v3.26.1
Note 3 - Acquisition of Canada's Best Holdings
 9 Months Ended
Mar. 31, 2026
CBH [Member]  
Notes to Financial Statements  
Business Combination [Text Block]

NOTE 3 — ACQUISITION OF CANADA’S BEST HOLDINGS

 

On March 11, 2025, the Company acquired 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 payments up to $7.0 million. As of the acquisition date, total purchase consideration of $28.8 million includes the current fair value of the contingent consideration related to future earnout payments of $3.4 million. 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 $1.0 million which are included in the selling and administrative expense line of the consolidated statements of operations. The Company funded the initial purchase consideration totaling $25.9 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 $28.8 million, which includes 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 allocation was subject to the final determination of the purchase price, which was finalized in fiscal 2026, which includes revisions resulting from the finalization of pre-acquisition tax filing. The Company has finalized the third-party valuations of certain assets including fixed assets and intangible assets. The 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

  

Measurement

  

March 11, 2025

 

(In thousands)

 

as initially reported

  

period adjustments

  

as adjusted

 

Cash and cash equivalents

 $4,592  $-  $4,592 

Accounts receivable

  3,907   (55)  3,852 

Inventory

  4,287   (104)  4,183 

Property, plant and equipment

  640   1,422   2,062 

Operating lease right-of-use assets

  5,211   (386)  4,825 

Other assets

  204   1,790   1,994 

Intangible assets

  9,955   (353)  9,602 

Accounts payable

  (29)  2   (27)

Accrued expenses

  (472)  (639)  (1,111)

Operating lease liabilities

  (2,954)  -   (2,954)

Other long-term liabilities

  -   (1,515)  (1,515)

Deferred tax liability

  (3,700)  573   (3,127)

Identifiable Assets

  21,641   735   22,376 

Goodwill

  5,748   709   6,457 

Net Purchase Consideration

 $27,389  $1,444  $28,833 

 

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

  

Estimated Useful

 

(in thousands)

 

Value

  

Life (Years)

 
           

Tradename

 $991    10  

Non-compete agreements

  180   3-5 

Customer relationships

  8,431    20  
  $9,602       

 

CBH’s post-acquisition results of operations for the period from July 1, 2025, through March 31, 2026, are included in the Company’s Condensed Consolidated Statements of Operations. Since the acquisition date, net sales of CBH for the period from July 1, 2025, through March 31, 2026, were $22.8 million and operating income was $2.8 million, and net sales of CBH for the period from January 1, 2026, through March 31, 2026, were $7.5 million and operating income was $1.1 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 three and nine months ended March 31, 2025, 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 unaudited pro forma operating income for the three months ended March 31, 2025 of $6.2 million excludes acquisition-related expenses of $0.1 million. The unaudited pro forma operating income for the nine months ended March 31, 2025 of $23.9 million excludes acquisition-related expenses of $0.3 million.

 

  

Three Months Ended

  

Nine Months Ended

 

(in thousands; unaudited)

 

March 31,

  

March 31,

 
  

2025

  

2025

 

Sales

 $137,313  $432,807 
         

Gross Profit

 $34,579  $106,559 
         

Operating Income

 $6,245  $23,853