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Note 3 - Acquisition of EMI Industries, LLC | 6 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Business Combination Disclosure [Text Block] | NOTE 3 — ACQUISITION OF EMI INDUSTRIES, LLC On April 18, 2024, the Company entered into and consummated the transactions contemplated by an asset purchase agreement with EMI Industries, LLC (EMI), a Florida-based metal and millwork manufacturer of standard and customized fixtures, displays and equipment for the convenience store, supermarket and restaurant industries, for $50.0 million, of which $0.1 million of the purchase price was retained pending a review of the acquired working capital. In the first quarter of fiscal 2025, the company funded an additional $59,000 related to the final settlement of the acquired working capital. The Company incurred acquisition-related costs totaling $1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations. The acquisition of EMI is expected to increase the Company’s total addressable markets within the grocery, quick service restaurant and convenience store verticals. The Company funded the acquisition totaling $49.9 million with a combination of cash on hand and from the $75 million revolving line of credit. The Company accounted for this transaction as a business combination. The Company has allocated the purchase price of approximately $49.9 million which includes an estimate of customary post-closing purchase price adjustments to the assets acquired and liabilities assumed at estimated fair values, and the excess of the purchase price over the aggregate fair values is recorded as goodwill. This preliminary allocation is subject to the final determination of the purchase price which will be finalized in fiscal 2025, as well as the potential revision resulting from the finalization of pre-acquisition tax filings. The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of April 18, 2024, is as follows:
(In thousands) |  | April 18, 2024 as initially reported |  |  | Adjustments |  |  | April 18, 2024 as adjusted |
Accounts Receivable |  | $ | 11,386 |  |  | $ | - |  |  | $ | 11,386 |
Inventory |  |  | 12,246 |  |  |  | - |  |  |  | 12,246 |
Property, Plant and Equipment |  |  | 7,719 |  |  |  | - |  |  |  | 7,719 |
Operating Lease Right-Of-Use Assets |  |  | 8,734 |  |  |  | - |  |  |  | 8,734 |
Other Assets |  |  | 1,176 |  |  |  | - |  |  |  | 1,176 |
Intangible Assets |  |  | 15,670 |  |  |  | - |  |  |  | 15,670 |
Accounts Payable |  |  | (7,103 | ) |  |  | - |  |  |  | (7,103 | )
Accrued Expenses |  |  | (6,308 | ) |  |  | - |  |  |  | (6,308 | )
Operating Lease Liabilities |  |  | (5,987 | ) |  |  | - |  |  |  | (5,987 | )
Identifiable Assets |  |  | 37,533 |  |  |  | - |  |  |  | 37,533 |
Goodwill |  |  | 12,367 |  |  |  | 59 |  |  |  | 12,426 |
Net Purchase Consideration |  | $ | 49,900 |  |  | $ | 59 |  |  | $ | 49,959 |
The gross amount of accounts receivable acquired was $11.9 million. Goodwill recorded from the acquisition of EMI is attributable to the impact of the positive cash flow from EMI in addition to expected synergies from the business combination. The goodwill resulting from the acquisition is deductible for tax purposes. The trade name and technology used an income (relief from royalty) approach, the non-compete used an income (with or without) approach, and the customer relationships used an income (excess earnings) approach. The following table presents the details of the intangible assets acquired at the date of acquisition:
(in thousands) |  | Estimated Fair Value |  |  | Estimated Useful Life (Years) |
Tradename |  | $ | 4,880 |  |  | Indefinite life |
Technology assets |  |  | 3,160 |  |  |  | 7 |
Non-compete |  |  | 140 |  |  |  | 5 |
Customer relationships |  |  | 7,490 |  |  |  | 20 |
|  | $ | 15,670 |  |  |  |  |
EMI’s post-acquisition results of operations for the period from April 18, 2024, through June 30, 2024, are included in the Company’s Consolidated Statements of Operations. Since the acquisition date, net sales of EMI for the period from April 18, 2024, through June 30, 2024, were $18.1 million and operating income was $0.7 million. The operating results of EMI are included in the Display Solutions Segment. Pro Forma Impact of the Acquisition of EMI (Unaudited) The following table represents unaudited pro forma results of operations and gives effect to the acquisition of EMI as if the transaction had occurred on July 1, 2022. The unaudited pro forma results of operations have been prepared for comparative purposes only and are not necessarily indicative of what would have occurred had the business combination been completed at the beginning of the period or the results that may occur in the future. Furthermore, the unaudited pro forma financial information does not reflect the impact of any synergies or operating efficiencies resulting from the acquisition of EMI. The unaudited pro forma financial information for the twelve months ended June 30, 2024, and June 30, 2023, is prepared using the acquisition method of accounting and has been adjusted to reflect the pro forma events that are: (1) directly attributable to the acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the combined results. The fiscal 2024 unaudited pro forma operating income of $36.3 million excludes acquisition-related expenses of $1.0 million.
|  | Twelve Months Ended June 30 |
(in thousands; unaudited) |  |  |  |  |  |  |  |
|  | 2024 |  |  | 2023 |
Sales |  | $ | 535,849 |  |  | $ | 578,169 |
Gross Profit |  | $ | 141,788 |  |  | $ | 147,967 |
Operating Income |  | $ | 36,303 |  |  | $ | 38,798 |

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