LSI Industries Inc. (NASDAQ: LYTS) a leading U.S. based
manufacturer of commercial lighting and graphics solutions, today
announced the acquisition of privately held JSI Store Fixtures
(“JSI”) from RFE Investment Partners for a cash purchase price of
$90 million.
Maine-based JSI is a market-leading provider of
retail commercial display solutions throughout North America. For
more than 30 years, JSI has supplied major supermarket, convenience
and specialty store chains with branded display solutions focused
on enhancing the customer experience and driving store revenue.
Multi-year growth in demand for fresh foods, prepared “grab-and-go”
meals and evolving consumer purchasing habits have led to increased
demand for JSI’s display fixtures across a deep base of established
national accounts. JSI’s solutions are designed, engineered,
manufactured and marketed from four facilities located throughout
the United States and Canada.
“JSI is an established market leader within the
retail display solutions industry, one whose history of growth and
innovation, attractive margin profile and loyal customer following
within the supermarket, convenience and specialty store verticals
are highly complementary to LSI’s existing portfolio of lighting
and graphics solutions,” stated James A. Clark, President and Chief
Executive Officer.
“This acquisition will significantly increase
LSI’s total addressable markets within the grocery and convenience
store verticals, while driving meaningful revenue synergies across
our combined product portfolio, consistent with our long-term
strategic focus,” continued Clark. “At a commercial level, the
combination of LSI’s graphics signage and JSI’s display fixtures
businesses, together with our deep portfolio of lighting and
program management solutions, will provide a compelling, one-stop
value proposition for both new and existing customers.”
“Just as the combination of our lighting and
graphics businesses led to the creation of a commercially
successful, complementary product offering, the addition of JSI
follows a similar template, one that positions us to further
diversify our revenue and customer mix within higher-margin product
markets,” continued Clark. “Pro-forma for the
transaction, we remain on track to achieve $500 million in annual
sales and $50 million in annual Adjusted EBITDA by year-end fiscal
2025.”
“We are excited to join the LSI family,” stated
Terry Awalt, CEO of JSI. “Our shared commitment to product
innovation, customer-centric relationships, performance excellence
and profitable growth position LSI as an ideal partner to scale the
JSI brand in the years ahead. Our established presence within the
supermarket vertical, when combined with LSI’s leading position
within the c-store vertical, create a compelling opportunity that
we believe will result in significant, long-term revenue synergies
for the combined businesses.”
FINANCIAL AND TRANSACTION
OVERVIEW
JSI has a long-term track record of consistent
financial execution, one characterized by sustained growth in
revenue, operating income, adjusted EBITDA and free cash
flow. In the full year calendar 2020, JSI reported
total revenue and Adjusted EBITDA of approximately $70 million and
$10 million, respectively, resulting in an Adjusted EBITDA margin
in excess of LSI’s trailing twelve-month corporate
average. Upon closing, the transaction will be
immediately accretive to LSI on an adjusted earnings per share
basis.
LSI funded the all-cash acquisition of JSI
utilizing its existing cash balance and availability under its $100
million credit facility. At closing, LSI anticipates
that its pro-forma ratio of net debt outstanding to trailing twelve
month adjusted EBITDA will be approximately 2.6x. LSI
intends to significantly reduce net leverage within the business
during the first 24 months post-close, supported by anticipated
growth in pro-forma free cash flow from the combined
entities.
As part of the transaction, LSI will welcome
JSI’s more than 300 employees to LSI, while retaining JSI’s
experienced leadership, including founder and CEO Terry Awalt,
together with each of its four facilities. Following the close of
the transaction, JSI will remain an independent brand, given its
established presence in the market. LSI anticipates JSI will become
part of LSI’s graphics segment on a reporting basis, moving
forward.
COMPELLING TRANSACTION
RATIONALE
- Creates
a diversified business of scale with meaningful cross-selling
opportunities in growing vertical markets. The combination
of LSI and JSI will create a leading, integrated provider of
lighting and display solutions to the North American supermarket,
convenience and specialty store channels. JSI’s established
presence within the grocery channel, together with LSI’s market
leadership position within the petroleum convenience store and QSR
channels, are highly complementary, creating the potential for
significant, multi-year revenue synergies.
- Provides
compelling growth platform with established product portfolio and
customer base. LSI estimates the North American remote
refrigeration and fixtures market to be approximately $1.7 billion
annually and growing. JSI is one of the largest food
equipment companies in North America, with a diverse base of
recurring, long-term customers, including Whole Foods, Kroger,
Target, Albertsons, Ahold Delhaize and Sprouts, among others.
-
Capitalizes on significant, multi-year investment cycle
within the grocery vertical. The North American grocery
industry is engaged in a multi-year investment cycle intended to
drive incremental in-store traffic growth 38,000+ grocery stores in
the U.S. representing $700 billion in annual sales. Increased
investment in store remodels, evolving formats, cost-efficient
energy-saving solutions and fresh grab-and-go options have driven
increased customer appetite for aesthetically appealing, compliant
refrigeration solutions and fixtures. LSI believes its time-on-site
and share-of-wallet for its lighting and graphics solutions in the
grocery vertical will be significantly enhanced by the acquisition
of JSI.
-
Transaction is immediately accretive to LSI’s adjusted
earnings per share. JSI is expected to deliver meaningful
adjusted earnings per share accretion to LSI in the first year
after the close of the transaction, excluding acquisition-related
revenue synergies. LSI anticipates a combination of continued,
above-market revenue growth, together with significant
opportunities for additional margin expansion, have the potential
to support incremental accretion, over time.
JSI ACQUISITION CONFERENCE
CALL
A conference call will be held tomorrow at 8:30
A.M. ET to review the LSI’s acquisition of JSI and conduct a
question-and-answer session.
A webcast of the conference call and
accompanying presentation materials will be available in the
Investor Relations section of LSI Industries’ website
at www.lsicorp.com. Individuals can also participate by
teleconference dial-in. To listen to a live broadcast, go to the
site at least 15 minutes prior to the scheduled start time to
register, download and install any necessary audio software.
Details of the conference call are as
follows:
Call
Dial-In: |
1-877-407-4018 |
Conference ID: |
13720054 |
Call Replay: |
1-844-512-2921 |
Replay ID: |
13720054 |
ABOUT LSI INDUSTRIES
Headquartered in Blue Ash, Ohio (Greater
Cincinnati), LSI Industries is a leading producer of
high-performance, American-made lighting solutions. The Company’s
strength in outdoor lighting applications creates opportunities for
it to introduce additional solutions to its valued customers. LSI’s
indoor and outdoor products and services, including its digital and
print graphics capabilities, are valued by architects, engineers,
distributors and contractors for their quality, reliability and
innovation. The Company’s products are used extensively in
automotive dealerships, petroleum stations, quick service
restaurants, grocery stores and pharmacies, retail establishments,
sports complexes, parking lots and garages, and commercial and
industrial buildings. LSI has approximately 1,100 employees at
seven manufacturing plants in the United States, including its
corporate headquarters. Additional information about LSI is
available at www.lsicorp.com.
ABOUT JSI STORE FIXTURES
JSI is a Milo, Maine-based designer and
manufacturer of high-quality refrigerated and non-refrigerated
merchandising displays for the grocery and convenience store
industry. JSI’s merchandising displays are used by many of North
America’s top retail food chains. JSI has established itself as an
innovator and leader within its niche, with commanding market
shares in its primary product categories.
ABOUT RFE INVESTMENT
PARTNERS
RFE Investment Partners is a private equity firm
focused on making control investments in established small market
companies located in North America. RFE is a long-standing
Connecticut-based firm founded in 1980 with over 40 years of
experience investing in the lower middle market. RFE’s investment
strategy is to acquire well-managed and growing small market
companies and prepare them for exit to middle market strategic and
private equity acquirers. RFE is currently investing out of Fund
IX. For more information, please visit www.rfeip.com.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking
statements. Forward-looking statements may be identified by words
such as “estimates,” “anticipates,” “encourage,” “projects,”
“plans,” “expects,” “can,” “intends,” “believes,” “seeks,” “may,”
“will,” “should,” or the negative versions of those words and
similar expressions and by the context in which they are used. Such
statements, whether expressed or implied, are based upon current
expectations of the Company and speak only as of the date
made. Actual results could differ materially from those
contained in or implied by such forward-looking statements as a
result of a variety of risks and uncertainties over which the
Company may have no control. These risks and
uncertainties include, but are not limited to, risks that the
benefits from the transaction may not be fully realized or may take
longer to realize than expected, including as a result of changes
in general economic and market conditions, interest and exchange
rates, monetary policy, laws and regulations and their enforcement,
and the degree of competition in the geographic and business areas
in which LSI and JSI operate; uncertainties regarding the ability
of LSI and JSI to promptly and effectively integrate their
businesses; uncertainties regarding the reaction to the transaction
of the companies’ respective customers, employees, and
counterparties; and risks relating to the diversion of management
time on transaction-related issues. For details on additional
risks and uncertainties that may cause our actual results to be
materially different than those expressed in our forward-looking
statements, visit https://investors.lsicorp.com as well
as our Annual Reports on Form 10-K and Quarterly Reports on Form
10-Q which contain risk factors. The Company does not
undertake and hereby disclaims any duty to update any
forward-looking statements to reflect subsequent events or
circumstances.
INVESTOR CONTACT
Noel Ryan, IRC720.778.2415LYTS@vallumadvisors.com
MEDIA CONTACT
Mike WallnerSenior Manager,
Communications513.372.3417mike.wallner@lsi-industries.com
LSI Industries (NASDAQ:LYTS)
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LSI Industries (NASDAQ:LYTS)
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