v3.26.1
Note 4 - Acquisition of Royston Group
 9 Months Ended
Mar. 31, 2026
Royston [Member]  
Notes to Financial Statements  
Business Combination [Text Block]

NOTE 4 — ACQUISITION OF ROYSTON GROUP

 

On February 20, 2026 the Company entered into an agreement and a plan of merger to acquire SRR Holdings, Inc. (Royston) which was completed on March 24, 2026.  Royston is a leading U.S.-based designer and manufacturer of cabinetry and store fixtures, refrigerated and heated cases, and signage for multiple end markets. Royston’s customer base spans across large, attractive end-markets of convenience, grocery and gas stations and other retail.  Royston was acquired for $325.0 million; 320.0 million in cash and $5.0 million in the Company’s common stock, subject to a working capital adjustment. The Company prefunded $13.2 million as an estimate of the cash and working capital acquired which brings the total purchase consideration to $338.2 million. The amount prefunded for cash and working capital will be adjusted in the fourth quarter of 2026 fiscal year to reflect the actual amounts acquired. The Company incurred acquisition-related costs totaling $6.5 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 $338.2 million with a combination of cash on hand, the $150 million revolving line of credit, the $200 million five-year term loan, and the $98.1 million of net proceeds from the Company’s February 26, 2026 public common stock offering.

 

The Company accounted for this transaction as a business combination. The Company has preliminarily allocated the purchase price of $338.2 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 2027, as well as potential revision resulting from the finalization of pre-acquisition tax filings and net working capital adjustments. 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 24, 2026, is as follows:

 

  

March 24, 2026

  

Measurement

  

March 24, 2026

 

(In thousands)

 

as initially reported

  

period adjustments

  

as adjusted

 

Cash and cash equivalents

 $1,353  $-  $1,353 

Accounts receivable

  36,990   -   36,990 

Inventory

  32,400   -   32,400 

Property, plant and equipment

  28,500   -   28,500 

Prepaids expenses and other current assets

  8,135   -   8,135 

Income tax provision refund

  1,792   -   1,792 

Operating lease right-of-use assets

  22,538   -   22,538 

Other assets

  1,291   -   1,291 

Intangible assets

  127,000   -   127,000 

Accounts payable

  (16,861)  -   (16,861)

Accrued expenses

  (18,558)  -   (18,558)

Operating lease liabilities

  (19,638)  -   (19,638)

Deferred tax liability

  (10,919)  -   (10,919)

Identifiable Assets

  194,023   -   194,023 

Goodwill

  144,176   -   144,176 

Net Purchase Consideration

 $338,199  $-  $338,199 

 

The gross amount of accounts receivable is $37.2 million.

 

Goodwill recorded from the acquisition of Royston is attributable to the impact of the positive cash flow from Royston 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 Fair

  

Estimated Useful

 

(in thousands)

 

Value

  

Life (Years)

 
         

Tradename

 $23,600  

Indefinite

 

Technology assets

  17,800   7 

Non-compete agreements

  1,300   5 

Customer relationships

  84,300   15 
  $127,000     

 

Royston’s post-acquisition results of operations for the period from March 24, 2026, through March 31, 2026, are included in the Company’s Condensed Consolidated Statements of Operations. Since the acquisition date, net sales of Royston for the period from March 24, 2025, through March 31, 2026, were $6.6 million and operating income was $0.8 million. The operating results of Royston are included in the Display Solutions Segment.

 

Pro Forma Impact of the Acquisition of Royston (Unaudited)

 

The following table represents unaudited pro forma results of operations and gives effect to the acquisition of Royston as if the transaction had occurred on July 1, 2024. 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 Royston.

 

The unaudited pro forma financial information for the three and nine months ended March 31, 2026, 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, 2026 of ($9.4) million excludes acquisition-related expenses of $21.4 million. The unaudited pro forma operating income for the nine months ended March 31, 2026 of $8.0 million excludes acquisition-related expenses of $21.8 million.

 

  

Three Months Ended

  

Nine Months Ended

 

(in thousands; unaudited)

 

March 31,

  

March 31,

 
  

2026

  

2026

 

Sales

 $205,929  $637,547 
         

Gross Profit

 $48,003  $156,022 
         

Operating Income

 $(9,414) $8,051