Note 3 - Acquisition of Royston Group |
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| Royston [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Business Combination [Text Block] |
NOTE 3 — 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, which was finalized in the first quarter of the 2027 fiscal year for $2.0 million returned to Company. The Company prefunded $13.2 million as an estimate of the cash and working capital acquired, followed by a $2.0 million refund in the first quarter of fiscal 2027, which brings the total purchase consideration to $336.2 million. 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 purchase consideration totaling $336.2 million with a combination of cash on hand, approximately $38 million of the $150 million revolving line of credit, the $200 million -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 allocated the purchase price of $336.2 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 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:
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. As a result of the acquisition, goodwill of $20.3 million recognized in the United States is expected to be deductible for tax purposes. 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:
Royston’s post-acquisition results of operations for the period from July 1, 2026, through September 30, 2026, are included in the Company’s Condensed Consolidated Statements of Operations. Since the acquisition date, net sales of Royston for the period from July 1, 2026, through September 30, 2026, were $72.4 million and operating income was $4.9 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 months ended September 30, 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 September 30, 2025 of $15.5 million excludes acquisition-related expenses of $0.2 million.
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