Acquisitions

12 Months Ended

Jun. 30, 2023

Acquisitions [Abstract]

Acquisitions

3. Acquisitions

Fiscal 2023 Acquisitions

On September 1, 2022, the Company completed the acquisitions of Aldrich Clean-Tech Equipment Corp. (“ACT”), 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, and K&B Laundry Service, LLC (“K&B”), a North Carolina-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 total consideration for these two acquisitions consisted of approximately $1.2 million in cash, net of cash acquired, which the Company funded through borrowings under its credit facility. Fees and expenses related to these acquisitions, consisting primarily of legal and other professional fees, totaled approximately $102,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statements of operations for fiscal 2023. Each acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), pursuant to which the consideration paid by the Company 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 Company allocated a total of $793,000 to goodwill, which is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforces, as well as the expected benefits from the increased scale of the Company as a result of these acquisitions. The financial position, including assets and liabilities, of ACT and K&B is included in the Company’s consolidated balance sheet as of June 30, 2023 and the results of operations of the businesses since the September 1, 2022 closing date are included in the Company’s consolidated financial statements for fiscal 2023.

On November 1, 2022, the Company acquired substantially all of the assets of Wholesale Commercial Laundry Equipment Company SE, LLC (“WCL”), an Alabama-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 consideration paid by the Company in connection with the acquisition consisted of $650,000 in cash and 24,243 shares of the Company’s common stock, with an acquisition date fair value of approximately $503,000. Fees and expenses related to the acquisition, consisting primarily of legal and other professional fees, totaled approximately $31,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2023. 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, pursuant to which the consideration paid by the Company 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 goodwill. The Company allocated $1,062,000 to goodwill, which is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce, as well as the expected benefits from the increased scale of the Company as a result of the acquisition. The financial position, including assets and liabilities, of WCL is included in the Company’s consolidated balance sheet as of June 30, 2023 and the results of operations of WCL since the November 1, 2022 closing date are included in the Company’s consolidated financial statements for fiscal 2023.

On June 5, 2023, the Company acquired substantially all of the assets of Gluno, Inc. d/b/a Express Parts and Services (“EXP”), a Maryland-based distributor of commercial laundry products and a provider of related technical installation and maintenance services. The consideration paid by the Company in connection with the acquisition consisted of $550,000 in cash. Fees and expenses related to the acquisition, consisting primarily of legal and other professional fees, were not material and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2023. 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, pursuant to which the consideration paid by the Company 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 goodwill. The Company allocated $392,000 to goodwill, which is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce, as well as the expected benefits from the increased scale of the Company as a result of the acquisition. The financial position, including assets and liabilities, of EXP is included in the Company’s consolidated balance sheet as of June 30, 2023 and the results of operations of EXP since the June 5, 2023 closing date are included in the Company’s consolidated financial statements for fiscal 2023.

Fiscal 2022 Acquisitions

CLK Acquisition

On February 7, 2022, the Company acquired Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), pursuant to a merger whereby CLK merged with and into, and became, a wholly-owned subsidiary of the Company (the “CLK Acquisition”). CLK is a North Carolina-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 Southeast region of the United States. The consideration paid by the Company in connection with the merger consisted of $4.5 million in cash and 179,087 shares of the Company’s common stock. The Company funded the cash consideration with borrowings under its credit facility. Fees and expenses related to the CLK Acquisition, consisting primarily of legal and other professional fees, totaled approximately $45,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2022. The total purchase price for accounting purposes was $7.2 million, net of cash acquired of $1.2 million.

The CLK Acquisition was treated for accounting purposes as a purchase of CLK using the acquisition method of accounting in accordance with ASC 805. Under the acquisition method of accounting, the aggregate consideration paid in the CLK 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 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)	$	3,346
Stock consideration(b)		3,840
Total purchase price consideration, net of cash acquired	$	7,186
(a) Includes $4.5 million paid net of $1.2 million of cash acquired. (b) Calculated as 179,087 shares of the Company’s common stock, multiplied by $21.44, the closing price of the Company’s common stock on the closing date.
Allocation of purchase price consideration:
Accounts receivable	$	1,322
Inventories		2,074
Vendor Deposits		170
Other assets		779
Equipment and improvements		841
Intangible assets		1,700
Accounts payable and accrued expenses		(948	)
Accrued employee expenses		(62	)
Customer deposits		(689	)
Deferred tax liabilities		(622	)
Total identifiable net assets		4,565
Goodwill		2,621
Total	$	7,186

Intangible assets consist of $800,000 allocated to the Consolidated Laundry Equipment trade name and $900,000 allocated to customer-related intangible assets. The Consolidated Laundry Equipment trade name is indefinite-lived and therefore not subject to amortization. The Consolidated Laundry Equipment 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 are being amortized over 10 years.

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

CDL Acquisition

On June 1, 2022, the Company acquired Clean Designs, Inc. and Clean Route, LLC (collectively “CDL”). The acquisition (the “CDL Acquisition”) was effected by the Company, indirectly through a wholly-owned subsidiary, which purchased substantially all of the assets and assumed certain of the liabilities of CDL. CDL is a Colorado -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 West region of the United States. The consideration paid by the Company in connection with the acquisition consisted of $5.4 million in cash. The Company funded the cash consideration with borrowings under its credit facility. Fees and expenses related to the CDL Acquisition, consisting primarily of legal and other professional fees, totaled approximately $65,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2022. The total purchase price for accounting purposes was $5.4 million.

The CDL Acquisition was treated for accounting purposes as a purchase of CDL using the acquisition method of accounting in accordance with ASC 805. Under the acquisition method of accounting, the aggregate consideration paid in the CDL 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 identifiable net assets acquired being allocated to goodwill. The computation of the purchase price consideration and the allocation of the consideration to the net assets acquired are presented in the following tables (in thousands):

Purchase price consideration:
Cash consideration	$	5,366
Total purchase price consideration	$	5,366
Allocation of purchase price consideration:
Accounts receivable	$	920
Inventories		1,232
Other assets		161
Equipment and improvements		770
Intangible assets		1,580
Accounts payable and accrued expenses		(1,357	)
Accrued employee expenses		(72	)
Customer deposits		(336	)
Total identifiable net assets		2,898
Goodwill		2,468
Total	$	5,366

Intangible assets consist of $590,000 allocated to the Clean Designs trade name and $990,000 allocated to customer-related intangible assets. The Clean Designs trade name is indefinite-lived and therefore not subject to amortization. The Clean Designs 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 are being amortized over 10 years.

Goodwill is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce acquired, as well as expected benefits from the increased scale of the Company as a result of the CDL Acquisition.

Other Fiscal 2022 Acquisitions

In addition to the CLK Acquisition and the CDL Acquisition, during fiscal 2022, the Company completed the acquisition of the following two companies: (i) LS Acquisition, LLC d/b/a Laundry South Systems and Repair (“LSS”), which was acquired on April 29, 2022; and (ii) Spynr, Inc. (“SPR”), which was acquired on May 5, 2022. The total consideration for these two transactions consisted of $3.2 million in cash and 34,391 shares of the Company’s common stock. The Company funded the cash consideration for each acquisition with credit facility borrowings. Fees and expenses related to these acquisitions, consisting primarily of legal and other professional fees, totaled approximately $46,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2022. Each acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with ASC 805, pursuant to which the consideration paid by the Company 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 Company allocated a total of $2.2 million to goodwill, $760,000 to customer-related intangibles, and $460,000 to the respective trade names. Goodwill totaling $2.2 million from these acquisitions is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforces, as well as expected benefits from the increased scale of the Company as a result of these acquisitions.

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 acquisitions completed by the Company during fiscal 2023 and 2022 as described above, as if the Company had completed each such transaction on July 1, 2021, using the estimated fair values of the assets acquired and liabilities assumed. These 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 year ended June 30,
(in thousands)	2023 (Unaudited)		2022 (Unaudited)
Revenues	$	357,353	$	299,321
Net income		10,074		6,850

The Company’s consolidated results of operations for fiscal 2023 include total revenue of approximately $37.8 million and total net income of approximately $931,000 attributable to businesses acquired during fiscal 2023 and fiscal 2022, based on the consolidated effective tax rate. The Company’s consolidated results of operations for fiscal 2022 include total revenue of approximately $9.3 million and total net income of approximately $134,000 attributable to businesses acquired during fiscal 2022, based on the consolidated effective tax rate. These results of acquired businesses do not include the effects of acquisition costs or interest expense associated with consideration paid for the acquisitions.