10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission file number 001-14757

EVI Industries, Inc.

(Exact name of registrant as specified in its charter)

Delaware	11-2014231
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

4500 Biscayne Blvd., Suite 340, Miami, FL 33137

(Address of principal executive offices)

(305) 402-9300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.025 par value	EVI	NYSE American

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $.025 par value per share – 11,887,966 shares outstanding as of February 3, 2020.

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Statements of Operations (Unaudited) for the six and three months ended December 31, 2019 and 2018	3
	Condensed Consolidated Balance Sheets at December 31, 2019 (Unaudited) and June 30, 2019	4
	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the six and three months ended December 31, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended December 31, 2019 and 2018	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	31
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 6.	Exhibits	33
Signatures		34

2 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data) (Unaudited)

	For the six months ended December 31,				For the three months ended December 31,
	2019		2018		2019		2018
Revenues	$	122,338	$	104,216	$	66,657	$	60,841
Cost of sales		94,429		80,817		52,582		47,164
Gross profit		27,909		23,399		14,075		13,677
Selling, general and administrative expenses		25,823		19,865		13,270		11,575
Operating income		2,086		3,534		805		2,102
Interest expense, net		855		539		433		374
Income before provision for income taxes		1,231		2,995		372		1,728
Provision for income taxes		388		934		109		463
Net income	$	843	$	2,061	$	263	$	1,265
Net earnings per share – basic	$	0.07	$	0.17	$	0.02	$	0.10
Net earnings per share - diluted	$	0.06	$	0.16	$	0.02	$	0.10

See Notes to Condensed Consolidated Financial Statements

3 

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

ASSETS
	December 31, 2019 (Unaudited)		June 30, 2019
Current assets
Cash and cash equivalents	$	5,924	$	5,038
Accounts receivable, net of allowance for doubtful accounts of $379 and $323, respectively		23,436		30,557
Inventories, net		29,400		26,445
Vendor deposits		103		403
Contract assets		1,483		2,487
Other current assets		3,948		2,938
Total current assets		64,294		67,868
Equipment and improvements, net		7,181		5,865
Operating lease assets		5,727		—
Intangible assets, net		21.808		22,351
Goodwill		55,529		54,501
Other assets		3,862		3,900
Total assets	$	158,401	$	154,485

See Notes to Condensed Consolidated Financial Statements

4 

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share data)

LIABILITIES AND SHAREHOLDERS’ EQUITY
	December 31, 2019 (Unaudited)			June 30, 2019
Current liabilities
Accounts payable and accrued expenses	$	15,612		$	17,508
Accrued employee expenses		5,200			5,187
Customer deposits		8,971			7,163
Contract liabilities		1,755			854
Current portion of operating lease liabilities		1,621			—
Total current liabilities		33,159			30,712
Deferred tax liabilities, net		2,044			1,708
Long-term operating lease liabilities		4,136			—
Long-term debt, net		34,791			40,563
Total liabilities		74,130			72,983
Commitments and contingencies (Note 11)
Common stock related to acquiree’s Employee Stock Ownership Plan (“ESOP”)		—			4,240
Shareholders’ equity
Preferred stock, $1.00 par value; authorized shares – 200,000; none issued and outstanding		—			—
Common stock, $.025 par value; authorized shares - 20,000,000; 11,893,567 shares issued at December 31, 2019 and 11,825,615 shares issued at June 30, 2019, including shares held in treasury		297			296
Additional paid-in capital		75,244			73,010
Retained earnings		10,478			9,635
Treasury stock, 83,044 shares at December 31, 2019 and 72,934 shares at June 30, 2019, at cost		(1,748	)		(1,439	)
Common stock related to acquiree’s ESOP		—			(4,240	)
Total shareholders’ equity		84,271			77,262
Total liabilities and shareholders’ equity	$	158,401		$	154,485

See Notes to Condensed Consolidated Financial Statements

5 

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share data) (Unaudited)

	Six months ended December 31, 2019
														Common
														Stock
					Additional									Related to
	Common Stock				Paid-in		Treasury Stock					Retained		Acquiree’s
	Shares		Amount		Capital		Shares		Cost			Earnings		ESOP			Total
Balance at June 30, 2019		11,825,615	$	296	$	73,010		72,934	$	(1,439	)	$	9,635	$	(4,240	)	$	77,262
Share repurchases		—		—		—		10,110		(309	)		—		—			(309	)
Issuance of restricted shares		29,880		—		—		—		—			—		—			—
Issuance of shares under employee stock purchase plan		1,022		—		26		—		—			—		—			26
Issuance of shares in connection with acquisitions		37,050		1		1,293		—		—			—		4,240			5,534
Stock compensation		—		—		915		—		—			—		—			915
Net income		—		—		—		—		—			843		—			843
Balance at December 31, 2019		11,893,567	$	297	$	75,244		83,044	$	(1,748	)	$	10,478	$	—		$	84,271

	Three months ended December 31, 2019
														Common
														Stock
					Additional									Related to
	Common Stock				Paid-in		Treasury Stock					Retained		Acquiree’s
	Shares		Amount		Capital		Shares		Cost			Earnings		ESOP		Total
Balance at September 30, 2019		11,862,665	$	297	$	74,756		72,934	$	(1,439	)	$	10,215	$	—	$	83,829
Share repurchases		—		—		—		10,110		(309	)		—		—		(309	)
Issuance of restricted shares		29,880		—		—		—		—			—		—		—
Issuances of shares under employee stock purchase plan		1,022		—		26		—		—			—		—		26
Stock compensation		—		—		462		—		—			—		—		462
Net income		—		—		—		—		—			263		—		263
Balance at December 31, 2019		11,893,567	$	297	$	75,244		83,044	$	(1,748	)	$	10,478	$	—	$	84,271

See Notes to Condensed Consolidated Financial Statements

6 

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share data) (Unaudited)

	Six months ended December 31, 2018
					Additional
	Common Stock				Paid-in		Treasury Stock					Retained
	Shares		Amount		Capital		Shares		Cost			Earnings			Total
Balance at June 30, 2018		11,239,656	$	281	$	49,950		52,686	$	(711	)	$	7,511		$	57,031
Share repurchases		—		—		—		10,123		(359	)		—			(359	)
Issuance of restricted shares		28,170		—		—		—		—			—			—
Issuance of shares under employee stock purchase plan		726		—		23		—		—			—			23
Issuance of shares in connection with acquisitions		350,678		9		14,629		—		—			—			14,638
Stock compensation		—		—		838		—		—			—			838
Dividends payable ($.13 per share)		—		—		—		—		—			(1,619	)		(1,619	)
Net income		—		—		—		—		—			2,061			2,061
Balance at December 31, 2018		11,619,230	$	290	$	65,440		62,809	$	(1,070	)	$	7,953		$	72,613

	Three months ended December 31, 2018
					Additional
	Common Stock				Paid-in		Treasury Stock					Retained
	Shares		Amount		Capital		Shares		Cost			Earnings			Total
Balance at September 30, 2018		11,470,033	$	287	$	60,740		52,686	$	(711	)	$	8,307		$	68,623
Share repurchases		—		—		—		10,123		(359	)		—			(359	)
Issuance of restricted shares		28,170		—		—		—		—			—			—
Issuance of shares under employee stock purchase plan		726		—		23		—		—			—			23
Issuance of shares in connection with acquisitions		120,301		3		4,253		—		—			—			4,256
Stock compensation		—		—		424		—		—			—			424
Dividends payable ($.13 per share)		—		—		—		—		—			(1,619	)		(1,619	)
Net income		—		—		—		—		—			1,265			1,265
Balance at December 31, 2018		11,619,230	$	290	$	65,440		62,809	$	(1,070	)	$	7,953		$	72,613

See Notes to Condensed Consolidated Financial Statements

7 

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	For the six months ended
	December 31, 2019			December 31, 2018
Operating activities:
Net income	$	843		$	2,061
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization		1,730			1,255
Amortization of debt discount		28			68
Provision for bad debt expense		101			104
Non-cash lease expense		30			—
Share-based compensation		915			838
Inventory reserve		94			91
Provision for deferred income taxes		336			131
(Increase) decrease in operating assets:
Accounts receivable		7,209			(10,985	)
Inventories		(2,270	)		(3,347	)
Vendor deposits		300			(237	)
Contract assets		1,004			963
Other assets		(971	)		(1,492	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(2,412	)		2,402
Accrued employee expenses		(38	)		(907	)
Customer deposits		1,808			(3,357	)
Contract liabilities		901			2,557
Net cash provided (used) by operating activities		9,608			(9,855	)
Investing activities:
Capital expenditures		(2,165	)		(1,200	)
Cash paid for acquisitions, net of cash acquired		(474	)		(7,231	)
Net cash used by investing activities		(2,639	)		(8,431	)
Financing activities:
Proceeds from borrowings		4,000			99,963
Debt repayments		(9,800	)		(72,235	)
Payment of debt issuance costs		—			(263	)
Repurchases of common stock in satisfaction of employee tax withholding obligations		(309	)		(359	)
Issuances of common stock under employee stock purchase plan		26			23
Net cash (used) provided by financing activities		(6,083	)		27,129
Net increase in cash and cash equivalents		886			8,843
Cash and cash equivalents at beginning of period		5,038			1,330
Cash and cash equivalents at end of period	$	5,924		$	10,173

 See Notes to Condensed Consolidated Financial Statements

8 

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)  

	For the six months ended
	December 31, 2019		December 31, 2018
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	870	$	387
Cash paid during the period for income taxes	$	136	$	1,117
Supplemental disclosure of non-cash financing activities:
Common stock issued for acquisitions	$	1,294	$	14,633
Dividends payable	$	—	$	1,619

See Notes to Condensed Consolidated Financial Statements

9 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

Note (1) - General: The accompanying unaudited condensed consolidated financial statements include the accounts of EVI Industries, Inc. and its subsidiaries (the “Company”). All material intercompany balances and transactions have been eliminated in consolidation.

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, shareholders’ equity 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, 2019. The June 30, 2019 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, 2019.

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.

The Company, through its wholly-owned subsidiaries, is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.

The Company’s customers include retail, commercial, industrial, institutional, and government customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems. The Company also provides its customers with the services described above.

The Company’s growth strategy includes organic growth initiatives and business acquisitions pursuant to the Company’s “buy-and-build” growth strategy, which was implemented in 2015. See Note 3, “Acquisitions,” for information regarding the acquisition of PLS (as defined in Note 3), which was consummated during the six months ended December 31, 2019.

Note (2) – Summary of Significant Accounting Policies:

Adoption of New Lease Standard

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize

10 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

substantially all leases on their balance sheets and disclose certain additional key information about leasing arrangements. The new standard establishes a right of use (“ROU”) model that requires a lessee to recognize a ROU asset and liability on the balance sheet for all leases with a term longer than 12 months. Leases are required to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The new standard became effective for the Company on July 1, 2019. The Company adopted this standard using the modified retrospective transition approach, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption without restatement of prior periods. Therefore, the accompanying unaudited condensed consolidated financial statements for the six and three-month periods ended December 31, 2019 are presented under the new standard, while the comparative period financial statements presented herein were not adjusted for this standard and continue to be reported in accordance with the Company's previous lease accounting policy. There was no cumulative-effect adjustment recorded on July 1, 2019.

The Company elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company's contracts are or contain leases, (2) lease classification and (3) initial direct costs.

The primary impact for the Company was the balance sheet recognition of ROU assets and lease liabilities for operating leases as a lessee. The adoption of this ASU did not have a material impact on the results of operations or cash flows of the Company. See Note 6, “Leases,” for further discussion regarding the Company’s adoption of the new standard.

Significant Accounting Policies

Except for the new lease standard adopted on July 1, 2019 described above, there have been no changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Note (3) – Acquisitions:

PLS Acquisition

On August 1, 2019, the Company, through its wholly-owned subsidiary, Professional Laundry Systems, LLC (“Professional Laundry Systems”), purchased substantially all of the assets and assumed certain of the liabilities of Commercial Laundry Products, Inc., Professional Laundry Systems of PA, Inc. and Professional Laundry Systems West, Inc. (collectively, “PLS”), which distribute commercial, industrial, and vended laundry products and provide installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. The acquisition was treated for accounting purposes as a purchase of PLS using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The Company allocated $945,000 to goodwill, $170,000 to customer-related intangibles, and $110,000 to the Professional Laundry Systems trade name. The purchase price allocation is considered preliminary, as the Company is still assessing certain working capital items.

11 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

PAC Acquisition

On February 5, 2019, the Company completed its acquisition (the “PAC Acquisition”) of PAC Industries Inc. (“PAC”). As a portion of the consideration paid in connection with the PAC Acquisition, the Company issued 114,634 shares to PAC’s employee stock ownership plan (“ESOP”). These shares were not permitted to be traded during the six-month period commencing on the closing date. Further, if a distribution event occurred during such six-month period, then each participant in the ESOP would have had the option to require the Company to purchase such participant’s shares at fair market value. Due to the Company’s obligation under this put option, which was in effect at June 30, 2019 but has subsequently expired, the distributed shares subject to the put option which were held by the ESOP were classified as temporary equity in the mezzanine section of the consolidated balance sheet as of June 30, 2019. No distribution events occurred during the six-month restriction period. Accordingly, on August 5, 2019, each participant’s option to require the Company to purchase such participant’s shares at fair market value if a distribution event occurred expired. As a result, such shares are classified as permanent equity in the consolidated balance sheet as of December 31, 2019.

See also Note 13, “Subsequent Events,” for information regarding the Company’s acquisition of Laundry Systems of Tennessee, which was completed on January 31, 2020.

Note (4) - Earnings Per Share: The Company computes earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Shares of the Company’s common stock subject to unvested restricted stock awards and restricted stock units are considered participating securities because they contain a non-forfeitable right to cash dividends or dividend equivalents paid prior to vesting or forfeiture, if any, irrespective of whether the awards or units ultimately vest. Basic and diluted earnings per share for the six and three months ended December 31, 2019 and 2018 are computed as follows (in thousands, except per share data):

	For the six months ended December 31,				For the three months ended December 31,
	2019 (Unaudited)		2018 (Unaudited)		2019 (Unaudited)		2018 (Unaudited)
Net income	$	843	$	2,061	$	263	$	1,265
Less: distributed and undistributed income         allocated to unvested restricted common         stock		58		148		18		91
Net income allocated to EVI Industries, Inc.         shareholders	$	785	$	1,913	$	245	$	1,174
Weighted average shares outstanding used in         basic earnings per share		11,787		11,364		11,797		11,492
Dilutive common share equivalents		421		506		402		474
Weighted average shares outstanding used in         diluted earnings per share		12,208		11,870		12,199		11,966
Basic earnings per share	$	0.07	$	0.17	$	0.02	$	0.10
Diluted earnings per share	$	0.06	$	0.16	$	0.02	$	0.10

12 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

At December 31, 2019 and 2018, other than 872,084 shares and 896,777 shares, respectively, of unvested common stock subject to restricted stock awards or restricted stock units, there were no potentially dilutive securities outstanding.

Note (5) - Debt: Long-term debt as of December 31, 2019 and June 30, 2019 are as follows (in thousands):

	December 31, 2019			June 30, 2019
Revolving Line of Credit	$	35,000		$	40,800
Less: unamortized discount and deferred financing costs		(209	)		(237	)
Total long-term debt	$	34,791		$	40,563

On November 2, 2018, the Company entered into a syndicated credit agreement (the “2018 Credit Agreement”) for a five-year revolving credit facility 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.

Borrowings (other than swingline loans) under the 2018 Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a) LIBOR plus a margin that ranges from 1.25% to 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 one month LIBOR rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. Swingline loans bear interest calculated at the Base Rate plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. The 2018 Credit Agreement has a term of five years and matures on November 2, 2023.

The 2018 Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The 2018 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, 2019, the Company was in compliance with its covenants under the 2018 Credit Agreement and $4.4 million was available to borrow under the revolving credit facility.

The obligations of the Company under the 2018 Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries, and are guaranteed, jointly and severally, by certain of the Company’s subsidiaries.

13 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

Note (6) - Leases:

Company as Lessee

The Company leases warehouse and distribution facilities and administrative office space, generally for terms of three to five years.

As described in Note 2 above, the Company adopted ASC Topic 842, Leases (“ASC 842” or “Topic 842”), utilizing the modified retrospective adoption method with an effective date of July 1, 2019. The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, the Company, as permitted by Topic 842, will recognize the lease payments under its short-term leases in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use asset.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, certain of the Company’s leases do not provide a readily determinable implicit rate. For such leases, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company uses instruments with similar characteristics when calculating its incremental borrowing rates.

The Company has options to extend certain of its operating leases for additional periods of time and the right to terminate several of its operating leases prior to its contractual expiration, in each case, subject to the terms and conditions of the lease. The lease term consists of the non-cancellable period of the lease and the periods covered by Company options to extend the lease when it is reasonably certain that the Company will exercise such options. The Company's lease agreements do not contain residual value guarantees. The Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components.

As of December 31, 2019, the Company had 24 facilities financed under operating leases, consisting of warehouse facilities and administrative offices, with lease term expirations between 2020 and 2028. Rent expense consists of monthly rental payments under the terms of the Company’s lease agreements recognized on a straight-line basis.

The following table provides details of the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of December 31, 2019. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

14 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

Fiscal years ending June 30,	Total Operating Lease Obligations (in thousands)
2020 (remainder of)	$	989
2021		1,688
2022		1,474
2023		1,093
2024		329
Thereafter		650
Total minimum lease payments	$	6,223
Less: amounts representing interest		466
Present value of minimum lease payments	$	5,757
Less: current portion		1,621
Long-term portion	$	4,136

The table below presents additional information related to the Company’s operating leases (in thousands):

	Six months ended December 31, 2019
Operating lease cost
Operating lease cost (1)	$	905
Short-term lease cost (1)		114
Variable lease cost (1)		49
Total lease cost	$	1,068

(1) Expenses are classified within selling, general and administrative expenses in the Company’s condensed consolidated statement of operations.

The table below presents lease-related terms and discount rates as of December 31, 2019:

	December 31, 2019
Weighted average remaining lease terms
Operating leases	4.3 years
Weighted average discount rate
Operating leases	3.6%

The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities as of December 31, 2019 (in thousands):

	Six months ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:	$	905
Operating lease right-of-use assets obtained in exchange for operating lease liabilities:	$	864

Company as Lessor

The Company derives a portion of its revenue from equipment leasing arrangements. Such arrangements provide for monthly payments covering the equipment provided, maintenance, and interest. These arrangements meet the criteria to be accounted for as sales type leases. Accordingly, revenue for provision of the equipment is recognized upon delivery of the equipment and its acceptance by the customer. Upon the recognition of such revenue, an asset is established for the investment in sales type leases. Maintenance revenue and interest are recognized monthly over the lease term.

The future minimum lease payments receivable for sales type leases are as follows (in thousands):

15 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

Fiscal years ending June 30,	Total Minimum Lease Payments to be Received		Amortization of Unearned Income		Net Investment in Sales Type Leases
2020 (remainder of)	$	1,002	$	551	$	451
2021		1,206		754		452
2022		889		507		382
2023		623		311		312
2024		397		162		235
Thereafter		189		94		95
					$	1,927

* Excludes residual values of $1.6 million.

The total net investments in sales type leases, including stated residual values, as of December 31, 2019 and June 30, 2019 was $3.5 million and $3.0 million, respectively. The current portion of $0.8 million and $0.5 million is included in Other Current Assets in the consolidated balance sheets as of December 31, 2019 and June 30, 2019, respectively, and the long term portion of $2.7 million and $2.5 million is included in Other Assets in the consolidated balance sheets as of December 31, 2019 and June 30, 2019, respectively.

Note (7) - Income Taxes: Income taxes are recorded in the Company’s quarterly financial statements based on the Company’s estimated annual effective income tax rate, subject to adjustment for discrete events, should they occur.

As of December 31, 2019 and June 30, 3019, the Company had net deferred tax liabilities of approximately $2.0 million and $1.7 million, respectively. Consistent with the guidance of 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 December 31, 2019, 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 six and three months ended December 31, 2019 and 2018, 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 December 31, 2019, the Company was subject to potential federal and state tax examinations for the tax years 2016 through 2019.

Note (8) – Equity Plans:

Equity Incentive Plan

In November 2015, the Company’s stockholders approved the Company’s 2015 Equity Incentive Plan (the “Plan”). The Plan authorizes the issuance of up to 1,500,000 shares of the Company’s common stock pursuant to awards granted under the Plan. The fair value of awards granted under the Plan is expensed on straight-line basis over the vesting period of the awards. Share-based compensation expense is included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

16 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

During the six and three months ended December 31, 2019, restricted stock awards and restricted stock units of a total of 12,110 shares and 6,500 shares, respectively, were granted under the Plan. During the six and three months ended December 31, 2018, restricted stock awards and restricted stock units of a total of 15,000 shares and 6,845 shares, respectively, were granted under the Plan. Non-cash share-based compensation expense under all plans totaled $915,000 and $838,000 for the six months ended December 31, 2019 and 2018, respectively, and totaled $462,000 and $424,000 for the three months ended December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company had $13.5 million and $1.2 million of total unrecognized compensation expense related to restricted stock awards and restricted stock units, respectively, granted under the Plan, which is expected to be recognized over the weighted-average period of 17.3 years and 14.8 years, respectively.

The following is a summary of non-vested restricted stock activity as of and for the six months ended December 31, 2019:

	Restricted Stock Awards					Restricted Stock Units
	Shares			Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Non-vested awards or units outstanding at June 30, 2019		855,854		$	18.62		27,500	$	36.24
Granted		6,500			34.50		12,110		27.64
Vested		(29,880	)		16.59		—		—
Forfeited		—			—		—		—
Non-vested awards or units outstanding at December 31, 2019		832,474		$	18.81		39,610	$	33.61

Employee Stock Purchase Plan

The Company’s employee stock purchase plan provides for six-month offering periods ending on December 31 and June 30 of each year. During the six and three months ended December 31, 2019, 1,022 shares of common stock were issued under the Company’s employee stock purchase plan for which the Company received net proceeds of $26,000. During the six and three months ended December 31, 2018, 726 shares of common stock were issued under the Company’s employee stock purchase plan for which the Company received net proceeds of $23,000.

Note (9) – Transactions with Related Parties: Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals of those subsidiaries. These leases include the following:

The Company’s wholly-owned subsidiary, Steiner-Atlantic Corp. (“Steiner-Atlantic”), leases 28,000 square feet of warehouse and office space from an affiliate of Michael S. Steiner, President of Steiner-Atlantic and a former director and officer of the Company, pursuant to a lease agreement dated November 1, 2014, as amended. The lease term was extended during January 2020 to run through October 31, 2020. Monthly base rental payments under the lease are $12,000. In addition to base rent, Steiner-Atlantic is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $74,000 and $72,000 during the six months ended December 31, 2019 and 2018, respectively.

17 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

On October 10, 2016, the Company’s wholly-owned subsidiary, Western State Design, Inc. (“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 Executive Vice President, Corporate Strategy of the Company, and Tom Marks, Executive Vice President, Business Development of the Company. 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 the Company. Payments under this lease totaled approximately $72,000 during each of the six months ended December 31, 2019 and 2018.

On October 31, 2017, the Company’s wholly-owned subsidiary, Tri-State Technical Services, Inc. (“Tri-State”), entered into lease agreements pursuant to which it leases a total of 81,000 square feet of warehouse and office space from an affiliate of Matt Stephenson, President of Tri-State. Monthly base rental payments total $21,000 during the initial terms of the leases. In addition to base rent, Tri-State is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $126,000 during each of the six months ended December 31, 2019 and 2018.

On February 9, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, Inc. (“AAdvantage”), entered into a lease agreement pursuant to which it leases a total of 5,000 square feet of warehouse and office space from an affiliate of Mike Zuffinetti, Chief Executive Officer of AAdvantage. Monthly base rental payments are $3,950 during the initial term of the lease. 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 has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. During February 2018, AAdvantage entered into a month-to-month lease agreement with an affiliate of Mike Zuffinetti for a total of 17,000 square feet of warehouse and office space. Monthly base rental payments under this lease were $13,500. This month-to-month lease was terminated on October 31, 2018. In addition, on November 1, 2018, AAdvantage entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti. Monthly base rental payments 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 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 has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under the leases described in this paragraph totaled approximately $240,000 and $130,000 during the six months ended December 31, 2019 and 2018, respectively.

On September 12, 2018, the Company’s wholly-owned subsidiary, Scott Equipment, Inc. (“Scott Equipment”), entered into lease agreements pursuant to which it leases a total of 18,000 square feet of warehouse and office space from an affiliate of Scott Martin, President of Scott Equipment. Monthly base rental payments total $11,000 during the initial terms of the leases. In addition to base rent, Scott Equipment is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $69,000 and $44,000 during the six months ended December 31, 2019 and 2018, respectively.

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EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

On February 5, 2019, the Company’s wholly-owned subsidiary, PAC Industries Inc. (“PAC Industries”), entered into two lease agreements pursuant to which it leases a total of 29,500 square feet of warehouse and office space from an affiliate of Frank Costabile, President of PAC Industries, and Rocco Costabile, Director of Finance of PAC Industries. Monthly base rental payments total $14,600 during the initial terms of the leases. In addition to base rent, PAC Industries is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of four years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $88,000 during the six months ended December 31, 2019.

Note (10) – Recently Issued Accounting Guidance: In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new guidance will eliminate the second step from the goodwill impairment test required in computing the implied fair value of goodwill. Instead, under the new guidance, 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 and, if applicable, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the charge 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 performing the goodwill impairment test. 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 (the fiscal year ending June 30, 2021 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements.

Other than as described above, management does not believe that accounting standards and updates which have been issued but are not yet effective will have a material impact on the Company’s consolidated financial statements upon adoption.

Note (11) – Commitments and Contingencies: In the ordinary course of business, certain of the Company’s contracts require the Company to provide performance and payment bonds related to projects in process. These bonds are intended to provide a guarantee to the customer that the Company will perform under the terms of the contract and that the Company will pay subcontractors and vendors. If the Company fails to perform under the contract or pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company is required to reimburse the surety for expenses or outlays it incurs. At each of December 31, 2019 and June 30, 2019, outstanding performance and payment bonds totaled $8.0 million, and there were no estimated costs to complete projects secured by these bonds.

The Company may from time to time become subject to litigation and other legal proceedings. Litigation and other legal proceedings may require the Company to incur significant expenses, including those relating to legal and other professional fees. In addition, litigation and other legal proceedings are inherently uncertain, and adverse outcomes in litigation or other legal proceedings could adversely affect the Company’s financial condition, cash flows, and operating results.

19 

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

Note (12) – Goodwill: The changes in the carrying amount of goodwill are as follows (in thousands):

Balance at June 30, 2019	$	54,501
Goodwill from the PLS Acquisition		945
Other		83
Balance at December 31, 2019	$	55,529

Note (13) – Subsequent Events:

On January 31, 2020, the Company acquired Large Equipment, Inc. (d/b/a Laundry Systems of Tennessee) (“LSOT”), pursuant to a merger whereby LSOT merged with and into, and became, a wholly-owned subsidiary of the Company (“Laundry Systems of Tennessee”). Laundry Systems of Tennessee is a Tennessee-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry.

On February 7, 2020, the Company executed a definitive purchase agreement to acquire substantially all the assets and certain liabilities of Commercial Laundry Equipment Company, Inc. (“Commercial Laundry Equipment”). Commercial Laundry Equipment is a Virginia-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry.

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Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations.

Forward Looking Statements

Certain statements in this Report are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Report, words such as “may,” “should,” “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; technology changes; competition, including the Company’s ability to compete effectively and the impact that competition may have on the Company and its results, including the prices which the Company may charge for its products and services and on the Company’s profit margins, and competition for qualified employees; the Company’s ability to implement its business and growth strategies and plans, including changes thereto; risks and uncertainties associated with the Company’s pursuit of acquisitions and other strategic opportunities, including, without limitation, that the Company may not be successful in identifying or consummating acquisitions or other strategic opportunities, integration risks, risks related to indebtedness incurred by the Company in connection with financing acquisitions, dilution experienced by the Company’s existing stockholders as a result of the issuance of shares of the Company’s common stock in connection with acquisitions, risks related to the business, operations and prospects of acquired businesses, risks that suppliers of the acquired business may not consent to the transaction or otherwise continue its relationship with the acquired business following the transaction and the impact that the loss of any such supplier may have on the results of the Company and the acquired business, and risks that the Company’s goals or expectations with respect to acquisitions and other strategic transactions may not be met; market share growth tactics and investments and expenses in pursuit of growth, including those incurred in connection with the Company’s “buy-and-build” growth strategy, or otherwise may not result in the benefits anticipated; risks relating to the impact of pricing concessions and other measures which the Company may take from time to time in connection with its expansion and pursuit of growth, including the impact they may have on gross margin and the Company’s other financial results; risks relating to the Company’s ability to enter into and compete effectively in new industries, as well as risks and trends related to those industries and the costs and timing of the Company’s efforts with respect thereto; risks relating to the Company’s relationships with its principal suppliers and customers, including the impact of the loss of any such relationship; risks that equipment sales may not result in the ancillary benefits anticipated, including that they not lead to increases in higher gross margin sale of parts, accessories, supplies, and technical services related to the equipment, and the risk that the benefit of lower gross margin equipment sales under longer-term contracts will not outweigh the possible short-term impact to gross margin; risks related to the Company’s indebtedness; the availability, terms and deployment of debt and equity capital if needed for expansion or otherwise; 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; 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 of revenue expected to be recognized in future periods 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; and other economic, competitive, governmental, technological and other risks and factors discussed in the Company’s filings with the SEC, including, without limitation, those described in the “Risk Factors” section of the Company’s Annual

21 

Report on Form 10-K for the fiscal year ended June 30, 2019. Many of these risks and factors are beyond the Company’s control. In addition, dividends are subject to declaration by the Company’s Board of Directors based on factors deemed relevant by it from time to time, may be restricted by the terms of the Company’s indebtedness, and may not be paid in the future, whether with the frequency or in the amounts previously paid or at all. 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 specifically disclaims any obligation to, update or supplement any forward looking statement, whether as a result of changes in circumstances, new information, subsequent events or otherwise, except as may be required by law.

Company Overview

EVI Industries, Inc., through its wholly-owned subsidiaries (collectively “EVI” or the “Company”), is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.

The Company’s customers include retail, commercial, industrial, institutional, and government customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems. The Company also provides its customers with the services described above.

The Company believes that equipment sales provide a strong foundation for the Company to further strengthen its customer relationships, including that they may in the future result in higher gross margin opportunities from the sale of parts, accessories, supplies, and technical services related to the equipment. It is important to note, however, that from time to time the Company enters into longer-term contracts, including to fulfill large complex laundry projects for divisions of the federal government, where the nature of, and competition for, such contracts may result in a lower gross margin as compared to other equipment sales. Despite the potential for a lower gross margin from such longer-term contracts, the Company believes that the long-term benefit from the increase in its installed equipment will outweigh the possible short-term impact to gross margin.

The Company’s operating expenses consist of (a) selling, general and administrative expenses, primarily salaries, and commissions and marketing expenses that are variable and correlate to changes in sales, (b) expenses related to the operation of warehouse facilities, including facility rent, which is payable mostly under non-cancelable operating leases, and the Company’s fleet of installation and service vehicles, and (c) operating expenses at the parent company, including compensation expenses, fees for professional services, expenses associated with being a public company, including increased expenses attributable to the Company’s growth, and expenses in furtherance of the Company’s buy-and-build growth strategy.

Acquisition History

Prior to the completion of the Company’s first acquisition, the WSD Acquisition (as defined below), pursuant to its “buy-and-build” growth strategy, the Company’s operations consisted primarily of the business and operations of Steiner-Atlantic Corp. (“Steiner-Atlantic”), a wholly-owned subsidiary of the Company. Beginning in 2015, the Company implemented a “buy-and-build” growth strategy and has since acquired the following businesses under such growth strategy:

22 

Acquisitions Completed During the Six Months Ended December 31, 2019

· On August 1, 2019, the Company acquired substantially all of the assets of New York-based Commercial Laundry Products, Inc., Professional Laundry Systems of PA, Inc., and Professional Laundry Systems West, Inc. (collectively, “PLS”) (the “PLS Acquisition”). See Note 3 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information regarding the PLS Acquisition.

Acquisitions Completed Subsequent to the Six Months Ended December 31, 2019

· On January 31, 2020, the Company acquired Tennessee-based Large Equipment, Inc. (d/b/a Laundry Systems of Tennessee) (“LSOT”) via a merger of LSOT with and into a wholly-owned subsidiary of the Company (“Laundry Systems of Tennessee”). See Note 13 to the unaudited consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for information regarding this acquisition.

Acquisitions Completed Prior to the Current Fiscal Year

· On October 10, 2016, the Company acquired substantially all the assets of California-based Western State Design, LLC;

· On June 19, 2017, the Company acquired substantially all of the assets of Colorado-based Martin-Ray Laundry Systems, Inc.;

· On October 31, 2017, the Company acquired substantially all of the assets of Georgia-based Tri-State Technical Services, Inc.;

· On February 9, 2018, the Company acquired substantially all of the assets of Texas-based companies, Zuf Acquisitions I LLC (d/b/a AAdvantage Laundry Systems) and Sky-Rent LP (“Sky-Rent”);

· On September 4, 2018, the Company acquired substantially all of the assets of Florida-based Industrial Laundry Services, Inc.;

· On September 12, 2018, the Company acquired substantially all of the assets of Texas-based Scott Equipment, Inc. (“Scott Equipment”);

· On November 6, 2018, the Company acquired Washington-based Washington Automated, Inc. (‘WAI”) via a merger of WAI with and into a wholly-owned subsidiary of the Company (“Washington Automated”);

· On November 14, 2018, the Company acquired substantially all of the assets of Texas-based Skyline Equipment, Inc.;

· On November 16, 2018, the Company acquired substantially all of the assets of Florida-based Worldwide Laundry, Inc.; and

· On February 5, 2019, the Company acquired Pennsylvania-based PAC Industries, Inc. (“PAC”) via a merger of PAC with and into a wholly-owned subsidiary of the Company (“PAC Industries”).

Each acquisition described above was effected by the Company, indirectly through a separate wholly-owned subsidiary formed by the Company for the purpose of effecting the transaction and operating the related business following the acquisition, and included both cash consideration and stock consideration in the form of shares of the Company’s common stock. In connection with each asset acquisition, the Company, indirectly through its applicable wholly-owned subsidiary, also assumed 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 are included in the Company’s consolidated financial statements. The financial position and results of Laundry Systems of Tennessee following the

23 

January 31, 2020 closing date of the Company’s acquisition of LSOT will be included in the Company’s consolidated financial statements beginning with the quarter ending March 31, 2020.

Recent Accounting Pronouncements

Refer to Note 2 to the unaudited condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q for a discussion of recently adopted significant accounting policies.

Results of Operations

Six and Three-Month Periods Ended December 31, 2019 Compared to the Six and Three-Month Periods Ended December 31, 2018

The “build” component of the Company’s “buy-and-build” growth strategy involves implementing a growth culture at acquired businesses based on the exchange of ideas and business concepts among the management teams of the Company and the acquired businesses as well as through certain initiatives, which may include investments in additional sales and service personnel, new product lines, enhanced service operations and capabilities, new and improved facilities, and advanced technologies. The Company pursues market share growth using a variety of strategies aimed at increasing the installed base of the wide range of commercial laundry equipment the Company represents. Certain market share growth tactics may, from time to time, result in lower gross margins. However, the Company believes that a greater installed base of equipment strengthens the Company’s existing customer relationships and increases the Company’s total number of customer relationships, consequently creating a larger and stronger customer base to which the Company may sell products and services. These may include certain higher margin products and services and any additional products and services which the Company may offer or sell from time to time as a result of any business acquisitions, the sale or lease of complementary products, and expansion of its service operations.

Finally, it is important to note that, as a value-added distributor and a provider of technical services in the commercial laundry industry, the Company partners with its customers to plan, design, install, and maintain their commercial laundry operations. The nature of the Company’s business not only requires a competent and well-trained sales organization to win customer orders, but also requires proper, timely, and cost-effective installation ranging from single units of equipment to complex multimillion dollar laundry systems. Such installations also require coordination and collaboration with the Company’s customers and any third-parties they may retain. Consequently, the recognition of revenue and profit, from time to time, may be impacted by delays in construction and/or the preparation of customer facilities for the installation of purchased commercial laundry equipment and systems. This may result in decreased revenue and profit in the current period but a source of future revenue and profit through the ultimate fulfillment of the Company’s backlog of customer orders not yet recognized and pending installation.

Revenues

Revenues for the six and three-month periods ended December 31, 2019 increased $18.1 million, or 17%, and $5.8 million, or 10%, respectively, compared to the same periods of the prior fiscal year. The increases in revenue were due to the results of operations of acquired businesses whose results for all or part of the six and three months ended December 31, 2018 were not included in the Company’s consolidated financial statements for such periods, including Scott Equipment, Washington Automated, and PAC Industries, and the success of certain sales tactics executed by the Company to increase market share.

Gross Profit

Gross profit for the six and three-month periods ended December 31, 2019 increased $4.5 million, or 19%, and $398,000, or 3%, respectively, compared to the same periods of the prior fiscal year, primarily as a

24 

result of increased revenues. Gross margins increased from 22.5% to 22.8% for the six-month period ended December 31, 2019 and decreased from 22.5% to 21.1% for the three-month period ended December 31, 2019, each compared to the same period of the prior fiscal year. The success of the Company’s market share growth strategy described above had an adverse impact on gross margins during the six and three-month periods ended December 31, 2019.

Further, as described above, from time to time the Company enters into longer-term contracts, including to fulfill large complex laundry projects for divisions of the federal government. These contracts generally have a lower gross margin compared to other equipment sales and, as a result, adversely impact the Company’s gross margin for periods in which a significant number of these contracts are entered into. However, the Company believes that these contracts will result in higher margin opportunities over the long-term. During the six and three month periods ended December 31, 2019 and December 31, 2018, the Company entered into a number of longer-term federal government contracts, which adversely impacted the Company’s gross margin for each such period. In the absence of such longer-term federal government contracts, gross margins for the six and three-month periods ended December 31, 2019 as compared to the same periods of the prior fiscal year decreased 1.7% to 24.0% and 3.3% to 22.8%, respectively.

Selling, General and Administrative Expenses

Operating expenses increased $6.0 million, or 30%, and $1.7 million, or 15%, for the six and three-month periods ended December 31, 2019, compared to the same periods of the prior fiscal year. The increase in operating expenses resulted from the Company’s continued execution of its buy-and-build growth strategy and other expenses in connection with the Company’s growth and growth initiatives.

The increase in operating expenses is primarily attributable to (a) additional post-acquisition operating expenses associated with acquired businesses not reflected in operating expenses for the prior fiscal year period, (b) additional operating expenses at the acquired businesses in pursuit of future growth and in support of the Company’s growing operations, (c) increases in operating expenses in connection with the Company’s growth, including greater accounting fees and expenses, legal fees, and insurance costs, (d) the addition of sales, service, and operations support professionals and related costs, as total personnel at December 31, 2019 increased by 29% compared to total personnel at December 31, 2018, with 74% of such increase attributable to sales and service related personnel, (e) increased investments in sales, service, and operations related technologies in support of the Company’s “buy-and-build” growth strategy, and (f) an increase in non-cash amortization expense related to the intangible assets the Company acquired in connection with its acquisitions, an increase in depreciation expense and an increase in non-cash share-based compensation.

As a result of the foregoing, operating expenses as a percentage of revenues for the six and three-month periods ended December 31, 2019 were 21.1% and 19.9%, respectively, compared to 19.1% and 19.0% for the six and three-month periods ended December 31, 2018, respectively.

Interest Expense

Net interest expense for the six and three-month periods ended December 31, 2019 were $855,000 and $433,000, respectively, compared to $539,000 and $374,000, respectively, for the same periods of the prior fiscal year. The increases in net interest expense are primarily due to increases in average outstanding borrowings.

Income Taxes

The Company’s effective tax rates were 31.5% and 29.3% for the six and three-month periods ended December 31, 2019, respectively, compared to 31.2% and 26.8%% for the same periods of the prior fiscal year, respectively. The increase in the effective tax rate for the six and three-month periods ended December 31, 2019 is attributable to an increase in the net impact of permanent book-tax differences

25 

resulting primarily from nondeductible compensation, partially offset by lower effective state tax rates from increased apportionment to states with lower tax rates.

Net Income

Net income for the six and three months ended December 31, 2019 was $843,000 and $263,000, respectively, compared to $2.1 million and $1.3 million for the same periods of the prior fiscal year, respectively. As described above, the increases in revenue and gross profit were offset by lower gross margins and by operating expense increases, including increases in (a) operating expenses related to acquired businesses, (b) operating expenses in support of the Company’s buy-and-build efforts and initiatives, and (c) the increase in non-cash charges related to the amortization of intangible assets, depreciation expense and share-based compensation.

Consolidated Financial Condition

The Company’s total assets increased from $154.5 million at June 30, 2019 to $158.4 million at December 31, 2019. The increase in total assets was primarily attributable to the adoption of the new lease standard effective July 1, 2019, resulting in the establishment of an operating lease asset, and the assets the Company acquired in connection with the PLS Acquisition consummated by the Company during the six months ended December 31, 2019, partially offset by a decrease in accounts receivable and contract assets. The Company’s total liabilities increased from $73.0 million at June 30, 2019 to $74.1 million at December 31, 2019, which was primarily attributable to the adoption of the new lease standard effective July 1, 2019, resulting in the establishment of an operating lease liability, and an increase in customer deposits, partially offset by decrease in long-term debt as well as a decrease in accounts payable and accrued expenses from timing of payments.

Liquidity and Capital Resources

For the six-month period ended December 31, 2019, cash increased by approximately $886,000 compared to an increase of approximately $8.8 million during the six-month period ended December 31, 2018.

Working Capital

Working capital decreased from $37.2 million at June 30, 2019 to $31.1 million at December 31, 2019, primarily reflecting the adoption of the new lease standard effective July 1, 2019, resulting in the establishment of a current operating lease liability, lower levels of accounts receivable and the utilization of cash on hand to pay off long-term debt, partially offset by higher levels of inventory and lower levels of accounts payable and accrued expenses. The decrease in accounts receivable was primarily attributable to the timing of collection of payments and decreased amounts that were owed related to progress billing on longer-term contracts. The increase in inventory was primarily attributable to the inventory acquired in connection with the PLS Acquisition as well as increases related to the timing of the Company’s placement of equipment orders and availability of products from certain vendors at favorable prices during the period.

Cash Flows

The following table summarizes the Company’s cash flow activity for the six months ended December 31, 2019 and 2018 (in thousands):

26 

	Six Months Ended December 31,
	2019			2018
Net cash provided (used) by:
Operating activities	$	9,608		$	(9,855	)
Investing activities	$	(2,639	)	$	(8,431	)
Financing activities	$	(6,083	)	$	27,129

The individual items contributing to cash flow changes for the periods presented are detailed in the unaudited condensed consolidated statements of cash flows included in Item 1 of this Quarterly Report on Form 10-Q.

Operating Activities

For the six months ended December 31, 2019, operating activities provided cash of $9.6 million compared to cash used by operating activities of $9.9 million during the six months ended December 31, 2018. This $19.5 million increase in cash provided by operating activities was primarily attributable to changes in working capital, including a decrease in accounts receivable and an increase in customer deposits partially offset by the decrease in accounts payable and accrued expenses.

Investing Activities

Net cash used in investing activities decreased $5.8 million to $2.6 million during the six months ended December 31, 2019 compared to $8.4 million during the six months ended December 31, 2018. This $5.8 million decrease was primarily attributable to a decrease in cash used for acquisitions, partially offset by an increase in cash used for capital expenditures. The increase in capital expenditures is due in part to expenses in furtherance of certain growth initiatives, including primarily an increase in capital expenditures in connection with growth initiatives related to the laundry route and rental business in which certain of the Company’s subsidiaries are engaged.

Financing Activities

For the six months ended December 31, 2019, financing activities used cash of $6.1 million compared to cash provided by financing activities of $27.1 million during the six months ended December 31, 2018. This $33.2 million increase in cash used by financing activities was primarily attributable to the cash provided by operating activities during the six months ended December 31, 2019 which were used to make debt repayments in excess of proceeds from borrowings compared to proceeds from borrowings in excess of debt repayments during the six months ended December 31, 2018. Borrowings during the six months ended December 31, 2018 were used primarily to fund the changes in working capital during such period and the cash consideration paid in connection with the acquisitions consummated by the Company during such period.

Revolving Credit Agreement

On November 2, 2018, the Company entered into a syndicated credit agreement (the “2018 Credit Agreement”) for a revolving credit facility with a five-year term and a 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. The Company uses borrowings under the revolving credit facility to fund in part its working capital needs, acquisitions, dividends (if and to the extent declared by the Company’s Board of Directors), capital expenditures, amounts paid to satisfy tax withholding obligations upon the vesting of certain restricted stock awards, issuances of letters of credit, and for other general corporate purposes. The obligations of the Company under the 2018 Credit Agreement are secured by

27 

substantially all of the assets of the Company and certain of its subsidiaries, and are guaranteed, jointly and severally, by certain of the Company’s subsidiaries. The 2018 Credit Agreement replaced the Company’s previous credit facility, which was repaid in full with borrowings of $20.8 million under the 2018 Credit Agreement.

Borrowings (other than swingline loans) under the 2018 Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a) LIBOR plus a margin that ranges from 1.25% to 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 one month LIBOR rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. Swingline loans bear interest calculated at the Base Rate plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio.

The 2018 Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The 2018 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, 2019, the Company was in compliance with its covenants under the 2018 Credit Agreement and $4.4 million was available to borrow under the revolving credit facility.

The Company believes that its existing cash and cash equivalents, anticipated cash from operations and funds available under the 2018 Credit Agreement will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months. 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 or consummated by the Company as part of its buy-and-build growth strategy.

As previously described, the Company has in place an equity incentive plan, the EVI Industries, Inc. 2015 Equity Incentive Plan (the “Plan”), pursuant to which restricted stock and other equity-based awards and cash awards may be granted to participants in the Plan. Upon request by a holder of restricted stock granted under the Plan, the Company may issue shares upon vesting net of the statutory withholding requirements that the Company pays on behalf of its employees. For financial statement purposes, the shares withheld are treated as being repurchased by the Company and reduce additional paid-in capital within shareholders’ equity and are reflected as repurchases in the Company’s condensed consolidated statements of cash flows and shareholders’ equity as they reduce the number of shares that would have been issued upon vesting. During the six months ended December 31, 2019 and 2018, share repurchases related to shares withheld upon the vesting of previously granted restricted stock awards were approximately $309,000 and $359,000, respectively.

Off-Balance Sheet Financing

The Company had no off-balance sheet financing arrangements within the meaning of Item 303(a)(4) of Regulation S-K at December 31, 2019.

Inflation

Inflation did not have a significant effect on the Company’s results during any of the reported periods.

28 

Transactions with Related Parties

Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals of those subsidiaries. These leases include the following:

The Company’s wholly-owned subsidiary, Steiner-Atlantic Corp. (“Steiner-Atlantic”), leases 28,000 square feet of warehouse and office space from an affiliate of Michael S. Steiner, President of Steiner-Atlantic and a former director and officer of the Company, pursuant to a lease agreement dated November 1, 2014, as amended. The lease term was extended during January 2020 to run through October 31, 2020. Monthly base rental payments under the lease are $12,000. In addition to base rent, Steiner-Atlantic is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $74,000 and $72,000 during the six months ended December 31, 2019 and 2018, respectively.

On October 10, 2016, the Company’s wholly-owned subsidiary, Western State Design, Inc. (“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 Executive Vice President, Corporate Strategy of the Company, and Tom Marks, Executive Vice President, Business Development of the Company. 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 the Company. Payments under this lease totaled approximately $72,000 during each of the six months ended December 31, 2019 and 2018.

On October 31, 2017, the Company’s wholly-owned subsidiary, Tri-State Technical Services, Inc. (“Tri-State”), entered into lease agreements pursuant to which it leases a total of 81,000 square feet of warehouse and office space from an affiliate of Matt Stephenson, President of Tri-State. Monthly base rental payments total $21,000 during the initial terms of the leases. In addition to base rent, Tri-State is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $126,000 during each of the six months ended December 31, 2019 and 2018.

On February 9, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, Inc. (“AAdvantage”), entered into a lease agreement pursuant to which it leases a total of 5,000 square feet of warehouse and office space from an affiliate of Mike Zuffinetti, Chief Executive Officer of AAdvantage. Monthly base rental payments are $3,950 during the initial term of the lease. 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 has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. During February 2018, AAdvantage entered into a month-to-month lease agreement with an affiliate of Mike Zuffinetti for a total of 17,000 square feet of warehouse and office space. Monthly base rental payments under this lease were $13,500. This month-to-month lease was terminated on October 31, 2018. In addition, on November 1, 2018, AAdvantage entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti. Monthly base rental payments 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 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 has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under the leases described in this paragraph totaled approximately $240,000 and $130,000 during the six months ended December 31, 2019 and 2018, respectively.

29 

On September 12, 2018, the Company’s wholly-owned subsidiary, Scott Equipment, Inc. (“Scott Equipment”), entered into lease agreements pursuant to which it leases a total of 18,000 square feet of warehouse and office space from an affiliate of Scott Martin, President of Scott Equipment. Monthly base rental payments total $11,000 during the initial terms of the leases. In addition to base rent, Scott Equipment is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $69,000 and $44,000 during the six months ended December 31, 2019 and 2018, respectively.

On February 5, 2019, the Company’s wholly-owned subsidiary, PAC Industries Inc. (“PAC Industries”), entered into two lease agreements pursuant to which it leases a total of 29,500 square feet of warehouse and office space from an affiliate of Frank Costabile, President of PAC Industries, and Rocco Costabile, Director of Finance of PAC Industries. Monthly base rental payments total $14,600 during the initial terms of the leases. In addition to base rent, PAC Industries is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of four years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $88,000 during the six months ended December 31, 2019.

Critical Accounting Policies

In connection with the preparation of its financial statements, the Company makes estimates and assumptions, including those that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and revenues and expenses during the reported periods. Estimates and assumptions made may not prove to be correct, and actual results may differ from the estimates. The accounting policies that the Company has identified as critical to its business operations and to an understanding of the Company’s financial statements remain unchanged from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019, except with respect to the adoption of the new lease accounting standard as described in Note 2 to the unaudited condensed consolidated financial statements included in Item 1 of this Report.

Recently Issued Accounting Guidance

See Note 10 to the unaudited condensed consolidated financial statements included in Item 1 of this Report for a description of Recently Issued Accounting Guidance.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The Company’s indebtedness subjects the Company to interest rate risk. Interest rates are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The nature and timing of any changes in such policies or general economic conditions and the effect they may have on the Company are unpredictable. The Company’s indebtedness may also have other important impacts on the Company, including that the Company will be required to utilize cash flow to service the debt, indebtedness may make the Company more vulnerable to economic downturns, and the Company’s indebtedness subjects the Company to covenants and may place restrictions on its operations and activities, including its ability to pay dividends and take certain other actions. Interest on borrowings under the Company’s 2018 Credit Agreement accrue at a rate, at the Company’s election at the time of borrowing, equal to (a) LIBOR plus a margin that ranges from 1.25% to 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 one-month LIBOR rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the

30 

Consolidated Leverage Ratio. As of December 31, 2019, the Company had approximately $35.0 million of outstanding borrowings with a weighted average interest rate of 3.49%. Based on the amounts outstanding at December 31, 2019, a hypothetical 1% increase in daily interest rates would increase the Company’s annual interest expense by approximately $350,000.

All of the Company’s export sales require the customer to make payment in United States dollars. Accordingly, foreign sales may be affected by the strength of the United States dollar relative to the currencies of the countries in which the Company’s customers are located, as well as the strength of the economies of the countries in which the Company’s customers are located. The Company has, at times in the past, paid certain suppliers in Euros. The Company had no foreign exchange contracts outstanding at December 31, 2019 or June 30, 2019.

The Company’s cash and cash equivalents are maintained in bank accounts which bear interest at prevailing interest rates. At December 31, 2019, bank deposits exceeded Federal Deposit Insurance Corporation limits.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Report, management of the Company, with the participation of the Company’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the Company’s principal executive officer and principal financial officer concluded that, as of December 31, 2019, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (a) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (b) is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. It should be noted that a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Changes in Internal Control over Financial Reporting

During the quarter ended December 31, 2019, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

31 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company is involved in, or subject to, legal and regulatory claims, proceedings, demands or actions arising in the ordinary course of business. There have been no material changes with respect to such matters from the disclosure included in the “Legal Proceedings” section of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

Item 1A. Risk Factors

There have been no material changes in the risks and uncertainties that the Company faces from those disclosed in the “Risk Factors” section of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

32 

Item 6. Exhibits.

Exhibit
Number	Description
*31.01	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.02	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
+32.01	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
+32.02	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed with this Report.

+ Furnished with this Report.

33 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date:  February 10, 2020		EVI Industries, Inc.
	By:	/s/ Robert H. Lazar
		Robert H. Lazar
		Chief Financial Officer

34 

EX-31.01

EXHIBIT 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Henry M. Nahmad, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of EVI Industries, Inc.;

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

1 

5.       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2020

/s/ Henry M. Nahmad 

Henry M. Nahmad

Principal Executive Officer

2 

EX-31.02

EXHIBIT 31.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert H. Lazar, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of EVI Industries, Inc.;

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.       The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

1 

5.       The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 10, 2020

/s/ Robert H. Lazar 

Robert H. Lazar

Principal Financial Officer

2 

EX-32.01

EXHIBIT 32.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of EVI Industries, Inc. (the “Company”) for the quarter ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Henry M. Nahmad, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 10, 2020

/s/ Henry M. Nahmad 

Henry M. Nahmad

Principal Executive Officer

EX-32.02

EXHIBIT 32.02

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of EVI Industries, Inc. (the “Company”) for the quarter ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert H. Lazar, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 10, 2020

/s/ Robert H. Lazar 

Robert H. Lazar

Principal Financial Officer

XML

Leases

6 Months Ended

Dec. 31, 2019

Leases [Abstract]

Leases

Note (6) - Leases:

Company as Lessee

The Company leases warehouse and distribution facilities and administrative office space, generally for terms of three to five years.

As described in Note 2 above, the Company adopted ASC Topic 842, Leases (“ASC 842” or “Topic 842”), utilizing the modified retrospective adoption method with an effective date of July 1, 2019. The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, the Company, as permitted by Topic 842, will recognize the lease payments under its short-term leases in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use asset.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, certain of the Company’s leases do not provide a readily determinable implicit rate. For such leases, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company uses instruments with similar characteristics when calculating its incremental borrowing rates.

The Company has options to extend certain of its operating leases for additional periods of time and the right to terminate several of its operating leases prior to its contractual expiration, in each case, subject to the terms and conditions of the lease. The lease term consists of the non-cancellable period of the lease and the periods covered by Company options to extend the lease when it is reasonably certain that the Company will exercise such options. The Company's lease agreements do not contain residual value guarantees. The Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components.

As of December 31, 2019, the Company had 24 facilities financed under operating leases, consisting of warehouse facilities and administrative offices, with lease term expirations between 2020 and 2028. Rent expense consists of monthly rental payments under the terms of the Company’s lease agreements recognized on a straight-line basis.

The following table provides details of the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of December 31, 2019. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

Fiscal years ending June 30,	Total Operating Lease Obligations (in thousands)
2020 (remainder of)	$	989
2021		1,688
2022		1,474
2023		1,093
2024		329
Thereafter		650
Total minimum lease payments	$	6,223
Less: amounts representing interest		466
Present value of minimum lease payments	$	5,757
Less: current portion		1,621
Long-term portion	$	4,136

The table below presents additional information related to the Company’s operating leases (in thousands):

	Six months ended December 31, 2019
Operating lease cost
Operating lease cost (1)	$	905
Short-term lease cost (1)		114
Variable lease cost (1)		49
Total lease cost	$	1,068

(1) Expenses are classified within selling, general and administrative expenses in the Company’s condensed consolidated statement of operations.

The table below presents lease-related terms and discount rates as of December 31, 2019:

	December 31, 2019
Weighted average remaining lease terms
Operating leases	4.3 years
Weighted average discount rate
Operating leases	3.6%

The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities as of December 31, 2019 (in thousands):

	Six months ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:	$	905
Operating lease right-of-use assets obtained in exchange for operating lease liabilities:	$	864

Company as Lessor

The Company derives a portion of its revenue from equipment leasing arrangements. Such arrangements provide for monthly payments covering the equipment provided, maintenance, and interest. These arrangements meet the criteria to be accounted for as sales type leases. Accordingly, revenue for provision of the equipment is recognized upon delivery of the equipment and its acceptance by the customer. Upon the recognition of such revenue, an asset is established for the investment in sales type leases. Maintenance revenue and interest are recognized monthly over the lease term.

The future minimum lease payments receivable for sales type leases are as follows (in thousands):

Fiscal years ending June 30,	Total Minimum Lease Payments to be Received		Amortization of Unearned Income		Net Investment in Sales Type Leases
2020 (remainder of)	$	1,002	$	551	$	451
2021		1,206		754		452
2022		889		507		382
2023		623		311		312
2024		397		162		235
Thereafter		189		94		95
					$	1,927

* Excludes residual values of $1.6 million.

The total net investments in sales type leases, including stated residual values, as of December 31, 2019 and June 30, 2019 was $3.5 million and $3.0 million, respectively. The current portion of $0.8 million and $0.5 million is included in Other Current Assets in the consolidated balance sheets as of December 31, 2019 and June 30, 2019, respectively, and the long term portion of $2.7 million and $2.5 million is included in Other Assets in the consolidated balance sheets as of December 31, 2019 and June 30, 2019, respectively.

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Recently Issued Accounting Guidance

6 Months Ended

Dec. 31, 2019

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

Recently Issued Accounting Guidance

Note (10) – Recently Issued Accounting Guidance: In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The new guidance will eliminate the second step from the goodwill impairment test required in computing the implied fair value of goodwill. Instead, under the new guidance, 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 and, if applicable, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the charge 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 performing the goodwill impairment test. 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 (the fiscal year ending June 30, 2021 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements.

Other than as described above, management does not believe that accounting standards and updates which have been issued but are not yet effective will have a material impact on the Company’s consolidated financial statements upon adoption.

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Equity Plans (Narrative) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized under 2015 Equity Incentive Plan	1,500,000		1,500,000
Non-cash share-based compensation expense	$ 462	$ 424	$ 915	$ 838
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted under 2015 Equity Incentive Plan	12,110	15,000	12,110	15,000
Unrecognized compensation expense, net of estimated forfeitures, related to non-vested restricted stock	$ 13,500		$ 13,500
Weighted-average period			17 years 3 months 19 days
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards granted under 2015 Equity Incentive Plan	6,500	6,845	6,500	6,845
Unrecognized compensation expense, net of estimated forfeitures, related to non-vested restricted stock	$ 1,200		$ 1,200
Weighted-average period			14 years 9 months 18 days
Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock issued under employee stock purchase plan	1,022	726	1,022	726
Proceeds from issuance	$ 26	$ 23	$ 26	$ 23

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Summary of Significant Accounting Policies

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note (2) – Summary of Significant Accounting Policies:

Adoption of New Lease Standard

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize substantially all leases on their balance sheets and disclose certain additional key information about leasing arrangements. The new standard establishes a right of use (“ROU”) model that requires a lessee to recognize a ROU asset and liability on the balance sheet for all leases with a term longer than 12 months. Leases are required to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The new standard became effective for the Company on July 1, 2019. The Company adopted this standard using the modified retrospective transition approach, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption without restatement of prior periods. Therefore, the accompanying unaudited condensed consolidated financial statements for the six and three-month periods ended December 31, 2019 are presented under the new standard, while the comparative period financial statements presented herein were not adjusted for this standard and continue to be reported in accordance with the Company's previous lease accounting policy. There was no cumulative-effect adjustment recorded on July 1, 2019.

The Company elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company's contracts are or contain leases, (2) lease classification and (3) initial direct costs.

The primary impact for the Company was the balance sheet recognition of ROU assets and lease liabilities for operating leases as a lessee. The adoption of this ASU did not have a material impact on the results of operations or cash flows of the Company. See Note 6, “Leases,” for further discussion regarding the Company’s adoption of the new standard.

Significant Accounting Policies

Except for the new lease standard adopted on July 1, 2019 described above, there have been no changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

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Document and Entity Information - shares	6 Months Ended
	Dec. 31, 2019	Feb. 03, 2020
Document And Entity Information
Entity Registrant Name	EVI INDUSTRIES, INC.
Entity Central Index Key	0000065312
Document Type	10-Q
Document Period End Date	Dec. 31, 2019
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		11,887,966
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2020
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Incorporation State Country Code	DE
Entity File Number	001-14757

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Leases (Schedule of Operating Leases) (Details) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Operating lease cost
Operating lease cost	$ 905	[1]
Short-term lease cost	114	[1]
Variable lease cost	49	[1]
Total lease cost	$ 1,068
Other information
Weighted average remaining lease terms - operating leases	4 years 3 months 19 days
Weighted average discount rate - operating leases	3.60%

[1] Expenses are classified within selling, general and administrative expenses in the Company's condensed consolidated statement of operations.

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Debt (Narrative) (Details) - USD ($) $ in Thousands		6 Months Ended
	Nov. 02, 2018	Dec. 31, 2019	Jun. 30, 2019
Debt Instrument [Line Items]
Revolving line of credit facility amount outstanding		$ 35,000	$ 40,800
Credit facility [Member]
Debt Instrument [Line Items]
Revolving line of credit facility maximum borrowing capacity	$ 100,000
Revolving line of credit facility amount outstanding	$ 40,000
Debt outstanding		$ 5,000
Basis of variable interest rate		LIBOR plus a margin that ranges from 1.25% to 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 one month LIBOR rate plus 100 basis points (such highest rate, the "Base Rate"), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. Swingline loans bear interest calculated at the Base Rate plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio.
Expiration date		Nov. 02, 2023
Credit facility term	5 years	5 years
Amount available for borrowing under the revolving line of credit facility		$ 4,400
Revolving line of credit [Member]
Debt Instrument [Line Items]
Debt outstanding		$ 10,000
Maximum [Member] | Credit facility [Member]
Debt Instrument [Line Items]
Revolving line of credit facility maximum borrowing capacity	$ 140,000

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Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Common Stock Related to Acquiree's ESOP [Member]	Total
Balance, beginning at Jun. 30, 2018	$ 281	$ 49,950	$ (711)	$ 7,511		$ 57,031
Balance, shares, beginning at Jun. 30, 2018	11,239,656		52,686
Share repurchases			$ (359)			(359)
Share repurchases, shares			10,123
Issuance of restricted shares
Issuance of restricted shares, shares	28,170
Issuance of shares under employee stock purchase plan		23				23
Issuance of shares under employee stock purchase plan, shares	726
Issuance of shares in connection with acquisitions	$ 9	14,629				14,638
Issuance of shares in connection with acquisitions, shares	350,678
Stock compensation		838				838
Dividends payable				(1,619)		(1,619)
Net income				2,061		2,061
Balance, ending at Dec. 31, 2018	$ 290	65,440	$ (1,070)	7,953		72,613
Balance, shares, ending at Dec. 31, 2018	11,619,230		62,809
Balance, beginning at Sep. 30, 2018	$ 287	60,740	$ (711)	8,307		68,623
Balance, shares, beginning at Sep. 30, 2018	11,470,033		52,686
Share repurchases			$ (359)			(359)
Share repurchases, shares			10,123
Issuance of restricted shares
Issuance of restricted shares, shares	28,170
Issuance of shares under employee stock purchase plan		23				23
Issuance of shares under employee stock purchase plan, shares	726
Issuance of shares in connection with acquisitions	$ 3	4,253				4,256
Issuance of shares in connection with acquisitions, shares	120,301
Stock compensation		424				424
Dividends payable				(1,619)		(1,619)
Net income				1,265		1,265
Balance, ending at Dec. 31, 2018	$ 290	65,440	$ (1,070)	7,953		72,613
Balance, shares, ending at Dec. 31, 2018	11,619,230		62,809
Balance, beginning at Jun. 30, 2019	$ 296	73,010	$ (1,439)	9,635	$ (4,240)	77,262
Balance, shares, beginning at Jun. 30, 2019	11,825,615		72,934
Share repurchases			$ (309)			(309)
Share repurchases, shares			10,110
Issuance of restricted shares
Issuance of restricted shares, shares	29,880
Issuance of shares under employee stock purchase plan		26				26
Issuance of shares under employee stock purchase plan, shares	1,022
Issuance of shares in connection with acquisitions	$ 1	1,293			4,240	5,534
Issuance of shares in connection with acquisitions, shares	37,050
Stock compensation		915				915
Dividends payable
Net income				843		843
Balance, ending at Dec. 31, 2019	$ 297	75,244	$ (1,748)	10,478		84,271
Balance, shares, ending at Dec. 31, 2019	11,893,567		83,044
Balance, beginning at Sep. 30, 2019	$ 297	74,756	$ (1,439)	10,215		83,829
Balance, shares, beginning at Sep. 30, 2019	11,862,665		72,934
Share repurchases			$ (309)			(309)
Share repurchases, shares			10,110
Issuance of restricted shares
Issuance of restricted shares, shares	29,880
Issuance of shares under employee stock purchase plan		26				26
Issuance of shares under employee stock purchase plan, shares	1,022
Stock compensation		462				462
Net income				263		263
Balance, ending at Dec. 31, 2019	$ 297	$ 75,244	$ (1,748)	$ 10,478		$ 84,271
Balance, shares, ending at Dec. 31, 2019	11,893,567		83,044

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Transactions with Related Parties (Details)	1 Months Ended	6 Months Ended
	Jan. 04, 2019 USD ($)	Dec. 31, 2019 USD ($) ft²	Dec. 31, 2018 USD ($)
Michael S. Steiner [Member]
Related Party Transaction [Line Items]
Area of lease | ft²		28,000
Lease start date		Nov. 01, 2014
Annual rent payment, year one		$ 12,000
Rental expense		$ 74,000	$ 72,000
Dennis Mack and Tom Marks [Member] | Western State Design [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		$ 72,000	72,000
Matt Stephenson [Member] | Tri-State [Member]
Related Party Transaction [Line Items]
Original lease term		5 years
Area of lease | ft²		81,000
Lease start date		Oct. 31, 2017
Annual rent payment, year one		$ 21,000
Rental expense		$ 126,000	126,000
Mike Zuffinetti [Member]
Related Party Transaction [Line Items]
Original lease term	5 years	5 years
Area of lease | ft²		17,000
Lease start date		Feb. 28, 2018
Annual rent payment, year one		$ 13,500
Rental expense	$ 36,000	$ 26,000
Mike Zuffinetti [Member] | AAdvantage [Member]
Related Party Transaction [Line Items]
Original lease term		5 years
Area of lease | ft²		5,000
Lease start date		Feb. 09, 2018
Annual rent payment, year one		$ 3,950
Rental expense		$ 240,000	130,000
Scott Martin [Member] | Scott Equipment [Member]
Related Party Transaction [Line Items]
Original lease term		5 years
Area of lease | ft²		18,000
Lease start date		Sep. 12, 2018
Annual rent payment, year one		$ 11,000
Rental expense		$ 69,000	$ 44,000
Frank Costabile [Member] | PAC Industries Inc. [Member]
Related Party Transaction [Line Items]
Original lease term		4 years
Area of lease | ft²		29,500
Lease start date		Feb. 05, 2019
Annual rent payment, year one		$ 14,600
Rental expense		$ 88,000

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2019

Accounting Policies [Abstract]

Adoption of New Revenue Standard

Adoption of New Lease Standard

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which, among other things, requires lessees to recognize substantially all leases on their balance sheets and disclose certain additional key information about leasing arrangements. The new standard establishes a right of use (“ROU”) model that requires a lessee to recognize a ROU asset and liability on the balance sheet for all leases with a term longer than 12 months. Leases are required to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The new standard became effective for the Company on July 1, 2019. The Company adopted this standard using the modified retrospective transition approach, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption without restatement of prior periods. Therefore, the accompanying unaudited condensed consolidated financial statements for the six and three-month periods ended December 31, 2019 are presented under the new standard, while the comparative period financial statements presented herein were not adjusted for this standard and continue to be reported in accordance with the Company's previous lease accounting policy. There was no cumulative-effect adjustment recorded on July 1, 2019.

The Company elected the package of transition practical expedients for expired or existing contracts, which does not require reassessment of: (1) whether any of the Company's contracts are or contain leases, (2) lease classification and (3) initial direct costs.

The primary impact for the Company was the balance sheet recognition of ROU assets and lease liabilities for operating leases as a lessee. The adoption of this ASU did not have a material impact on the results of operations or cash flows of the Company. See Note 6, “Leases,” for further discussion regarding the Company’s adoption of the new standard.

Significant Accounting Policies

Significant Accounting Policies

Except for the new lease standard adopted on July 1, 2019 described above, there have been no changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019.

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Equity Plans (Tables)

6 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Schedule of Non-vested Restricted Stock Activity

The following is a summary of non-vested restricted stock activity as of and for the six months ended December 31, 2019:

	Restricted Stock Awards					Restricted Stock Units
	Shares			Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Non-vested awards or units outstanding at June 30, 2019		855,854		$	18.62		27,500	$	36.24
Granted		6,500			34.50		12,110		27.64
Vested		(29,880	)		16.59		—		—
Forfeited		—			—		—		—
Non-vested awards or units outstanding at December 31, 2019		832,474		$	18.81		39,610	$	33.61

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Earnings Per Share (Schedule of Basic and Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Earnings Per Share [Abstract]
Net income	$ 263	$ 1,265	$ 843	$ 2,061
Less: distributed and undistributed income allocated to unvested restricted common stock	18	91	58	148
Net income allocated to EVI Industries, Inc. shareholders	$ 245	$ 1,174	$ 785	$ 1,913
Weighted average shares outstanding used in basic earnings per share	11,797	11,492	11,787	11,364
Dilutive common share equivalents	402	474	421	506
Weighted average shares outstanding used in diluted earnings per share	12,199	11,966	12,208	11,870
Basic earnings per share	$ 0.02	$ 0.10	$ 0.07	$ 0.17
Diluted earnings per share	$ 0.02	$ 0.10	$ 0.06	$ 0.16

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Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Outstanding performance and payment bonds	$ 8,000	$ 8,000

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Earnings Per Share (Narrative) (Details)	6 Months Ended
	Dec. 31, 2019 shares
Restricted Stock Awards [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities outstanding	872,084
Restricted Stock Units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Dilutive securities outstanding	896,777

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Subsequent Events

6 Months Ended

Dec. 31, 2019

Subsequent Events [Abstract]

Subsequent Events

Note (13) – Subsequent Events:

On January 31, 2020, the Company acquired Large Equipment, Inc. (d/b/a Laundry Systems of Tennessee) (“LSOT”), pursuant to a merger whereby LSOT merged with and into, and became, a wholly-owned subsidiary of the Company (“Laundry Systems of Tennessee”). Laundry Systems of Tennessee is a Tennessee-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry.

On February 7, 2020, the Company executed a definitive purchase agreement to acquire substantially all the assets and certain liabilities of Commercial Laundry Equipment Company, Inc. (“Commercial Laundry Equipment”). Commercial Laundry Equipment is a Virginia-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry.

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Leases (Tables)

6 Months Ended

Dec. 31, 2019

Lessee Disclosure [Abstract]

Schedule of Maturities of Operating Lease Liabilities

The following table provides details of the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of December 31, 2019. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

Fiscal years ending June 30,	Total Operating Lease Obligations (in thousands)
2020 (remainder of)	$	989
2021		1,688
2022		1,474
2023		1,093
2024		329
Thereafter		650
Total minimum lease payments	$	6,223
Less: amounts representing interest		466
Present value of minimum lease payments	$	5,757
Less: current portion		1,621
Long-term portion	$	4,136

Schedule of Operating Leases

The table below presents additional information related to the Company’s operating leases (in thousands):

	Six months ended December 31, 2019
Operating lease cost
Operating lease cost (1)	$	905
Short-term lease cost (1)		114
Variable lease cost (1)		49
Total lease cost	$	1,068

(1) Expenses are classified within selling, general and administrative expenses in the Company’s condensed consolidated statement of operations.

The table below presents lease-related terms and discount rates as of December 31, 2019:

	December 31, 2019
Weighted average remaining lease terms
Operating leases	4.3 years
Weighted average discount rate
Operating leases	3.6%

Schedule of Supplemental Cash Flow Information Related to Company's Long-Term Operating Lease Liabilities

The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities as of December 31, 2019 (in thousands):

	Six months ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:	$	905
Operating lease right-of-use assets obtained in exchange for operating lease liabilities:	$	864

Schedule of Future Minimum Lease Payments Receivable

The future minimum lease payments receivable for sales type leases are as follows (in thousands):

Fiscal years ending June 30,	Total Minimum Lease Payments to be Received		Amortization of Unearned Income		Net Investment in Sales Type Leases
2020 (remainder of)	$	1,002	$	551	$	451
2021		1,206		754		452
2022		889		507		382
2023		623		311		312
2024		397		162		235
Thereafter		189		94		95
					$	1,927

* Excludes residual values of $1.6 million.

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Debt

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Debt

Note (5) - Debt: Long-term debt as of December 31, 2019 and June 30, 2019 are as follows (in thousands):

	December 31, 2019			June 30, 2019
Revolving Line of Credit	$	35,000		$	40,800
Less: unamortized discount and deferred financing costs		(209	)		(237	)
Total long-term debt	$	34,791		$	40,563

On November 2, 2018, the Company entered into a syndicated credit agreement (the “2018 Credit Agreement”) for a five-year revolving credit facility 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.

Borrowings (other than swingline loans) under the 2018 Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a) LIBOR plus a margin that ranges from 1.25% to 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 one month LIBOR rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. Swingline loans bear interest calculated at the Base Rate plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. The 2018 Credit Agreement has a term of five years and matures on November 2, 2023.

The 2018 Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The 2018 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, 2019, the Company was in compliance with its covenants under the 2018 Credit Agreement and $4.4 million was available to borrow under the revolving credit facility.

The obligations of the Company under the 2018 Credit Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries, and are guaranteed, jointly and severally, by certain of the Company’s subsidiaries.

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Transactions with Related Parties

6 Months Ended

Dec. 31, 2019

Related Party Transactions [Abstract]

Transactions with Related Parties

Note (9) – Transactions with Related Parties: Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals of those subsidiaries. These leases include the following:

The Company’s wholly-owned subsidiary, Steiner-Atlantic Corp. (“Steiner-Atlantic”), leases 28,000 square feet of warehouse and office space from an affiliate of Michael S. Steiner, President of Steiner-Atlantic and a former director and officer of the Company, pursuant to a lease agreement dated November 1, 2014, as amended. The lease term was extended during January 2020 to run through October 31, 2020. Monthly base rental payments under the lease are $12,000. In addition to base rent, Steiner-Atlantic is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $74,000 and $72,000 during the six months ended December 31, 2019 and 2018, respectively.

On October 10, 2016, the Company’s wholly-owned subsidiary, Western State Design, Inc. (“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 Executive Vice President, Corporate Strategy of the Company, and Tom Marks, Executive Vice President, Business Development of the Company. 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 the Company. Payments under this lease totaled approximately $72,000 during each of the six months ended December 31, 2019 and 2018.

On October 31, 2017, the Company’s wholly-owned subsidiary, Tri-State Technical Services, Inc. (“Tri-State”), entered into lease agreements pursuant to which it leases a total of 81,000 square feet of warehouse and office space from an affiliate of Matt Stephenson, President of Tri-State. Monthly base rental payments total $21,000 during the initial terms of the leases. In addition to base rent, Tri-State is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $126,000 during each of the six months ended December 31, 2019 and 2018.

On February 9, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, Inc. (“AAdvantage”), entered into a lease agreement pursuant to which it leases a total of 5,000 square feet of warehouse and office space from an affiliate of Mike Zuffinetti, Chief Executive Officer of AAdvantage. Monthly base rental payments are $3,950 during the initial term of the lease. 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 has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. During February 2018, AAdvantage entered into a month-to-month lease agreement with an affiliate of Mike Zuffinetti for a total of 17,000 square feet of warehouse and office space. Monthly base rental payments under this lease were $13,500. This month-to-month lease was terminated on October 31, 2018. In addition, on November 1, 2018, AAdvantage entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti. Monthly base rental payments 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 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 has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under the leases described in this paragraph totaled approximately $240,000 and $130,000 during the six months ended December 31, 2019 and 2018, respectively.

On September 12, 2018, the Company’s wholly-owned subsidiary, Scott Equipment, Inc. (“Scott Equipment”), entered into lease agreements pursuant to which it leases a total of 18,000 square feet of warehouse and office space from an affiliate of Scott Martin, President of Scott Equipment. Monthly base rental payments total $11,000 during the initial terms of the leases. In addition to base rent, Scott Equipment is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $69,000 and $44,000 during the six months ended December 31, 2019 and 2018, respectively.

On February 5, 2019, the Company’s wholly-owned subsidiary, PAC Industries Inc. (“PAC Industries”), entered into two lease agreements pursuant to which it leases a total of 29,500 square feet of warehouse and office space from an affiliate of Frank Costabile, President of PAC Industries, and Rocco Costabile, Director of Finance of PAC Industries. Monthly base rental payments total $14,600 during the initial terms of the leases. In addition to base rent, PAC Industries is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of four years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $88,000 during the six months ended December 31, 2019.

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Leases (Schedule of Supplemental Cash Flow Information Related to Company's Long-Term Operating Lease Liabilities) (Details) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities:	$ 905
Operating lease right-of-use assets obtained in exchange for operating lease liabilities:	$ 864

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Debt (Schedule of Long-term debt) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Debt Disclosure [Abstract]
Revolving Line of Credit	$ 35,000	$ 40,800
Less: unamortized discount and deferred financing costs	(209)	(237)
Total long-term debt	$ 34,791	$ 40,563

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Statement of Financial Position [Abstract]
Accounts receivable, net of allowance for doubtful accounts	$ 379	$ 323
Preferred stock, par value	$ 1.00	$ 1.00
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	20,000,000
Common stock, shares issued	11,893,567	11,825,615
Treasury stock, shares	83,044	72,934

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Equity Plans (Schedule of Non-vested Restricted Stock Activity) (Details)	6 Months Ended
	Dec. 31, 2019 $ / shares shares
Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested awards or units outstanding, beginning of period | shares	855,854
Granted | shares	6,500
Vested | shares	(29,880)
Forfeited | shares
Non-vested awards or units outstanding, end of period | shares	832,474
Weighted-average grant date fair value, beginning of period | $ / shares	$ 18.62
Granted | $ / shares	34.50
Vested | $ / shares	16.59
Forfeited | $ / shares
Weighted-average grant date fair value, end of period | $ / shares	$ 18.81
Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Non-vested awards or units outstanding, beginning of period | shares	27,500
Granted | shares	12,110
Vested | shares
Forfeited | shares
Non-vested awards or units outstanding, end of period | shares	39,610
Weighted-average grant date fair value, beginning of period | $ / shares	$ 36.24
Granted | $ / shares	27.64
Vested | $ / shares
Forfeited | $ / shares
Weighted-average grant date fair value, end of period | $ / shares	$ 33.61

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General

6 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

General

Note (1) - General: The accompanying unaudited condensed consolidated financial statements include the accounts of EVI Industries, Inc. and its subsidiaries (the “Company”). All material intercompany balances and transactions have been eliminated in consolidation.

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, shareholders’ equity 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, 2019. The June 30, 2019 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, 2019.

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.

The Company, through its wholly-owned subsidiaries, is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.

The Company’s customers include retail, commercial, industrial, institutional, and government customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems. The Company also provides its customers with the services described above.

The Company’s growth strategy includes organic growth initiatives and business acquisitions pursuant to the Company’s “buy-and-build” growth strategy, which was implemented in 2015. See Note 3, “Acquisitions,” for information regarding the acquisition of PLS (as defined in Note 3), which was consummated during the six months ended December 31, 2019.

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Earnings Per Share (Tables)

6 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Schedule of Basic and Diluted Earnings Per Share

Basic and diluted earnings per share for the six and three months ended December 31, 2019 and 2018 are computed as follows (in thousands, except per share data):

	For the six months ended December 31,				For the three months ended December 31,
	2019 (Unaudited)		2018 (Unaudited)		2019 (Unaudited)		2018 (Unaudited)
Net income	$	843	$	2,061	$	263	$	1,265
Less: distributed and undistributed         income allocated to unvested         restricted common stock		58		148		18		91
Net income allocated to         EVI Industries, Inc.         shareholders	$	785	$	1,913	$	245	$	1,174
Weighted average shares         outstanding used in basic         earnings per share		11,787		11,364		11,797		11,492
Dilutive common share         equivalents		421		506		402		474
Weighted average shares         outstanding used in diluted         earnings per share		12,208		11,870		12,199		11,966
Basic earnings per share	$	0.07	$	0.17	$	0.02	$	0.10
Diluted earnings per share	$	0.06	$	0.16	$	0.02	$	0.10

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Goodwill (Tables)

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Carrying Amount of Goodwill

The changes in the carrying amount of goodwill are as follows (in thousands):

Balance at June 30, 2019	$	54,501
Goodwill from the PLS Acquisition		945
Other		83
Balance at December 31, 2019	$	55,529

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2019	Dec. 31, 2018
Income Statement [Abstract]
Revenues	$ 66,657	$ 60,841	$ 122,338	$ 104,216
Cost of sales	52,582	47,164	94,429	80,817
Gross profit	14,075	13,677	27,909	23,399
Selling, general and administrative expenses	13,270	11,575	25,823	19,865
Operating income	805	2,102	2,086	3,534
Interest expense, net	433	374	855	539
Income before provision for income taxes	372	1,728	1,231	2,995
Provision for income taxes	109	463	388	934
Net income	$ 263	$ 1,265	$ 843	$ 2,061
Net earnings per share - basic	$ 0.02	$ 0.10	$ 0.07	$ 0.17
Net earnings per share - diluted	$ 0.02	$ 0.10	$ 0.06	$ 0.16

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Income Taxes (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Income Tax Disclosure [Abstract]
Deferred tax liabilities, net	$ 2,044	$ 1,708

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Leases (Schedule of Maturities of Operating Lease Liabilities) (Details) - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Operating leases
2020 (remainder of)	$ 989
2021	1,688
2022	1,474
2023	1,093
2024	329
Thereafter	650
Total minimum lease payments	6,223
Less: amounts representing interest	466
Present value of minimum lease payments	5,757
Less: current portion	1,621
Long-term portion	$ 4,136

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Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares	3 Months Ended	6 Months Ended
	Dec. 31, 2018	Dec. 31, 2018
Statement of Stockholders' Equity [Abstract]
Dividends paid per share	$ 0.13	$ 0.13

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Acquisitions

6 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Acquisitions

Note (3) – Acquisitions:

PLS Acquisition

On August 1, 2019, the Company, through its wholly-owned subsidiary, Professional Laundry Systems, LLC (“Professional Laundry Systems”), purchased substantially all of the assets and assumed certain of the liabilities of Commercial Laundry Products, Inc., Professional Laundry Systems of PA, Inc. and Professional Laundry Systems West, Inc. (collectively, “PLS”), which distribute commercial, industrial, and vended laundry products and provide installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. The acquisition was treated for accounting purposes as a purchase of PLS using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The Company allocated $945,000 to goodwill, $170,000 to customer-related intangibles, and $110,000 to the Professional Laundry Systems trade name. The purchase price allocation is considered preliminary, as the Company is still assessing certain working capital items.

PAC Acquisition

On February 5, 2019, the Company completed its acquisition (the “PAC Acquisition”) of PAC Industries Inc. (“PAC”). As a portion of the consideration paid in connection with the PAC Acquisition, the Company issued 114,634 shares to PAC’s employee stock ownership plan (“ESOP”). These shares were not permitted to be traded during the six-month period commencing on the closing date. Further, if a distribution event occurred during such six-month period, then each participant in the ESOP would have had the option to require the Company to purchase such participant’s shares at fair market value. Due to the Company’s obligation under this put option, which was in effect at June 30, 2019 but has subsequently expired, the distributed shares subject to the put option which were held by the ESOP were classified as temporary equity in the mezzanine section of the consolidated balance sheet as of June 30, 2019. No distribution events occurred during the six-month restriction period. Accordingly, on August 5, 2019, each participant’s option to require the Company to purchase such participant’s shares at fair market value if a distribution event occurred expired. As a result, such shares are classified as permanent equity in the consolidated balance sheet as of December 31, 2019.

See also Note 13, “Subsequent Events,” for information regarding the Company’s acquisition of Laundry Systems of Tennessee, which was completed on January 31, 2020.

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Income Taxes

6 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note (7) - Income Taxes: Income taxes are recorded in the Company’s quarterly financial statements based on the Company’s estimated annual effective income tax rate, subject to adjustment for discrete events, should they occur.

As of December 31, 2019 and June 30, 3019, the Company had net deferred tax liabilities of approximately $2.0 million and $1.7 million, respectively. Consistent with the guidance of 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 December 31, 2019, 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 six and three months ended December 31, 2019 and 2018, 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 December 31, 2019, the Company was subject to potential federal and state tax examinations for the tax years 2016 through 2019.

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Commitments and Contingencies

6 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note (11) – Commitments and Contingencies: In the ordinary course of business, certain of the Company’s contracts require the Company to provide performance and payment bonds related to projects in process. These bonds are intended to provide a guarantee to the customer that the Company will perform under the terms of the contract and that the Company will pay subcontractors and vendors. If the Company fails to perform under the contract or pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company is required to reimburse the surety for expenses or outlays it incurs. At each of December 31, 2019 and June 30, 2019, outstanding performance and payment bonds totaled $8.0 million, and there were no estimated costs to complete projects secured by these bonds.

The Company may from time to time become subject to litigation and other legal proceedings. Litigation and other legal proceedings may require the Company to incur significant expenses, including those relating to legal and other professional fees. In addition, litigation and other legal proceedings are inherently uncertain, and adverse outcomes in litigation or other legal proceedings could adversely affect the Company’s financial condition, cash flows, and operating results.

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Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Jun. 30, 2019
Current assets
Cash and cash equivalents	$ 5,924	$ 5,038
Accounts receivable, net of allowance for doubtful accounts of $379 and $323, respectively	23,436	30,557
Inventories, net	29,400	26,445
Vendor deposits	103	403
Contract assets	1,483	2,487
Other current assets	3,948	2,938
Total current assets	64,294	67,868
Equipment and improvements, net	7,181	5,865
Operating lease assets	5,727
Intangible assets, net	21,808	22,351
Goodwill	55,529	54,501
Other assets	3,862	3,900
Total assets	158,401	154,485
Current liabilities
Accounts payable and accrued expenses	15,612	17,508
Accrued employee expenses	5,200	5,187
Customer deposits	8,971	7,163
Contract liabilities	1,755	854
Current portion of operating lease liabilities	1,621
Total current liabilities	33,159	30,712
Deferred tax liabilities, net	2,044	1,708
Long-term operating lease liabilities	4,136
Long-term debt, net	34,791	40,563
Total liabilities	74,130	72,983
Commitments and contingencies (Note 11)
Common stock related to acquiree's Employee Stock Ownership Plan ("ESOP")		4,240
Shareholders' equity
Preferred stock, $1.00 par value; authorized shares - 200,000; none issued and outstanding
Common stock, $.025 par value; authorized shares - 20,000,000; 11,893,567 shares issued at December 31, 2019 and 11,825,615 shares issued at June 30, 2019, including shares held in treasury	297	296
Additional paid-in capital	75,244	73,010
Retained earnings	10,478	9,635
Treasury stock, 83,044 shares at December 31, 2019 and 72,934 shares at June 30, 2019, at cost	(1,748)	(1,439)
Common stock related to acquiree's ESOP		(4,240)
Total shareholders' equity	84,271	77,262
Total liabilities and shareholders' equity	$ 158,401	$ 154,485

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Leases (Schedule of Future Minimum Lease Payments Receivable) (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Property Subject to or Available for Operating Lease [Line Items]
2020 (remainder of)	$ 451
2021	452
2022	382
2023	312
2024	235
Thereafter	95
Future minimum lease payments receivable	1,927
Total Minimum Lease Payments to be Received [Member]
Property Subject to or Available for Operating Lease [Line Items]
2020 (remainder of)	1,002
2021	1,206
2022	889
2023	623
2024	397
Thereafter	189
Amortization of Unearned Income [Member]
Property Subject to or Available for Operating Lease [Line Items]
2020 (remainder of)	551
2021	754
2022	507
2023	311
2024	162
Thereafter	$ 94

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Leases (Narrative) (Details) $ in Thousands	Dec. 31, 2019 USD ($) Facilities	Jun. 30, 2019 USD ($)
Lessee Disclosure [Abstract]
Number of facilities financed under operating leases | Facilities	24
Residual values	$ 1,600
Total net investment in sales type leases	3,500	$ 3,000
Current portion Sales type leases	800	500
Long term portion sales type leases	$ 2,700	$ 2,500

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Operating activities:
Net income	$ 843	$ 2,061
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization	1,730	1,255
Amortization of debt discount	28	68
Provision for bad debt expense	101	104
Non-cash lease expense	30
Share-based compensation	915	838
Inventory reserve	94	91
Provision for deferred income taxes	336	131
(Increase) decrease in operating assets:
Accounts receivable	7,209	(10,985)
Inventories	(2,270)	(3,347)
Vendor deposits	300	(237)
Contract assets	1,004	963
Other assets	(971)	(1,492)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses	(2,412)	2,402
Accrued employee expenses	(38)	(907)
Customer deposits	1,808	(3,357)
Contract liabilities	901	2,557
Net cash provided (used) by operating activities	9,608	(9,855)
Investing activities:
Capital expenditures	(2,165)	(1,200)
Cash paid for acquisitions, net of cash acquired	(474)	(7,231)
Net cash used by investing activities	(2,639)	(8,431)
Financing activities:
Proceeds from borrowings	4,000	99,963
Debt repayments	(9,800)	(72,235)
Payment of debt issuance costs		(263)
Repurchases of common stock in satisfaction of employee tax withholding obligations	(309)	(359)
Issuances of common stock under employee stock purchase plan	26	23
Net cash (used) provided by financing activities	(6,083)	27,129
Net increase in cash and cash equivalents	886	8,843
Cash and cash equivalents at beginning of period	5,038	1,330
Cash and cash equivalents at end of period	5,924	10,173
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	870	387
Cash paid during the period for income taxes	136	1,117
Supplemental disclosure of non-cash financing activities
Common stock issued for acquisitions	1,294	14,633
Dividends payable		$ 1,619

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Goodwill

6 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Note (12) – Goodwill: The changes in the carrying amount of goodwill are as follows (in thousands):

Balance at June 30, 2019	$	54,501
Goodwill from the PLS Acquisition		945
Other		83
Balance at December 31, 2019	$	55,529

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Earnings Per Share

6 Months Ended

Dec. 31, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Note (4) - Earnings Per Share: The Company computes earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Shares of the Company’s common stock subject to unvested restricted stock awards and restricted stock units are considered participating securities because they contain a non-forfeitable right to cash dividends or dividend equivalents paid prior to vesting or forfeiture, if any, irrespective of whether the awards or units ultimately vest. Basic and diluted earnings per share for the six and three months ended December 31, 2019 and 2018 are computed as follows (in thousands, except per share data):

	For the six months ended December 31,				For the three months ended December 31,
	2019 (Unaudited)		2018 (Unaudited)		2019 (Unaudited)		2018 (Unaudited)
Net income	$	843	$	2,061	$	263	$	1,265
Less: distributed and undistributed         income allocated to unvested         restricted common stock		58		148		18		91
Net income allocated to         EVI Industries, Inc.         shareholders	$	785	$	1,913	$	245	$	1,174
Weighted average shares         outstanding used in basic         earnings per share		11,787		11,364		11,797		11,492
Dilutive common share         equivalents		421		506		402		474
Weighted average shares         outstanding used in diluted         earnings per share		12,208		11,870		12,199		11,966
Basic earnings per share	$	0.07	$	0.17	$	0.02	$	0.10
Diluted earnings per share	$	0.06	$	0.16	$	0.02	$	0.10

At December 31, 2019 and 2018, other than 872,084 shares and 896,777 shares, respectively, of unvested common stock subject to restricted stock awards or restricted stock units, there were no potentially dilutive securities outstanding.

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Equity Plans

6 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Equity Plans

Note (8) – Equity Plans:

Equity Incentive Plan

In November 2015, the Company’s stockholders approved the Company’s 2015 Equity Incentive Plan (the “Plan”). The Plan authorizes the issuance of up to 1,500,000 shares of the Company’s common stock pursuant to awards granted under the Plan. The fair value of awards granted under the Plan is expensed on straight-line basis over the vesting period of the awards. Share-based compensation expense is included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

During the six and three months ended December 31, 2019, restricted stock awards and restricted stock units of a total of 12,110 shares and 6,500 shares, respectively, were granted under the Plan. During the six and three months ended December 31, 2018, restricted stock awards and restricted stock units of a total of 15,000 shares and 6,845 shares, respectively, were granted under the Plan. Non-cash share-based compensation expense under all plans totaled $915,000 and $838,000 for the six months ended December 31, 2019 and 2018, respectively, and totaled $462,000 and $424,000 for the three months ended December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company had $13.5 million and $1.2 million of total unrecognized compensation expense related to restricted stock awards and restricted stock units, respectively, granted under the Plan, which is expected to be recognized over the weighted-average period of 17.3 years and 14.8 years, respectively.

The following is a summary of non-vested restricted stock activity as of and for the six months ended December 31, 2019:

	Restricted Stock Awards					Restricted Stock Units
	Shares			Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Non-vested awards or units outstanding at June 30, 2019		855,854		$	18.62		27,500	$	36.24
Granted		6,500			34.50		12,110		27.64
Vested		(29,880	)		16.59		—		—
Forfeited		—			—		—		—
Non-vested awards or units outstanding at December 31, 2019		832,474		$	18.81		39,610	$	33.61

Employee Stock Purchase Plan

The Company’s employee stock purchase plan provides for six-month offering periods ending on December 31 and June 30 of each year. During the six and three months ended December 31, 2019, 1,022 shares of common stock were issued under the Company’s employee stock purchase plan for which the Company received net proceeds of $26,000. During the six and three months ended December 31, 2018, 726 shares of common stock were issued under the Company’s employee stock purchase plan for which the Company received net proceeds of $23,000.

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Goodwill (Schedule of Carrying Amount of Goodwill) (Details) $ in Thousands	6 Months Ended
	Dec. 31, 2019 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Balance at June 30, 2019	$ 54,501
Goodwill from the PLS Acquisition	945
Other	83
Balance at December 31, 2019	$ 55,529

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Debt (Tables)

6 Months Ended

Dec. 31, 2019

Debt Disclosure [Abstract]

Schedule of Long-term debt

Long-term debt as of December 31, 2019 and June 30, 2019 are as follows (in thousands):

	December 31, 2019			June 30, 2019
Revolving Line of Credit	$	35,000		$	40,800
Less: unamortized discount and deferred financing costs		(209	)		(237	)
Total long-term debt	$	34,791		$	40,563

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Acquisitions (Narrative) (Details) - USD ($)	Dec. 31, 2019	Feb. 05, 2019
PLS Acquisition [Member] | Customer-related intangible assets [Member]
Business Acquisition [Line Items]
Finite lived intangible assets acquired	$ 170,000
PLS Acquisition [Member] | Goodwill [Member]
Business Acquisition [Line Items]
Finite lived intangible assets acquired	945,000
PLS Acquisition [Member] | Trade Names [Member]
Business Acquisition [Line Items]
Indefinite lived intangible assets acquired	$ 110,000
PAC Industries Inc. [Member]
Business Acquisition [Line Items]
Number of shares transferred to PAC's ESOP		114,634