UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended |
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OR | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
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Commission file number |
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |||
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(Address of principal executive offices) | ||||
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(Registrant’s telephone number, including area code) | ||||
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Securities registered pursuant to Section 12(b) of the Act: | ||
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Not Applicable | ||
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(Former name, former address and former fiscal year, if changed since last report) | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $.025 par value per share –
PART I—FINANCIAL INFORMATION
Item 1.Financial Statements.
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data) (Unaudited)
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For the nine months ended March 31, |
For the three months ended March 31, | ||||||||||||||
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2021 |
2020 |
2021 |
2020 | ||||||||||||
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Revenues |
$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Operating income |
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Interest and other (expense) income, net (Note 6) |
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Income before income taxes |
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Provision for income taxes |
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Net income (loss) |
$ |
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$ |
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$ |
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$ |
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Net earnings (loss) per share – basic |
$ |
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$ |
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$ |
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$ |
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Net earnings (loss) per share – diluted |
$ |
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$ |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
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ASSETS | ||||||||
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March 31, 2021 (Unaudited) |
June 30, 2020 | |||||||
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Current assets | ||||||||
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Cash |
$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories, net |
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Vendor deposits |
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Contract assets |
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Other current assets |
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Total current assets |
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Equipment and improvements, net |
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Operating lease assets |
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Intangible assets, net |
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Goodwill |
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Other assets |
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Total assets |
$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share data)
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LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
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March 31, 2021 (Unaudited) |
June 30, 2020 | |||||||
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Current liabilities | ||||||||
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Accounts payable and accrued expenses |
$ |
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$ |
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Accrued employee expenses |
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Customer deposits |
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Contract liabilities |
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Current portion of long-term debt |
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Current portion of operating lease liabilities |
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Total current liabilities |
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Deferred tax liabilities, net |
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Long-term operating lease liabilities |
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Long-term debt, net |
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Total liabilities |
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Commitments and contingencies (Note 12) |
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Shareholders’ equity |
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Preferred stock, $ |
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Common stock, $. |
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Additional paid-in capital |
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Retained earnings |
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Treasury stock, |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
(In thousands, except share data) (Unaudited)
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Nine months ended March 31, 2021 | ||||||||||||||||||||||||||||
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Additional | ||||||||||||||||||||||||||||
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Common Stock |
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Paid-in |
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Treasury Stock |
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Retained |
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Shares |
Amount |
Capital |
Shares |
Cost |
Earnings |
Total | ||||||||||||||||||||
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Share repurchases |
- |
- |
- |
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( |
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- |
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Vesting of restricted shares |
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( |
- |
- |
- |
- | |||||||||||||||||||||
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Issuances of shares under employee stock purchase plan |
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- |
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- |
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Issuances of shares in connection with acquisitions |
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Stock compensation |
- |
- |
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- |
- |
- |
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Net income |
- |
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- |
- |
- |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Three months ended March 31, 2021 | ||||||||||||||||||||||||||||
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Additional | ||||||||||||||||||||||||||||
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Common Stock |
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Paid-in |
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Treasury Stock |
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Retained |
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Shares |
Amount |
Capital |
Shares |
Cost |
Earnings |
Total | ||||||||||||||||||||
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Share repurchases |
- |
- |
- |
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( |
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- |
( |
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Vesting of restricted shares |
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- |
- |
- |
- |
- |
- | |||||||||||||||||||||
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Issuances of shares in connection with acquisitions |
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- |
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- |
- |
- |
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Stock compensation |
- |
- |
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- |
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- |
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Net income |
- |
- |
- |
- |
- |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Shareholders’ Equity
(In thousands, except share data) (Unaudited)
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Nine months ended March 31, 2020 | |||||||||||||||||||||||||||||||
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Additional |
Common Stock Related to | ||||||||||||||||||||||||||||||
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Common Stock |
Paid-in |
Treasury Stock |
Retained |
Acquiree’s | |||||||||||||||||||||||||||
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Shares |
Amount |
Capital |
Shares |
Cost |
Earnings |
ESOP |
Total | ||||||||||||||||||||||||
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Balance at June 30, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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$ |
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Share repurchases |
- |
- |
- |
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( |
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- |
- |
( |
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Vesting of restricted shares |
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- |
- |
- |
- |
- |
- |
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Issuances of shares under employee stock purchase plan |
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- |
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- |
- |
- |
- |
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Issuances of shares in connection with acquisitions |
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- |
- |
- |
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Stock compensation |
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- |
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- |
- |
- |
- |
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Net income |
- |
- |
- |
- |
- |
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- |
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Balance at March 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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$ |
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Three months ended March 31, 2020 | |||||||||||||||||||||||||||||||
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Additional |
Common Stock Related to | ||||||||||||||||||||||||||||||
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Common Stock |
Paid-in |
Treasury Stock |
Retained |
Acquiree’s | |||||||||||||||||||||||||||
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Shares |
Amount |
Capital |
Shares |
Cost |
Earnings |
ESOP |
Total | ||||||||||||||||||||||||
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
- |
$ |
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Share repurchases |
- |
- |
- |
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( |
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- |
- |
( |
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Issuances of shares in connection with acquisitions |
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- |
- |
- |
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Stock compensation |
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- |
- |
- |
- |
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Net loss |
- |
- |
- |
- |
- |
( |
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- |
( |
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Balance at March 31, 2020 |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
- |
$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
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For the nine months ended | ||||||||
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March 31, 2021 |
March 31, 2020 | |||||||
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Operating activities: | ||||||||
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Net income |
$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
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Depreciation and amortization |
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Amortization of debt discount |
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Provision for bad debt expense |
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Non-cash lease expense |
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Share-based compensation |
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Inventory reserve |
( |
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Provision for deferred income taxes |
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Other |
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(Increase) decrease in operating assets: | ||||||||
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Accounts receivable |
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Inventories |
( |
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Vendor deposits |
( |
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Contract assets |
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Other assets |
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( |
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Increase (decrease) in operating liabilities: | ||||||||
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Accounts payable and accrued expenses |
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Accrued employee expenses |
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Customer deposits |
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Contract liabilities |
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Net cash provided by operating activities |
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Investing activities: | ||||||||
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Capital expenditures |
( |
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( |
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Cash paid for acquisitions, net of cash acquired |
( |
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( |
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Net cash used by investing activities |
( |
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( |
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Financing activities: | ||||||||
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Proceeds from borrowings |
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Debt repayments |
( |
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( |
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Repurchases of common stock in satisfaction of employee tax withholding obligations |
( |
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( |
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Issuances of common stock under employee stock purchase plan |
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Net cash used by financing activities |
( |
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( |
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Net decrease in cash |
( |
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( |
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Cash at beginning of period |
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Cash at end of period |
$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands) (Unaudited)
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For the nine months ended | ||||||||
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March 31, 2021 |
March 31, 2020 | |||||||
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Supplemental disclosures of cash flow information: | ||||||||
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Cash paid during the period for interest |
$ |
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$ |
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Cash paid during the period for income taxes |
$ |
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$ |
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Supplemental disclosure of non-cash financing activities: | ||||||||
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Common stock issued for acquisitions |
$ |
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$ |
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Forgiveness of PPP Loan |
$ |
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$ |
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See Notes to Condensed Consolidated Financial Statements
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note (1) - General: The accompanying unaudited condensed consolidated financial statements include the accounts of EVI Industries, Inc. and its subsidiaries (the “Company”). All material intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X related to interim period financial statements. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include certain information and footnotes required by GAAP for complete financial statements. However, in management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals and adjustments) which are necessary in order to state fairly the Company’s results of operations, financial position, shareholders’ equity and cash flows as of and for the periods presented. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period, particularly in light of the COVID-19 pandemic and its effects and potential future effects (which are highly uncertain) on economic and market conditions and on the Company and its business, results and financial condition, as described below and elsewhere herein. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes, including the Summary of Significant Accounting Policies, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. The June 30, 2020 balance sheet information contained herein was derived from the Company’s audited consolidated financial statements as of that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions made may not prove to be correct, and actual results could differ from the estimates.
The Company, through its wholly-owned subsidiaries, is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment, specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.
The Company’s customers include government, institutional, industrial, commercial and retail customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems. The Company also provides its customers with the services described above.
The Company’s growth strategy includes organic growth initiatives and business acquisitions pursuant to the Company’s “buy-and-build” growth strategy, which was implemented in 2015.
The COVID-19 pandemic has been, and continues to be, an unprecedented disruption in the economy and has negatively impacted, and may continue to negatively impact, the Company’s business and results. Specifically, beginning at the end of the quarter ended March 31, 2020, the COVID-19 pandemic and accompanying economic disruption caused delays and declines in the placement of customer orders, the completion of equipment and parts installations, and the fulfillment of parts orders. The adverse impact of the COVID-19 pandemic is expected to continue in the near-term and possibly longer, including, without limitation, if the pandemic increases in size and scope, its duration is prolonged, or, among other matters related thereto, additional governmental actions, including, without limitation, business restrictions, are imposed. In response to the economic and business disruption, the Company has taken actions to reduce costs and spending across the organization, including changes to inventory stock levels, renegotiating payment terms with suppliers, and reducing hiring activities. The Company continues to actively monitor the COVID-19 pandemic and may take further actions, including those that may alter business operations, if required by federal, state or local authorities or otherwise determined to be advisable by management.
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
As a precautionary measure in order to increase its cash position and preserve financial flexibility in light of the uncertainties resulting from the COVID-19 pandemic, during May 2020, the Company and certain of its subsidiaries received loans (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the aggregate principal amount of approximately $
As of the date of this Quarterly Report on Form 10-Q, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. Factors arising from the COVID-19 pandemic that have impacted, or may negatively impact, the Company’s business and results, including sales and gross margin, in the future include, but are not limited to: potential limitations on the ability of suppliers to manufacture, or the Company’s ability to procure from manufacturers, the products the Company sells, or to meet delivery requirements and commitments; limitations on the ability of the Company’s employees to perform their work due to impacts caused by the pandemic or local, state, or federal orders that may restrict the Company’s operations or the operations of its customers, or require that employees be quarantined; limitations on the ability of carriers to deliver products to the Company’s facilities and customers; adverse impacts of the pandemic on certain industries and customers of the Company which operate in those industries, including the hospitality industry; and potential decreased demand for products and services, including potential limitations on the ability of, or adverse changes in the desire of, the Company’s customers to conduct their business, purchase products and services and pay for purchases on a timely basis or at all.
The situation surrounding the COVID-19 pandemic remains fluid and highly uncertain. The Company is unable to determine or predict the nature, duration, or scope of the overall impact that the COVID-19 pandemic will have on the Company’s business, results of operations, liquidity, or financial condition, as such impact will depend in large part on future developments, including the severity and duration of the pandemic and government and other actions taken in response thereto, all of which are highly uncertain. Further, even after the COVID-19 pandemic subsides, the Company may continue to experience adverse impacts to its business as a result of, among other things, any adverse impact that has occurred or may occur in the future in the economy or markets generally, and changes in customer or supplier behavior.
Note (2) – Summary of Significant Accounting Policies: There have been no changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note (3) – Recently Issued Accounting Guidance: In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which will change the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other specified instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard will also require enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. The guidance must be applied using a cumulative-effect transition method. ASU 2016-13 is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years (the fiscal year ending June 30, 2022 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new guidance provides (i) temporary optional guidance to ease the potential burden in accounting for reference rate reform and (ii) optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until March 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the potential adoption of this guidance and the impact, if any, that it may have on the Company’s consolidated financial statements.
Other than as described above, management does not believe that accounting standards and updates which have been issued but are not yet effective will have a material impact on the Company’s consolidated financial statements upon adoption.
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 $
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) |
$ |
|
|
Stock consideration(b) |
| |
|
Total purchase price consideration, net of cash acquired |
$ |
|
|
(a) | ||
|
(b) |
|
Allocation of purchase price consideration: | ||
|
Accounts receivable |
$ |
|
|
Inventory |
| |
|
Other assets |
| |
|
Property, plant and equipment |
| |
|
Intangible assets |
| |
|
Accounts payable and accrued expenses |
( | |
|
Accrued employee expenses |
( | |
|
Customer deposits |
( | |
|
Deferred tax liabilities |
( | |
|
Assumption of debt |
( | |
|
Total identifiable net assets |
| |
|
Goodwill |
| |
|
Total |
$ |
|
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 $
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.
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 $
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 |
$ |
|
$ |
| ||||
|
Net income |
|
| ||||||
The Company’s consolidated results of operations for the nine months ended March 31, 2021 include total revenue of approximately $
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note (5) - Earnings Per Share: The Company computes earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Shares of the Company’s common stock subject to unvested restricted stock awards and restricted stock units are considered participating securities because they contain a non-forfeitable right to cash dividends (in the case of restricted stock awards) or dividend equivalents (in the case of restricted stock units) paid prior to vesting or forfeiture, if any, irrespective of whether the awards or units ultimately vest. Basic and diluted earnings per share for the nine and three months ended March 31, 2021 and 2020 are computed as follows (in thousands, except per share data):
|
For the nine months ended March 31, |
For the three months ended March 31, | ||||||||||||||||
|
2021 (Unaudited) |
2020 (Unaudited) |
2021 (Unaudited) |
2020 (Unaudited) | ||||||||||||||
|
| |||||||||||||||||
|
Net income (loss) |
$ |
|
$ |
|
$ |
|
$ |
( |
) | ||||||||
|
| |||||||||||||||||
|
Less: distributed and undistributed income allocated to unvested restricted common stock |
|
|
|
| |||||||||||||
|
Net income (loss) allocated to EVI Industries, Inc. shareholders |
$ |
|
$ |
|
$ |
|
$ |
( |
) | ||||||||
|
Weighted average shares outstanding used in basic earnings per share |
|
|
|
| |||||||||||||
|
Dilutive common share equivalents |
|
|
|
| |||||||||||||
|
Weighted average shares outstanding used in diluted earnings per share |
|
|
|
| |||||||||||||
|
Basic earnings per share |
$ |
|
$ |
|
$ |
|
$ |
| |||||||||
|
Diluted earnings per share (1) |
$ |
|
$ |
|
$ |
|
$ |
| |||||||||
|
(1) |
|
At March 31, 2021 and 2020, other than
Note (6) – Interest and other income (expense), net: Interest and other income (expense), net for the nine and three months ended March 31, 2021 and 2020 are as follows (in thousands):
|
For the nine months ended March 31, |
For the three months ended March 31, | ||||||||||||||||
|
2021 (Unaudited) |
2020 (Unaudited) |
2021 (Unaudited) |
2020 (Unaudited) | ||||||||||||||
|
| |||||||||||||||||
|
Bargain purchase gain |
$ |
|
$ |
|
$ |
|
$ |
| |||||||||
|
Interest (expense), net |
( |
) |
( |
) |
( |
) |
( |
) | |||||||||
|
Interest and other income (expense), net |
$ |
( |
) |
$ |
( |
) |
$ |
|
$ |
( |
) | ||||||
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note (7) - Debt: Long-term debt as of March 31, 2021 and June 30, 2020 are as follows (in thousands):
|
March 31, 2021 |
June 30, 2020 | |||||||
|
Revolving Line of Credit |
$ |
|
$ |
| ||||
|
PPP Loans |
|
| ||||||
|
Less: unamortized discount and deferred financing costs |
( |
) |
( |
) | ||||
|
Total debt, net |
|
| ||||||
|
Less: current maturities of long-term debt |
( |
) |
( |
) | ||||
|
Total long-term debt |
$ |
|
$ |
| ||||
On November 2, 2018, the Company entered into a syndicated credit agreement (the “2018 Credit Agreement”) for a
Borrowings (other than swingline loans) under the 2018 Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a)
The 2018 Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The 2018 Credit Agreement also contains other provisions which may restrict the Company’s ability to, among other things, dispose of or acquire assets or businesses, incur additional indebtedness, make certain investments and capital expenditures, pay dividends, repurchase shares and enter into transactions with affiliates. As of March 31, 2021, the Company was in compliance with its covenants under the 2018 Credit Agreement and $
The obligations of the Company under the 2018 Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries, and are guaranteed, jointly and severally, by certain of the Company’s subsidiaries.
On May 21, 2020, the Company and certain of its subsidiaries received PPP Loans totaling approximately $
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The proceeds of the PPP Loans have been used primarily for payroll costs and, to a limited extent, other permitted purposes under the CARES Act, including rent and utility costs. Under the terms of the CARES Act, each borrower can apply for forgiveness for all or a portion of the PPP Loan and, as described below, the Company has agreed to apply, and for each of its subsidiaries that received PPP Loans to apply, for forgiveness. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during the 24-week period after loan origination and the maintenance or achievement of certain employee levels. As described in further detail in Note 14 below, during April 2021, the Company and its applicable subsidiaries applied for forgiveness of the PPP Loans. While the Company believes that the proceeds of the PPP Loans have been used only for qualifying expenses in accordance with the terms of the CARES Act, any forgiveness of a PPP Loan will be subject to approval by the Lender and the U.S. Small Business Administration (“SBA”), which is administering the PPP under the CARES Act, and there can be no assurance that any or all of the PPP Loans will be forgiven in whole or in part.
The Company received the consent (the “Consent”) of Bank of America, N.A., U.S. Bank National Association, and Fifth Third Bank under the Company’s 2018 Credit Agreement in connection with its and its subsidiaries’ receipt of the PPP Loans. The Consent, among other things, contains certain representations, warranties and agreements of the Company, including, without limitation, agreements to use the proceeds of the PPP Loan only for permitted expenses under the CARES Act, to timely apply for forgiveness of the PPP Loans, and to maintain all records required to be submitted in connection with the forgiveness of the PPP Loans. The breach of any such representations, warranties or agreements will constitute a default under the 2018 Credit Agreement, subject to any applicable cure periods or provisions thereof.
As previously described, in addition to the PPP Loans obtained by the Company and certain of its subsidiaries during May 2020, in connection with the YES Acquisition during November 2020, the Company, indirectly through its wholly-owned subsidiary, also assumed the approximately $
Note (8) – Leases:
Company as Lessee
The Company leases warehouse and distribution facilities, administrative office space and service and other fleet vehicles, generally for terms of to
Effective July 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842” or “Topic 842”), which, among other things, requires lessees to recognize substantially all leases on their balance sheets and disclose certain additional key information about leasing arrangements. The new standard established a right-of-use model that requires a lessee to recognize a right-of-use asset and liability on the balance sheet for all leases with a term longer than 12 months. Leases are required to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company adopted this standard using the modified retrospective transition approach, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption without restatement of prior periods.
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, the Company, as permitted by Topic 842, recognizes the lease payments under its short-term leases in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use asset.
Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and right-of-use lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, certain of the Company’s leases do not provide a readily determinable implicit rate. For such leases, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company uses instruments with similar characteristics when calculating its incremental borrowing rates.
The Company has options to extend certain of its operating leases for additional periods of time and the right to terminate several of its operating leases prior to its contractual expiration, in each case, subject to the terms and conditions of the lease. The lease term consists of the non-cancellable period of the lease and the periods covered by Company options to extend the lease when it is reasonably certain that the Company will exercise such options. The Company's lease agreements do not contain residual value guarantees. The Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components.
As of March 31, 2021, the Company had
The following table provides details of the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of March 31, 2021. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.
|
Fiscal years ending June 30, |
Total Operating Lease Obligations (in thousands) | |||
|
2021 (remainder of) |
$ |
|
| |
|
2022 |
|
| ||
|
2023 |
|
| ||
|
2024 |
|
| ||
|
2025 |
|
| ||
|
Thereafter |
|
| ||
|
Total minimum lease payments |
$ |
|
| |
|
Less: amounts representing interest |
|
| ||
|
Present value of minimum lease payments |
$ |
|
| |
|
Less: current portion |
|
| ||
|
Long-term portion |
$ |
|
| |
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The table below presents additional information related to the Company’s operating leases (in thousands):
|
Nine months ended March 31, |
Three months ended March 31, | |||||||||||||||
|
2021 |
2020 |
2021 |
2020 | |||||||||||||
|
Operating lease cost |
| |||||||||||||||
|
Operating lease cost (1) |
$ |
|
$ |
|
$ |
|
$ |
|
| |||||||
|
Short-term lease cost (1) |
|
|
|
|
| |||||||||||
|
Variable lease cost (1) |
|
|
|
| ||||||||||||
|
Total lease cost |
$ |
|
$ |
|
$ |
|
$ |
|
| |||||||
|
(1) |
|
The table below presents lease-related terms and discount rates as of March 31, 2021:
|
March 31, 2021 | ||
|
Weighted average remaining lease terms | ||
|
Operating leases |
| |
|
Weighted average discount rate | ||
|
Operating leases |
|
The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities for the nine months ended March 31, 2021 and 2020 (in thousands):
|
Nine months ended March 31, | ||||||||
|
2021 |
2020 | |||||||
|
Cash paid for amounts included in the measurement of lease liabilities: |
$ |
|
$ |
| ||||
|
Operating lease right-of-use assets obtained in exchange for operating lease liabilities: |
$ |
|
$ |
| ||||
Company as Lessor
The Company derives a portion of its revenue from equipment leasing arrangements. Such arrangements provide for monthly payments covering the equipment provided, maintenance, and interest. These arrangements meet the criteria to be accounted for as sales type leases. Accordingly, revenue from the provision of the equipment is recognized upon delivery of the equipment and its acceptance by the customer. Upon the recognition of such revenue, an asset is established for the investment in sales type leases. Maintenance revenue and interest are recognized monthly over the lease term.
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The future minimum lease payments receivable for sales type leases are as follows (in thousands):
|
Fiscal years ending June 30, |
Total Minimum Lease Payments Receivable |
Amortization of Unearned Income |
Net Investment in Sales Type Leases | |||||||||
|
2021 (remainder of) |
$ |
|
$ |
|
$ |
|
| |||||
|
2022 |
|
|
|
| ||||||||
|
2023 |
|
|
|
| ||||||||
|
2024 |
|
|
|
| ||||||||
|
2025 |
|
|
|
| ||||||||
|
Thereafter |
|
|
|
| ||||||||
|
$ |
|
* | ||||||||||
|
* | ||||||||||||
The total net investments in sales type leases, including stated residual values, as of March 31, 2021 and June 30, 2020 was $
Note (9) - Income Taxes: Income taxes are recorded in the Company’s quarterly financial statements based on the Company’s estimated annual effective income tax rate, subject to adjustment for discrete events, should they occur.
As of March 31, 2021 and June 30, 2020, the Company had net deferred tax liabilities of approximately $ million and $ million, respectively. Consistent with the guidance of the FASB regarding accounting for income taxes, the Company regularly estimates its ability to recover deferred tax assets and establishes a valuation allowance against deferred tax assets to reduce the balance to amounts expected to be recoverable. This evaluation includes the consideration of several factors, including an estimate of the likelihood of generating sufficient taxable income in future periods over which temporary differences reverse, the expected reversal of deferred tax liabilities, past and projected taxable income, and available tax planning strategies. As of March 31, 2021, management believed that it was more-likely-than-not that the results of future operations will generate sufficient taxable income to realize the net amount of the Company’s deferred tax assets over the periods during which temporary differences reverse.
The Company follows ASC Topic 740-10-25, “Accounting for Uncertainty in Income Taxes” (“ASC 740”). ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. During the nine and three months ended March 31, 2021 and 2020, the Company’s accounting for income taxes in accordance with this standard did not result in any adjustment to the Company’s provision for income taxes.
As of March 31, 2021, the Company was subject to potential federal and state tax examinations for the tax years 2017 through 2020.
The CARES Act, among its other provisions, includes tax provisions relating to refundable payroll tax credits, deferral of employer’s social security payments, net operating loss (“NOL”) utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP), and financing options. During the nine months ended March 31, 2021, the Company recognized an income tax benefit of $
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Note (10) – Equity Plans:
Equity Incentive Plan
In November 2015, the Company’s stockholders approved the Company’s 2015 Equity Incentive Plan (the “Plan”). During December 2020, the Company’s stockholders approved an amendment to the Plan to increase the number of shares of the Company’s common stock authorized for issuance pursuant to awards granted under the Plan to
During the nine months ended March 31, 2021, restricted stock awards of a total of
For the nine months ended March 31, 2021 and 2020, non-cash share-based compensation expense related to awards granted under the Plan totaled $ million and $ million, respectively. For the three months ended March 31, 2021 and 2020, non-cash share-based compensation expense related to awards granted under the Plan totaled $
As of March 31, 2021, the Company had $
The following is a summary of non-vested restricted stock activity as of and for the nine months ended March 31, 2021:
|
Restricted Stock Awards |
Restricted Stock Units | |||||||||||||||
|
Shares |
Weighted- Average Grant Date Fair Value |
Shares |
Weighted- Average Grant Date Fair Value | |||||||||||||
|
Non-vested awards or units outstanding at June 30, 2020 |
|
$ |
|
|
$ |
|
| |||||||||
|
Granted |
|
|
|
|
| |||||||||||
|
Vested |
( |
|
( |
|
| |||||||||||
|
Forfeited |
( |
|
|
|
| |||||||||||
|
Non-vested awards or units outstanding at March 31, 2021 |
|
$ |
|
|
$ |
|
| |||||||||
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
Employee Stock Purchase Plan
The Company’s employee stock purchase plan provides for six-month offering periods ending on December 31 and June 30 of each year. During the nine months ended March 31, 2021,
Note (11) – Transactions with Related Parties: Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals of those subsidiaries. These leases include the following:
The Company’s wholly-owned subsidiary, Steiner-Atlantic Corp. (“Steiner-Atlantic”), leased
During , the Company’s wholly-owned subsidiary, Western State Design, Inc. (“Western State Design”), entered into a lease agreement pursuant to which it leases
During , the Company’s wholly-owned subsidiary, Tri-State Technical Services, LLC (“Tri-State”), entered into lease agreements pursuant to which it leases a total of
During , the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, LLC (“AAdvantage”), entered into a lease agreement pursuant to which it leases a total of
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
During , the Company’s wholly-owned subsidiary, Scott Equipment, LLC (“Scott Equipment”), entered into lease agreements pursuant to which it leases a total of
During , the Company’s wholly-owned subsidiary, PAC Industries, LLC (“PAC Industries”), entered into two lease agreements pursuant to which it leases a total of
During , the Company’s wholly-owned subsidiary, Yankee Equipment Systems, LLC (“Yankee Equipment Systems”), entered into a lease agreement pursuant to which it leases a total of
Note (12) – Commitments and Contingencies: In the ordinary course of business, certain of the Company’s contracts require the Company to provide performance and payment bonds related to projects in process. These bonds are intended to provide a guarantee to the customer that the Company will perform under the terms of the contract and that the Company will pay subcontractors and vendors. If the Company fails to perform under the contract or pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company is required to reimburse the surety for expenses or outlays it incurs. At March 31, 2021 and June 30, 2020, no such performance or payment bonds were outstanding.
EVI Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(Unaudited)
The Company may from time to time become subject to litigation and other legal proceedings. Litigation and other legal proceedings may require the Company to incur significant expenses, including those relating to legal and other professional fees. In addition, litigation and other legal proceedings are inherently uncertain, and