with the enormity of the size of the market and the stage of which we’re at in the roll out. I understand the economy’s not helping. I understand you can’t predict customers but just understand our point of view was that action is, in terms of confidence and the payout of the dividends and such, is a much more convincing argument to us than the concept of selling a solid-state lighting product. That’s all. Thank you, Bob.

Robert J. Ready

I understand that and if I may answer that, as a CEO and a major shareholder of this company, I think I understand that very, very well.

Operator

The next question comes from Shawn Boyd.

Shawn Boyd

I just wanted to do a little follow up here on the operating income. Did you guys provide a break down earlier in terms of operating income by segment, both pre- and post- the impairment charges?

Ronald S. Stowell

We did not provide it earlier. That will be in the information that is attached to this presentation file but it will not give any indication as to pre-operating income, or pre-impairment, is what you wanted. You could do the math because there’s a goodwill impairment slide by segment. There’s a segment that has operating income. But I will give you that for the full year. In Lighting, we had about $9.6 million of operating income. In Graphics, mind you, that’s where the heaviest impairment charge went, was an operating loss of $18.7 million, totaling $9.1 million loss that we reported.

Shawn Boyd

Okay, that’s the reported loss after the impairment for the full year?

Ronald S. Stowell

Yes.

Shawn Boyd

And the reason I’m asking the question is that I’m sitting here trying to look at ‘09. You’ve given us a very clear range on revenue and earnings. And that gives us a rough deal on operating income if we have a couple assumptions backed into that. Can you give us what your assumed, just a range perhaps, on what your assumed markets are or the Graphics and the Lighting, that allows you to get to that guidance that you’re providing?

Ronald S. Stowell

We don’t have that information available. That’s never really been a part of our guidance that we’ve issued, and our guidance really is the top line and the bottom line earnings per share at this point. Obviously, the mix of Graphics which is going to have a couple of tough comparable quarters because of the large programs we are working on in the first, second quarters of fiscal ‘08. That’s going to have an impact on the overall margins and the overall profitability in fiscal ‘09.

Shawn Boyd

Within the Graphics business, is there any kind of seasonality that we should be thinking about as we move into the next year?

Robert J. Ready

David, I’ll let you handle that. I think, if I can add, certainly with the retail environment coming into the Christmas season has always been a period starting in what, mid-November, David? Perhaps through December. As certainly, one part of that cyclical direction.

David W. McCauley

In fact, you hit the nail in the head. It’s even sneaking back to really November 1st, right after the Halloween holiday, it seems like Christmas comes out. It’s hard to get into the stores. And then if during remodel phase and new construction slows down in the northern states during the winter season. But it’s not as drastic as one would think, the seasonality.

Robert J. Ready

As I look at the Graphics business and I certainly appreciate what you folks are going through to try to understand what’s happening here, and I could only go from being in this business for a long time and I’ve been through a couple of these, not quite as dramatic as we’ve seen here with this gasoline price, but certainly as an experience. When a company as ours, it’s very strong and well-managed as a total group of people, we’re going to come out of this thing probably a better company because of all the changes and the adjustment that you make when your market changes. But more importantly is our customer base goes through some dramatic changes. And because we have invested so heavily in so many different areas that we have, I call them “triggers,” that we have available to us. And you never know, especially in the retail segment, what brand, whether it be a Nike or it be a drug store or it be greeting cards. Whatever it may be, is that when these folks all of a sudden start to see a little better light, how quickly they react and how quickly they want you to respond to it. And those are the areas that we will protect because we have become a company that is well recognized to handle these kinds of programs.

It is my direction to look at this company and look at where we have these opportunities and leverage our size and leverage our relationships to work into those directions so that we can offset some of that softness. That’s what we’ve done before. We’ve been through it; we’ve come out of it successfully. Certainly last but not least, the balance sheet will continue to be in our sights. This acquisition is an accretive acquisition. It’s an acquisition that strengthens our market position for all of our products, not just a single product line. It should open us into other horizons as it relates to other markets with products that we don’t have. And certainly, as we’ve talked about LED and we’ll continue to. These are the things that will continue to emphasize the strength and the direction of the company.

We did well when we were running $300 million and we will go back to that strategy and we will bring this company into that level. And then we’ll go on. And we’ll move on. This has been a setback but it hasn’t been anything but a setback. And it’s one that we couldn’t control based on the environment and what happened to it. However, we’re ready for it and we’ll turn it around.

Shawn Boyd

That’s also a great segue to my last question here. The SG&A is, I think a couple of the callers earlier alluded to, is up on a year-over-year basis by, I don’t know, $5 million here, $6 million. It’s a full year. As we go into next year, given that you see--you want to be ready for the turnaround when that does occur. Does that mean we should assume the SG&A is up again into next year or do you have cost cutting programs underway that you think you can bring that down?

Robert J. Ready

Well, I think everything is volume-related and certainly product mix. I think what we’ve done, and let me break it down by segment. From a lighting standpoint, we’ve invested in more automation over the past year. But really will help if the volume grows to become more efficient in the production process. On the Graphics side, equally so, we’ve invested in some very, very sophisticated printing equipment that gives us the ability to handle any kind of volume that we have. From an installation standpoint, which is a critical part of the success of these roll out programs, we have the people and have the management skills. It’s a matter of just hiring subcontractors and managing them from an installation standpoint.

So, I guess as I look at it, from the standpoint of looking at how we’re going to improve the profitability, it’s a combination of many things that we’re very good at doing. And we’ll continue to do so. We certainly have a commitment on our R&D as it relates to the type of expenses we have involved with the R&D expense. And a lot of that information, or much of that information, can be actually--tonight or when you have some time, on our webcast you could pick up that additional information. We didn’t publish all of that today because the time. We felt that you folks would have a lot more questions to ask and so we cut that part of it short.

Ronald S. Stowell

You’ll find the R&D expense, and I have the data to answer the question earlier because I didn’t have the solid numbers in front of me but the R&D expense is up about $1.6 million year-over-year. And we could look north to Montreal to our LED initiatives. We really put that into gear to come out with the products that we are coming. And another large amount of the increase is in our marketing sales effort. Now, recognize that we report our sales commissions there on our lighting products. And with increases in lighting, there’s going to be more commissions with a program to try to go into a soft market, to try to introduce new products like the crossover. We’ve tend to use a little higher commission.

Robert J. Ready

Ron, if I might add, it’s very important for us in a soft market to grow market share. This is our opportunity to do so and our commitment to R&D and our commitment to growing market shares as a percentage of commission or as the direct result of commission expense is a very deliberate strategy that is working and it’s an investment in the future that we feel very important.

As there are no further questions, I want to thank you for your time. As always, we’re available to answer other questions that you may have. As a wrap up, certainly, we are not happy with the results. We understand what had happened in the marketplace. I think that we have shared with you a tremendous amount of information that relates to the direction that we’re taking the company. And it is our goal and certainly our job to take on this adversity in the economy and turn it into a direction that will improve the bottom line and get our stock back, and win back the confidence of Wall Street.

These are not fun times when you run into another direction like we have. But to be quite honest with you, this company is probably in the best shape it’s ever been. We’ve got a lot of work in getting certain things ready. It’s a shame that the economy kind of taint the way it did but certainly from my perspective, this is a challenge. And for those who know me, I love a damn good challenge. And we’ve got a damn good challenge ahead of us. The rest of my staff recognizes that as well. We’re going to work and try to turn this thing into a more positive approach. And when the economy does turn around, we’re going to be in a better position to do a lot more things that we’ve ever been in a position to do before when a downturn has come about.

So with that, I want to thank you for your time and give us a call if you have any other further questions. Thank you.

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THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

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Source: LSI Industries, Inc. F4Q08 (Qtr End 06/30/08) Earnings Call Transcript
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