Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Apr. 03, 2015 | 13-May-15 | |
Document and Entity Information | ||
Entity Registrant Name | Willdan Group, Inc. | |
Entity Central Index Key | 1370450 | |
Document Type | 10-Q | |
Document Period End Date | 3-Apr-15 | |
Amendment Flag | FALSE | |
Current Fiscal Year End Date | -1 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 7,819,582 | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Apr. 03, 2015 | Jan. 02, 2015 |
Current assets: | ||
Cash and cash equivalents | $12,079,000 | $20,371,000 |
Accounts receivable, net of allowance for doubtful accounts of $888,000 and $662,000 at April 3,2015 and January 2,2015, respectively | 17,060,000 | 13,189,000 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 15,530,000 | 12,170,000 |
Other receivables | 212,000 | 208,000 |
Prepaid expenses and other current assets | 2,331,000 | 2,244,000 |
Total current assets | 47,212,000 | 48,182,000 |
Equipment and leasehold improvements, net | 1,684,000 | 1,384,000 |
Goodwill | 15,363,000 | |
Other intangible assets, net | 2,088,000 | |
Other assets | 907,000 | 535,000 |
Deferred income taxes, net of current portion | 4,333,000 | 4,558,000 |
Total assets | 71,587,000 | 54,659,000 |
Current liabilities: | ||
Excess of outstanding checks over bank balance | 1,875,000 | 2,198,000 |
Accounts payable | 5,242,000 | 3,237,000 |
Accrued liabilities | 9,784,000 | 10,668,000 |
Contingent consideration payable | 1,687,000 | |
Billings in excess of costs and estimated earnings on uncompleted contracts | 4,996,000 | 3,863,000 |
Current portion of notes payable | 3,745,000 | 355,000 |
Current portion of capital lease obligations | 313,000 | 324,000 |
Current portion of deferred income taxes | 3,382,000 | 3,131,000 |
Total current liabilities | 31,024,000 | 23,776,000 |
Contingent consideration payable, less current portion | 4,055,000 | |
Notes payable, less current portion | 2,319,000 | |
Capital lease obligations, less current portion | 262,000 | 306,000 |
Deferred lease obligations | 227,000 | 164,000 |
Total liabilities | 37,887,000 | 24,246,000 |
Commitments and contingencies | ||
Stockholders' equity: | ||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.01 par value, 40,000,000 shares authorized: 7,795,000 and 7,635,000 shares issued and outstanding at April 3, 2015 and January 2, 2015, respectively | 77,000 | 76,000 |
Additional paid-in capital | 37,233,000 | 35,436,000 |
Accumulated deficit | -3,610,000 | -5,099,000 |
Total stockholders' equity | 33,700,000 | 30,413,000 |
Total liabilities and stockholders' equity | $71,587,000 | $54,659,000 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Apr. 03, 2015 | Jan. 02, 2015 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $888,000 | $662,000 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $0.01 | $0.01 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 7,795,000 | 7,635,000 |
Common stock, shares outstanding | 7,795,000 | 7,635,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Apr. 03, 2015 | Mar. 28, 2014 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||
Contract revenue | $33,297,000 | $22,686,000 |
Direct costs of contract revenue (exclusive of depreciation and amortization shown separately below): | ||
Salaries and wages | 7,985,000 | 6,202,000 |
Subcontractor services and other direct costs | 11,821,000 | 6,996,000 |
Total direct costs of contract revenue | 19,806,000 | 13,198,000 |
General and administrative expenses: | ||
Salaries and wages, payroll taxes and employee benefits | 6,641,000 | 4,918,000 |
Facilities and facilities related | 1,048,000 | 1,062,000 |
Stock-based compensation | 124,000 | 41,000 |
Depreciation and amortization | 429,000 | 103,000 |
Other | 2,620,000 | 2,052,000 |
Total general and administrative expenses | 10,862,000 | 8,176,000 |
Income from operations | 2,629,000 | 1,312,000 |
Other income (expense), net: | ||
Interest income | 1,000 | 2,000 |
Interest expense | -51,000 | -4,000 |
Other, net | 54,000 | 49,000 |
Total other income, net | 4,000 | 47,000 |
Income before income taxes | 2,633,000 | 1,359,000 |
Income tax expense | 1,138,000 | 44,000 |
Net income | $1,495,000 | $1,315,000 |
Earnings per share: | ||
Basic | $0.19 | $0.18 |
Diluted | $0.18 | $0.17 |
Weighted-average shares outstanding: | ||
Basic | 7,765,000 | 7,397,000 |
Diluted | 8,103,000 | 7,609,000 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Apr. 03, 2015 | Mar. 28, 2014 | |
Cash flows from operating activities: | ||
Net income | $1,495,000 | $1,315,000 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||
Depreciation and amortization | 429,000 | 103,000 |
Deferred income taxes | 476,000 | |
(Gain) loss on sale of equipment | -5,000 | 2,000 |
Provision for doubtful accounts | 226,000 | 78,000 |
Stock-based compensation | 124,000 | 41,000 |
Changes in operating assets and liabilities, net of effects from business acquisitions: | ||
Accounts receivable | -3,052,000 | 2,298,000 |
Costs and estimated earnings in excess of billings on uncompleted contracts | -2,870,000 | -1,093,000 |
Other receivables | -4,000 | -138,000 |
Prepaid expenses and other current assets | -46,000 | 477,000 |
Other assets | -372,000 | -315,000 |
Accounts payable | 1,523,000 | -381,000 |
Changes in excess of outstanding checks over bank balance | -323,000 | 633,000 |
Accrued liabilities | -1,358,000 | 1,516,000 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 1,063,000 | 232,000 |
Deferred lease obligations | 63,000 | -47,000 |
Net cash (used in) provided by operating activities | -2,631,000 | 4,721,000 |
Cash flows from investing activities: | ||
Purchase of equipment and leasehold improvements | -211,000 | -33,000 |
Cash paid for acquisitions, net of cash acquired | -7,043,000 | |
Net cash used in investing activities | -7,254,000 | -33,000 |
Cash flows from financing activities: | ||
Payments on notes payable | -491,000 | -198,000 |
Proceeds from notes payable | 1,950,000 | |
Principal payments on capital lease obligations | -55,000 | -41,000 |
Proceeds from stock option exercise | 111,000 | 45,000 |
Proceeds from sales of common stock under employee stock purchase plan | 78,000 | 28,000 |
Net cash provided by (used in) financing activities | 1,593,000 | -166,000 |
Net (decrease) increase in cash and cash equivalents | -8,292,000 | 4,522,000 |
Cash and cash equivalents at beginning of the period | 20,371,000 | 8,134,000 |
Cash and cash equivalents at end of the period | 12,079,000 | 12,656,000 |
Cash paid during the period for: | ||
Interest | 48,000 | 4,000 |
Income taxes | 362,000 | 15,000 |
Supplemental disclosures of noncash investing and financing activities: | ||
Issuance of notes payable related to business acquisitions | 4,250,000 | |
Issuance of common stock related to business acquisitions | 1,485,000 | |
Contingent consideration related to business acquisitions | 5,742,000 | |
Equipment acquired under capital lease obligations | $47,000 |
BASIS_OF_PRESENTATION_ORGANIZA
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | 3 Months Ended |
Apr. 03, 2015 | |
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | |
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | |
1.BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | |
Basis of Presentation | |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments, which consist of only normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the consolidated results for the interim periods presented. The Company operates and reports its quarterly financial results based on the 13-week period ending on the Friday closest to March 31, June 30 and September 30 and the 13 or 14-week period ending on the Friday closest to December 31, as applicable, with consideration of business days. Results for the interim periods are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements should be read in conjunction with Willdan Group, Inc.’s 2014 Annual Report on Form 10-K filed on March 31, 2015. | |
Nature of Business | |
Willdan Group, Inc. and subsidiaries (“Willdan Group” or the “Company”) is a provider of professional technical and consulting services, including comprehensive energy efficiency solutions, for utilities, private industry, and public agencies at all levels of government, primarily in California and New York. The Company also has operations in Arizona, Florida, Kansas, Oregon, Texas, Washington and Washington, D.C. The Company provides a broad range of complementary services including energy efficiency, engineering and planning, economic and financial consulting, and national preparedness and interoperability. The Company’s clients primarily consist of public and governmental agencies, including cities, counties, public utilities, redevelopment agencies, water districts, school districts and universities, state agencies, federal agencies, a variety of other special districts and agencies, private utilities and industry and tribal governments. The Company enables their clients to provide a wide range of specialized services without the clients having to incur and maintain the overhead necessary to develop staffing in-house. | |
Principles of Consolidation | |
The consolidated financial statements include the accounts of Willdan Group, Inc. and its wholly owned subsidiaries, Willdan Engineering, Willdan Energy Solutions, Public Agency Resources, Willdan Financial Services and Willdan Homeland Solutions and their respective subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. | |
Accounting for Contracts | |
The Company enters into contracts with its clients that contain three principal types of pricing provisions: fixed price, time-and-materials, and unit-based. Revenue on fixed price contracts is recognized on the percentage-of-completion method based generally on the ratio of direct costs (primarily exclusive of depreciation and amortization costs) incurred to date to estimated total direct costs at completion. Revenue on time-and-materials and unit-based contracts is recognized as the work is performed in accordance with the specific terms of the contract. Contracts that provide for multiple services or deliverables are evaluated as multiple element arrangements to determine the appropriate unit of accounting, allocation of contract value, and method of revenue recognition for each element. Revenue for amounts that have been billed but not earned is deferred and such deferred revenue is referred to as billings in excess of costs and estimated earnings on uncompleted contracts in the accompanying consolidated balance sheets. Service-related contracts, including operations and maintenance services and a variety of technical assistance services, are accounted for over the period of performance, in proportion to the costs of performance. Award and incentive fees are recorded when they are fixed or determinable and consider customer contract terms. | |
Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is provided for currently in its entirety. Claims revenue is recognized only upon resolution of the claim. Change orders in dispute are evaluated as claims. Costs related to un-priced change orders are expensed when incurred and recognition of the related contract revenue is based on an evaluation of the probability of recovery of the costs. Estimated profit is recognized for un-priced change orders if realization of the expected price of the change order is probable. | |
Applying the percentage-of-completion method of recognizing revenue requires the Company to estimate the outcome of its long-term contracts. The Company forecasts such outcomes to the best of its knowledge and belief of current and expected conditions and its expected course of action. Differences between the Company’s estimates and actual results often occur resulting in changes to reported revenue and earnings. Such changes could have a material effect on future consolidated financial statements. | |
Direct costs of contract revenue consist primarily of that portion of technical and nontechnical salaries and wages that has been incurred in connection with revenue producing projects. Direct costs of contract revenue also include production expenses, subcontractor services and other expenses that are incurred in connection with revenue producing projects. | |
Direct costs of contract revenue exclude that portion of technical and nontechnical salaries and wages related to marketing efforts, vacations, holidays and other time not spent directly generating revenue under existing contracts. Such costs are included in general and administrative expenses. Additionally, payroll taxes, bonuses and employee benefit costs for all Company personnel are included in general and administrative expenses in the accompanying consolidated statements of operations since no allocation of these costs is made to direct costs of contract revenue. No allocation of facilities costs is made to direct costs of contract revenue. Other companies may classify as direct costs of contract revenue some of the costs that the Company classifies as general and administrative costs. The Company expenses direct costs of contract revenue when incurred. | |
Included in revenue and costs are all reimbursable costs for which the Company has the risk or on which the fee was based at the time of bid or negotiation. No revenue or cost is recorded for costs in which the Company acts solely in the capacity of an agent and has no risks associated with such costs. | |
Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based upon a review of all outstanding amounts on a quarterly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Credit risk is generally minimal with governmental entities, but disputes may arise related to these receivable amounts. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivables previously written off are recorded when received. | |
The value of retainage is included in accounts receivable in the accompanying consolidated financial statements. Retainage represents the billed amount that is retained by the customer, in accordance with the terms of the contract, generally until performance is substantially complete. At April 3, 2015 and January 2, 2015, the Company had retained accounts receivable of approximately $903,000 and $700,000 respectively. | |
Goodwill | |
Goodwill represents the excess of costs over fair value of the assets acquired. The goodwill, which has an indefinite useful life, is not amortized, but instead tested for impairment at least annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. | |
The Company tests goodwill at least annually for possible impairment. The Company completes annual testing of goodwill as of the last day of the first month of its fourth fiscal quarter each year to determine whether there is impairment. In addition to the annual test, the Company regularly evaluates whether events and circumstances have occurred that may indicate a potential impairment of goodwill. As of April 3, 2015, we had $15.4 million of goodwill, all of which relates to the Energy Efficiency Services reporting segment and the acquisitions of Abacus and 360 Energy. | |
The Company tests goodwill for impairment at the level of its reporting units, which are components of its operating segments. The process of testing goodwill for impairment involves an optional qualitative assessment on goodwill impairment of its reporting units to determine whether a quantitative assessment is necessary. If a quantitative assessment is warranted, the Company will then determine the fair value of the applicable reporting units. To estimate the fair value of its reporting units, the Company uses both an income approach based on management’s estimates of future cash flows and other market data and a market approach based upon multiples of EBITDA earned by similar public companies. | |
Once the fair value is determined, the Company then compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is determined to be less than the carrying value, the Company performs an additional assessment to determine the extent of the impairment based on the implied fair value of goodwill compared with the carrying amount of the goodwill. In the event that the current implied fair value of the goodwill is less than the carrying value, an impairment charge is recognized. | |
Inherent in such fair value determinations are significant judgments and estimates, including but not limited to assumptions about future revenue, profitability and cash flows, operational plans and interpretation of current economic indicators and market valuations. To the extent these assumptions are incorrect or economic conditions that would impact the future operations of the reporting units change, any goodwill may be deemed to be impaired, and an impairment charge could result in a material adverse effect on the financial position or results of operation. | |
Fair Value of Financial Instruments | |
The Company’s financial instruments consist primarily of cash, cash equivalents, accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, other receivables, prepaid expenses and other current assets, excess of outstanding checks over bank balance, accounts payable, accrued liabilities and billings in excess of costs and estimated earnings on uncompleted contracts, and approximate their fair values because of the relatively short period of time between the origination of these instruments and their expected realization or payment. The carrying amounts of debt obligations approximate their fair values since the terms are comparable to terms currently offered by local lending institutions for loans of similar terms to companies with comparable credit risk. | |
Use of Estimates | |
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | |
Liquidity | |
The Company had $12.1 million of cash and cash equivalents as of April 3, 2015. The Company’s primary sources of liquidity are cash generated from operations and its revolving line of credit with BMO Harris Bank, National Association (“BMO”), which matures on March 24, 2016. While the Company believes that its cash and cash equivalents on hand, cash generated by operating activities and funds available under its line of credit will be sufficient to finance its operating activities for at least the next 12 months, if the Company does experience a cash flow shortage or violates the current terms of its credit agreement, the Company may have difficulty obtaining additional funds on favorable terms, if at all, to meet its obligations as they come due in the normal course of business. | |
BUSINESS_COMBINATIONS
BUSINESS COMBINATIONS | 3 Months Ended | ||||||||||
Apr. 03, 2015 | |||||||||||
BUSINESS COMBINATIONS | |||||||||||
BUSINESS COMBINATIONS | |||||||||||
2.BUSINESS COMBINATIONS | |||||||||||
On January 15, 2015, the Company and its wholly-owned subsidiary, Willdan Energy Solutions (“WES”) completed two separate acquisitions. The Company and WES acquired all of the outstanding shares of Abacus Resource Management Company (“Abacus”), an Oregon-based energy engineering company. In addition, the Company and WES also separately acquired substantially all of the assets of 360 Energy Engineers, LLC (“360 Energy”), a Kansas-based energy and engineering energy management consulting company. | |||||||||||
Pursuant to the terms of the Stock Purchase Agreement, dated as of January 15, 2015, by and between the Company, WES, Abacus and the selling shareholders of Abacus (the “Abacus Shareholders”), WES will pay the Abacus Shareholders a maximum purchase price of $6.1 million, consisting of (i) $2.5 million in cash which was paid at closing, (ii) 75,758 shares of Common Stock, par value $0.01 per share, of the Company (“Common Stock”) with a fair value of $0.9 million which were issued at closing, (iii) $1.25 million aggregate principal amount of promissory notes issued to the Abacus Shareholders at closing and (iv) up to $1.4 million in cash, based on the achievement of certain financial targets by Abacus at the end of the Company’s 2015 and 2016 fiscal years. | |||||||||||
Pursuant to the terms of the Asset Purchase Agreement, dated January 15, 2015, by and between the Company, WES and 360 Energy, WES will pay 360 Energy a maximum purchase price of $15.0 million, consisting of (i) $4.9 million in cash which was paid at closing, (ii) 47,348 shares of Common Stock with a fair value of $0.6 million which were issued at closing, (iii) $3.0 million aggregate principal amount of promissory note issued to 360 Energy at closing and (iv) up to $6.5 million in cash, based on the achievement of certain financial targets by WES’s division made up of the assets acquired from, and the former employees of 360 Energy at the end of the Company’s 2015, 2016 and 2017 fiscal years. The Company provided a guaranty to 360 Energy which guarantees WES’s obligations under the promissory note issued to 360 Energy. | |||||||||||
The acquisitions were accounted for as business combinations in accordance with ASC 805. Under ASC 805, the Company recorded the acquired assets and assumed liabilities at their estimated fair value with the excess allocated to goodwill. Goodwill represents the value the Company expects to achieve through the operational synergies and the expansion of the Company into new markets. The Company estimates that the entire $15.4 million of goodwill resulting from the acquisitions will be tax deductible. Consideration for the acquisitions includes the following: | |||||||||||
Three Months Ended | |||||||||||
April 3, 2015 | |||||||||||
360 Energy | Abacus | Total | |||||||||
Cash paid | $ | 4,875,000 | $ | 2,500,000 | $ | 7,375,000 | |||||
Issuance of common stock | 571,000 | 914,000 | 1,485,000 | ||||||||
Issuance of notes payable | 3,000,000 | 1,250,000 | 4,250,000 | ||||||||
Contingent consideration | 5,061,000 | 681,000 | 5,742,000 | ||||||||
Total consideration | $ | 13,507,000 | $ | 5,345,000 | $ | 18,852,000 | |||||
The following table summarizes the preliminary amounts for the acquired assets recorded at their estimated fair value as of the acquisition date: | |||||||||||
Three Months Ended | |||||||||||
April 3, 2015 | |||||||||||
360 Energy | Abacus | Total | |||||||||
Cash acquired | $ | — | $ | 332,000 | $ | 332,000 | |||||
Property, plant and equipment | 153,000 | 104,000 | 257,000 | ||||||||
Backlog | 158,000 | 161,000 | 319,000 | ||||||||
Tradename | 666,000 | 366,000 | 1,032,000 | ||||||||
Non-compete agreements | 876,000 | 137,000 | 1,013,000 | ||||||||
Other assets, net | 41,000 | 495,000 | 536,000 | ||||||||
Goodwill | 11,613,000 | 3,750,000 | 15,363,000 | ||||||||
Net assets acquired | $ | 13,507,000 | $ | 5,345,000 | $ | 18,852,000 | |||||
As of April 3, 2015, the Company had not completed its final estimate of fair value of the assets acquired and liabilities assumed due to the timing of such transactions and incomplete information necessary to finalize such estimates of fair value. Accordingly, the Company has preliminarily estimated the fair values of the assets acquired and the liabilities assumed. The Company will finalize the fair value estimates within twelve months of the acquisition date. | |||||||||||
To finance the acquisitions of Abacus and 360 Energy, the Company borrowed $2.0 million under its delayed draw term loan facility. The Company used cash on hand to pay the remaining $5.4 million due at closing. | |||||||||||
The acquisition date fair value of the intangible asset relating to tradenames was estimated using comparable values ascribed in other recent market transactions as well as taking into account Abacus and 360 Energy’s market position in their respective markets. This asset is deemed to have a finite life. As of April 3, 2015, the Company has contingent consideration payable of $5.7 million related to these acquisitions. Contingent consideration is subject to change for each reporting period through settlement. The Company measures the contingent earn-out liabilities at fair value on the date of acquisition and on a recurring basis using significant unobservable inputs classified within Level 3 of the fair value hierarchy. The Company uses a probability-weighted discounted income approach as a valuation technique to convert future estimated cash flows to a single present value amount. The significant unobservable inputs used in the fair value measurements are operating income projections over the earn-out period, and the probability outcome percentages assigned to each scenario. Significant increases or decreases to either of these inputs in isolation would result in a significantly higher or lower liability, with a higher liability capped by the contractual maximum of the contingent earn-out obligation. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate and amount paid will be recorded in earnings | |||||||||||
Unaudited pro forma consolidated statements of operations for the three months ended April 3, 2015 as though Abacus and 360 Energy had been acquired as of the first day of the period presented is as follows: | |||||||||||
Three Months Ended | |||||||||||
April 3, | March 28, | ||||||||||
2015 | 2014 | ||||||||||
Contract revenue | $ | 33,752,000 | $ | 26,376,000 | |||||||
Income from operations | 2,637,000 | 1,832,000 | |||||||||
Net income | 1,498,000 | 1,767,000 | |||||||||
Earnings per share | |||||||||||
Basic | $ | 0.19 | $ | 0.24 | |||||||
Diluted | $ | 0.18 | $ | 0.23 | |||||||
GOODWILL_AND_OTHER_INTANGIBLE_
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended | |||||||||||||||
Apr. 03, 2015 | ||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||
3.GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||
As of April 3, 2015, the Company had $15.4 million of goodwill, all of which relates to the Energy Solutions reporting segment and the acquisitions on January 15, 2015 of Abacus and 360 Energy. The changes in the carrying value of goodwill by reporting unit for the three months ended April 3, 2015 were as follows: | ||||||||||||||||
January 2, | Acquisitions | April 3, | ||||||||||||||
2015 | 2015 | |||||||||||||||
Reporting Unit: | ||||||||||||||||
Energy Solutions | $ | — | $ | 15,363,000 | $ | 15,363,000 | ||||||||||
$ | — | $ | 15,363,000 | $ | 15,363,000 | |||||||||||
The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of April 3, 2015 included in intangible assets, net in the accompanying consolidated balance sheets, were as follows: | ||||||||||||||||
April 3, 2015 | January 2, 2015 | |||||||||||||||
Gross | Accumulated | Gross | Accumulated | Amortization | ||||||||||||
Amount | Amortization | Amount | Amortization | Period (yrs) | ||||||||||||
Backlog | $ | 319,000 | $ | 148,000 | $ | — | $ | — | 2-Jan | |||||||
Tradename | 1,032,000 | 84,000 | — | — | 2.5-3.5 | |||||||||||
Non-compete agreements | 1,013,000 | 44,000 | — | — | 5 | |||||||||||
$ | 2,364,000 | $ | 276,000 | $ | — | $ | — | |||||||||
The Company’s amortization expense for acquired identifiable intangible assets with finite useful lives was $0.3 million for the fiscal three months ended April 3, 2015, as compared to no amortization expense for the fiscal three months ended March 28, 2014. Estimated amortization expense for acquired identifiable intangible assets for the remainder of fiscal 2015 and the succeeding years is as follows: | ||||||||||||||||
Fiscal year: | ||||||||||||||||
2015 | $ | 582,000 | ||||||||||||||
2016 | 539,000 | |||||||||||||||
2017 | 466,000 | |||||||||||||||
2018 | 298,000 | |||||||||||||||
2019 | 203,000 | |||||||||||||||
$ | 2,088,000 | |||||||||||||||
The purchase price allocation as described in Note 2 is preliminary as of April 3, 2015. Accordingly goodwill and intangible assets presented in this footnote will be updated should there be purchase price allocation adjustments as the allocations are finalized. | ||||||||||||||||
EARNINGS_PER_SHARE_EPS
EARNINGS PER SHARE (EPS) | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
EARNINGS PER SHARE (EPS) | ||||||||
EARNINGS PER SHARE (EPS) | ||||||||
4.EARNINGS PER SHARE (EPS) | ||||||||
Basic EPS is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding and dilutive potential common shares for the period. Potential common shares include the weighted-average dilutive effects of outstanding stock options using the treasury stock method. | ||||||||
The following table sets forth the number of weighted-average shares used to compute basic and diluted EPS: | ||||||||
Three Months Ended | ||||||||
April 3, | March 28, | |||||||
2015 | 2014 | |||||||
Net income | $ | 1,495,000 | $ | 1,315,000 | ||||
Weighted-average common shares outstanding | 7,765,000 | 7,397,000 | ||||||
Effect of dilutive stock options | 338,000 | 212,000 | ||||||
Weighted-average common stock outstanding-diluted | 8,103,000 | 7,609,000 | ||||||
Earnings per share: | ||||||||
Basic | $ | 0.19 | $ | 0.18 | ||||
Diluted | $ | 0.18 | $ | 0.17 | ||||
For the three months ended April 3, 2015, 122,000 options were excluded from the calculation of dilutive potential common shares, compared to 275,000 options for the same period last year. These options were not included in the computation of dilutive potential common shares because the assumed proceeds per share exceeded the average market price per share for the 2015 and 2014 periods. Accordingly, the inclusion of these options would have been anti-dilutive. For periods in which the Company incurs net losses, dilutive potential common shares are excluded as they would be anti-dilutive. | ||||||||
EQUIPMENT_AND_LEASEHOLD_IMPROV
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||||||||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||||||||
5.EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||||||||
Equipment and leasehold improvements consist of the following: | ||||||||
April 3, | January 2, | |||||||
2015 | 2015 | |||||||
Furniture and fixtures | $ | 2,966,000 | $ | 2,994,000 | ||||
Computer hardware and software | 5,706,000 | 5,667,000 | ||||||
Leasehold improvements | 884,000 | 785,000 | ||||||
Equipment under capital leases | 927,000 | 919,000 | ||||||
Automobiles, trucks, and field equipment | 1,023,000 | 677,000 | ||||||
11,506,000 | 11,042,000 | |||||||
Accumulated depreciation and amortization | (9,822,000 | ) | (9,658,000 | ) | ||||
Equipment and leasehold improvements, net | $ | 1,684,000 | $ | 1,384,000 | ||||
ACCRUED_LIABILITIES
ACCRUED LIABILITIES | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
ACCRUED LIABILITIES | ||||||||
ACCRUED LIABILITIES | ||||||||
6.ACCRUED LIABILITIES | ||||||||
Accrued liabilities consist of the following: | ||||||||
April 3, | January 2, | |||||||
2015 | 2015 | |||||||
Accrued bonuses | $ | 593,000 | $ | 1,450,000 | ||||
Accrued interest | 3,000 | — | ||||||
Paid leave bank | 1,654,000 | 1,404,000 | ||||||
Compensation and payroll taxes | 1,051,000 | 1,371,000 | ||||||
Accrued legal | 666,000 | 556,000 | ||||||
Accrued workers’ compensation insurance | 208,000 | 192,000 | ||||||
Accrued rent | 53,000 | 149,000 | ||||||
Employee withholdings | 592,000 | 637,000 | ||||||
Client deposits | 440,000 | 79,000 | ||||||
Unvouchered accounts payable | 3,322,000 | 4,462,000 | ||||||
Other | 1,202,000 | 368,000 | ||||||
Total accrued liabilities | $ | 9,784,000 | $ | 10,668,000 | ||||
DEBT
DEBT | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
DEBT | ||||||||
DEBT | ||||||||
7.DEBT | ||||||||
Notes payable consist of the following: | ||||||||
April 3, | January 2, | |||||||
2015 | 2015 | |||||||
BMO term note | $ | 1,950,000 | $ | — | ||||
Notes payable related to acquisitions | 3,908,000 | — | ||||||
Notes payable related to insurance | 204,000 | 352,000 | ||||||
Other | 2,000 | 3,000 | ||||||
Total notes payable | 6,064,000 | 355,000 | ||||||
Less current portion | 3,745,000 | 355,000 | ||||||
Notes payable, less current portion | $ | 2,319,000 | $ | — | ||||
To finance the acquisitions of Abacus and 360 Energy, Willdan borrowed $2.0 million under its delayed draw term loan facility pursuant to the BMO Credit Agreement described below. The term loan bears interest at the LIBOR rate plus an applicable margin ranging between 2.25% and 2.75%, currently set at the LIBOR rate plus 2.75%, and matures on March 24, 2016. Interest on the term loan is payable quarterly, beginning April 13, 2015. Principal on the term loan is payable on the last day of each March, June, September, and December in each year, commencing on March 31, 2015, with the amount of each such principal installment equal to: (i) $50,000 on the last day of March, June, September and December 2015, (ii) $75,000 on the last day of March, June, September, and December 2016, and (iii) all remaining outstanding principal amount on March 24, 2016. The term loan is governed by the terms of the BMO Credit Agreement. | ||||||||
On January 15, 2015, in connection with the completion of the acquisition of Abacus, WES issued promissory notes to Mark Kinzer (the “Kinzer Note”) and Steve Rubbert (the “Rubbert Note” and, together with the Kinzer Note, the “Abacus Notes”). The initial outstanding principal amounts of the Kinzer Note and the Rubbert Note were $625,000 and $625,000, respectively. The Abacus Notes provide for a fixed interest rate of 4% per annum. The Abacus Notes are fully amortizing and payable in equal monthly installments between January 15, 2015 and their January 15, 2017 maturity date. The Abacus Notes contain events of default provisions customary for documents of this nature. Mr. Kinzer and Mr. Rubbert have entered into a Subordination Agreement, dated as of January 15, 2015, in favor of BMO Harris, pursuant to which any indebtedness under the Abacus Notes is subordinated to any indebtedness under the BMO Credit Agreement. As of April 3, 2015 the Company had made payments of approximately $100,000 on the Abacus Notes. | ||||||||
On January 15, 2015, in connection with the completion of the acquisition of 360 Energy, WES issued a promissory note to 360 Energy (the “360 Energy Note”). The initial outstanding principal amount of the 360 Energy Note was $3,000,000. The 360 Energy Note provides for a fixed interest rate of 4% per annum. The 360 Energy Note is fully amortizing and payable in equal monthly installments between January 15, 2015 and its January 15, 2018 maturity date. The 360 Energy Note contains events of default provisions customary for documents of this nature. 360 Energy has entered into a Subordination Agreement, dated as of January 15, 2015, in favor of BMO Harris, pursuant to which any indebtedness under the 360 Energy Note is subordinated to any indebtedness under the BMO Credit Agreement. As of April 3, 2015 the Company had made payments of approximately $242,000 on the 360 Energy Note. | ||||||||
BMO Credit Facility: On March 24, 2014, the Company and its subsidiaries, as guarantors, entered into a credit agreement with BMO Harris Bank, N.A., or BMO, that provides for a revolving line of credit of up to $7.5 million, subject to a borrowing base calculation, and a delayed draw term loan facility of up to $2.5 million. The $7.5 million revolving credit facility includes a $5.0 million standby letter of credit sub-facility. On January 15, 2015, the Company and its subsidiaries, as guarantors, entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement (as amended, the “BMO Credit Agreement”) to, among other things, permit the acquisitions of Abacus and 360 Energy, the incurrence of the notes and guarantees issued in connection with the acquisitions of Abacus and 360 Energy and to add Abacus as a guarantor under the BMO Credit Agreement. The Second Amendment also increased the amount available to the Company for borrowing under the delayed draw term loan facility from $2.5 million to $3.0 million. To finance the acquisition of Abacus and 360 Energy, the Company borrowed $2.0 million under the delayed draw term loan facility. As of April 3, 2015, there was approximately $1.9 million of term loans outstanding, with the remaining $1.1 million under the delayed draw term loan facility available for borrowing, and there was no outstanding borrowings under the revolving line of credit, with all $7.5 million under the revolving line of credit available for borrowing. | ||||||||
All borrowings under the revolving line of credit are limited to a borrowing base equal to roughly 75% of the eligible accounts receivable plus 50% of the lower of cost or market value of the Company’s eligible inventory, each term as defined in the BMO Credit Agreement. Under the BMO Credit Agreement, as of April 3, 2015, no cash amounts are restricted. The revolving line of credit matures on March 24, 2016 and term loans can be requested at any time prior to February 23, 2016. Subject to certain conditions, including that the Company is not in default under the BMO Credit Agreement and that the Company’s trailing twelve month EBITDA (as defined in the BMO Credit Agreement) is not less than $10.0 million as of the end of the third fiscal quarter of 2015, the Company may request that the maturity date be extended by one year to March 24, 2017 and term loans could accordingly be requested at any time prior to February 22, 2017. | ||||||||
Borrowings under the delayed draw term loan facility bear interest, at the Company’s option, at (a) the base rate plus an applicable margin ranging between 1.25% and 1.75%, or (b) the LIBOR rate plus an applicable margin ranging between 2.25% and 2.75%. Borrowings under the revolving line of credit bear interest, at the Company’s option, at (a) the base rate plus an applicable margin ranging between 0.75% and 1.25%, or (b) the LIBOR rate plus an applicable margin ranging between 1.75% and 2.25%. The applicable margin is determined based on the Company’s total leverage ratio. | ||||||||
Borrowings under the term loan facility and the revolving line of credit are guaranteed by all of the Company’s subsidiaries (the “Guarantors”) and secured by all of the Company’s and the Guarantors’ accounts receivable and other rights to payment, general intangibles, inventory and equipment. Pursuant to the BMO Credit Agreement, the Company also must pay a fee of up to 0.3% on unused commitments and customary fees on any letters of credit drawn under the facility. | ||||||||
The BMO Credit Agreement contains customary representations and affirmative covenants, including financial covenants that require the Company to maintain (i) a maximum total leverage ratio, measured as total funded debt (measured as the sum of all obligations for borrowed money, including subordinated debt, plus all capital lease obligations) plus capital leases plus financial letters of credit divided by a trailing twelve month EBITDA (as defined in the BMO Credit Agreement) measured on a rolling basis of not more than 2.25 for the first four fiscal quarters after the acquisitions of Abacus and 360 Energy, and not more than 2.0 thereafter; (ii) a minimum fixed charge coverage ratio (measured as the sum of EBITDA plus rent expense less unfinanced capital expenditures divided by the sum of rent expense plus principal payments plus cash taxes plus cash interest plus restricted payments plus distributions) of not less than 1.25; and (iii) a minimum tangible net worth of at least (x) the greater of (1) $5.0 million and (2) 85% of the Company’s actual tangible net worth as of March 31, 2015, plus (y) an amount equal to 50% of net income for the first fiscal quarter of 2015, and 50% of net income (only if positive) for each fiscal quarter ending thereafter, plus or minus (z) 80% of any adjustments to the Company’s tangible net worth arising as a result of the consummation of the acquisitions of Abacus and 360 Energy. | ||||||||
The BMO Credit Agreement also includes customary negative covenants, including (i) restrictions on the incurrence of additional indebtedness by the Company or the Guarantors other than indebtedness existing on the date of the BMO Credit Agreement, (ii) restrictions on the total consideration for all permitted acquisitions (including potential future earn-out obligations) shall not exceed $1.5 million during the term of the agreement and the total consideration for any individual permitted acquisition shall not exceed $750,000 without BMO’s consent, and (iii) limitations on asset sales, mergers and acquisitions. In addition, the credit agreement includes customary events of default. Upon the occurrence of an event of default, the interest rate may be increased by 2.0%, BMO has the option to make any loans then outstanding under the BMO Credit Agreement immediately due and payable, and BMO would no longer be obligated to extend further credit to the Company under the BMO Credit Agreement. As of April 3, 2015, the Company was in compliance with the covenants under the BMO Credit Agreement. | ||||||||
Insurance Premiums: The Company has also financed, from time to time, insurance premiums by entering into unsecured notes payable with insurance companies. During the Company’s annual insurance renewals in the fourth quarter of its fiscal year ended January 2, 2015, the Company elected to finance its insurance premiums for the upcoming fiscal year. | ||||||||
COMMITMENTS
COMMITMENTS | 3 Months Ended |
Apr. 03, 2015 | |
COMMITMENTS | |
COMMITMENTS | |
8.COMMITMENTS | |
Leases | |
The Company is obligated under capital leases for certain furniture and office equipment that expire at various dates through the year 2017. | |
The Company also leases certain office facilities under non-cancelable operating leases that expire at various dates through the year 2017 and is committed under non-cancelable operating leases for the lease of automobiles through the year 2016. | |
Employee Benefit Plans | |
The Company has a qualified profit sharing plan pursuant to Code Section 401(a) and qualified cash or deferred arrangement pursuant to Code Section 401(k) covering substantially all employees. Employees may elect to contribute up to 50% of compensation limited to the amount allowed by tax laws. Company contributions are made solely at the discretion of the Company’s board of directors. | |
The Company has a discretionary bonus plan for regional managers, division managers and others as determined by the Company president. Bonuses are awarded if certain financial goals are achieved. The financial goals are not stated in the plan; rather they are judgmentally determined each year. In addition, the board of directors may declare discretionary bonuses to key employees and all employees are eligible for bonuses for outstanding performance. The Company’s compensation committee of the board of directors determines the compensation of the president and chief executive officer. | |
Post Employment Health Benefits | |
In May 2006, the Company’s board of directors approved providing lifetime health insurance coverage for Win Westfall, the Company’s former chief executive officer and current chairman of the board of directors, and his spouse and for Linda Heil, the widow of the Company’s former chief executive officer, Dan Heil. These benefits relate to past services provided to the Company. Accordingly, there is no unamortized compensation cost for the benefits. | |
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Apr. 03, 2015 | |
INCOME TAXES | |
INCOME TAXES | |
9.INCOME TAXES | |
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities, subject to a judgmental assessment of the recoverability of deferred tax assets. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets may not be realized. Significant judgment is applied when assessing the need for valuation allowances. Areas of estimation include the Company’s consideration of future taxable income and ongoing prudent and feasible tax planning strategies. Should a change in circumstances lead to a change in judgment about the utilization of deferred tax assets in future years, the Company would adjust the related valuation allowances in the period that the change in circumstances occurs, along with a corresponding increase or charge to income. As of April 3, 2015, the Company believes it is more likely than not that it will be able to realize all of its deferred tax assets. Accordingly, no valuation allowance is recorded as of the balance sheet date. The Company will continue to assess the need for a valuation allowance in the future. | |
The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of April 3, 3015, the Company has not recorded a liability for uncertain tax positions. | |
Based on management’s estimates and determination of an effective tax rate for the year, the Company recorded an income tax expense of $1.1 million for the three months ended April 3, 2015 as compared to an income tax expense of $44,000 for the three months ended March 28, 2014. The difference between the tax expense recorded at April 3, 2015 and the expense that would be recorded by applying the federal statutory rate primarily relates to state income taxes and certain expenses that are non-deductible for tax purposes, including meals and entertainment, lobbying and compensation expense related to incentive stock options. Additionally, the income tax expense in the current quarter reflects an adjustment to the tax effected value of deferred tax assets and liabilities resulting from changes in the estimated effective state income tax rate. | |
SEGMENT_INFORMATION
SEGMENT INFORMATION | 3 Months Ended | ||||||||||||||||||||||
Apr. 03, 2015 | |||||||||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||||||||
10. SEGMENT INFORMATION | |||||||||||||||||||||||
The Company has four reporting segments: Energy Efficiency Services, Engineering Services, Public Finance Services and Homeland Security Services. The Energy Efficiency Services segment, which consists of Willdan Energy Solutions, provides energy efficiency and sustainability consulting services to utilities, state agencies, municipalities, private industry and non-profit organizations. The Engineering Services segment consists of Willdan Engineering, Willdan Infrastructure and Public Agency Resources. The Engineering Services segment offers a broad range of engineering and planning services to our public and private sector clients. The Public Finance Services segment, which consists of Willdan Financial Services, provides expertise and support for the various financing techniques employed by public agencies to finance their operations and infrastructure along with the mandated reporting and other requirements associated with these financings. The Homeland Security Services segment, which consists of Willdan Homeland Solutions, provides national preparedness, homeland security consulting, public safety and emergency response services to cities, related municipal service agencies and other entities. | |||||||||||||||||||||||
The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies included in the Company’s 2014 Annual Report on Form 10-K filed on March 31, 2015. There were no intersegment sales in the three month periods ended April 3, 2015 and March 28, 2014. Management evaluates the performance of each segment based upon income or loss from operations before income taxes. Certain segment asset information including expenditures for long-lived assets has not been presented as it is not reported to or reviewed by the chief operating decision maker. In addition, enterprise-wide service line contract revenue is not included as it is impracticable to report this information for each group of similar services. | |||||||||||||||||||||||
Financial information with respect to the reportable segments as of and for the fiscal three months ended April 3, 2015 and March 28, 2014 is as follows: | |||||||||||||||||||||||
Energy | Engineering | Public | Homeland | Unallocated | Intersegment | Consolidated | |||||||||||||||||
Efficiency | Services | Finance | Security | Corporate | Total | ||||||||||||||||||
Services | Services | Services | |||||||||||||||||||||
Fiscal Three Months Ended April 3, 2015 | |||||||||||||||||||||||
Contract revenue | $ | 18,905,000 | $ | 10,804,000 | $ | 2,671,000 | $ | 917,000 | $ | — | $ | — | $ | 33,297,000 | |||||||||
Segment income before income taxes | 1,832,000 | 1,136,000 | 41,000 | 99,000 | (475,000 | ) | — | 2,633,000 | |||||||||||||||
Net income | 1,040,000 | 627,000 | 42,000 | 56,000 | (270,000 | ) | — | 1,495,000 | |||||||||||||||
Segment assets(1) | 38,503,000 | 11,267,000 | 4,290,000 | 1,068,000 | 39,589,000 | (23,130,000 | ) | 71,587,000 | |||||||||||||||
Fiscal Three Months Ended March 28, 2014 | |||||||||||||||||||||||
Contract revenue | $ | 10,359,000 | $ | 8,892,000 | $ | 2,490,000 | $ | 945,000 | $ | — | $ | — | $ | 22,686,000 | |||||||||
Segment income before income taxes | 528,000 | 529,000 | 237,000 | 65,000 | — | — | 1,359,000 | ||||||||||||||||
Net income | 507,000 | 514,000 | 231,000 | 63,000 | — | — | 1,315,000 | ||||||||||||||||
Segment assets(1) | 10,150,000 | 9,209,000 | 3,221,000 | 1,465,000 | 40,512,000 | (23,130,000 | ) | 41,427,000 | |||||||||||||||
(1) Segment assets represent segment assets, net of intercompany receivables. | |||||||||||||||||||||||
CONTINGENCIES
CONTINGENCIES | 3 Months Ended |
Apr. 03, 2015 | |
CONTINGENCIES | |
CONTINGENCIES | |
11.CONTINGENCIES | |
Claims and Lawsuits | |
The Company is subject to claims and lawsuits from time to time, including those alleging professional errors or omissions that arise in the ordinary course of business against firms that operate in the engineering and consulting professions. The Company carries professional liability insurance, subject to certain deductibles and policy limits, for such claims as they arise and may from time to time establish reserves for litigation that is considered probable of a loss. | |
In accordance with accounting standards regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss is probable and the amount can be reasonably estimated, and discloses the amount accrued and an estimate of any reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for the Company’s financial statements not to be misleading. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote. | |
Because litigation outcomes are inherently unpredictable, the Company’s evaluation of legal proceedings often involves a series of complex assessments by management about future events and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to any one of the Company’s financial statements are not probable, but are reasonably possible, or are probable, but cannot be estimated, then the Company will disclose the nature of the loss contingencies, together with an estimate of the possible loss or a statement that such loss is not reasonably estimable. While the consequences of certain unresolved proceedings are not presently determinable, and a reasonable estimate of the probable and reasonably possible loss or range of loss in excess of amounts accrued for such proceedings cannot be made, an adverse outcome from such proceedings could have a material adverse effect on the Company’s earnings in any given reporting period. However, in the opinion of the Company’s management, after consulting with legal counsel, and taking into account insurance coverage, the ultimate liability related to current outstanding claims and lawsuits is not expected to have a material adverse effect on the Company’s financial statements. | |
City of Glendale v. Willdan Financial Services, Superior Court of California, Los Angeles County | |
A complaint was filed against the Company on July 16, 2014 relating to a project performed by Willdan Financial Services to prepare a Cost of Services Analysis (a “COSA”) for the Department of Water and Power of the City of Glendale, California (the “City of Glendale”). The purpose of the COSA was to assist the City of Glendale in setting water rates for property owners. The lawsuit alleges that the City of Glendale suffered damages due to mistakes in the COSA, as follows: the City of Glendale received less revenue than anticipated in an amount exceeding $9,000,000; the City of Glendale was required to retain another consultant to prepare a new COSA at the cost of $130,000; and the City of Glendale incurred costs associated with noticing and conducting public hearings at a cost of $83,052. The Company denies the allegations asserted in the lawsuit and will vigorously defend against the claims. Additionally, this matter is covered by the Company’s professional liability insurance policy. | |
BASIS_OF_PRESENTATION_ORGANIZA1
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Policies) | 3 Months Ended |
Apr. 03, 2015 | |
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | |
Basis of Presentation | |
Basis of Presentation | |
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission and reflect all adjustments, which consist of only normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the consolidated results for the interim periods presented. The Company operates and reports its quarterly financial results based on the 13-week period ending on the Friday closest to March 31, June 30 and September 30 and the 13 or 14-week period ending on the Friday closest to December 31, as applicable, with consideration of business days. Results for the interim periods are not necessarily indicative of results for the full year. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The consolidated financial statements should be read in conjunction with Willdan Group, Inc.’s 2014 Annual Report on Form 10-K filed on March 31, 2015. | |
Principles of Consolidation | |
Principles of Consolidation | |
The consolidated financial statements include the accounts of Willdan Group, Inc. and its wholly owned subsidiaries, Willdan Engineering, Willdan Energy Solutions, Public Agency Resources, Willdan Financial Services and Willdan Homeland Solutions and their respective subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. | |
Accounting for Contracts | |
Accounting for Contracts | |
The Company enters into contracts with its clients that contain three principal types of pricing provisions: fixed price, time-and-materials, and unit-based. Revenue on fixed price contracts is recognized on the percentage-of-completion method based generally on the ratio of direct costs (primarily exclusive of depreciation and amortization costs) incurred to date to estimated total direct costs at completion. Revenue on time-and-materials and unit-based contracts is recognized as the work is performed in accordance with the specific terms of the contract. Contracts that provide for multiple services or deliverables are evaluated as multiple element arrangements to determine the appropriate unit of accounting, allocation of contract value, and method of revenue recognition for each element. Revenue for amounts that have been billed but not earned is deferred and such deferred revenue is referred to as billings in excess of costs and estimated earnings on uncompleted contracts in the accompanying consolidated balance sheets. Service-related contracts, including operations and maintenance services and a variety of technical assistance services, are accounted for over the period of performance, in proportion to the costs of performance. Award and incentive fees are recorded when they are fixed or determinable and consider customer contract terms. | |
Adjustments to contract cost estimates are made in the periods in which the facts requiring such revisions become known. When the revised estimate indicates a loss, such loss is provided for currently in its entirety. Claims revenue is recognized only upon resolution of the claim. Change orders in dispute are evaluated as claims. Costs related to un-priced change orders are expensed when incurred and recognition of the related contract revenue is based on an evaluation of the probability of recovery of the costs. Estimated profit is recognized for un-priced change orders if realization of the expected price of the change order is probable. | |
Applying the percentage-of-completion method of recognizing revenue requires the Company to estimate the outcome of its long-term contracts. The Company forecasts such outcomes to the best of its knowledge and belief of current and expected conditions and its expected course of action. Differences between the Company’s estimates and actual results often occur resulting in changes to reported revenue and earnings. Such changes could have a material effect on future consolidated financial statements. | |
Direct costs of contract revenue consist primarily of that portion of technical and nontechnical salaries and wages that has been incurred in connection with revenue producing projects. Direct costs of contract revenue also include production expenses, subcontractor services and other expenses that are incurred in connection with revenue producing projects. | |
Direct costs of contract revenue exclude that portion of technical and nontechnical salaries and wages related to marketing efforts, vacations, holidays and other time not spent directly generating revenue under existing contracts. Such costs are included in general and administrative expenses. Additionally, payroll taxes, bonuses and employee benefit costs for all Company personnel are included in general and administrative expenses in the accompanying consolidated statements of operations since no allocation of these costs is made to direct costs of contract revenue. No allocation of facilities costs is made to direct costs of contract revenue. Other companies may classify as direct costs of contract revenue some of the costs that the Company classifies as general and administrative costs. The Company expenses direct costs of contract revenue when incurred. | |
Included in revenue and costs are all reimbursable costs for which the Company has the risk or on which the fee was based at the time of bid or negotiation. No revenue or cost is recorded for costs in which the Company acts solely in the capacity of an agent and has no risks associated with such costs. | |
Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based upon a review of all outstanding amounts on a quarterly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts and by using historical experience applied to an aging of accounts. Credit risk is generally minimal with governmental entities, but disputes may arise related to these receivable amounts. Accounts receivables are written off when deemed uncollectible. Recoveries of accounts receivables previously written off are recorded when received. | |
The value of retainage is included in accounts receivable in the accompanying consolidated financial statements. Retainage represents the billed amount that is retained by the customer, in accordance with the terms of the contract, generally until performance is substantially complete. At April 3, 2015 and January 2, 2015, the Company had retained accounts receivable of approximately $903,000 and $700,000 respectively. | |
Goodwill | |
Goodwill | |
Goodwill represents the excess of costs over fair value of the assets acquired. The goodwill, which has an indefinite useful life, is not amortized, but instead tested for impairment at least annually or more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the reporting unit’s fair value. | |
The Company tests goodwill at least annually for possible impairment. The Company completes annual testing of goodwill as of the last day of the first month of its fourth fiscal quarter each year to determine whether there is impairment. In addition to the annual test, the Company regularly evaluates whether events and circumstances have occurred that may indicate a potential impairment of goodwill. As of April 3, 2015, we had $15.4 million of goodwill, all of which relates to the Energy Efficiency Services reporting segment and the acquisitions of Abacus and 360 Energy. | |
The Company tests goodwill for impairment at the level of its reporting units, which are components of its operating segments. The process of testing goodwill for impairment involves an optional qualitative assessment on goodwill impairment of its reporting units to determine whether a quantitative assessment is necessary. If a quantitative assessment is warranted, the Company will then determine the fair value of the applicable reporting units. To estimate the fair value of its reporting units, the Company uses both an income approach based on management’s estimates of future cash flows and other market data and a market approach based upon multiples of EBITDA earned by similar public companies. | |
Once the fair value is determined, the Company then compares the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is determined to be less than the carrying value, the Company performs an additional assessment to determine the extent of the impairment based on the implied fair value of goodwill compared with the carrying amount of the goodwill. In the event that the current implied fair value of the goodwill is less than the carrying value, an impairment charge is recognized. | |
Inherent in such fair value determinations are significant judgments and estimates, including but not limited to assumptions about future revenue, profitability and cash flows, operational plans and interpretation of current economic indicators and market valuations. To the extent these assumptions are incorrect or economic conditions that would impact the future operations of the reporting units change, any goodwill may be deemed to be impaired, and an impairment charge could result in a material adverse effect on the financial position or results of operation. | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | |
The Company’s financial instruments consist primarily of cash, cash equivalents, accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, other receivables, prepaid expenses and other current assets, excess of outstanding checks over bank balance, accounts payable, accrued liabilities and billings in excess of costs and estimated earnings on uncompleted contracts, and approximate their fair values because of the relatively short period of time between the origination of these instruments and their expected realization or payment. The carrying amounts of debt obligations approximate their fair values since the terms are comparable to terms currently offered by local lending institutions for loans of similar terms to companies with comparable credit risk. | |
Use of Estimates | |
Use of Estimates | |
The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. | |
Liquidity | |
Liquidity | |
The Company had $12.1 million of cash and cash equivalents as of April 3, 2015. The Company’s primary sources of liquidity are cash generated from operations and its revolving line of credit with BMO Harris Bank, National Association (“BMO”), which matures on March 24, 2016. While the Company believes that its cash and cash equivalents on hand, cash generated by operating activities and funds available under its line of credit will be sufficient to finance its operating activities for at least the next 12 months, if the Company does experience a cash flow shortage or violates the current terms of its credit agreement, the Company may have difficulty obtaining additional funds on favorable terms, if at all, to meet its obligations as they come due in the normal course of business. | |
BUSINESS_COMBINATIONS_Tables
BUSINESS COMBINATIONS (Tables) | 3 Months Ended | ||||||||||
Apr. 03, 2015 | |||||||||||
BUSINESS COMBINATIONS | |||||||||||
Schedule of consideration for the acquisitions | |||||||||||
Three Months Ended | |||||||||||
April 3, 2015 | |||||||||||
360 Energy | Abacus | Total | |||||||||
Cash paid | $ | 4,875,000 | $ | 2,500,000 | $ | 7,375,000 | |||||
Issuance of common stock | 571,000 | 914,000 | 1,485,000 | ||||||||
Issuance of notes payable | 3,000,000 | 1,250,000 | 4,250,000 | ||||||||
Contingent consideration | 5,061,000 | 681,000 | 5,742,000 | ||||||||
Total consideration | $ | 13,507,000 | $ | 5,345,000 | $ | 18,852,000 | |||||
Schedule of preliminary amounts for the acquired assets recorded at their estimated fair value as of the acquisition date | |||||||||||
Three Months Ended | |||||||||||
April 3, 2015 | |||||||||||
360 Energy | Abacus | Total | |||||||||
Cash acquired | $ | — | $ | 332,000 | $ | 332,000 | |||||
Property, plant and equipment | 153,000 | 104,000 | 257,000 | ||||||||
Backlog | 158,000 | 161,000 | 319,000 | ||||||||
Tradename | 666,000 | 366,000 | 1,032,000 | ||||||||
Non-compete agreements | 876,000 | 137,000 | 1,013,000 | ||||||||
Other assets, net | 41,000 | 495,000 | 536,000 | ||||||||
Goodwill | 11,613,000 | 3,750,000 | 15,363,000 | ||||||||
Net assets acquired | $ | 13,507,000 | $ | 5,345,000 | $ | 18,852,000 | |||||
Schedule of unaudited pro forma consolidated statements of operations | |||||||||||
Three Months Ended | |||||||||||
April 3, | March 28, | ||||||||||
2015 | 2014 | ||||||||||
Contract revenue | $ | 33,752,000 | $ | 26,376,000 | |||||||
Income from operations | 2,637,000 | 1,832,000 | |||||||||
Net income | 1,498,000 | 1,767,000 | |||||||||
Earnings per share | |||||||||||
Basic | $ | 0.19 | $ | 0.24 | |||||||
Diluted | $ | 0.18 | $ | 0.23 | |||||||
GOODWILL_AND_OTHER_INTANGIBLE_1
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended | |||||||||||||||
Apr. 03, 2015 | ||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | ||||||||||||||||
Schedule of changes in carrying value of goodwill by reporting unit | ||||||||||||||||
January 2, | Acquisitions | April 3, | ||||||||||||||
2015 | 2015 | |||||||||||||||
Reporting Unit: | ||||||||||||||||
Energy Solutions | $ | — | $ | 15,363,000 | $ | 15,363,000 | ||||||||||
$ | — | $ | 15,363,000 | $ | 15,363,000 | |||||||||||
Schedule of gross amounts and accumulated amortization of the Company's acquired identifiable intangible assets with finite useful lives | ||||||||||||||||
April 3, 2015 | January 2, 2015 | |||||||||||||||
Gross | Accumulated | Gross | Accumulated | Amortization | ||||||||||||
Amount | Amortization | Amount | Amortization | Period (yrs) | ||||||||||||
Backlog | $ | 319,000 | $ | 148,000 | $ | — | $ | — | 2-Jan | |||||||
Tradename | 1,032,000 | 84,000 | — | — | 2.5-3.5 | |||||||||||
Non-compete agreements | 1,013,000 | 44,000 | — | — | 5 | |||||||||||
$ | 2,364,000 | $ | 276,000 | $ | — | $ | — | |||||||||
Schedule of estimated amortization expense for acquired identifiable intangible assets | ||||||||||||||||
Fiscal year: | ||||||||||||||||
2015 | $ | 582,000 | ||||||||||||||
2016 | 539,000 | |||||||||||||||
2017 | 466,000 | |||||||||||||||
2018 | 298,000 | |||||||||||||||
2019 | 203,000 | |||||||||||||||
$ | 2,088,000 | |||||||||||||||
EARNINGS_PER_SHARE_EPS_Tables
EARNINGS PER SHARE (EPS) (Tables) | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
EARNINGS PER SHARE (EPS) | ||||||||
Schedule of number of weighted-average shares used to compute basic and diluted EPS | ||||||||
Three Months Ended | ||||||||
April 3, | March 28, | |||||||
2015 | 2014 | |||||||
Net income | $ | 1,495,000 | $ | 1,315,000 | ||||
Weighted-average common shares outstanding | 7,765,000 | 7,397,000 | ||||||
Effect of dilutive stock options | 338,000 | 212,000 | ||||||
Weighted-average common stock outstanding-diluted | 8,103,000 | 7,609,000 | ||||||
Earnings per share: | ||||||||
Basic | $ | 0.19 | $ | 0.18 | ||||
Diluted | $ | 0.18 | $ | 0.17 | ||||
EQUIPMENT_AND_LEASEHOLD_IMPROV1
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Tables) | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||||||||
Schedule of equipment and leasehold improvements | ||||||||
April 3, | January 2, | |||||||
2015 | 2015 | |||||||
Furniture and fixtures | $ | 2,966,000 | $ | 2,994,000 | ||||
Computer hardware and software | 5,706,000 | 5,667,000 | ||||||
Leasehold improvements | 884,000 | 785,000 | ||||||
Equipment under capital leases | 927,000 | 919,000 | ||||||
Automobiles, trucks, and field equipment | 1,023,000 | 677,000 | ||||||
11,506,000 | 11,042,000 | |||||||
Accumulated depreciation and amortization | (9,822,000 | ) | (9,658,000 | ) | ||||
Equipment and leasehold improvements, net | $ | 1,684,000 | $ | 1,384,000 | ||||
ACCRUED_LIABILITIES_Tables
ACCRUED LIABILITIES (Tables) | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
ACCRUED LIABILITIES | ||||||||
Schedule of accrued liabilities | ||||||||
April 3, | January 2, | |||||||
2015 | 2015 | |||||||
Accrued bonuses | $ | 593,000 | $ | 1,450,000 | ||||
Accrued interest | 3,000 | — | ||||||
Paid leave bank | 1,654,000 | 1,404,000 | ||||||
Compensation and payroll taxes | 1,051,000 | 1,371,000 | ||||||
Accrued legal | 666,000 | 556,000 | ||||||
Accrued workers’ compensation insurance | 208,000 | 192,000 | ||||||
Accrued rent | 53,000 | 149,000 | ||||||
Employee withholdings | 592,000 | 637,000 | ||||||
Client deposits | 440,000 | 79,000 | ||||||
Unvouchered accounts payable | 3,322,000 | 4,462,000 | ||||||
Other | 1,202,000 | 368,000 | ||||||
Total accrued liabilities | $ | 9,784,000 | $ | 10,668,000 | ||||
DEBT_Tables
DEBT (Tables) | 3 Months Ended | |||||||
Apr. 03, 2015 | ||||||||
DEBT | ||||||||
Schedule of notes payable | ||||||||
April 3, | January 2, | |||||||
2015 | 2015 | |||||||
BMO term note | $ | 1,950,000 | $ | — | ||||
Notes payable related to acquisitions | 3,908,000 | — | ||||||
Notes payable related to insurance | 204,000 | 352,000 | ||||||
Other | 2,000 | 3,000 | ||||||
Total notes payable | 6,064,000 | 355,000 | ||||||
Less current portion | 3,745,000 | 355,000 | ||||||
Notes payable, less current portion | $ | 2,319,000 | $ | — | ||||
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 3 Months Ended | ||||||||||||||||||||||
Apr. 03, 2015 | |||||||||||||||||||||||
SEGMENT INFORMATION | |||||||||||||||||||||||
Schedule of financial information with respect to the reportable segments | |||||||||||||||||||||||
Energy | Engineering | Public | Homeland | Unallocated | Intersegment | Consolidated | |||||||||||||||||
Efficiency | Services | Finance | Security | Corporate | Total | ||||||||||||||||||
Services | Services | Services | |||||||||||||||||||||
Fiscal Three Months Ended April 3, 2015 | |||||||||||||||||||||||
Contract revenue | $ | 18,905,000 | $ | 10,804,000 | $ | 2,671,000 | $ | 917,000 | $ | — | $ | — | $ | 33,297,000 | |||||||||
Segment income before income taxes | 1,832,000 | 1,136,000 | 41,000 | 99,000 | (475,000 | ) | — | 2,633,000 | |||||||||||||||
Net income | 1,040,000 | 627,000 | 42,000 | 56,000 | (270,000 | ) | — | 1,495,000 | |||||||||||||||
Segment assets(1) | 38,503,000 | 11,267,000 | 4,290,000 | 1,068,000 | 39,589,000 | (23,130,000 | ) | 71,587,000 | |||||||||||||||
Fiscal Three Months Ended March 28, 2014 | |||||||||||||||||||||||
Contract revenue | $ | 10,359,000 | $ | 8,892,000 | $ | 2,490,000 | $ | 945,000 | $ | — | $ | — | $ | 22,686,000 | |||||||||
Segment income before income taxes | 528,000 | 529,000 | 237,000 | 65,000 | — | — | 1,359,000 | ||||||||||||||||
Net income | 507,000 | 514,000 | 231,000 | 63,000 | — | — | 1,315,000 | ||||||||||||||||
Segment assets(1) | 10,150,000 | 9,209,000 | 3,221,000 | 1,465,000 | 40,512,000 | (23,130,000 | ) | 41,427,000 | |||||||||||||||
(1) Segment assets represent segment assets, net of intercompany receivables. | |||||||||||||||||||||||
BASIS_OF_PRESENTATION_ORGANIZA2
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Details) | 3 Months Ended |
Apr. 03, 2015 | |
Summary of Significant Accounting Policies [Line Items] | |
Length of quarter | 91 days |
Minimum | |
Summary of Significant Accounting Policies [Line Items] | |
Length of quarter | 91 days |
Maximum | |
Summary of Significant Accounting Policies [Line Items] | |
Length of quarter | 98 days |
BASIS_OF_PRESENTATION_ORGANIZA3
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Details 2) (USD $) | 3 Months Ended | ||
Apr. 03, 2015 | Mar. 28, 2014 | Jan. 02, 2015 | |
item | |||
Accounting for Contracts | |||
Number of principal types of pricing provisions | 3 | ||
Payroll taxes, bonuses and employee benefit costs for all Company personnel | $6,641,000 | $4,918,000 | |
Facilities costs | 1,048,000 | 1,062,000 | |
Revenue of the entity recorded in which it acts solely in the capacity of an agent | 0 | ||
Costs recorded for costs to the entity in which it acts solely in the capacity of an agent | 0 | ||
Retained accounts receivable | 903,000 | 700,000 | |
Cost of Sales | |||
Accounting for Contracts | |||
Payroll taxes, bonuses and employee benefit costs for all Company personnel | 0 | ||
Facilities costs | $0 |
BASIS_OF_PRESENTATION_ORGANIZA4
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Details 3) (USD $) | 3 Months Ended | |||
Apr. 03, 2015 | Jan. 02, 2015 | Mar. 28, 2014 | Dec. 27, 2013 | |
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | ||||
Goodwill | $15,363,000 | |||
Liquidity | ||||
Cash and cash equivalents | $12,079,000 | $20,371,000 | $12,656,000 | $8,134,000 |
Minimum period over which cash and cash equivalents on hand, cash generated by operating activities and funds available under line of credit will be sufficient to finance operating activities | 12 months |
BUSINESS_COMBINATIONS_Details
BUSINESS COMBINATIONS (Details) (USD $) | 0 Months Ended | 3 Months Ended | ||
Share data in Thousands, except Per Share data, unless otherwise specified | Jan. 15, 2015 | Apr. 03, 2015 | Mar. 28, 2014 | Jan. 02, 2015 |
item | ||||
BUSINESS COMBINATION | ||||
Number of acquisitions | 2 | |||
Par value (in dollars per share) | $0.01 | $0.01 | ||
Allocation of acquired assets | ||||
Goodwill | $15,363,000 | |||
Term Note | BMO | ||||
Allocation of acquired assets | ||||
Amount borrowed to finance acquisition | 2,000,000 | |||
Abacus and 360 Energy | ||||
BUSINESS COMBINATION | ||||
Tax deductible goodwill | 15,400,000 | |||
Cash paid | 7,375,000 | |||
Issuance of common stock | 1,485,000 | |||
Issuance of notes payable | 4,250,000 | |||
Contingent consideration | 5,742,000 | |||
Total consideration | 18,852,000 | |||
Allocation of acquired assets | ||||
Cash acquired | 332,000 | |||
Property, plant and equipment, net | 257,000 | |||
Other assets, net | 536,000 | |||
Goodwill | 15,363,000 | |||
Net assets acquired | 18,852,000 | |||
Cash on hand | 5,400,000 | |||
Unaudited pro forma consolidated statements of operations | ||||
Contract revenue | 33,752,000 | 26,376,000 | ||
Income from operations | 2,637,000 | 1,832,000 | ||
Net income | 1,498,000 | 1,767,000 | ||
Earnings per share: | ||||
Basic (in dollars per share) | $0.19 | $0.24 | ||
Diluted (in dollars per share) | $0.18 | $0.23 | ||
Abacus and 360 Energy | Backlog | ||||
Allocation of acquired assets | ||||
Intangible assets | 319,000 | |||
Abacus and 360 Energy | Tradename | ||||
Allocation of acquired assets | ||||
Intangible assets | 1,032,000 | |||
Abacus and 360 Energy | Non-compete agreements | ||||
Allocation of acquired assets | ||||
Intangible assets | 1,013,000 | |||
Abacus | ||||
BUSINESS COMBINATION | ||||
Maximum contingent consideration to be paid | 1,400,000 | |||
Cash paid | 2,500,000 | |||
Issuance of common stock | 914,000 | |||
Issuance of notes payable | 1,250,000 | |||
Contingent consideration | 681,000 | |||
Total consideration | 5,345,000 | |||
Allocation of acquired assets | ||||
Cash acquired | 332,000 | |||
Property, plant and equipment, net | 104,000 | |||
Other assets, net | 495,000 | |||
Goodwill | 3,750,000 | |||
Net assets acquired | 5,345,000 | |||
Abacus | Common Stock | ||||
BUSINESS COMBINATION | ||||
Consideration in Common Stock (in shares) | 75,758 | |||
Abacus | Maximum | ||||
BUSINESS COMBINATION | ||||
Total consideration | 6,100,000 | |||
Abacus | Backlog | ||||
Allocation of acquired assets | ||||
Intangible assets | 161,000 | |||
Abacus | Tradename | ||||
Allocation of acquired assets | ||||
Intangible assets | 366,000 | |||
Abacus | Non-compete agreements | ||||
Allocation of acquired assets | ||||
Intangible assets | 137,000 | |||
360 Energy | ||||
BUSINESS COMBINATION | ||||
Maximum contingent consideration to be paid | 6,500,000 | |||
Cash paid | 4,875,000 | |||
Issuance of common stock | 571,000 | |||
Issuance of notes payable | 3,000,000 | |||
Contingent consideration | 5,061,000 | |||
Total consideration | 13,507,000 | |||
Allocation of acquired assets | ||||
Property, plant and equipment, net | 153,000 | |||
Other assets, net | 41,000 | |||
Goodwill | 11,613,000 | |||
Net assets acquired | 13,507,000 | |||
360 Energy | Common Stock | ||||
BUSINESS COMBINATION | ||||
Consideration in Common Stock (in shares) | 47,348 | |||
360 Energy | Maximum | ||||
BUSINESS COMBINATION | ||||
Total consideration | 15,000,000 | |||
360 Energy | Backlog | ||||
Allocation of acquired assets | ||||
Intangible assets | 158,000 | |||
360 Energy | Tradename | ||||
Allocation of acquired assets | ||||
Intangible assets | 666,000 | |||
360 Energy | Non-compete agreements | ||||
Allocation of acquired assets | ||||
Intangible assets | $876,000 |
GOODWILL_AND_OTHER_INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) (USD $) | 3 Months Ended |
Apr. 03, 2015 | |
Changes in carrying value of goodwill | |
Acquisitions | $15,363,000 |
Goodwill at end of period | 15,363,000 |
Energy Efficiency Services | |
Changes in carrying value of goodwill | |
Acquisitions | 15,363,000 |
Goodwill at end of period | $15,363,000 |
GOODWILL_AND_OTHER_INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS (Details 2) (USD $) | 3 Months Ended | 15 Months Ended | |
Apr. 03, 2015 | Mar. 28, 2014 | Apr. 03, 2015 | |
Goodwill and other intangible assets | |||
Goodwill | $15,363,000 | 15,363,000 | |
Gross Amount | 2,364,000 | 2,364,000 | |
Accumulated Amortization | 276,000 | 276,000 | |
Amortization expense for acquired identifiable intangible assets | 300,000 | 0 | |
Estimated amortization expense for acquired identifiable intangible assets | |||
2015 | 582,000,000 | 582,000,000 | |
2016 | 539,000,000 | 539,000,000 | |
2017 | 466,000,000 | 466,000,000 | |
2018 | 298,000,000 | 298,000,000 | |
2019 | 203,000,000 | 203,000,000 | |
Total estimated amortization expense | 2,088,000,000 | 2,088,000,000 | |
Energy Efficiency Services | |||
Goodwill and other intangible assets | |||
Goodwill | 15,363,000 | 15,363,000 | |
Backlog | |||
Goodwill and other intangible assets | |||
Gross Amount | 319,000 | 319,000 | |
Accumulated Amortization | 148,000 | 148,000 | |
Backlog | Minimum | |||
Goodwill and other intangible assets | |||
Amortization Period | 1 year | ||
Backlog | Maximum | |||
Goodwill and other intangible assets | |||
Amortization Period | 2 years | ||
Tradename | |||
Goodwill and other intangible assets | |||
Gross Amount | 1,032,000 | 1,032,000 | |
Accumulated Amortization | 84,000 | 84,000 | |
Tradename | Minimum | |||
Goodwill and other intangible assets | |||
Amortization Period | 2 years 6 months | ||
Tradename | Maximum | |||
Goodwill and other intangible assets | |||
Amortization Period | 3 years 6 months | ||
Non-compete agreements | |||
Goodwill and other intangible assets | |||
Gross Amount | 1,013,000 | 1,013,000 | |
Accumulated Amortization | $44,000 | 44,000 | |
Amortization Period | 5 years |
EARNINGS_PER_SHARE_EPS_Details
EARNINGS PER SHARE (EPS) (Details) (USD $) | 3 Months Ended | |
Apr. 03, 2015 | Mar. 28, 2014 | |
Earnings per share | ||
Net income | $1,495,000 | $1,315,000 |
Weighted-average common shares outstanding | 7,765,000 | 7,397,000 |
Effect of dilutive stock options | 338,000 | 212,000 |
Weighted-average common stock outstanding-diluted (in shares) | 8,103,000 | 7,609,000 |
Earnings per share: | ||
Basic (in dollars per share) | $0.19 | $0.18 |
Diluted (in dollars per share) | $0.18 | $0.17 |
Stock options | ||
Anti-dilutive securities excluded from the computation of earnings per share | ||
Number of awards excluded from calculation of dilutive potential common shares (in shares) | 122,000 | 275,000 |
EQUIPMENT_AND_LEASEHOLD_IMPROV2
EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Details) (USD $) | Apr. 03, 2015 | Jan. 02, 2015 |
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||
Equipment and leasehold improvements, Gross | $11,506,000 | $11,042,000 |
Accumulated depreciation and amortization | -9,822,000 | -9,658,000 |
Equipment and leasehold improvements, net | 1,684,000 | 1,384,000 |
Furniture and fixtures | ||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||
Equipment and leasehold improvements, Gross | 2,966,000 | 2,994,000 |
Computer hardware and software | ||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||
Equipment and leasehold improvements, Gross | 5,706,000 | 5,667,000 |
Leasehold improvements | ||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||
Equipment and leasehold improvements, Gross | 884,000 | 785,000 |
Equipment under capital leases | ||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||
Equipment and leasehold improvements, Gross | 927,000 | 919,000 |
Automobiles, trucks, and field equipment | ||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | ||
Equipment and leasehold improvements, Gross | $1,023,000 | $677,000 |
ACCRUED_LIABILITIES_Details
ACCRUED LIABILITIES (Details) (USD $) | Apr. 03, 2015 | Jan. 02, 2015 |
ACCRUED LIABILITIES | ||
Accrued bonuses | $593,000 | $1,450,000 |
Accrued interest | 3,000 | |
Paid leave bank | 1,654,000 | 1,404,000 |
Compensation and payroll taxes | 1,051,000 | 1,371,000 |
Accrued legal | 666,000 | 556,000 |
Accrued workers' compensation insurance | 208,000 | 192,000 |
Accrued rent | 53,000 | 149,000 |
Employee withholdings | 592,000 | 637,000 |
Client deposits | 440,000 | 79,000 |
Unvouchered accounts payable | 3,322,000 | 4,462,000 |
Other | 1,202,000 | 368,000 |
Total accrued liabilities | $9,784,000 | $10,668,000 |
DEBT_Details
DEBT (Details) (USD $) | Apr. 03, 2015 | Jan. 02, 2015 |
Notes Payable | ||
Total notes payable | $6,064,000 | $355,000 |
Less current portion | 3,745,000 | 355,000 |
Notes payable, less current portion | 2,319,000 | |
Term Note | ||
Notes Payable | ||
Total notes payable | 1,950,000 | |
Notes payable related to acquisitions | ||
Notes Payable | ||
Total notes payable | 3,908,000 | |
Notes payable related to insurance | ||
Notes Payable | ||
Total notes payable | 204,000 | 352,000 |
Other | ||
Notes Payable | ||
Total notes payable | $2,000 | $3,000 |
DEBT_Details_2
DEBT (Details 2) (USD $) | 3 Months Ended | 0 Months Ended | ||
Apr. 03, 2015 | Mar. 28, 2014 | Jan. 15, 2015 | Mar. 24, 2014 | |
Line of Credit | ||||
Payment on note | $491,000 | $198,000 | ||
Abacus Notes | ||||
Line of Credit | ||||
Interest rate (as a percent) | 4.00% | |||
Payment on note | 100,000 | |||
Kinzer Note | ||||
Line of Credit | ||||
Amount borrowed to finance acquisition | 625,000 | |||
Rubbert Note | ||||
Line of Credit | ||||
Amount borrowed to finance acquisition | 625,000 | |||
360 Energy Note | ||||
Line of Credit | ||||
Amount borrowed to finance acquisition | 3,000,000 | |||
Interest rate (as a percent) | 4.00% | |||
Payment on note | 242,000 | |||
Revolving Credit Facility | BMO | ||||
Line of Credit | ||||
Maximum borrowing capacity | 7,500,000 | |||
Restricted cash | 0 | |||
EBITDA threshold as of the 3rd fiscal quarter of 2015 | 10,000,000 | |||
Period in which maturity date may be extended | 1 year | |||
Maximum total leverage ratio of total funded debt to EBITDA for first four fiscal quarters after acquisition | 2.25 | |||
Maximum total leverage ratio of total funded debt to EBITDA thereafter | 2 | |||
Minimum fixed charge coverage ratio | 1.25 | |||
Minimum tangible net worth required to be maintained | 5,000,000 | |||
Minimum tangible net worth required to be maintained (as a percent) | 85.00% | |||
Step up amount equal to net income required to be maintained (as a percent) | 50.00% | |||
Step up amount equal to net income required to be maintained after first quarter of current fiscal year (as a percent) | 50.00% | |||
Adjustment to tangible net worth arising from acquisition (as a percent) | 80.00% | |||
Percentage of increased interest rate in case of default | 2.00% | |||
Revolving Credit Facility | Maximum | BMO | ||||
Line of Credit | ||||
Total consideration for all permitted acquisitions | 1,500,000 | |||
Total consideration for individual permitted acquisitions | 750,000 | |||
Revolving line of credit | BMO | ||||
Line of Credit | ||||
Borrowings outstanding | 0 | |||
Amount available for borrowing | 7,500,000 | |||
Percentage of eligible accounts receivable used to determine maximum borrowing base | 75.00% | |||
Percentage of the lower of cost or market value of eligible inventory used to determine maximum borrowing base | 50.00% | |||
Revolving line of credit | Maximum | BMO | ||||
Line of Credit | ||||
Fee on unused commitments (as a percent) | 0.30% | |||
Revolving line of credit | Base rate | Maximum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 1.25% | |||
Revolving line of credit | Base rate | Minimum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 0.75% | |||
Revolving line of credit | LIBOR | Maximum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 2.25% | |||
Revolving line of credit | LIBOR | Minimum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 1.75% | |||
Standby letter of credit sub-facility | BMO | ||||
Line of Credit | ||||
Maximum borrowing capacity | 5,000,000 | |||
Term Note | BMO | ||||
Line of Credit | ||||
Amount borrowed to finance acquisition | 2,000,000 | |||
Amount of quarterly principal payments in 2015 | 50,000 | |||
Amount of quarterly prinical payments in 2016 | 75,000 | |||
Maximum borrowing capacity | 3,000,000 | 2,500,000 | ||
Borrowings outstanding | 1,900,000 | |||
Amount available for borrowing | $1,100,000 | |||
Term Note | Base rate | Maximum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 1.75% | |||
Term Note | Base rate | Minimum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 1.25% | |||
Term Note | LIBOR | Maximum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 2.75% | |||
Term Note | LIBOR | Minimum | BMO | ||||
Line of Credit | ||||
Spread on floating interest rate (as a percent) | 2.25% |
COMMITMENTS_Details
COMMITMENTS (Details) (USD $) | 3 Months Ended |
Apr. 03, 2015 | |
Employee Benefit Plans | |
Maximum employee contribution as a percentage of compensation under 401 (k) Plan | 50.00% |
Post Employment Health Benefits | |
Unamortized compensation cost | $0 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | |
Apr. 03, 2015 | Mar. 28, 2014 | |
INCOME TAXES | ||
Income tax expense | $1,138,000 | $44,000 |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | ||
Apr. 03, 2015 | Mar. 28, 2014 | Jan. 02, 2015 | |
item | |||
SEGMENT INFORMATION | |||
Number of reporting segments | 4 | ||
SEGMENT INFORMATION | |||
Contract revenue | $33,297,000 | $22,686,000 | |
Segment income before income taxes | 2,633,000 | 1,359,000 | |
Net income | 1,495,000 | 1,315,000 | |
Segment assets(1) | 71,587,000 | 41,427,000 | 54,659,000 |
Engineering Services | |||
SEGMENT INFORMATION | |||
Contract revenue | 10,804,000 | 8,892,000 | |
Segment income before income taxes | 529,000 | ||
Net income | 514,000 | ||
Energy Efficiency Services | |||
SEGMENT INFORMATION | |||
Contract revenue | 18,905,000 | 10,359,000 | |
Segment income before income taxes | 528,000 | ||
Net income | 507,000 | ||
Public Finance Services | |||
SEGMENT INFORMATION | |||
Contract revenue | 2,671,000 | 2,490,000 | |
Segment income before income taxes | 237,000 | ||
Net income | 231,000 | ||
Homeland Security Services | |||
SEGMENT INFORMATION | |||
Contract revenue | 917,000 | 945,000 | |
Segment income before income taxes | 65,000 | ||
Net income | 63,000 | ||
Reporting Segments | Engineering Services | |||
SEGMENT INFORMATION | |||
Segment income before income taxes | 1,136,000 | ||
Net income | 627,000 | ||
Segment assets(1) | 11,267,000 | 9,209,000 | |
Reporting Segments | Energy Efficiency Services | |||
SEGMENT INFORMATION | |||
Segment income before income taxes | 1,832,000 | ||
Net income | 1,040,000 | ||
Segment assets(1) | 38,503,000 | 10,150,000 | |
Reporting Segments | Public Finance Services | |||
SEGMENT INFORMATION | |||
Segment income before income taxes | 41,000 | ||
Net income | 42,000 | ||
Segment assets(1) | 4,290,000 | 3,221,000 | |
Reporting Segments | Homeland Security Services | |||
SEGMENT INFORMATION | |||
Segment income before income taxes | 99,000 | ||
Net income | 56,000 | ||
Segment assets(1) | 1,068,000 | 1,465,000 | |
Unallocated Corporate | |||
SEGMENT INFORMATION | |||
Segment income before income taxes | -475,000 | ||
Net income | -270,000 | ||
Segment assets(1) | 39,589,000 | 40,512,000 | |
Intersegment | |||
SEGMENT INFORMATION | |||
Segment assets(1) | ($23,130,000) | ($23,130,000) |
CONTINGENCIES_Details
CONTINGENCIES (Details) (COSA, Subsidiaries, USD $) | 0 Months Ended |
Jul. 16, 2014 | |
COSA | Subsidiaries | |
Contingencies | |
Minimum revenue shortfall alleged in lawsuit | $9,000,000 |
Alleged cost to retain another consultant | 130,000 |
Alleged costs associated with noticing and conducting public hearings | $83,052 |