EnviroStar(US:EVI)2020-05-11 20:48Financial Performance - The Company experienced a decline in revenue for the quarter ended March 31, 2020, compared to the same period of the prior fiscal year due to the COVID-19 pandemic[112]. - Revenues for the nine-month period ended March 31, 2020 increased by $17.9 million, or 11%, compared to the same period of the prior fiscal year, driven by acquired businesses and successful sales tactics[119]. - Gross profit for the nine-month period ended March 31, 2020 increased by $4.9 million, or 13%, with gross margins rising from 22.5% to 23.0% compared to the prior year[120]. - Net income for the nine months ended March 31, 2020 was $831,000, a decrease from $2.5 million in the prior year, impacted by increased operating expenses and the COVID-19 pandemic[128]. Operating Expenses - Operating expenses increased by $7.1 million, or 22%, for the nine-month period ended March 31, 2020, primarily due to the execution of the "buy-and-build" growth strategy[122]. - The Company’s operating expenses include selling, general and administrative expenses, which correlate with changes in sales[101]. Liquidity and Financing - The Company borrowed approximately $9.0 million under its credit facility in April 2020 to ensure liquidity[114]. - The Company borrowed approximately $9.0 million under its existing 2018 Credit Agreement to ensure liquidity as the impact of COVID-19 evolves[141]. - The Company had $10.0 million available to borrow under the revolving credit facility as of March 31, 2020, under the 2018 Credit Agreement[140]. - The Company believes its existing cash and cash equivalents, along with anticipated cash from operations, will be sufficient to fund operations and capital expenditures for at least the next twelve months[143]. - As of March 31, 2020, the Company had approximately $30.0 million of outstanding borrowings with a weighted average interest rate of 2.41%[157]. - A hypothetical 1% increase in daily interest rates would increase the Company's annual interest expense by approximately $300,000[157]. Acquisitions and Growth Strategy - The Company has implemented a "buy-and-build" growth strategy since 2015, acquiring multiple businesses to expand its operations[102]. - Recent acquisitions include Commercial Laundry Products, Inc. and Large Equipment, Inc., enhancing the Company's market presence[104]. Impact of COVID-19 - The Company is actively monitoring the impact of COVID-19 and has taken actions to reduce costs and spending across the organization[112]. - The Company applied for PPP Loans under the CARES Act in the aggregate principal amount of approximately $7.3 million, but has not yet received any of the loans[114]. - Certain subsidiaries applied for approximately $7.3 million in PPP Loans under the Paycheck Protection Program, although acceptance of these loans is not assured[143]. Cash Flow and Investments - Cash provided by operating activities was $14.3 million for the nine months ended March 31, 2020, compared to cash used of $9.6 million in the prior year, marking a $23.9 million increase[134]. - Net cash used in investing activities decreased by $10.2 million to $4.1 million during the nine months ended March 31, 2020, primarily due to reduced cash used for acquisitions[135]. - Financing activities used cash of $11.3 million for the nine months ended March 31, 2020, a significant decrease compared to cash provided of $29.3 million in the prior year[137]. Assets and Working Capital - Total assets increased from $154.5 million at June 30, 2019 to $158.4 million at March 31, 2020, primarily due to acquisitions and the adoption of a new lease accounting standard[129]. - Working capital decreased from $37.2 million at June 30, 2019 to $26.9 million at March 31, 2020, reflecting lower accounts receivable and increased customer deposits[132]. Other Financial Information - Monthly base rental payments for leases with related parties totaled approximately $12,000 for Steiner-Atlantic and $21,000 for Tri-State during the nine months ended March 31, 2020[148][150]. - Payments under leases with PAC Industries totaled approximately $132,000 and $29,000 for the nine months ended March 31, 2020 and 2019, respectively[154]. - The Company had no off-balance sheet financing arrangements as of March 31, 2020[145]. - Inflation did not have a significant effect on the Company's results during the reported periods[146].