EX-99.2 4 ex_272029.htm EXHIBIT 99.2 ex_272029.htm

Exhibit 99.2

UNAUDITED PROFORMA CONDENSED COMBINED

 

FINANCIAL INFORMATION

 

On May 21, 2021, LSI Industries Inc. (LSI or Company) completed the acquisition of all the capital stock of JSI Store Fixtures (JSI), a Maine-based provider of retail commercial display solutions, for $94.8 million. 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 combined financial information.

 

The unaudited pro forma condensed combined statements of operations for the nine months ended March 31, 2021 and the year end June 30, 2020 combine the historical statements of operations of LSI and JSI, adjusted to reflect the pro forma effect as if the acquisition of JSI occurred on July 1, 2019 (the first day of the Company’s 2020 fiscal year). The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of LSI and JSI as of March 31, 2021 and reflects the pro forma effect as if the acquisition of JSI occurred on that date. LSI’s historical consolidated financial statement referred to above were included in its Quarterly Report on Form 10-Q for the nine months ended March 31, 2021 and Annual Report on Form 10-K for the year ended June 30, 2020. JSI’s historical financial statements referred to above for JSI for the comparable periods 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 JSI 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 factually supportable with respect to the statement of operations, and are expected to have a continuing impact on the consolidated results. The pro forma adjustments are described in the accompanying combined notes to the unaudited pro forma combined financial statements.

 

The unaudited pro forma condensed combined statements of operations for the nine months ended March 31, 2021 and the year end June 30, 2020 is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have actually been reported had the acquisition occurred on July 1, 2019, nor is it necessarily indicative of the future results of the operations. The unaudited pro forma condensed combined statements of operations and proforma condensed combined balance sheet include adjustments to reflect the allocation of the purchase price to the acquired assets and assumed liabilities of JSI.

 

 
 

 

LSI INDUSTRIES INC.

Unaudited Pro Forma Condensed Combined Balance Sheet

March 31, 2021

(Unaudited)

 

   

Historical

    

Historical

    

Pro Forma

      

Pro Forma

  

(in thousands, except shares)

  

LSI

    

JSI

    

Adjustments

      

Total

  
                                   

ASSETS

                                  
                                   

Current assets

                                  
                                   

Cash and cash equivalents

   $ 23,528     $ 906     $ (23,170 )

A

  $ 1,264  

Accounts receivable

     44,974       14,341       (207 )

E

    59,108  

Inventories

     40,390       8,809       -         49,199  

Refundable income tax

     3,233       -       -         3,233  

Other current assets

     4,277       1,247       -         5,524  

Total current assets

     116,402       25,303       (23,377 )       118,328  
                                   

Property, Plant and Equipment, at cost

                                  

Land

     3,943       30       30  

B

    4,003  

Buildings

     20,667       3,645       128  

B

    24,440  

Machinery and equipment

     68,444       5,784       (2,624 )

B

    71,604  

Buildings under finance leases

     2,033       -       -  

B

    2,033  

Construction in progress

     778       593       (510 )

B

    861  
      95,865       10,052       (2,976 )

B

    102,941  

Less accumulated depreciation

     (71,713 )     (5,192 )     5,192  

B

    (71,713 )

Net property, plant and equipment

     24,152       4,860       2,216  

B

    31,228  
                                   

Goodwill

     10,373       12,990       22,041  

D, E

    45,404  

Other Intangible Assets, net

     27,948       6,619       39,141  

C

    73,708  

Operating Lease Right-Of-Use Assets

     7,673       -       4,517  

F

    12,190  

Other Long-Term Assets, net

     10,546       64       1,620  

E

    12,230  

Total assets

   $ 197,094     $ 49,836     $ 46,158       $ 293,088  
                                   
                                   

LIABILITIES & SHAREHOLDERS' EQUITY

                                  
                                   

Current liabilities

                                  

Accounts payable

   $ 25,003     $ 5,430               $ 30,433  

Revolving line of credit

     -       5,139       (5,139 )

H

    -  

Capital lease liability, current

             84       (84 )

H

    -  

Accrued expenses

     30,302       3,310       3,649  

E, F, J

    37,261  

Total current liabilities

     55,305       13,963       (1,574 )       67,694  
                                   

Long-Term Debt

     -       27,071       44,551  

A, H

    71,622  

Capital lease liability, net of current portion

     -       205       (205 )

H

    -  

Finance Lease Liabilities

     1,568       -       -         1,568  

Operating Lease Liabilities

     8,105       -       3,499  

F

    11,604  

Other Long-Term Liabilities

     1,046       1,618       10,848  

E

    13,512  
                                   

Shareholders' Equity

                                  

Preferred shares

     -       17,816       (17,816 )

I

    -  

Common shares

     131,330       -       -         131,330  

Treasury shares, without par value

     (2,111 )     -       -         (2,111 )

Deferred compensation plan

     2,111       -                 2,111  

Retained (loss)

     (260 )     (10,293 )     6,855  

E, I, J

    (3,698 )

Accumulated other comprehensive income

     -       (544 )     -         (544 )
                                   

Total shareholders' equity

     131,070       6,979       (10,961 )       127,088  
                                   

Total liabilities & shareholders' equity

   $ 197,094     $ 49,836     $ 46,158       $ 293,088  

 

 
 

 

LSI INDUSTRIES INC.

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Nine Months Ended March 31, 2021

 

   

Historical

    

Historical

    

Pro Forma

      

Pro Forma

  

(In thousands, except per share data)

  

LSI

    

JSI

    

Adjustments

      

Total

  
                                   

Net Sales

   $ 218,597     $ 66,718               $ 285,315  
                                   

Cost of products and services sold

     162,519       48,980       401  

K

     211,900  

Restructuring costs

     3       -                 3  

Severance costs

     5       -                 5  

Gross profit

     56,070       17,738       (401 )       73,407  
                                   

Selling and administrative expenses

     49,070       10,271       (873 )

G, L, M, N

     58,468  

Severance costs

     16       -                 16  
                                   

Operating income (loss)

     6,984       7,467       472         14,923  
                                   

Interest (income)

     (4 )     (38 )               (42 )

Interest expense

     175       3,112       (2,150 )

O

     1,137  

Other (income) expense

     (197 )     -                 (197 )
                                   

Income (loss) before income taxes

     7,010       4,393       2,622         14,025  
                                   

Income tax (benefit) expense

     1,340       1,318       708  

P

     3,366  
                                   

Net income (loss)

   $ 5,670     $ 3,075     $ 1,914       $ 10,659  
                                   
                                   

Earnings (loss) per common share

                                  

Basic

   $ 0.21                       $ 0.40  

Diluted

   $ 0.21                       $ 0.39  
                                   
                                   

Weighted average common shares outstanding

                                  

Basic

     26,642                         26,642  

Diluted

     27,352                         27,352  

 

 
 

 

LSI INDUSTRIES INC.

Unaudited Pro Forma Condensed Combined Statements of Operations

For the Twelve Months Ended June 30, 2020

 

   

Historical

    

Historical

    

Pro Forma

      

Pro Forma

  

(In thousands, except per share data)

  

LSI

    

JSI

    

Adjustments

      

Total

  
                                   

Net Sales

   $ 305,558     $ 56,983               $ 362,541  
                                   

Cost of products and services sold

     230,944       43,483       631  

K

     275,058  

Restructuring costs

     980       -                 980  

Severance costs

     104       -                 104  

Gross profit

     73,530       13,500       (631 )       86,399  
                                   

Selling and administrative expenses

     68,783       12,916       (849 )

G, L, M, N

     80,850  

Restructuring (gain) costs

     (8,571 )     -                 (8,571 )

Severance costs

     242       -                 242  
                                   

Operating income (loss)

     13,076       584       218         13,878  
                                   

Interest (income)

     (3 )     (156 )               (159 )

Interest expense

     873       4,089       (2,237 )

O

     2,725  

Other expense

     513       -                 513  
                                   

Income (loss) before income taxes

     11,693       (3,349 )     2,455         10,799  
                                   

Income tax (benefit) expense

     2,101       334       (167 )

P

     2,268  
                                   

Net income (loss)

   $ 9,592     $ (3,683 )   $ 2,622       $ 8,531  
                                   
                                   

Earnings (loss) per common share

                                  

Basic

   $ 0.37                       $ 0.32  

Diluted

   $ 0.36                       $ 0.32  
                                   
                                   

Weighted average common shares outstanding

                                  

Basic

     26,274                         26,274  

Diluted

     26,473                         26,473  

 

 
 

 

LSI INDUSTRIES INC.

 

NOTES TO THE UNAUDITED PROFORMA COMBINED CONSOLIDATED 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 nine months ended March 31, 2021 and Annual Report on Form 10-K for the year ended June 30, 2020 and JSI Store Fixtures (JSI) financial statements for the comparable periods are included in this Current Report on Form 8K/A. The unaudited pro forma condensed combined statements of operations for the nine months ended March 31, 2021 and the year end June 30, 2020 combine the historical statements of operations of LSI and JSI, adjusted to reflect the pro forma effect as if the acquisition of JSI occurred on July 1, 2019 (the first day of the Company’s 2020 fiscal year). The unaudited pro forma condensed combined balance sheet combines the historical balance sheets of LSI and JSI as of March 31, 2021 and reflects the pro forma effect as if the acquisition of JSI occurred on that date.

 

In accordance with generally accepted accounting principle, the acquisition of JSI 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 combined financial statements is based upon the purchase price of $94.8 million.

 

Pro Forma Adjustments

 

A.

Cash paid for the acquisition of JSI from the Company’s available cash with the difference of the cash consideration coming from the Company’s Line of Credit.
 

B.

Fair value adjustment of JSI’s fixed assets.
 

C.

Fair value adjustment of JSI’s intangible assets.
 

D.

The value of goodwill at March 31, 2021.
 

E.

Includes an estimated deferred tax asset and liability of $10.8 million and an accrued liability for paid-time off of $0.2 million partially offset by the elimination of a sales tax receivable of $0.2 million, sales tax liability of $0.4 million and deferred rent liability of $0.1 million.
 

F.

Adoption of Accounting Standards Codification (ASC) 842 Leases.
 

G.

Elimination of JSI’s amortization on existing intangibles assets.
 

H.

Elimination of JSI’s existing short-term and long-term debt obligations, including capital lease liabilities.
 

I.

Elimination of the JSI’s preferred stock, common stock and retained earnings.
 

J.

Acquisition transaction costs of $2.9 million.
 

K.

The increase in depreciation expense as a result of the fair value adjustments of JSI’s fixed assets. The increase in depreciation expense over a nine month period will approximate $0.4 million and the increase in depreciation expense over a twelve month period will approximate $0.6 million.
 

L.

The elimination of certain private company expenses. Private company expenses removed from the combined results approximate $0.4 million for the nine month period and $0.8 million for the twelve month period.
 

M.

Amortization expense of JSI’s intangible assets. Amortization expense for the nine month period is $1.8 million and $2.3 million for the twelve months ended.
 

N.

The increase in expenses that JSI will incur as a result of its integration into LSI. Costs include compensation and benefit-related expenses and a representation and warranty insurance policy related to the acquisition of JSI, offset with known property and casualty insurance cost savings. Additional costs approximate $0.4 million for the nine month period and $0.9 million for the twelve month period.
 

O.

Interest expense incurred on the funds borrowed to purchase JSI. Assumed an average loan balance of $57 million over both reported periods at a borrowing rate of 3.25% for the twelve month period, which approximates $1.9 million of interest expense, and a borrowing rate of 2.25% for the nine month period, which approximates $1.0 million of interest expense.
 

P.

Adjust income tax to reflect an effective tax rate of 24% for the nine month period and 21% for the twelve month period.