Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - LSI INDUSTRIES INC | ex99-1.htm |
| EX-23.1 - EXHIBIT 23.1 - LSI INDUSTRIES INC | ex23-1.htm |
| 8-K/A - FORM 8-K/A - LSI INDUSTRIES INC | lyts20170214_8ka.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
On February 21, 2017, LSI Industries Inc. (LSI or Company) completed the acquisition of all the capital stock of Atlas Lighting Products, Inc. (Atlas) a Burlington, North Carolina manufacturer of high-quality LED lighting products for $97.5 million, which consisted of a cash payment of $96.9 million and an aggregate value of $0.6 million related to 200,000 five-year stock warrants with a fair value of $2.87 per warrant. The following unaudited pro forma condensed combined financial information has been prepared to give effect to the acquisition by LSI using the acquisition method of accounting with the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined statements of operations for the six months ended December 31, 2016 and the year end June 30, 2016 combine the historical statements of operations of LSI and Atlas, adjusted to reflect the pro forma effect as if the acquisition of Atlas occurred on July 1, 2015 (the first day of the Company’s 2016 fiscal year). The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of LSI and Atlas as of December 31, 2016 and reflects the pro forma effect as if the acquisition of Atlas occurred on that date. LSI’s historical consolidated financial statements referred to above were included in its Quarterly Report on Form 10-Q for the six months ended December 31, 2016 and Annual Report on Form 10-K for the year ended June 30, 2016. Atlas’s historical financial statements are reported for the comparable periods and are included in this Current Report on Form 8K/A. The accompanying unaudited pro forma condensed combined financial information and the historical consolidated financial information presented therein should be read in conjunction with the historical consolidated financial statements and notes thereto for LSI described above. The historical statements of Atlas have been adjusted to conform to the Company’s financial statement presentation.
The unaudited pro forma condensed combined balance sheet and statements of operations include pro forma adjustments which reflect transactions and events that are directly attributed to the acquisition and are factually supportable and with respect to the statements of operations, and are expected to have a continuing impact on the combined results. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined statements of operations for the six months ended December 31, 2016 and the year end June 30, 2016 are presented for illustrative purposes only and are not necessarily indicative of the results of operations that would have actually been reported had the acquisition occurred on July 1, 2015, nor are they necessarily indicative of the future results of the operations. The unaudited pro forma condensed combined statements of operations and pro forma condensed combined balance sheet include adjustments to reflect the allocation of the purchase price to the acquired assets and assumed liabilities of Atlas.
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LSI Industries Inc. |
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Unaudited Pro Forma Condensed Combined Balance Sheet |
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December 31, 2016 |
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(amounts in thousands) |
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| Historical |
Historical Atlas |
Pro Forma |
Pro Forma |
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LSI |
Lighting |
Adjustments |
Total |
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Assets: |
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Current Assets |
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Cash |
$ | 33,023 | $ | 1,657 | $ | (30,893) | A | $ | 3,787 | |||||||
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Accounts Receivable |
49,541 | 8,888 | - | 58,429 | ||||||||||||
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Inventories |
42,404 | 9,164 | 228 | B | 51,796 | |||||||||||
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Asset Held for Sale |
3,176 | - | - | 3,176 | ||||||||||||
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Prepaids and Other Current Assets |
2,996 | 186 | - | 3,182 | ||||||||||||
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Total Current Assets |
131,140 | 19,895 | (30,665) | 120,370 | ||||||||||||
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Property, Plant and Equipment |
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Land |
6,422 | - | - | 6,422 | ||||||||||||
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Leasehold Improvements |
- | 1,171 | - | 1,171 | ||||||||||||
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Buildings |
34,654 | - | - | 34,654 | ||||||||||||
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Machinery and Equipment |
78,908 | 5,427 | 526 | C | 84,861 | |||||||||||
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Construction in Progress |
1,697 | - | - | 1,697 | ||||||||||||
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Less; Accumulated Depreciation |
(78,255 | ) | (3,416 | ) | - | (81,671 | ) | |||||||||
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Net Property, Plant, and Equipment |
43,426 | 3,182 | 526 | 47,134 | ||||||||||||
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Goodwill |
10,508 | - | 47,097 | D | 57,605 | |||||||||||
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Intangible Assets |
5,378 | - | 34,319 | E | 39,697 | |||||||||||
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Other Long-Term Assets |
5,384 | 71 | - | 5,455 | ||||||||||||
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Total Assets |
$ | 195,836 | $ | 23,148 | $ | 51,277 | $ | 270,261 | ||||||||
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Liabilities and Shareholders' Equity |
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Current Liabilities |
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Current portion of long-term debt and lease obligations |
$ | - | $ | 96 | $ | - | $ | 96 | ||||||||
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Accounts Payable |
13,917 | 3,809 | - | 17,726 | ||||||||||||
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Accrued Expenses |
22,980 | 3,343 | 1,480 | I | 27,803 | |||||||||||
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Total Current Liabilities |
36,897 | 7,248 | 1,480 | 45,625 | ||||||||||||
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Long-Term Debt |
- | 173 | 66,000 | A | 66,173 | |||||||||||
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Other Long-Term Liabilities |
1,119 | 360 | 69 | F | 1,548 | |||||||||||
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Shareholders' Equity |
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Common Stock |
115,631 | 781 | (206) | G, H | 116,206 | |||||||||||
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Retained Earnings |
42,189 | 14,586 | (16,066) | G, I | 40,707 | |||||||||||
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Total Shareholders' Equity |
157,820 | 15,367 | (16,272) | 156,915 | ||||||||||||
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Total Liabilities and Shareholders' Equity |
$ | 195,836 | $ | 23,148 | $ | 51,277 | $ | 270,261 | ||||||||
LSI Industries Inc.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Six months ended December 31, 2016
(amounts in thousands, except per share data)
| Historical | ||||||||||||||||
| Historical |
Atlas |
Pro Forma | Pro Forma | |||||||||||||
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LSI |
Lighting |
Adjustments |
Total |
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Net Sales |
$ | 169,817 | $ | 28,281 | $ | - | $ | 198,098 | ||||||||
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Cost of Products and Services Sold |
126,432 | 18,020 | (120) | J | 144,332 | |||||||||||
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Restructuring Costs |
1,143 | - | - | 1,143 | ||||||||||||
| 42,242 | 10,261 | 120 | 52,623 | |||||||||||||
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Gross Profit |
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Restructuring Costs |
210 | - | - | 210 | ||||||||||||
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Selling and Administrative Expenses |
38,148 | 8,614 | 772 | K,L,M | 47,534 | |||||||||||
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Operating Income |
3,884 | 1,647 | (652) | 4,879 | ||||||||||||
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Interest (Income) |
(55) | - | 66 | N | 11 | |||||||||||
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Interest Expense |
21 | 6 | 735 | N | 762 | |||||||||||
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Income before Income Taxes |
3,918 | 1,641 | (1,453) | 4,106 | ||||||||||||
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Income Tax Expense |
1,083 | - | 270 | O | 1,353 | |||||||||||
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Net Income |
$ | 2,835 | $ | 1,641 | $ | (1,723) | $ | 2,753 | ||||||||
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Earnings Per Share |
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Basic |
$ | 0.11 | $ | 0.11 | ||||||||||||
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Diluted |
$ | 0.11 | $ | 0.11 | ||||||||||||
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Weighted Average Common Shares Outstanding |
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Basic |
25,294 | 25,294 | ||||||||||||||
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Diluted |
25,859 | 25,859 | ||||||||||||||
LSI Industries Inc.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Twelve months ended June 30, 2016
(amounts in thousands, except per share data)
| Historical | ||||||||||||||||
| Historical |
Atlas |
Pro Forma | Pro Forma | |||||||||||||
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LSI |
Lighting |
Adjustments |
Total |
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Net Sales |
$ | 322,196 | $ | 59,454 | $ | - | $ | 381,650 | ||||||||
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Cost of Products and Services Sold |
238,525 | 37,773 | (241) | J | 276,057 | |||||||||||
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Gross Profit |
83,671 | 21,681 | 241 | 105,593 | ||||||||||||
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Selling and Administrative Expenses |
69,715 | 15,466 | 2,149 | K,L,M | 87,330 | |||||||||||
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Operating Income |
13,956 | 6,215 | (1,908) | 18,263 | ||||||||||||
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Interest (Income) |
(84 | ) | - | 132 | N | 48 | ||||||||||
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Interest Expense |
36 | 23 | 1,470 | N | 1,529 | |||||||||||
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Income before Income Taxes |
14,004 | 6,192 | (3,510) | 16,686 | ||||||||||||
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Income Tax Expense |
4,522 | - | 985 | O | 5,507 | |||||||||||
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Net Income |
$ | 9,482 | $ | 6,192 | $ | (4,495) | $ | 11,179 | ||||||||
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Earnings Per Share |
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Basic |
$ | 0.38 | $ | 0.45 | ||||||||||||
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Diluted |
$ | 0.37 | $ | 0.44 | ||||||||||||
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Weighted Average Common Shares Outstanding |
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Basic |
24,988 | 24,988 | ||||||||||||||
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Diluted |
25,592 | 25,592 | ||||||||||||||
LSI INDUSTRIES INC.
NOTES TO THE UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial statements are based upon the historical consolidated financial statements of LSI Industries Inc. (LSI or Company) which were included in its Quarterly Report on Form 10-Q for the six months ended December 31, 2016 and Annual Report on Form 10-K for the year ended June 30, 2016 and the historical financial statements of Atlas Lighting Products, Inc. (Atlas) are reported for the comparable periods and are included in this Current Report on Form 8K/A. The unaudited pro forma condensed combined statements of operations for the six months ended December 31, 2016 and the year end June 30, 2016 combine the historical statements of operations of LSI and Atlas, adjusted to reflect the pro forma effect as if the acquisition of Atlas occurred on July 1, 2015 (the first day of the Company’s 2016 fiscal year). The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of LSI and Atlas as of December 31, 2016 and reflects the pro forma effect as if the acquisition of Atlas occurred on that date.
In accordance with generally accepted accounting principle, the acquisition of Atlas by LSI is being accounted for using the acquisition method of accounting. As a result, the unaudited condensed combined balance sheet has been adjusted to reflect the allocation of the purchase price to the identified assets and assumed liabilities based upon the Company’s fair value assessment and the excess purchase price to goodwill. The purchase price allocation in these unaudited pro forma condensed combined financial statements is based upon the purchase price of $97.5 million which consists of $96.9 million cash and 200,000 warrants with a fair market value of $2.87 per warrant.
Pro Forma Adjustments
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A. |
Cash paid for the acquisition of Atlas from the Company’s available cash with the difference of the cash consideration coming from the Company’s Line of Credit. | |
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B. |
Fair value adjustment of Atlas’s finished good inventory. | |
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C. |
Fair value adjustment of Atlas’s fixed assets. | |
| D. | The value of goodwill as of December 31, 2016. | |
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E. |
Fair value adjustment of Atlas’s intangible assets. | |
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F. |
Includes an estimated liability for uncertain tax positions of Atlas of $406,000 and an accrued liability for paid time off of $23,000 partially offset by the elimination of a deferred rent liability of $360,000. |
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G. |
Elimination of the Atlas’s common stock and retained earnings. |
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H. |
Stock warrants issued as part of the purchase consideration. 200,000 warrants were issued at a fair market value of $2.87 per warrant with an aggregate fair value of $0.6 million. The fair value of the warrants was determined as of the date of acquisition. | |
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I. |
Acquisition deal costs of $1.48 million. |
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J. |
The decrease in depreciation expense is a result of the fair value adjustments and re-evaluation of useful lines of Atlas’s fixed assets. The decrease in depreciation expense over a six month period will approximate $120,000 and the decrease in depreciation expense over a twelve month period will approximate $241,000. | |
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K. |
The elimination of certain private company expenses. Private company expenses removed from the combined results approximate $785,000 for the six month period and $964,000 for the twelve month period. Certain executive salary amounts which approximate $1.3 million in the six month and $2.5 million in the twelve month period are included in the unaudited proforma condensed combined statements of operations. These salary amounts are not anticipated to continue. |
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L. |
Amortization expense of Atlas’s intangible assets. Amortization expense for the six month period is $1.207 million and $2.413 million for the twelve month period. |
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M. |
The increase in expenses that Atlas will incur as a result of its integration into LSI. Costs include audit fees, compensation and benefit expense, a representation and warranty insurance policy related to the acquisition of Atlas, offset with known property and casualty insurance cost savings. Additional costs approximate $350,000 for six months and $700,000 for twelve months. |
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N. |
The increase in interest expense is the result of the interest expense incurred on the funds borrowed to purchase Atlas. Assumed an average loan balance of $58 million over the period reported at a borrowing rate of 2.534% approximates $1.5 million of interest expense over a twelve month period and $0.7 million over a six month period. Also, interest income generated on invested cash was reduced to purchase Atlas. Assumed the reduction of $33 million of invested funds at an interest rate of 0.4% which approximates $132,000 for the twelve month period and $66,000 for the six month period. |
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O. |
Adjust income tax to reflect an effective tax rate of 33% |