CINCINNATI — LSI Industries Inc. announced that it has completed the acquisition of all the capital stock of Atlas Lighting Products, Inc., a Burlington, N.C. manufacturer of high-quality LED lighting products sold into the electrical distribution market. For the fiscal year ended December 25, 2016, Atlas' revenues were $56.5 million, and operating income was $8.8 million after adding back adjustments of private company expenses estimated to be $3.6 million. Similarly, adjusted EBITDA is estimated to have been approximately $9.7 million. Net of cash, Atlas' balance sheet was debt-free at December 25, 2016. Founded in 1992, Atlas has operated as an S Corporation since its formation.
The terms of the agreement include a cash payment of $96.9 million, plus 200,000 five-year warrants to purchase LSI's common stock at an exercise price of $9.95, for a total consideration of $97.5 million. Funding will be provided by a combination of cash on hand and $66 million from a new $100 million commercial bank facility provided by PNC Bank.
Dennis W. Wells, Chief Executive Officer and President, commented, "I am very excited to announce the acquisition of Atlas Lighting Products. This highly strategic acquisition, the largest in LSI's history, will immediately broaden our lighting product offering, expand our sourcing capabilities, improve our profit margins, and provide significant revenue and cost synergies.
"Atlas' line of quick-ship standard products, including floods, wallpacks, linear, pole mount, and high bay fixtures, complement LSI's custom product lines with minimal overlap, providing our customers with a very complete LED lighting product portfolio. LSI intends to keep the Atlas brand, a well-regarded name in the electrical distribution market, and we will maintain independent agent networks for both the LSI and the Atlas product lines. During our early integration planning, we have identified numerous product cross selling opportunities thereby providing an increased range of products to sales agencies and distribution partners in both sales channels, and resulting in synergistic revenue growth opportunities at LSI.
"In addition to LSI's and Atlas' complementary product lines, we anticipate significant cost synergies with this acquisition. Atlas has forged sourcing channels in Asia which we plan to utilize throughout LSI's existing businesses. These sourcing relationships, along with additional cost savings that we have identified during our due diligence, are expected to benefit LSI in the near-term, while savings resulting from the elimination of private company expenses will have an immediate benefit. We intend to implement The LSI Business System to maximize the savings potential.
"Over the course of the past several months I have become very impressed with Atlas' management group, and am pleased to welcome all of its employees to LSI. We intend to maintain the Atlas facility in Burlington, NC, and have signed a seven-year lease with multiple renewal options.
"Given the complementary product offerings of LSI and Atlas, combined with the expected revenue and cost synergies, I anticipate that this acquisition will be accretive to LSI's results beginning in fiscal 2018, and will accelerate our efforts to achieve above-market rate revenue growth and improve our gross and operating margins. It is an exciting time to be in the lighting industry, and I am confident that the combination of LSI and Atlas will provide numerous growth opportunities."
James H. Bennett, President of Atlas Lighting Products, commented, "I am thrilled to join forces with LSI Industries. I have always known LSI as a quality manufacturer of custom lighting fixtures, and am looking forward to continuing in my role as President of Atlas Lighting, working with Dennis and the LSI team to grow the business."
Rector Samuel (Sam) Hunt III, Chairman and Chief Executive Officer, commented, "After 25 years in the lighting business, I am pleased to announce my retirement. I am confident that my business will be in good hands under the management of Dennis Wells, Jim Bennett and the entire LSI team, and I wish them great success going forward."