Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.21.1
Acquisitions
9 Months Ended
Mar. 31, 2021
Business Combinations [Abstract]  
Acquisitions

Note (4) - Acquisitions:

YES Acquisition

On November 3, 2020, the Company acquired Yankee Equipment Systems, Inc. (“YES”), pursuant to a merger whereby YES merged with and into, and became, a wholly-owned subsidiary of the Company (the “YES Acquisition”). YES is a New Hampshire-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. This acquisition expanded the Company’s footprint in the Northeast region of the United States. The consideration paid by the Company in connection with the merger consisted of $5.3 million in cash and 278,385 shares of the Company’s common stock. The Company funded the cash consideration with borrowings under its credit facility. The Company, indirectly through its wholly-owned subsidiary, also assumed YES’s obligations under the approximately $916,000 loan obtained by it under the PPP, as described in further detail under Note 7 below. Fees and expenses related to the YES Acquisition, consisting primarily of legal and other professional fees, totaled approximately $144,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for the nine months ended March 31, 2021. The total purchase price for accounting purposes was $13.8 million, which included cash acquired of $792,000.

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EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

The YES Acquisition was treated for accounting purposes as a purchase of YES using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the aggregate consideration in the YES Acquisition was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The computation of the purchase price consideration and the preliminary allocation of the consideration to the net assets acquired are presented in the following tables (in thousands):

Purchase price consideration:

Cash consideration, net of cash acquired(a)

$

4,475

Stock consideration(b)

8,521

Total purchase price consideration, net of cash acquired

$

12,996

(a) Includes $5.3 million paid net of $792,000 of cash acquired.

(b) Calculated as 278,385 shares of the Company’s common stock, multiplied by $30.61, the closing price of the Company’s common stock on the closing date.

Allocation of purchase price consideration:

Accounts receivable

$

1,581

Inventory

1,554

Other assets

1,812

Property, plant and equipment

1,850

Intangible assets

3,800

Accounts payable and accrued expenses

(1,867)

Accrued employee expenses

(534)

Customer deposits

(485)

Deferred tax liabilities

(920)

Assumption of debt

(916)

Total identifiable net assets

5,875

Goodwill

7,121

Total

$

12,996

The Company is continuing its valuation of the net assets acquired, which is subject to adjustment in accordance with the merger agreement. Accordingly, the purchase price allocation set forth above reflects preliminary fair value estimates based on preliminary work and analyses performed by management and is subject to change as additional information to assist in determining the fair value of the net assets acquired as of the closing date is obtained during the post-closing measurement period of up to one year. The Company is also still assessing certain working capital items.

Intangible assets consist of $1.6 million allocated to the Yankee Equipment Systems trade name and $2.2 million allocated to customer-related intangible assets. The Yankee Equipment Systems trade name is indefinite-lived and therefore not subject to amortization. The Yankee Equipment Systems trade name will be evaluated for impairment annually or more frequently if an event occurs or circumstances change that indicate it may be impaired, by comparing its fair value to its carrying amount to determine if a write-down to fair value is required. Customer-related intangible assets will be amortized over 10 years.

Goodwill is attributable primarily to the assembled workforce acquired, as well as benefits from the increased scale of the Company as a result of the YES Acquisition. The goodwill from the YES Acquisition is not amortizable for income tax purposes.

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EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

ELS Acquisition

On January 15, 2021, the Company completed the acquisition (the “ELS Acquisition”) of Baystate Business Ventures d/b/a Eastern Laundry Systems (“ELS”), a Massachusetts-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. The acquisition was completed by the Company, indirectly through a wholly-owned subsidiary, which purchased substantially all of the assets and assumed certain of the liabilities of ELS. The total consideration for the transaction consisted of $400,000 in cash, net of $57,000 of cash acquired, and the issuance of 10,726 shares of the Company’s common stock. The Company funded the cash consideration for the acquisition with credit facility borrowings. The acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with ASC 805, Business Combinations, pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, based on their respective fair values as of the closing date, and the excess of the fair value of the acquired net assets over the purchase price has been recognized as a bargain purchase gain in the condensed consolidated statements of operations for the three and nine months ended March 31, 2021. Based on the Company’s preliminary analysis of working capital and valuation-related items, the Company recognized a bargain purchase gain of $361,000 in connection with the ELS Acquisition during the quarter ended March 31, 2021. The purchase price allocations are considered preliminary, as the Company is still assessing certain working capital and valuation-related items. Any change to the preliminary estimate of working capital and valuation-related items and the related deferred tax liability will be recognized as an adjustment to the bargain purchase gain.

Supplemental Pro Forma Results of Operations

The following unaudited supplemental pro forma information presents the results of operations of the Company, after giving effect to the YES Acquisition and ELS Acquisition as described above, as if the Company had completed each such transaction on July 1, 2019, using the estimated fair values of the assets acquired and liabilities assumed. The unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the Company would have been if the transactions had occurred on the date assumed, nor are they indicative of future results of operations.

For the nine months ended

March 31,

(in thousands)

2021

(Unaudited)

2020

(Unaudited)

Revenues

$

189,810

$

208,001

Net income

2,016

1,888

The Company’s consolidated results of operations for the nine months ended March 31, 2021 include total revenue of approximately $9.5 million and total net income of approximately $204,000 attributable to YES and ELS, based on the consolidated effective tax rate. These results of the acquired businesses do not include the effects of acquisition costs or interest expense associated with the consideration paid in connection with the acquisitions.