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Note 4 - Acquisition of Canada's Best Holdings | 9 Months Ended
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Mar. 31, 2025
CBH [Member] |
Notes to Financial Statements |
Business Combination [Text Block] | NOTE 4— ACQUISITION OF CANADA’S BEST HOLDINGS On March 11, 2025, the Company executed and closed on an asset purchase agreement with Canada’s Best Holdings (CBH), an Ontario Canada-based leading provider of retail fixtures and custom store design solutions for grocery, quick service restaurant, c-store, banking, and specialty retail environments, for $25.9 million, subject to a working capital adjustment and future potential earnout payment up to $7.0M as of the acquisition date for a total purchase consideration of $27.4M. The future earnout payments include revenue and EBITDA goals for the fiscal years ending June 30,2026 and June 30, 2027. The Company incurred acquisition-related costs totaling $0.8 million which are included in the selling and administrative expense line of the consolidated statements of operations. The Company funded the acquisition totaling $27.4 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 preliminarily allocated the purchase price of approximately $27.4 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 2026, as well as potential revision resulting from the finalization of pre-acquisition tax filings and earnout payment calculations. The Company is in the process of finalizing third party valuations of certain assets including fixed assets and intangible assets. The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of March 11, 2025, is as follows:
|  | March 11, 2025 as initially reported |
(In thousands) |  |  |  |
Cash and cash equivalents |  | $ | 4,592 |
Accounts receivable |  |  | 3,907 |
Inventory |  |  | 4,287 |
Property, plant and equipment |  |  | 640 |
Operating lease right-of-use assets |  |  | 5,211 |
Other assets |  |  | 204 |
Intangible assets |  |  | 9,955 |
Accounts payable |  |  | (29 | )
Accrued expenses |  |  | (472 | )
Operating lease liabilities |  |  | (2,954 | )
Deferred tax liability |  |  | (3,700 | )
Identifiable assets |  |  | 21,641 |
Goodwill |  |  | 5,748 |
Net purchase consideration |  | $ | 27,389 |
The gross amount of accounts receivable is $4.3 million. Goodwill recorded from the acquisition of CBH is attributable to the impact of the positive cash flow from CBH in addition to expected synergies from the business combination. The intangible assets include amounts recognized for the fair value of the trade name, non-compete agreements and customer relationships. The fair value of the intangible assets was determined based upon the income (discounted cash flow) approach. The following table presents the details of the intangible assets acquired at the date of acquisition:
| Estimated Fair Value | Estimated Useful Life (Years)
(in thousands) |  |  |  |
Tradename | $ | 1,009 |  | 10
Non-compete agreements |  | 220 |  | 3 | - | 5
Customer relationships |  | 8,726 |  | 15
| $ | 9,955 |  |
The preliminary fair market value write-up of the property, plant, and equipment totaled $0.6 million. The Company expects more transaction costs to follow in the fourth quarter. CBH’s post-acquisition results of operations for the period from March 11, 2025, through March 31, 2025, are included in the Company’s Consolidated Statements of Operations. Since the acquisition date, net sales of CBH for the period from March 11, 2025, through March 31, 2025, were $1.4 million and operating income was $0.3 million. The operating results of CBH are included in the Display Solutions Segment. Pro Forma Impact of the Acquisition of CBH (Unaudited) The following table represents unaudited pro forma results of operations and gives effect to the acquisition of CBH as if the transaction had occurred on July 1, 2023. 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 CBH. The unaudited pro forma financial information for the twelve months ended June 30, 2024 is prepared using the acquisition method of accounting and has been adjusted to effect to 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 unaudited pro forma operating income of $41.3 million excludes acquisition-related expenses of $0.8 million.
|  | Twelve Month Ended |
|  | June 30 |
(in thousands; unaudited) |  | 2024 |
Sales |  | $ | 496,965 |
Gross Profit |  | $ | 142,984 |
Operating Income |  | $ | 41,337 |

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