Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Mar. 31, 2017 | May 08, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | EnviroStar, Inc. | |
Entity Central Index Key | 65,312 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --06-30 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 10,369,045 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,017 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Income Statement [Abstract] | ||||
Revenues | $ 24,653 | $ 12,760 | $ 67,523 | $ 27,623 |
Cost of sales | 19,073 | 9,919 | 52,855 | 21,457 |
Gross profit | 5,580 | 2,841 | 14,668 | 6,166 |
Selling, general and administrative expenses | 4,081 | 1,600 | 10,328 | 4,066 |
Operating income | 1,499 | 1,241 | 4,340 | 2,100 |
Interest expense (income), net | 62 | (1) | 112 | (2) |
Income before provision for income taxes | 1,437 | 1,242 | 4,228 | 2,102 |
Provision for income taxes | 547 | 468 | 1,658 | 792 |
Net income | $ 890 | $ 774 | $ 2,570 | $ 1,310 |
Net earnings per share - basic | $ 0.08 | $ 0.11 | $ 0.27 | $ 0.19 |
Net earnings per share - diluted | $ 0.08 | $ 0.11 | $ 0.27 | $ 0.19 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Current assets | ||
Cash and cash equivalents | $ 3,612 | $ 3,942 |
Accounts receivable, net of allowance for doubtful accounts of $195 and $160, respectively | 10,672 | 1,833 |
Inventories, net | 6,465 | 2,627 |
Vendor deposits | 1,265 | 803 |
Other current assets | 561 | 673 |
Total current assets | 22,575 | 9,878 |
Equipment and improvements, net | 979 | 135 |
Intangible assets, net | 6,240 | 27 |
Goodwill | 22,139 | |
Other assets | 330 | 121 |
Total assets | 52,263 | 10,161 |
Current liabilities | ||
Accounts payable and accrued expenses | 8,649 | 2,898 |
Accrued employee expenses | 900 | 961 |
Customer deposits | 3,863 | 1,213 |
Billings in excess of costs on uncompleted contracts | 5,055 | |
Current portion of long-term debt | 714 | |
Total current liabilities | 19,181 | 5,072 |
Deferred income taxes | 298 | |
Long-term debt, net | 3,906 | |
Total liabilities | 23,385 | 5,072 |
Shareholders' equity | ||
Preferred stock, $1.00 par value; authorized shares - 200,000; none issued and outstanding | ||
Common stock, $.025 par value; 20,000,000 shares authorized at March 31, 2017 and 15,000,000 shares authorized at June 30, 2016; 10,850,787 shares issued at March 31, 2017 and 7,065,500 shares issued at June 30, 2016, including shares held in treasury | 260 | 177 |
Additional paid-in capital | 24,271 | 2,095 |
Retained earnings | 4,351 | 2,821 |
Treasury stock, 31,768 shares, at cost | (4) | (4) |
Total shareholders' equity | 28,878 | 5,089 |
Total liabilities and shareholders' equity | $ 52,263 | $ 10,161 |
Condensed Consolidated Balance4
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts and trade notes receivable, allowance for doubtful accounts | $ 195 | $ 160 |
Preferred stock, par value | $ 1 | $ 1 |
Preferred stock, shares authorized | 200,000 | 200,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.025 | $ 0.025 |
Common stock, shares authorized | 20,000,000 | 15,000,000 |
Common stock, shares issued | 10,850,787 | 7,065,500 |
Treasury stock, shares | 31,768 | 31,768 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Operating activities: | ||
Net income | $ 2,570 | $ 1,310 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 409 | 47 |
Amortization of debt discount | 6 | |
(Recovery of) bad debt expense | (33) | |
Share-based compensation | 200 | |
Inventory reserve | (27) | 15 |
Provision for deferred income taxes | 89 | 20 |
(Increase) decrease in operating assets: | ||
Accounts receivable | (209) | (1,561) |
Inventories | (376) | 165 |
Vendor deposits | 1,484 | (1,077) |
Other assets | 789 | 156 |
Increase (decrease) in operating liabilities: | ||
Accounts payable and accrued expenses | (548) | 2,667 |
Accrued employee expenses | (311) | 96 |
Customer deposits | (1,597) | (1,383) |
Billings in excess of costs on uncompleted contracts | 1,167 | |
Net cash provided by operating activities | 3,613 | 455 |
Investing activities: | ||
Capital expenditures | (123) | (2) |
Cash paid for acquisition, net of cash acquired | (13,394) | |
Net cash used by investing activities | (13,517) | (2) |
Financing activities: | ||
Dividends paid | (1,040) | (1,407) |
Proceeds from borrowings | 25,938 | |
Debt repayments | (21,236) | |
Payment of debt issuance costs | (88) | |
Proceeds from issuance of common shares to related party | 6,000 | |
Net cash provided (used) by financing activities | 9,574 | (1,407) |
Net decrease in cash and cash equivalents | (330) | (954) |
Cash and cash equivalents at beginning of period | 3,942 | 3,909 |
Cash and cash equivalents at end of period | 3,612 | 2,955 |
Supplemental disclosures of cash flow information: | ||
Cash paid during the period for interest | 72 | |
Cash paid during the period for income taxes | $ 1,370 | $ 316 |
Supplemental disclosure of non-cash financing activities | ||
Common stock issued for acquisition | 16,053 |
General
General | 9 Months Ended |
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | Note (1) - General: The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X related to interim period financial statements. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include certain information and footnotes required by GAAP for complete financial statements. However, in management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals and adjustments) which are necessary in order to state fairly the Company’s results of operations, financial position and cash flows as of and for the periods presented. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes, including the Summary of Significant Accounting Policies, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. The June 30, 2016 balance sheet information contained herein was derived from the audited consolidated financial statements as of that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2016. The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions made may not prove to be correct, and actual results could differ from the estimates. Certain prior period amounts in the accompanying unaudited condensed consolidated financial statements have been reclassified in order to be comparable to the current period’s classifications. These reclassifications had no effect on previously reported net income. The Company, through its wholly-owned subsidiaries, distributes commercial and industrial laundry and dry cleaning equipment and steam and hot water boilers manufactured by others, supplies replacement parts and accessories, provides maintenance services to its customers, and designs and plans turn-key laundry, dry cleaning and boiler systems for its customers, which include institutional, retail, industrial and commercial customers. On October 10, 2016 (the “Closing Date”), the Company, through its wholly-owned subsidiary, Western State Design, Inc. (“Western State Design”), completed the acquisition of substantially all the assets of Western State Design, LLC (“WSD”), a California-based distributor of commercial and industrial laundry equipment and related parts for new laundry facilities and to the replacement laundry market (the “Western State Design Acquisition”). As a result of the closing of the Western State Design Acquisition, the financial condition, including assets and liabilities, and results of operations of the acquired business following the Closing Date are included in the Company’s consolidated financial statements from the Closing Date. See Note 3 for additional information regarding the Western State Design Acquisition. In addition, the Company, through an indirect wholly-owned subsidiary, owns the worldwide rights to the name DRYCLEAN USA® and licenses the right to use such name for a fee to retail dry cleaners in the United States, the Caribbean and Latin America. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 9 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note (2) – Summary of Significant Accounting Policies: Revenue Recognition: Products are generally shipped Free on Board (“FOB”) from the Company’s warehouses or drop shipped from the Company’s vendor as FOB, at which time risk of loss and title passes to the purchaser. Revenue is recognized when there is persuasive evidence that the arrangement, shipment or delivery has occurred, the price is fixed and determinable, and collectability is reasonably assured. Installation revenues are recognized when the installation of the equipment has occurred. There are also instances where the Company enters into longer termed contracts where the price to the customer includes the sale of the equipment and the related installation. The installation on these types of contracts is usually completed within six to twelve months. Revenues from these contracts are recognized under the percentage-of-completion method of accounting, measured by the percentage of costs incurred to date against the estimated total costs for each contract. This method is used because management considers the total cost to be the best available measure of progress on the contracts. Due to the inherent uncertainties in estimating costs, it is possible that the estimates used may change in the near term. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tolls and insurance. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income, which would be recognized in the period during which the revisions are determined. Costs and estimated earnings in excess of billings are classified as other current assets. Billings in excess of costs on uncompleted contracts are classified as current liabilities. Contract retentions billed are included in accounts receivable. Revenues from part sales are recognized when the part is shipped and service revenues are recognized when the service is completed. Goodwill: |
Acquisition
Acquisition | 9 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Acquisition | Note (3) – Acquisition The Western State Design Acquisition was treated for accounting purposes as a purchase of WSD using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations Purchase price consideration: Cash Consideration, net of cash acquired (a) $ 13,394 Stock Consideration (b) 16,053 Total purchase price consideration, net of cash acquired $ 29,447 (a) (b) Allocation of purchase price consideration (in thousands): Accounts receivable $ 8,597 Inventory 3,429 Other assets 2,623 Property, plant and equipment 879 Intangible assets 6,464 Accounts payable and accrued expenses (6,549 ) Customer deposits (4,247 ) Billings in excess of costs on uncompleted contracts (3,888 ) Total identifiable net assets 7,378 Goodwill 22,139 Total $ 29,447 The purchase price allocation reflects preliminary fair value estimates based on preliminary work and analyses performed by management and is subject to change as additional information to assist in determining the fair value of the net assets acquired at the Closing Date is obtained during the one year post-closing measurement period. Intangible assets consist of $2.4 million allocated to the Western State Design trade name, $3.6 million allocated to customer-related intangible assets and $0.4 million allocated to covenants not to compete. The Western State Design trade name is indefinite-lived and therefore not subject to amortization. The Western State Design trade name will be evaluated for impairment annually or more frequently when 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 and covenants not to compete will be amortized over 10 years and 5 years, respectively. 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 benefits from the increased scale of the Company as a result of the Western State Design Acquisition. 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 Western State Design Acquisition, as if the Company had completed the Western State Design Acquisition and related financing transactions on July 1, 2015, but using the preliminary estimates of the fair values of the assets acquired and liabilities assumed as of the Closing Date. 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 Western State Design Acquisition had occurred on the date assumed, nor are they indicative of future results of operations. For the nine months ended (in thousands) 2017 2016 Revenues $ 84,193 $ 74,453 Net income 3,450 2,651 The unaudited supplemental pro forma net income for the nine months ended March 31, 2016 was adjusted to include a total of $868,000 of transaction costs incurred by the Company and WSD. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note (4) - Earnings Per Share: For the nine months ended For the three months ended 2017 2016 2017 2016 Net income $ 2,570 $ 1,310 $ 890 $ 774 Less: distributed and undistributed 107 — 37 — Net income allocated to EnviroStar, $ 2,463 $ 1,310 $ 853 $ 774 Weighted average shares outstanding 9,140 7,034 10,369 7,034 Dilutive common share equivalents 32 — 96 — Weighted average shares outstanding 9,172 7,034 10,465 7,034 Basic earnings per share $ 0.27 $ 0.19 $ 0.08 $ 0.11 Diluted earnings per share $ 0.27 $ 0.19 $ 0.08 $ 0.11 At March 31, 2017, other than the 449,974 shares of restricted common stock discussed above, there were no potentially dilutive securities outstanding. There were no potentially dilutive securities outstanding at March 31, 2016. For the nine and three months ended March 31, 2017 there were 417,972 and 353,969 of restricted common stock that was not included in the calculation of dilutive earnings per share because their impact is anti-dilutive. |
Debt
Debt | 9 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Debt | Note (5) - Debt: March 31, June 30, Term Loan $ 4,702 $ — Revolving Line of Credit — — Less: unamortized discount and deferred financing costs (82 ) — Total debt, net 4,620 — Less: current maturities of long-term debt (714 ) — Total long-term debt $ 3,906 $ — In connection with the Western State Design Acquisition, on October 7, 2016, the Company entered into a $20.0 million credit agreement (the “Credit Facility”), consisting of a $15.0 million revolving line of credit, subject to adjustment as described below (the “Revolving Line of Credit”), and a $5.0 million term loan (the “Term Loan”). The Company used a total of approximately $12.6 million of borrowings under the Revolving Line of Credit and Term Loan to finance a portion of the Cash Consideration paid on the Closing Date for the Western State Design Acquisition, and to pay approximately $88,000 of fees, costs and expenses arising in connection with entering into the Credit Facility. At March 31, 2017, no amounts were outstanding under the Revolving Line of Credit and $4.7 million was outstanding under the Term Loan. The Credit Facility replaced the Company’s previous credit facility which allowed for borrowings of up to $2.25 million. No amounts were outstanding under such prior credit facility at June 30, 2016 or at any time during the period from July 1, 2016 through October 7, 2016, when it was replaced by the Credit Facility. The Credit Facility has a term of five years and matures on October 10, 2021. Interest on the outstanding principal amount of borrowings under the Credit Facility accrues at an annual rate equal to the daily one-month LIBOR, plus (i) 2.25% in the case of borrowings under the Revolving Line of Credit and (ii) 2.85% in the case of borrowings under the Term Loan. In addition to interest payments, borrowings under the Term Loan require monthly principal payments of approximately $60,000 over the five-year term, with the balance due upon maturity. The obligations of the Company under the Credit Facility are secured by substantially all of the assets of the Company and its subsidiaries. In addition, the Company’s subsidiaries have jointly and severally guaranteed the performance of the Company’s payment and other obligations under the Credit Facility. The Credit Facility also contains affirmative covenants which require the Company to meet certain financial criteria, including a fixed charge coverage ratio, an asset coverage ratio, a senior leverage ratio and a total leverage ratio, as well as other covenants which may restrict, among other things, the Company’s ability to pay dividends, complete merger, acquisition or similar transactions, make certain capital expenditures, incur certain operating lease expenditures or repurchase shares of its common stock. Additionally, the amount available to borrow under the Revolving Line of Credit is determined based on an asset-based formula, which may restrict the amount available for borrowing under the Revolving Line of Credit to an amount less than $15.0 million. At March 31, 2017, the Company was in compliance with all Credit Facility covenants and $8.3 million was available to borrow under the Revolving Line of Credit. |
Income Taxes
Income Taxes | 9 Months Ended |
Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note (6) - Income Taxes: As of March 31, 2017 and June 30, 2016, the Company had deferred tax assets of approximately $320,000 and $121,000, respectively, which are included in other assets in the condensed consolidated balance sheets as of such dates. Consistent with the guidance of the Financial Accounting Standards Board (the “FASB”) regarding accounting for income taxes, the Company regularly estimates its ability to recover deferred tax assets and establishes a valuation allowance against deferred tax assets to reduce the balance to amounts expected to be recoverable. This evaluation includes the consideration of several factors, including an estimate of the likelihood of generating sufficient taxable income in future periods over which temporary differences reverse, the expected reversal of deferred tax liabilities, past and projected taxable income and available tax planning strategies. As of March 31, 2017 and June 30, 2016, management believed that it was more-likely-than not that the results of future operations will generate sufficient taxable income to realize the net amount of the Company’s deferred tax assets over the periods during which temporary differences reverse. The Company follows ASC Topic 740-10-25, “Accounting for Uncertainty in Income Taxes” (“ASC 740”). ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. During the nine months ended March 31, 2017, the Company’s accounting for income taxes in accordance with this standard did not result in any adjustment to the Company’s provision for income taxes. As of March 31, 2017, the Company was subject to potential federal and state tax examinations for the tax years 2013 through 2016. |
Shareholders' Equity
Shareholders' Equity | 9 Months Ended |
Mar. 31, 2017 | |
Stockholders' Equity Note [Abstract] | |
Shareholders' Equity | Note (7) – Shareholders’ Equity On November 30, 2016, the Company’s Board of Directors declared a $.10 per share cash dividend (an aggregate of $1.0 million), which was paid on January 6, 2017 to stockholders of record at the close of business on December 21, 2016. On November 13, 2015, the Company’s Board of Directors declared a $.20 per share cash dividend (an aggregate of $1.4 million), which was paid on December 18, 2015 to stockholders of record at the close of business on December 4, 2015. |
Equity Incentive Plan
Equity Incentive Plan | 9 Months Ended |
Mar. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Equity Incentive Plan | Note (8) – Equity Incentive Plan: |
Transactions with Related Parti
Transactions with Related Parties | 9 Months Ended |
Mar. 31, 2017 | |
Related Party Transactions [Abstract] | |
Transactions with Related Parties | Note (9) – Transactions with Related Parties: The Company’s wholly-owned subsidiary, Western State Design, leases 17,600 square feet of warehouse and office space from an affiliate of Dennis Mack, a director and Executive Vice President of the Company, and Tom Marks, an Executive Vice President of the Company, pursuant to a lease agreement dated October 10, 2016. Under the lease, monthly base rental payments are $12,000 during the initial term of the lease. In addition to base rent, Western State Design is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. The lease has an initial term of five years and provides for two successive three-year renewal terms at the option of Western State Design. Payments under this lease totaled approximately $66,000 in the period from October 10, 2016 through March 31, 2017. In connection with the Western State Design Acquisition, the Company made $520,000 of payments on behalf of an entity controlled by Dennis Mack and Tom Marks, which agreed to reimburse the Company for such payments. As of March 31, 2017, such entity had reimbursed the Company for $490,000 of such payments and, accordingly, $30,000 of such payments remain owed to the Company. See also Note 7 for a description of the Private Placement Transaction between the Company and an affiliate of Henry M. Nahmad, the Company’s Chairman, Chief Executive Officer and President, which was completed on October 10, 2016. |
Recently Issued Accounting Guid
Recently Issued Accounting Guidance | 9 Months Ended |
Mar. 31, 2017 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Recently Issued Accounting Guidance | Note (10) – Recently Issued Accounting Guidance In July 2015, the FASB issued ASU No. 2015-11 , In December 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU No. 2015-17”). The amendments in ASU No. 2015-17 eliminate the current requirement for organizations to separate deferred tax assets and liabilities into current and noncurrent amounts in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The standard is effective for annual reporting periods beginning after December 15, 2016. The amendments were applied prospectively to all deferred tax liabilities and assets, and retrospectively reclassed $108,000 of deferred tax assets from other current assets to other assets at June 30, 2016. The Company adopted this standard and it did not have a material impact on its consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU No. 2016-02”), which is designed to increase transparency and comparability by requiring the recognition of lease assets and lease liabilities on the balance sheet and the disclosure of key information about leasing arrangements. The new standard will require an entity to recognize the following for all leases (with the exception of short-term leases) at the commencement date (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is evaluating the impact, if any, that adopting this standard may have on its consolidated financial statements. In March 2016, the FASB issued ASU No. 2016-09, “Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU No. 2016-09”), which requires that all income tax effects of awards be recognized in the statement of operations when the awards vest or settle. The standard also requires presentation of excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. The standard increases the amount companies can withhold to cover income taxes on awards without triggering liability classification for shares used to satisfy statutory income tax withholding obligations and requires application of a modified retrospective transition method. ASU No. 2016-09 is effective for annual reporting periods beginning after December 15, 2016 (and interim periods therein). Early adoption is permitted if all provisions are adopted in the same period. The Company is evaluating the impact, if any, that adopting this standard may have on its consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which is designed to simplify the subsequent measurement of goodwill. The new guidance eliminated Step 2 from the goodwill impairment test which was required in computing the implied fair value of goodwill. Instead, under the new amendment, an entity will be required to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. If applicable, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss. The amendments in this guidance are effective for public business entities for annual and interim goodwill impairment tests performed in fiscal years beginning after December 15, 2019 with early adoption permitted after January 1, 2017. The Company is currently evaluating the impact of this guidance on the Company’s consolidated financial statements. Management believes the impact of other issued accounting standards and updates, which are not yet effective, will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows upon adoption. |
Summary of Significant Accoun16
Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Revenue Recognition | Revenue Recognition: Products are generally shipped Free on Board (“FOB”) from the Company’s warehouses or drop shipped from the Company’s vendor as FOB, at which time risk of loss and title passes to the purchaser. Revenue is recognized when there is persuasive evidence that the arrangement, shipment or delivery has occurred, the price is fixed and determinable, and collectability is reasonably assured. Installation revenues are recognized when the installation of the equipment has occurred. There are also instances where the Company enters into longer termed contracts where the price to the customer includes the sale of the equipment and the related installation. The installation on these types of contracts is usually completed within six to twelve months. Revenues from these contracts are recognized under the percentage-of-completion method of accounting, measured by the percentage of costs incurred to date against the estimated total costs for each contract. This method is used because management considers the total cost to be the best available measure of progress on the contracts. Due to the inherent uncertainties in estimating costs, it is possible that the estimates used may change in the near term. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tolls and insurance. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income, which would be recognized in the period during which the revisions are determined. Costs and estimated earnings in excess of billings are classified as other current assets. Billings in excess of costs on uncompleted contracts are classified as current liabilities. Contract retentions billed are included in accounts receivable. Revenues from part sales are recognized when the part is shipped and service revenues are recognized when the service is completed. |
Goodwill | Goodwill: |
Acquisition (Tables)
Acquisition (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Business Combinations [Abstract] | |
Schedule of Purchase Price | The computation of the purchase price consideration and the allocation thereof to the net assets acquired are presented in the following tables (in thousands): Purchase price consideration: Cash Consideration, net of cash acquired (a) $ 13,394 Stock Consideration (b) 16,053 Total purchase price consideration, net of cash acquired $ 29,447 (a) (b) |
Schedule of Allocation of Purchase Price Consideration | Allocation of purchase price consideration (in thousands): Accounts receivable $ 8,597 Inventory 3,429 Other assets 2,623 Property, plant and equipment 879 Intangible assets 6,464 Accounts payable and accrued expenses (6,549 ) Customer deposits (4,247 ) Billings in excess of costs on uncompleted contracts (3,888 ) Total identifiable net assets 7,378 Goodwill 22,139 Total $ 29,447 |
Schedule of 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 Western State Design Acquisition, as if the Company had completed the Western State Design Acquisition and related financing transactions on July 1, 2015, but using the preliminary estimates of the fair values of the assets acquired and liabilities assumed as of the Closing Date. 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 Western State Design Acquisition had occurred on the date assumed, nor are they indicative of future results of operations. For the nine months ended (in thousands) 2017 2016 Revenues $ 84,193 $ 74,453 Net income 3,450 2,651 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Earnings Per Share [Abstract] | |
Schedule of Basic and diluted earnings per share | Basic and diluted earnings per share for the nine and three months ended March 31, 2017 and 2016 are computed as follows (in thousands except per share data): For the nine months ended For the three months ended 2017 2016 2017 2016 Net income $ 2,570 $ 1,310 $ 890 $ 774 Less: distributed and undistributed 107 — 37 — Net income allocated to EnviroStar, $ 2,463 $ 1,310 $ 853 $ 774 Weighted average shares outstanding 9,140 7,034 10,369 7,034 Dilutive common share equivalents 32 — 96 — Weighted average shares outstanding 9,172 7,034 10,465 7,034 Basic earnings per share $ 0.27 $ 0.19 $ 0.08 $ 0.11 Diluted earnings per share $ 0.27 $ 0.19 $ 0.08 $ 0.11 |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term debt | Long-term debt as of March 31, 2017 and June 30, 2016 are as follows (in thousands): March 31, June 30, Term Loan $ 4,702 $ — Revolving Line of Credit — — Less: unamortized discount and deferred financing costs (82 ) — Total debt, net 4,620 — Less: current maturities of long-term debt (714 ) — Total long-term debt $ 3,906 $ — |
Acquisition (Narrative) (Detail
Acquisition (Narrative) (Details) - USD ($) | Oct. 10, 2016 | Mar. 31, 2017 | Mar. 31, 2017 |
Business Acquisition [Line Items] | |||
Stock Consideration | 2,044,990 | ||
Symmetric Capital II LLC [Member] | |||
Business Acquisition [Line Items] | |||
Shares issued in private placement | 1,290,323 | ||
Shares issued in private placement, value | $ 6,000,000 | ||
Western State Design [Member] | |||
Business Acquisition [Line Items] | |||
Cash Consideration | $ 18,500,000 | ||
Stock Consideration | 388,504 | 1,656,486 | |
Deposited in an escrow account | $ 2,800,000 | $ 2,800,000 | |
Proceeds from line of credit | 12,500,000 | ||
Acquisition legal and other professional fees | $ 478,000 | 478,000 | |
Total purchase price for accounting purposes | 34,600,000 | ||
Cash acquired | $ 5,100,000 | ||
Closing price | $ 7.85 | $ 7.85 | |
Western State Design [Member] | Trade Names [Member] | |||
Business Acquisition [Line Items] | |||
Indefinite lived intangible assets acquired | $ 2,400,000 | $ 2,400,000 | |
Amortized life | 15 years | ||
Western State Design [Member] | Customer-related intangible assets [Member] | |||
Business Acquisition [Line Items] | |||
Finite lived intangible assets acquired | 3,600,000 | $ 3,600,000 | |
Amortized life | 10 years | ||
Western State Design [Member] | Covenants not to compete [Member] | |||
Business Acquisition [Line Items] | |||
Finite lived intangible assets acquired | $ 400,000 | $ 400,000 | |
Amortized life | 5 years |
Acquisition (Schedule of Purcha
Acquisition (Schedule of Purchase price) (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Mar. 31, 2017 | Mar. 31, 2016 | ||
Purchase price consideration: | |||
Cash Consideration, net of cash acquired | $ 13,394 | ||
Western State Design [Member] | |||
Purchase price consideration: | |||
Cash Consideration, net of cash acquired | [1] | 13,394 | |
Stock Consideration | [2] | 16,053 | |
Total purchase price consideration, net of cash acquired | $ 29,447 | ||
[1] | Includes $18.5 million net of $5.1 million of cash acquired. | ||
[2] | Calculated as 2,044,990 shares of common stock, multiplied by $7.85, the closing price of the Company's common stock on the Closing Date. |
Acquisition (Schedule of Alloca
Acquisition (Schedule of Allocation of purchase price consideration) (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Allocation of purchase price consideration (in thousands): | ||
Goodwill | $ 22,139 | |
Western State Design [Member] | ||
Allocation of purchase price consideration (in thousands): | ||
Accounts receivable | 8,597 | |
Inventory | 3,429 | |
Other assets | 2,623 | |
Property, plant and equipment | 879 | |
Intangible assets | 6,464 | |
Accounts payable and accrued expenses | (6,549) | |
Customer deposits | (4,247) | |
Billings in excess of costs on uncompleted contracts | (3,888) | |
Total identifiable net assets | 7,378 | |
Goodwill | 22,139 | |
Total | $ 29,447 |
Acquisition (Schedule of Supple
Acquisition (Schedule of Supplemental Pro Forma Results of Operations) (Details) - Western State Design [Member] - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2017 | Mar. 31, 2016 | |
Business Acquisition [Line Items] | ||
Revenues | $ 84,193 | $ 74,453 |
Net income | $ 3,450 | 2,651 |
Transaction costs | $ 868 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Jan. 31, 2017 | Nov. 30, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2017 | Mar. 31, 2016 | |
Net income | $ 890 | $ 774 | $ 2,570 | $ 1,310 | ||
Less: distributed and undistributed income allocated to non-vested restricted common stock | 37 | 107 | ||||
Net income allocated to EnviroStar, Inc. shareholders | $ 853 | $ 774 | $ 2,463 | $ 1,310 | ||
Weighted average shares outstanding used in basic earnings per share | 10,369,000 | 7,034,000 | 9,140,000 | 7,034,000 | ||
Dilutive common share equivalents | 96,000 | 32,000 | ||||
Weighted average shares outstanding used in dilutive earnings per share | 10,465,000 | 7,034,000 | 9,172,000 | 7,034,000 | ||
Basic earnings per share | $ 0.08 | $ 0.11 | $ 0.27 | $ 0.19 | ||
Diluted earnings per share | $ 0.08 | $ 0.11 | $ 0.27 | $ 0.19 | ||
Options outstanding | 449,974 | 449,974 | ||||
Restricted stock issued | 353,969 | 417,972 | ||||
EnviroStar, Inc. 2015 Equity Incentive Plan [Member] | ||||||
Restricted stock issued | 35,212 | 414,762 |
Debt (Narrative) (Details)
Debt (Narrative) (Details) - USD ($) | 9 Months Ended | ||
Mar. 31, 2017 | Oct. 07, 2016 | Jun. 30, 2016 | |
Debt Instrument [Line Items] | |||
Line of credit amount outstanding | |||
Western State Design [Member] | |||
Debt Instrument [Line Items] | |||
Proceeds from credit facility | 12,500,000 | ||
Credit facility [Member] | |||
Debt Instrument [Line Items] | |||
Revolving line of credit facility amount | $ 20,000,000 | ||
Fees, costs and expenses | $ 88,000 | ||
Basis of variable interest rate | one-month LIBOR, plus | ||
Spread on variable interest rate basis | 2.25% | ||
Expiration date | Oct. 10, 2021 | ||
Amount available for borrowing under the Revolving Line of Credit | $ 15,000,000 | ||
Available to borrow under the Revolving Line of Credit | $ 8,300,000 | ||
Term Loan [Member] | |||
Debt Instrument [Line Items] | |||
Revolving line of credit facility amount | 5,000,000 | ||
Spread on variable interest rate basis | 2.85% | ||
Line of credit amount outstanding | $ 4,700,000 | ||
Credit facility term | 5 years | ||
Monthly payments | $ 60,000 | ||
Revolving line of credit [Member] | |||
Debt Instrument [Line Items] | |||
Revolving line of credit facility amount | 15,000,000 | ||
Line of credit amount outstanding | |||
Previous Credit facility [Member] | |||
Debt Instrument [Line Items] | |||
Revolving line of credit facility amount | $ 2,250,000 | ||
Line of credit amount outstanding |
Debt (Schedule of Long-term deb
Debt (Schedule of Long-term debt) (Details) - USD ($) $ in Thousands | Mar. 31, 2017 | Jun. 30, 2016 |
Debt Disclosure [Abstract] | ||
Term Loan | $ 4,702 | |
Revolving Line of Credit | ||
Less: unamortized discount and deferred financing costs | (82) | |
Total debt, net | 4,620 | |
Less: current maturities of long-term debt | (714) | |
Total long-term debt | $ 3,906 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Mar. 31, 2017 | Jun. 30, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal statutory tax rate | 34.00% | |
Total deferred income tax assets | $ 320 | $ 121 |
Shareholders' Equity (Details)
Shareholders' Equity (Details) - USD ($) | Oct. 10, 2016 | Nov. 30, 2016 | Mar. 31, 2017 | Mar. 31, 2017 | Nov. 13, 2016 |
Class of Stock [Line Items] | |||||
Stock Consideration | 2,044,990 | ||||
Cash dividends declared | $ 0.10 | $ 0.20 | |||
Dividends | $ 1,000,000 | $ 1,400,000 | |||
Dividend paid date | Jan. 6, 2017 | Dec. 18, 2015 | |||
Dividend record date | Dec. 21, 2016 | Dec. 4, 2015 | |||
Symmetric Capital II LLC [Member] | |||||
Class of Stock [Line Items] | |||||
Shares issued in private placement | 1,290,323 | ||||
Shares issued in private placement, value | $ 6,000,000 | ||||
Western State Design [Member] | |||||
Class of Stock [Line Items] | |||||
Stock Consideration | 388,504 | 1,656,486 |
Equity Incentive Plan (Details)
Equity Incentive Plan (Details) $ in Millions | 9 Months Ended |
Mar. 31, 2017USD ($)shares | |
Number of shares authorized under 2015 Equity Incentive Plan | 1,500,000 |
Awards granted under 2015 Equity Incentive Plan | 449,974 |
Vesting period | 4 years |
Grant date fair value of restricted stock | $ | $ 6.4 |
Minimum [Member] | |
Reminder vesting period | 10 years |
Maximum [Member] | |
Reminder vesting period | 24 years |
Transactions with Related Par30
Transactions with Related Parties (Details) | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2016USD ($) | Mar. 31, 2017USD ($)ft² | Mar. 31, 2016USD ($) | |
Michael S. Steiner [Member] | |||
Related Party Transaction [Line Items] | |||
Original lease term | 3 years | ||
Area of lease | ft² | 27,000 | ||
Lease start date | Nov. 1, 2014 | ||
Annual rent payment, year one | $ 10,275 | ||
Annual rent payment, year two | 10,580 | ||
Annual rent payment, year three | 10,900 | ||
Rental expense | $ 102,000 | $ 100,000 | |
Dennis Mack [Member] | |||
Related Party Transaction [Line Items] | |||
Original lease term | 5 years | ||
Area of lease | ft² | 17,600 | ||
Lease start date | Oct. 10, 2016 | ||
Annual rent payment, year one | $ 12,000 | ||
Rental expense | $ 66,000 | ||
Western State Design [Member] | Dennis Mack and Tom Marks [Member] | |||
Related Party Transaction [Line Items] | |||
Payment on behalf of related party entity | 520,000 | ||
Reimbursement of payment | 490,000 | ||
Due to related parties | $ 30,000 |
Recently Issued Accounting Gu31
Recently Issued Accounting Guidance (Details) | Jun. 30, 2016USD ($) |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |
Current deferred tax assets reclassified to other assets, resulting from adoption of ASU 2015-17 | $ 108,000 |