EVI INDUSTRIES INC

Previous wording

Certain statements in this Quarterly Report on Form 10-Q are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, words such as “may,” “should,” “could,” “seek,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “strategy” and similar expressions are intended to identify forward looking statements. Forward looking statements may relate to, among other things, events, conditions and trends that may affect the future plans, operations, business, strategies, operating results, financial position and prospects of the Company. Forward looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, or industry trends and results, to differ materially from the future results, trends, performance or achievements expressed or implied by such forward looking statements. These risks and uncertainties include, among others, those associated with: general economic and business conditions in the United States and other countries where the Company operates or where the Company’s customers and suppliers are located, including the potential of a recession; industry conditions and trends; credit market volatility; risks related to supply chain delays and disruptions and their impact on the Company’s business and results, including the Company’s ability to deliver products and services to its customers on a timely basis; risks relating to inflation, including the current inflationary trend, and the impact of inflation on the Company’s costs and its ability to increase the price of its products and services to offset such costs, and on the market for the Company’s products and services; risks related to labor shortages and increases in the costs of labor, and the impact thereof on the Company, including its ability to deliver products, provide services or otherwise meet customers’ expectations; risks related to interest rate increases, including the impact thereof on the cost of the Company’s indebtedness and the Company’s ability to raise capital if deemed necessary or advisable; risks associated with international relations and international hostilities, and the impact thereof on economic conditions, including supply chain constraints and inflationary trends; the Company’s ability to implement its business and growth strategies and plans, including changes thereto; risks and uncertainties associated with the Company’s ”buy-and-build” growth strategy, including, without limitation, that the Company may not be successful in identifying or consummating acquisitions or other strategic transactions, integration risks, risks related to indebtedness incurred by the Company in connection with the financing of acquisitions and other strategic transactions, dilution experienced by the Company’s existing stockholders as a result of the issuance of share…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements in this Quarterly Report on Form 10-Q are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on Form 10-Q, words such as “may,” “should,” “could,” “seek,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “strategy” and similar expressions are intended to identify forward looking statements. Forward looking statements may relate to, among other things, events, conditions and trends that may affect the future plans, operations, business, strategies, operating results, financial position and prospects of the Company. Forward looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, or industry trends and results, to differ materially from the future results, trends, performance or achievements expressed or implied by such forward looking statements. These risks and uncertainties include, among others, those associated with: general economic and business conditions in the United States and other countries where the Company operates or where the Company’s customers and suppliers are located; industry conditions and trends; credit market volatility; risks related to supply chain delays and disruptions and their impact on the Company’s business and results, including the Company’s ability to deliver products and services to its customers on a timely basis; risks relating to inflation, including the current inflationary trend, and the impact of inflation on the Company’s costs and its ability to increase the price of its products and services to offset such costs, and on the market for the Company’s products and services; risks related to labor shortages and increases in the costs of labor, and the impact thereof on the Company, including its ability to deliver products, provide services or otherwise meet customers’ expectations; risks related to interest rate increases, including the impact thereof on the cost of the Company’s indebtedness and the Company’s ability to raise capital if deemed necessary or advisable; risks associated with international relations and international hostilities, and the impact thereof on economic conditions, including supply chain constraints and inflationary trends; the Company’s ability to implement its business and growth strategies and plans, including changes thereto; risks and uncertainties associated with the Company’s “buy-and-build” growth strategy, including, without limitation, that the Company may not be successful in identifying or consummating acquisitions or other strategic transactions, integration risks, risks related to indebtedness incurred by the Company in connection with the financing of acquisitions and other strategic transactions, dilution experienced by the Company’s existing stockholders as a result of the issuance of shares of the Company’s common stock in conne…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

or at all; risks related to the Company’s indebtedness; the availability, terms and deployment of debt and equity capital if needed for expansion or otherwise; risks of cybersecurity threats or incidents, including the potential misappropriation or use of assets or confidential information, corruption of data or operational disruptions; changes in, or the failure to comply with, government regulation, including environmental regulations; litigation risks, including the costs of defending litigation and the impact of any adverse ruling; the availability and cost of inventory purchased by the Company, and the risk that inventory management initiatives may not be successful; the relative value of the United States dollar to currencies in the countries in which the Company’s customers, suppliers and competitors are located; risks relating to the recognition of revenue, including the amount and timing thereof (including potential delays resulting from, among other circumstances, delays in installation (including due to delays in construction or the preparation of the customer’s facilities) or in receiving required supplies) and that orders in the Company’s backlog may not be fulfilled as or when expected; risks related to the adoption of new accounting standards and the impact it may have on the Company’s financial statements and results; risks that the Company’s decentralized operating model, and that product, end-user and geographic diversity, may not result in the benefits anticipated and may change over time; risks related to organic growth initiatives and market share and other growth strategies, including that they may not result in the benefits anticipated; risks that investments, initiatives and expenses, including, without limitation, investments in acquired businesses and modernization and optimization initiatives, expenses associated with the Company’s implementation of its enterprise resource planning system, and other investments, initiatives and expenses, may not result in the benefits anticipated; risks related to the soundness of financial institutions and the Company’s exposure with respect to its cash balances in depositary accounts in excess of the $250,000 in maximum Federal Deposit Insurance Corporation (“FDIC“) insurance coverage; dividends may not be paid in the future; and other economic, competitive, governmental, technological and other risks and factors discussed in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including, without limitation, in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Many of these risks and factors are beyond the Company’s control. Further, past performance and perceived trends may not be indicative of future results. The Company cautions that the foregoing factors are not exclusive. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. The Com…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Company’s indebtedness; the availability, terms and deployment of debt and equity capital if needed for expansion or otherwise; risks of cybersecurity threats or incidents, including the potential misappropriation or use of assets or confidential information, corruption of data or operational disruptions; changes in, or the failure to comply with, government regulation, including environmental regulations; litigation risks, including the costs of defending litigation and the impact of any adverse ruling; the availability and cost of inventory purchased by the Company, and the risk that inventory management initiatives may not be successful; the relative value of the United States dollar to currencies in the countries in which the Company’s customers, suppliers and competitors are located; risks relating to the recognition of revenue, including the amount and timing thereof (including potential delays resulting from, among other circumstances, delays in installation (including due to delays in construction or the preparation of the customer’s facilities) or in receiving required supplies) and that orders in the Company’s backlog may not be fulfilled as or when expected; risks related to the adoption of new accounting standards and the impact it may have on the Company’s financial statements and results; risks that the Company’s decentralized operating model, and that product, end-user and geographic diversity, may not result in the benefits anticipated and may change over time; risks related to organic growth initiatives and market share and other growth strategies, including that they may not result in the benefits anticipated; risks that investments, initiatives and expenses, including, without limitation, investments in acquired businesses and modernization and optimization initiatives, expenses associated with the Company’s implementation of its enterprise resource planning system, and other investments, initiatives and expenses, may not result in the benefits anticipated; risks related to the soundness of financial institutions and the Company’s exposure with respect to its cash balances in depositary accounts in excess of the $250,000 in maximum Federal Deposit Insurance Corporation (“FDIC“) insurance coverage; dividends may not be paid in the future; and other economic, competitive, governmental, technological and other risks and factors discussed in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including, without limitation, in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024. Many of these risks and factors are beyond the Company’s control. Further, past performance and perceived trends may not be indicative of future results. The Company cautions that the foregoing factors are not exclusive. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. The Company does not undertake to, and …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

During 2015, the Company implemented a “buy-and-build” growth strategy. The “buy” component of the strategy includes the consideration and pursuit of acquisitions and other strategic transactions which management believes would complement the Company’s existing business or otherwise offer growth opportunities for, or benefit, the Company. The Company generally seeks to structure acquisitions to include both cash and stock consideration. Acquisitions are effected through a wholly-owned subsidiary which acquires the business or assets of the acquired company, whether by an asset purchase or merger, and operates the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned subsidiary, also assumes certain of the liabilities of the acquired business. The financial position, including assets and liabilities, and results of operations of the acquired businesses following the respective closing dates of the acquisitions are included in the Company’s consolidated financial statements. As described in greater detail in Note 4 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, on July 1, 2024, the Company acquired Florida-based Laundry Pro of Florida, Inc. for total consideration of $5.9 million in cash. The financial position, including assets and liabilities, of Laundry Pro of Florida, Inc. is included in the Company’s consolidated balance sheet as of September 30, 2024 and the results of operations of Laundry Pro of Florida, Inc. since the July 1, 2024 closing date are included in the Company’s consolidated financial statements for the quarter ended September 30, 2024. In addition, on November 1, 2024, the Company acquired Indiana-based O’Dell Equipment & Supply, Inc. for total consideration of $4.6 million in cash. The financial position, including assets and liabilities, and results of operations of O’Dell Equipment & Supply, Inc. following the November 1, 2024 closing date of the acquisition will be included in the Company’s consolidated financial statements commencing in the quarter ending December 31, 2024.

Current wording

During 2015, the Company implemented a “buy-and-build” growth strategy. The “buy” component of the strategy includes the consideration and pursuit of acquisitions and other strategic transactions which management believes would complement the Company’s existing business or otherwise offer growth opportunities for, or benefit, the Company. The Company generally seeks to structure acquisitions to include both cash and stock consideration. Acquisitions are effected through a wholly-owned subsidiary which acquires the business or assets of the acquired company, whether by an asset purchase or merger, and operates the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned subsidiary, also assumes certain of the liabilities of the acquired business. The financial position, including assets and liabilities, and results of operations of the acquired businesses following the respective closing dates of the acquisitions are included in the Company’s consolidated financial statements. As described in greater detail in Note 4 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q, on July 1, 2024, the Company acquired Florida-based Laundry Pro of Florida, Inc. (“LPF”) for total consideration of $5.9 million in cash and, on November 1, 2024, the Company acquired Indiana-based O’Dell Equipment & Supply, Inc. (“ODL”) for total consideration of $4.6 million in cash. The financial position, including assets and liabilities, of LPF and ODL are included in the Company’s consolidated balance sheet as of December 31, 2024 and the results of operations of LPF and ODL since the respective closing dates of the acquisitions of such companies are included in the Company’s consolidated financial statements for the six and three months ended December 31, 2024. On February 1, 2025, the Company acquired Illinois-based Haiges Machinery, Inc. for total consideration of $2.0 million in cash. The financial position, including assets and liabilities, and results of operations of Haiges Machinery, Inc. following the February 1, 2025 closing date of the acquisition will be included in the Company’s consolidated financial statements commencing in the quarter ending March 31, 2025.

Previous wording

Revenues for the three-month period ended September 30, 2024 increased $5.6 million, or 6%, compared to the same period of the prior fiscal year. The increase in revenue is primarily attributable to price increases established throughout the Company’s product lines and service offerings aimed at maintaining or increasing margins to cover incremental product and operating costs, as well as the revenues generated by the businesses acquired by the Company during the fiscal year ended June 30, 2024 and the three-month period ended September 30, 2024.

Current wording

Revenues for the six and three-month periods ended December 31, 2024 increased $6.9 million, or 4%, and $1.3 million, or 1%, respectively, compared to the same periods of the prior fiscal year. The increases in revenue were primarily attributable to price increases established throughout the Company’s product lines and service offerings aimed at maintaining or increasing margins to cover incremental product and operating costs, as well as the revenues generated by the businesses acquired by the Company during fiscal 2023 and the six-month period ended December 31, 2024.

Previous wording

Gross profit for the three-month period ended September 30, 2024 increased $3.2 million, or 12%, compared to the same period of the prior fiscal year. The increase was primarily the result of the increased revenues described above and a more favorable product and customer mix. Gross margins increased from 29.2% for the three-month period ended September 30, 2023 to 30.8% for the three-month period ended September 30, 2024.

Current wording

Gross profit for the six and three-month periods ended December 31, 2024 increased $4.3 million, or 8%, and $1.1 million, or 4%, respectively, compared to the same periods of the prior fiscal year. The increases were primarily the result of the increased revenues described above. Gross margins slightly increased from 29.0% for the six-month period ended December 31, 2023 to 30.3% for the six-month period ended December 31, 2024 and from 28.9% for the three-month period ended December 31, 2023 to 29.7% for the three-month period ended December 31, 2024, primarily due to more favorable product and customer mix in the current periods.

Previous wording

Operating expenses increased $0.8 million, or 3%, for the three-month period ended September 30, 2024 compared to the same period of the prior fiscal year. The increase is primarily attributable to (a) operating expenses of acquired businesses, including additional operating expenses at the acquired businesses in pursuit of future growth and in connection with the Company’s optimization initiatives, (b) increases in selling costs, including commissions, from increases in revenues during the period, and (c) increases in salary, professional, and technology costs, partially offset by a decrease in stock compensation. The decrease in stock compensation during the three-month period ended September 30, 2024 was primarily the result of a $1.2 million stock compensation expense incurred during the three-month period ended September 30, 2023 due to the acceleration of the vesting of certain restricted stock awards and restricted stock units in accordance with their terms during such period.

Current wording

Operating expenses increased $2.5 million, or 5%, and $1.7 million, or 7%, for the six and three-month periods ended December 31, 2024, respectively, compared to the same periods of the prior fiscal year. The increases were primarily attributable to (a) operating expenses of acquired businesses, including additional operating expenses at the acquired businesses in pursuit of future growth and in connection with the Company’s optimization initiatives, (b) increases in selling costs, including commissions, from increases in commissionable revenues during the current periods, and (c) increases in other expenses such as technology costs, insurance costs, and professional fees.

Previous wording

Interest expense for the three-month period ended September 30, 2024 was $482,000 compared to $770,000 for the same period of the prior fiscal year. The decrease in interest expense was attributable primarily to a decrease in the average outstanding borrowings and a slight decrease in the effective interest rate incurred on outstanding borrowings.

Current wording

Interest expense for the six and three-month periods ended December 31, 2024 was $1.2 million and $670,000, respectively, compared to $1.6 million and $823,000 for the six and three-month periods ended December 31, 2023, respectively. The decreases in interest expense were attributable primarily to decreases in the average outstanding balance and the effective interest rate incurred on outstanding borrowings.

Previous wording

The Company’s effective tax rate was 28.3% for the three-month period ended September 30, 2024 compared to 30.6% for the same period of the prior fiscal year. The decrease in the effective tax rate is attributable to a decrease in the net impact of permanent book-tax differences resulting primarily from nondeductible compensation.

Current wording

The Company’s effective tax rate was 30.0% and 34.4% for the six and three-month periods ended December 31, 2024, respectively, compared to 34.0% and 37.0% for the six and three-month periods ended December 31, 2023, respectively. The decreases in the effective tax rate are attributable to a decrease in the net impact of permanent book-tax differences resulting primarily from nondeductible compensation.

Previous wording

Net income for the three months ended September 30, 2024 was $3.2 million compared to net income of $1.3 million for the same period of the prior fiscal year. The increase in net income was attributable primarily to the increase in revenue and gross profit, partially offset by an increase in operating expenses and income taxes, in each case as described in further detail above.

Current wording

Net income for the six and three-month periods ended December 31, 2024 was $4.4 million and $1.1 million, respectively, compared to net income of $2.6 million and $1.3 million for the six and three-month periods ended December 31, 2023, respectively. The increase in net income for the six months ended December 31, 2024 was attributable to the increases in revenue and gross profit, partially offset by increased operating expenses, while the decrease in net income for the three months ended December 31, 2024 was attributable to increases in operating expenses, partially offset by higher gross profit, all as described in further detail above.

Previous wording

The Company’s total assets increased from $230.7 million at June 30, 2024 to $245.5 million at September 30, 2024. The increase in total assets was primarily attributable to a an increase in current assets, including accounts receivable, inventory and other current assets, as described under “Liquidity and Capital Resources - Working Capital” below as well as an increase in goodwill and intangibles related to the acquisition of Laundry Pro of Florida during July 2024. The Company’s total liabilities increased from $94.1 million at June 30, 2024 to $109.5 million at September 30, 2024. This increase was primarily the result of an increase in accounts payable, including dividends payable attributable to the special cash dividend on the Company’s common stock of $0.31 per share (an aggregate of $4.6 million) which was declared by the Company’s Board of Directors on September 11, 2024 and paid on October 7, 2024 to stockholders of record at the close of business on September 26, 2024, and an increase in long-term debt.

Current wording

The Company’s total assets increased from $230.7 million at June 30, 2024 to $248.8 million at December 31, 2024. The increase in total assets was primarily attributable to an increase in current assets, including inventory, other current assets, vendor deposits, and accounts receivable, as described under “Liquidity and Capital Resources - Working Capital” below. The increase in total assets was also attributable to an increase in intangible assets and goodwill resulting from acquisitions during the six months ended December 31, 2024. The Company’s total liabilities increased from $94.1 million at June 30, 2024 to $110.8 million at December 31, 2024, which was primarily attributable to an increase in long-term debt.

Previous wording

For the three-month period ended September 30, 2024, cash decreased by approximately $0.2 million compared to a decrease of approximately $1.7 million during the three-month period ended September 30, 2023. The Company’s primary sources of cash are sales and borrowings under its credit facility. The Company’s primary uses of cash are purchases of the products sold by the Company, employee related costs, and the cash consideration paid in connection with business acquisitions.

Current wording

For the six-month period ended December 31, 2024, cash decreased by approximately $0.7 million compared to a decrease of approximately $1.7 million during the six-month period ended December 31, 2023. The Company’s primary sources of cash are sales and borrowings under its credit facility. The Company’s primary uses of cash are purchases of the products sold by the Company, employee related costs, and the cash consideration paid in connection with business acquisitions.

Previous wording

Working capital increased from $32.1 million at June 30, 2024 to $34.5 million at September 30, 2024, primarily reflecting increases in accounts receivable, inventory, and other current assets, partially offset by an increase in accounts payable.

Current wording

Working capital increased from $32.1 million at June 30, 2024 to $41.4 million at December 31, 2024, primarily reflecting increases in accounts receivable related to increased sales and the timing of customer payments, increases in inventory primarily due to the inventory of acquired businesses, increases in vendor deposits for future sales, and increases in prepaid expenses, such as insurance, partially offset by increases in customer deposits related to future sales.

Previous wording

The following table summarizes the Company’s cash flow activity for the three months ended September 30, 2024 and 2023 (in thousands):

Current wording

The following table summarizes the Company’s cash flow activity for the six months ended December 31, 2024 and 2023 (in thousands):

Previous wording

For the three months ended September 30, 2024, operating activities provided cash of $0.2 million compared to $1.5 million of cash provided by operating activities during the three months ended September 30, 2023. This $1.3 million decrease in cash provided by operating activities was primarily attributable to changes in working capital, partially offset by an increase in net income. The changes in working capital include increases in cash provided by operating activities from changes in operating assets such as vendor deposits and accounts payable, partially offset by increases to the cash used by operating activities from changes in accounts receivable, inventories, other current and noncurrent assets, and customer deposits.

Current wording

For the six months ended December 31, 2024, operating activities provided cash of $2.2 million compared to $10.9 million of cash provided by operating activities during the six months ended December 31, 2023. This $8.7 million decrease in cash provided by operating activities was primarily attributable to changes in working capital partially offset by an increase in net income. The changes in working capital include decreases in cash provided by operating activities from changes in operating assets such as accounts receivable, inventories, contract assets, prepaid expenses, and vendor deposits, partially offset by increases to the cash provided by operating activities from changes in accounts payable, contract assets, and customer deposits.

Previous wording

For the three months ended September 30, 2024, financing activities provided cash of $6.7 million compared to $1.3 million of cash used by financing activities during the three months ended September 30, 2023. This $8.0 million increase in cash provided by financing activities was primarily attributable to an increase in net borrowings to fund investing activities.

Current wording

For the six months ended December 31, 2024, financing activities provided cash of $9.8 million compared to $9.2 million of cash used by financing activities during the six months ended December 31, 2023. This $19.0 million increase in cash provided by financing activities was primarily attributable to an increase in debt borrowings of $9.5 million and a decrease in debt payments of $9.5 million during the six months ended December 31, 2024 compared to the six months ended December 31, 2023.

Previous wording

The Company is party, as borrower, to a syndicated credit agreement (the “Credit Agreement”) which allows for borrowings in the maximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of $140 million. A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million. As of September 30, 2024, borrowings (other than swingline loans) under the Credit Agreement bore interest, at a rate, at the Company’s election at the time of borrowing, equal to (a) the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”) plus a margin that ranges between 1.25% and 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranged between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. Swingline loans generally bore interest at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. As previously disclosed, pursuant to the terms of the Credit Agreement, in connection with the discontinuation of the BSBY rate, the BSBY rate was to be replaced, when determined by the administrative agent under the Credit Agreement, with the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment ranging from a minimum of 0.11% to a maximum of 0.43%. Such replacement occurred during October 2024. The maturity date of the Credit Agreement is May 6, 2027.

Current wording

The Company is party, as borrower, to a syndicated credit agreement (the “Credit Agreement”) which allows for borrowings in the maximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of $140 million. A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million. Pursuant to the terms of the Credit Agreement, in connection with the discontinuation of the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”), during October 2024, the BSBY rate was replaced as the reference rate under the Credit Agreement by the Secured Overnight Financing Rate (“SOFR”) plus a SOFR adjustment ranging from a minimum of 0.11% to a maximum of 0.43%. As a result, borrowings (other than swingline loans) under the Credit Agreement now bear interest, at a rate, at the Company’s election at the time of borrowing, equal to (a) SOFR plus 0.11% to 0.43%, plus an additional adjustment margin that ranges between 1.25% and 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) SOFR plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. Swingline loans generally bear interest at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. The maturity date of the Credit Agreement is May 6, 2027.

Previous wording

The Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The Credit Agreement also contains other provisions which may restrict the Company’s ability to, among other things, dispose of or acquire assets or businesses, incur additional indebtedness, make certain investments and capital expenditures, pay dividends, repurchase shares and enter into transactions with affiliates. At September 30, 2024, the Company was in compliance with its covenants under the Credit Agreement and $64.6 million was available to borrow under the revolving credit facility.

Current wording

The Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The Credit Agreement also contains other provisions which may restrict the Company’s ability to, among other things, dispose of or acquire assets or businesses, incur additional indebtedness, make certain investments and capital expenditures, pay dividends, repurchase shares and enter into transactions with affiliates. At December 31, 2024, the Company was in compliance with its covenants under the Credit Agreement and $58.4 million was available to borrow under the revolving credit facility.

Previous wording

The Company believes that its existing cash, anticipated cash from operations and funds available under the Company’s Credit Agreement will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months and thereafter. The Company may also seek to raise funds through the issuance of equity and/or debt securities or the incurrence of additional secured or unsecured indebtedness, including in connection with acquisitions or other transactions pursued by the Company as part of its “buy-and-build” growth strategy.

Current wording

The Company believes that its existing cash, anticipated cash from operations and funds available under the Company’s Credit Agreement will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months and thereafter. The Company may also seek to raise funds through the issuance of equity and/or debt securities in public or private transactions or the incurrence of additional secured or unsecured indebtedness, including in connection with acquisitions or other transactions pursued by the Company as part of its “buy-and-build” growth strategy.

Previous wording

On October 10, 2016, the Company’s wholly-owned subsidiary, Western State Design, entered into a lease agreement pursuant to which it leases 17,600 square feet of warehouse and office space from an affiliate of Dennis Mack, a director and employee of the Company, and Tom Marks, Executive Vice President, Business Development and President of the West Region of the Company. The lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Monthly base rental payments were $12,000 during the initial term of the lease. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in October 2021. Base rent for the first renewal term was $19,000 per month. The Company intends to renew the lease for the second renewal term and is evaluating the market rate to establish the base rent for the second renewal term. 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. Payments under this lease totaled approximately $57,000 during each of the three months ended September 30, 2024 and 2023.

Current wording

On October 10, 2016, the Company’s wholly-owned subsidiary, Western State Design, entered into a lease agreement pursuant to which it leases 17,600 square feet of warehouse and office space from an affiliate of Dennis Mack, a director and employee of the Company, and Tom Marks, Executive Vice President, Business Development and President of the West Region of the Company. The lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Monthly base rental payments were $12,000 during the initial term of the lease. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in October 2021. Base rent for the first renewal term was $19,000 per month. The Company also exercised its option to renew the lease for the second three-year renewal term, which commenced in October 2024. Base rent for the second renewal term is $21,000 per month. 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. Payments under the lease totaled approximately $118,000 and $114,000 during the six months ended December 31, 2024 and 2023, respectively, and $61,000 and $57,000 during the three months ended December 31, 2024 and 2023, respectively.

Previous wording

On November 1, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti, former Chief Executive Officer of AAdvantage. Monthly base rental payments under this lease were $26,000 initially. Pursuant to the lease agreement, on January 1, 2019, the lease expanded to cover additional warehouse space and, in connection therewith, monthly base rental payments under this lease increased to $36,000. In addition to base rent, AAdvantage is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. The lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in November 2023. Base rent for the first renewal term is $40,000 per month. Payments under the lease totaled approximately $120,000 and $108,000 during the three months ended September 30, 2024 and 2023, respectively.

Current wording

On November 1, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti, former Chief Executive Officer of AAdvantage. Monthly base rental payments under this lease were $26,000 initially. Pursuant to the lease agreement, on January 1, 2019, the lease expanded to cover additional warehouse space and, in connection therewith, monthly base rental payments under this lease increased to $36,000. In addition to base rent, AAdvantage is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. The lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. The Company exercised its option to renew the lease for the first three-year renewal term, which commenced in November 2023. Base rent for the first renewal term is $40,000 per month. Payments under the lease totaled approximately $240,000 and $224,000 during the six months ended December 31, 2024 and 2023, respectively, and $120,000 and $116,000 during the three months ended December 31, 2024 and 2023, respectively.

Previous wording

On November 3, 2020, the Company’s wholly-owned subsidiary, Yankee Equipment Systems, entered into a lease agreement pursuant to which it leases a total of 12,500 square feet of warehouse and office space from an affiliate of Peter Limoncelli, President of Yankee Equipment Systems. Monthly base rental payments were $11,000 during the initial term of the lease. In addition to base rent, Yankee Equipment Systems is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. The lease had an initial term of three years and provides for three successive three-year renewal terms at the option of the Company. The Company exercised its option to renew this lease for the first three-year renewal term, which commenced in November 2023. Base rent for the first year of the renewal term was $12,500 per month. Base rent for the second year of the renewal term is $12,750 per month. Payments under this lease totaled approximately $38,000 during each of the three months ended September 30, 2024 and 2023.

Current wording

On November 3, 2020, the Company’s wholly-owned subsidiary, Yankee Equipment Systems, entered into a lease agreement pursuant to which it leases a total of 12,500 square feet of warehouse and office space from an affiliate of Peter Limoncelli, President of Yankee Equipment Systems. Monthly base rental payments were $11,000 during the initial term of the lease. In addition to base rent, Yankee Equipment Systems is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. The lease had an initial term of three years and provides for three successive three-year renewal terms at the option of the Company. The Company exercised its option to renew this lease for the first three-year renewal term, which commenced in November 2023. Base rent for the first year of the renewal term was $12,500 per month. Base rent for the second year of the renewal term is $12,750 per month. Payments under this lease totaled approximately $76,000 and $74,000 during the six months ended December 31, 2024 and 2023, respectively, and $38,000 and $36,000 during the three months ended December 31, 2024 and 2023, respectively.