Note 3 - Acquisition of JSI Store Fixtures

3 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Business Combination Disclosure [Text Block]

NOTE 3 — ACQUISITION OF JSI STORE FIXTURES

On  May 21, 2021, the Company acquired 100% of the issued and outstanding shares of capital stock of JSI Store Fixtures (JSI), a Maine-based provider of retail commercial display solutions, for $93.7 million. The acquisition of JSI expands the Company’s total addressable markets within the grocery and convenience store verticals. The Company funded the acquisition with a combination of cash on hand and $71.6 million from the revolving line of credit.

The Company accounted for this transaction as a business combination. The Company has preliminarily allocated the purchase price of approximately $93.7 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 2022, as well as potential revision resulting from the finalization of pre-acquisition tax filings. The Company is in the process of finalizing third party valuations of certain assets. The preliminary allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed as of  May 21, 2021, is as follows:

(In thousands)
Cash and cash equivalents	$	4,067
Accounts receivable, net		9,252
Inventories		9,898
Property, plant and equipment		7,076
Other assets		7,440
Intangible assets		45,760
Accounts payable		(4,199	)
Accrued liabilities		(8,434	)
Deferred tax liability		(10,583	)
Identifiable assets		60,277
Goodwill		33,415
Net purchase consideration	$	93,692

The gross amount of accounts receivable is $9.3 million.

Goodwill recorded from the acquisition of JSI is attributable to the impact of the positive cash flow from JSI in addition to expected synergies from the business combination. The intangible assets include amounts recognized for the fair value of the trade name, technology assets, 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		Estimated Useful
(In thousands)	Fair Value		Life (Years)
Tradename	$	8,680	Indefinite life
Technology asset		4,900		7
Non-compete		260		5
Customer relationship		31,920		20
	$	45,760

The fair market value write-up of the property, plant, and equipment totaled $1.8 million. Transaction costs related to the acquisition totaled $2.9 million in the fourth quarter of fiscal 2021.

Pro Forma Impact of the Acquisition of JSI (unaudited)

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of JSI as if the transaction had occurred on  July 1, 2019. 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 JSI.

The unaudited pro forma financial information for the twelve months ended  June 30, 2021 and  June 30, 2020 is prepared using the acquisition method of accounting and has been adjusted to give 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 $19.3 million excludes acquisition-related expenses of $2.9 million.

	Twelve Months Ended
	June 30
(In thousands, unaudited)	2021		2020
Net sales	$	391,000	$	362,541
Gross profit	$	97,947	$	86,399
Operating income	$	19,312	$	13,878