LSI Industries (LYTS) Closes Lighting Facility; Will Consolidates Oregon Tech Facility
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LSI Industries Inc. (Nasdaq: LYTS) announced that it will permanently close its LSI MidWest Lighting Inc. manufacturing facility in Kansas City, Kansas as well as consolidate its LSI Controls facility in Beaverton, Oregon into other LSI facilities.
Scheduled Plant Closing
LSI announced to its employees today the decision reached this week that it will permanently close the operations of LSI MidWest Lighting Inc. in Kansas City. The decision is based upon the changes in lighting technology and other market forces reducing the demand for the lighting products currently produced at LSI’s Kansas City location. The lighting market continues to shift away from fluorescent and other older technologies, and is rapidly moving to LED lighting solutions, which are manufactured at other LSI facilities. LSI Lighting Solutions will continue to meet customer demand for products containing both fluorescent and high intensity discharge light sources as long as those technologies are commercially viable. The Company anticipates that the closing will occur not later than December 31, 2016.
The Company will record estimated restructuring costs totaling, in the aggregate, between $1,100,000 and $1,300,000 over the first, second and third fiscal quarters. Restructuring costs primarily include employee-related costs (severance) and the probable impairment of manufacturing equipment, and also include plant shut down expenses, expenses related to preparation of the facility for sale, legal expenses, and other related costs. There also will be an additional inventory write-down expense of between $300,000 and $500,000 recorded in the first quarter of fiscal 2017. The Company owns the facility in Kansas City and expects to realize a gain when the facility is sold. The Company expects the closure of this facility will result in annual net operating profit improvement and cost savings of approximately $1,400,000, before consideration of the restructuring and inventory write-down expenses.
Consolidation of Facility
The Company has also taken recent action to consolidate its small LSI Controls facility in Beaverton, Oregon into other LSI facilities by about September 30, 2016. The light assembly of products in the Beaverton facility was moved to the Company’s Columbus, Ohio facility, and the administrative and engineering functions were moved to an LSI facility in Cincinnati, Ohio. A restructuring charge of approximately $368,000 will be recorded in the first quarter of fiscal 2017, with the majority of this primarily representing the costs related to the remaining period of the facility’s lease and severance costs for employees who formerly worked in the Beaverton facility. The consolidation of this facility and net reduction of employment is expected to result in annual cost savings of approximately $450,000.
Dennis Wells, Chief Executive Officer and President, stated “The actions we are taking to close one facility and consolidate another, while difficult decisions, are the result of the rapid evolution of lighting to LED technology in the case of Kansas City, and of the need to more efficiently manage the business in the case of Beaverton. As we have said before, we are committed to the lean transformation of our operations and facilities, to a culture of continuous and long-term cost reduction, and to continue the improvement in profitability that we have achieved in the past two years.”
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