Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 28, 2019 | Aug. 01, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Jun. 28, 2019 | |
Entity Registrant Name | Willdan Group, Inc. | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 11,244,856 | |
Entity Central Index Key | 0001370450 | |
Current Fiscal Year End Date | --12-28 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 27,602,000 | $ 15,259,000 |
Accounts receivable, net of allowance for doubtful accounts of $501,000 and $442,000 at June 28, 2019 and December 28, 2018, respectively | 46,828,000 | 61,346,000 |
Contract assets | 60,433,000 | 51,851,000 |
Other receivables | 3,649,000 | 1,893,000 |
Prepaid expenses and other current assets | 5,143,000 | 5,745,000 |
Total current assets | 143,655,000 | 136,094,000 |
Equipment and leasehold improvements, net | 10,556,000 | 7,998,000 |
Goodwill | 110,204,000 | 97,748,000 |
Right-of-use assets | 12,036,000 | |
Other intangible assets, net | 48,087,000 | 44,364,000 |
Other assets | 4,366,000 | 3,311,000 |
Deferred income taxes, net | 12,488,000 | 12,321,000 |
Total assets | 341,392,000 | 301,836,000 |
Current liabilities: | ||
Accounts payable | 30,261,000 | 36,829,000 |
Accrued liabilities | 40,174,000 | 37,401,000 |
Contingent consideration payable | 1,681,000 | 3,113,000 |
Contract liabilities | 5,291,000 | 5,075,000 |
Notes payable | 10,643,000 | 8,572,000 |
Finance lease obligations | 396,000 | 320,000 |
Lease liability | 4,056,000 | |
Total current liabilities | 92,502,000 | 91,310,000 |
Contingent consideration payable | 1,040,000 | 1,616,000 |
Notes payable | 90,139,000 | 63,139,000 |
Finance lease obligations, less current portion | 261,000 | 224,000 |
Lease liability, less current portion | 8,944,000 | |
Deferred lease obligations | 724,000 | |
Other noncurrent liabilities | 981,000 | 534,000 |
Total liabilities | 193,867,000 | 157,547,000 |
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; 11,194,000 and 10,968,000 shares issued and outstanding at June 28, 2019 and December 28, 2018, respectively | 112,000 | 110,000 |
Additional paid-in capital | 116,457,000 | 114,008,000 |
Accumulated other comprehensive loss | (438,000) | |
Retained earnings | 31,394,000 | 30,171,000 |
Total stockholders’ equity | 147,525,000 | 144,289,000 |
Total liabilities and stockholders’ equity | $ 341,392,000 | $ 301,836,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts receivable, allowance for doubtful accounts (in dollars) | $ 501,000 | $ 442,000 |
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 | 11,194,000 | 10,968,000 |
Common stock, shares outstanding | 11,194,000 | 10,968,000 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2019 | Jun. 29, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME | ||||
Contract revenue | $ 104,396,000 | $ 59,833,000 | $ 196,189,000 | $ 114,428,000 |
Direct costs of contract revenue (inclusive of directly related depreciation and amortization): | ||||
Salaries and wages | 15,624,000 | 11,127,000 | 30,534,000 | 22,125,000 |
Subcontractor services and other direct costs | 57,623,000 | 25,544,000 | 108,571,000 | 49,613,000 |
Total direct costs of contract revenue | 73,247,000 | 36,671,000 | 139,105,000 | 71,738,000 |
General and administrative expenses: | ||||
Salaries and wages, payroll taxes and employee benefits | 15,437,000 | 10,725,000 | 30,406,000 | 20,750,000 |
Facilities and facility related | 2,047,000 | 1,386,000 | 3,819,000 | 2,595,000 |
Stock-based compensation | 2,224,000 | 1,662,000 | 4,041,000 | 2,726,000 |
Depreciation and amortization | 2,866,000 | 1,111,000 | 5,520,000 | 2,175,000 |
Other | 5,802,000 | 4,073,000 | 10,759,000 | 8,265,000 |
Total general and administrative expenses | 28,376,000 | 18,957,000 | 54,545,000 | 36,511,000 |
Income from operations | 2,773,000 | 4,205,000 | 2,539,000 | 6,179,000 |
Other (expense) income: | ||||
Interest expense, net | (1,221,000) | (30,000) | (2,342,000) | (53,000) |
Other, net | 18,000 | 9,000 | 29,000 | 19,000 |
Total other expense, net | (1,203,000) | (21,000) | (2,313,000) | (34,000) |
Income before income taxes | 1,570,000 | 4,184,000 | 226,000 | 6,145,000 |
Income tax (benefit) expense | (70,000) | 869,000 | (997,000) | 627,000 |
Net income | 1,640,000 | 3,315,000 | 1,223,000 | 5,518,000 |
Other comprehensive income | ||||
Loss on cash flow hedge valuations | (219,000) | (438,000) | ||
Comprehensive income | $ 1,421,000 | $ 3,315,000 | $ 785,000 | $ 5,518,000 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.15 | $ 0.38 | $ 0.11 | $ 0.63 |
Diluted (in dollars per share) | $ 0.14 | $ 0.36 | $ 0.10 | $ 0.60 |
Weighted-average shares outstanding: | ||||
Basic | 11,100,000 | 8,796,000 | 11,037,000 | 8,775,000 |
Diluted | 11,679,000 | 9,288,000 | 11,670,000 | 9,247,000 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY - USD ($) | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Loss/Gain | Retained Earnings | Total |
Balances at Dec. 29, 2017 | $ 88,000 | $ 50,976,000 | $ 20,141,000 | $ 71,205,000 | |
Balances (in shares) at Dec. 29, 2017 | 8,799,000 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Shares of common stock issued in connection with employee stock purchase plan | 617,000 | 617,000 | |||
Shares of common stock issued in connection with employee stock purchase plan (in shares) | 30,000 | ||||
Shares of common stock issued in connection with incentive stock plan | $ 1,000 | 278,000 | 279,000 | ||
Shares of common stock issued in connection with incentive stock plan (in shares) | 32,000 | ||||
Stock-based compensation expense | 1,064,000 | 1,064,000 | |||
Net income (loss) | 2,203,000 | 2,203,000 | |||
Balances at Mar. 30, 2018 | $ 89,000 | 52,935,000 | 22,344,000 | 75,368,000 | |
Balances (in shares) at Mar. 30, 2018 | 8,861,000 | ||||
Balances at Dec. 29, 2017 | $ 88,000 | 50,976,000 | 20,141,000 | 71,205,000 | |
Balances (in shares) at Dec. 29, 2017 | 8,799,000 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | 5,518,000 | ||||
Balances at Jun. 29, 2018 | $ 89,000 | 54,216,000 | 25,659,000 | 79,964,000 | |
Balances (in shares) at Jun. 29, 2018 | 8,857,000 | ||||
Balances at Mar. 30, 2018 | $ 89,000 | 52,935,000 | 22,344,000 | 75,368,000 | |
Balances (in shares) at Mar. 30, 2018 | 8,861,000 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Shares of common stock issued in connection with incentive stock plan | 61,000 | 61,000 | |||
Shares of common stock issued in connection with incentive stock plan (in shares) | 11,000 | ||||
Shares used to pay taxes on stock grants | (442,000) | (442,000) | |||
Shares used to pay taxes on stock grants (in shares) | (15,000) | ||||
Stock-based compensation expense | 1,662,000 | 1,662,000 | |||
Net income (loss) | 3,315,000 | 3,315,000 | |||
Balances at Jun. 29, 2018 | $ 89,000 | 54,216,000 | 25,659,000 | 79,964,000 | |
Balances (in shares) at Jun. 29, 2018 | 8,857,000 | ||||
Balances at Dec. 28, 2018 | $ 110,000 | 114,008,000 | 30,171,000 | $ 144,289,000 | |
Balances (in shares) at Dec. 28, 2018 | 10,968,000 | 10,968,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Shares of common stock issued in connection with employee stock purchase plan | 749,000 | $ 749,000 | |||
Shares of common stock issued in connection with employee stock purchase plan (in shares) | 28,000 | ||||
Shares of common stock issued in connection with incentive stock plan | 291,000 | 291,000 | |||
Shares of common stock issued in connection with incentive stock plan (in shares) | 21,000 | ||||
Unregistered sales of equity securities and use of proceeds | $ (1,000) | (2,515,000) | (2,516,000) | ||
Unregistered sales of equity securities and use of proceeds (in shares) | (66,000) | ||||
Issuance of restricted stock award and units | $ 2,000 | (2,000) | |||
Issuance of restricted stock award and units (in shares) | 175,000 | ||||
Stock-based compensation expense | 1,817,000 | 1,817,000 | |||
Net income (loss) | (417,000) | (417,000) | |||
Loss on cash flow hedge valuations | $ (219,000) | (219,000) | |||
Balances at Mar. 29, 2019 | $ 111,000 | 114,348,000 | (219,000) | 29,754,000 | 143,994,000 |
Balances (in shares) at Mar. 29, 2019 | 11,126,000 | ||||
Balances at Dec. 28, 2018 | $ 110,000 | 114,008,000 | 30,171,000 | $ 144,289,000 | |
Balances (in shares) at Dec. 28, 2018 | 10,968,000 | 10,968,000 | |||
Increase (Decrease) in Stockholders' Equity | |||||
Net income (loss) | $ 1,223,000 | ||||
Loss on cash flow hedge valuations | (438,000) | ||||
Balances at Jun. 28, 2019 | $ 112,000 | 116,457,000 | (438,000) | 31,394,000 | $ 147,525,000 |
Balances (in shares) at Jun. 28, 2019 | 11,194,000 | 11,194,000 | |||
Balances at Mar. 29, 2019 | $ 111,000 | 114,348,000 | (219,000) | 29,754,000 | $ 143,994,000 |
Balances (in shares) at Mar. 29, 2019 | 11,126,000 | ||||
Increase (Decrease) in Stockholders' Equity | |||||
Shares of common stock issued in connection with incentive stock plan | $ 1,000 | 231,000 | 232,000 | ||
Shares of common stock issued in connection with incentive stock plan (in shares) | 77,000 | ||||
Shares used to pay taxes on stock grants | (346,000) | (346,000) | |||
Shares used to pay taxes on stock grants (in shares) | (9,000) | ||||
Stock-based compensation expense | 2,224,000 | 2,224,000 | |||
Net income (loss) | 1,640,000 | 1,640,000 | |||
Loss on cash flow hedge valuations | (219,000) | (219,000) | |||
Balances at Jun. 28, 2019 | $ 112,000 | $ 116,457,000 | $ (438,000) | $ 31,394,000 | $ 147,525,000 |
Balances (in shares) at Jun. 28, 2019 | 11,194,000 | 11,194,000 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 6 Months Ended | |
Jun. 28, 2019 | Jun. 29, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 1,223,000 | $ 5,518,000 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 5,712,000 | 2,243,000 |
Deferred income taxes, net | (167,000) | (792,000) |
Gain on sale/disposal of equipment | (8,000) | (14,000) |
Provision for doubtful accounts | 202,000 | 344,000 |
Stock-based compensation | 4,041,000 | 2,726,000 |
Accretion and fair value adjustments of contingent consideration | (627,000) | 622,000 |
Changes in operating assets and liabilities, net of effects from business acquisitions: | ||
Accounts receivable | 15,998,000 | 16,294,000 |
Contract assets | (8,148,000) | (16,910,000) |
Other receivables | (1,719,000) | 1,056,000 |
Prepaid expenses and other current assets | 877,000 | 385,000 |
Other assets | (615,000) | (94,000) |
Accounts payable | (6,615,000) | (6,915,000) |
Accrued liabilities | 2,036,000 | 722,000 |
Contract liabilities | 65,000 | (1,158,000) |
Deferred lease obligations | 17,000 | |
Right-of-use assets | 240,000 | |
Net cash provided by operating activities | 12,495,000 | 4,044,000 |
Cash flows from investing activities: | ||
Purchase of equipment and leasehold improvements | (3,619,000) | (511,000) |
Proceeds from sale of equipment | 44,000 | 36,000 |
Cash paid for acquisitions, net of cash acquired | (21,800,000) | (2,994,000) |
Net cash used in investing activities | (25,375,000) | (3,469,000) |
Cash flows from financing activities: | ||
Payments on contingent consideration | (1,381,000) | (3,199,000) |
Payments on notes payable | (929,000) | (383,000) |
Payments on debt issuance costs | (577,000) | |
Borrowings under term loan facility and line of credit | 100,000,000 | |
Repayments under term loan facility and line of credit | (70,000,000) | (500,000) |
Principal payments on finance leases | (300,000) | (207,000) |
Proceeds from stock option exercise | 523,000 | 341,000 |
Proceeds from sales of common stock under employee stock purchase plan | 749,000 | 616,000 |
Shares used to pay taxes on stock grants | (2,862,000) | (442,000) |
Net cash provided by (used in) financing activities | 25,223,000 | (3,774,000) |
Net increase (decrease) in cash and cash equivalents | 12,343,000 | (3,199,000) |
Cash and cash equivalents at beginning of period | 15,259,000 | 14,424,000 |
Cash and cash equivalents at end of period | 27,602,000 | 11,225,000 |
Cash paid during the period for: | ||
Interest | 2,156,000 | 53,000 |
Income taxes | 2,040,000 | 215,000 |
Supplemental disclosures of noncash investing and financing activities: | ||
Loss on cash flow hedge valuations, net of tax | (438,000) | |
Equipment acquired under finance leases | $ 413,000 | $ 187,000 |
BASIS OF PRESENTATION, ORGANIZA
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | 6 Months Ended |
Jun. 28, 2019 | |
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 (“SEC”) 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 condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2018. The condensed consolidated statement of stockholders' equity includes repurchases of shares of our common stock from employees to satisfy tax withholding obligations incurred in connection with the vesting of restricted stock or performance stock units, which amount is presented as a reduction of additional paid-in capital and common stock. Nature of Business Willdan Group, Inc. and subsidiaries (the “Company”) is a provider of professional technical and consulting services to utilities, private industry, and public agencies at all levels of government. The Company enables its clients to realize cost and energy savings by providing a wide range of specialized services without having to incur and maintain the overhead necessary to develop staffing in-house. Such services include energy and sustainability, engineering, construction management and planning and economic and financial consulting. The Company operates its business through a nationwide network of offices spread across 24 states and the District of Columbia. Its 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’s business with public and private utilities is concentrated primarily in California, New York and North Carolina and its business with public agencies is concentrated in California, New York and Arizona. Principles of Consolidation The condensed consolidated financial statements include the accounts of Willdan Group, Inc. (“WGI”) and its wholly-owned subsidiaries, Willdan Energy Solutions (“WES”), Willdan Engineering, Willdan Infrastructure, Public Agency Resources and Willdan Financial Services and their respective subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for variable interest entities in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation. Under ASC 810, a variable interest entity (“VIE”) is created when any of the following criteria are present: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity ’ s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity ’ s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity ’ s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. In accordance with ASC 810, the Company performs ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. As of June 28, 2019, the Company had one VIE—Genesys Engineering, P.C. (“Genesys”). Pursuant to New York law, the Company does not own capital stock of Genesys and does not have control over the professional decision making of Genesys’ engineering services. The Company, however, has entered into an administrative services agreement with Genesys pursuant to which WES, the Company’s wholly-owned subsidiary, will provide Genesys with ongoing administrative, operational and other non-professional support services. The Company manages Genesys and has the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a VIE. Management also concluded there is no noncontrolling interest related to the consolidation of Genesys because management determined that (i) the shareholder of Genesys does not have more than a nominal amount of equity investment at risk, (ii) WES absorbs the expected losses of Genesys through its deferral of Genesys’ service fees owed to WES, and the Company has, since entering into the administrative services agreement, had to continuously defer the service fees for Genesys, and (iii) the Company believes Genesys will continue to have a shortfall on payment of its service fees for the foreseeable future, leaving no expected residual returns for the shareholder. Segment Information WGI is a holding company with six wholly-owned subsidiaries. The Company presents segment information externally consistent with the manner in which the Company ’ s chief operating decision maker reviews information to assess performance and allocate resources. WGI performs administrative functions on behalf of its subsidiaries, such as treasury, legal, accounting, information systems, human resources and certain business development activities, and earns revenue that is only incidental to the activities of the enterprise. As a result, WGI does not meet the definition of an operating segment. The Company’s two segments are Energy and Engineering and Consulting. The Company’s principal segment, Energy, consists of the business of its subsidiary, WES, which offers energy and sustainability consulting services to utilities public agencies and private industry. The Company’s Engineering and Consulting segment includes the operation of the Company’s remaining direct subsidiaries, Willdan Engineering, Willdan Infrastructure, Public Agency Resources and Willdan Financial Services. Willdan Engineering provides civil engineering-related construction management, building and safety, city engineering, city planning, geotechnical, material testing and other engineering consulting services to its clients. Willdan Infrastructure, which was launched in fiscal year 2013, provides engineering services to larger rail, port, water, mining and other civil engineering projects. Public Agency Resources primarily provides staffing to Willdan Engineering. Willdan Financial Services provides economic and financial consulting to public agencies. See Note 11 “—Segment Information” for segment information for the current and prior period. Contract Assets and Liabilities Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized using the percentage-of-completion method of revenue recognition. Contract assets include unbilled amounts typically resulting from revenue under long-term contracts when the percentage-of-completion method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer and right to payment is not unconditional. In addition, contract assets include retainage amounts withheld from billings to the Company’s clients pursuant to provisions in the contracts. Contract liabilities consist of advance payments and billings in excess of revenue recognized and deferred revenue. The increase in contract assets and contract liabilities for the six months ended June 28, 2019 were primarily attributable to normal business operations. Off‑Balance Sheet Arrangements The Company does not have any off‑balance sheet financing arrangements or liabilities. Finally, the Company does not have any majority‑owned subsidiaries or any interests in, or relationships with, any special‑purpose entities that are not included in the condensed consolidated financial statements. The Company has, however, entered into an administrative services agreement with Genesys pursuant to which WES, the Company’s wholly-owned subsidiary, will provide Genesys with ongoing administrative, operational and other non-professional support services. The Company manages Genesys and has the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a variable interest entity. Contract Accounting The Company enters into contracts with its clients that contain various types of pricing provisions, including fixed price, time-and-materials and unit-based provisions. The Company recognizes revenues in accordance with ASU 2014-09, Revenue from Contracts with Customer, codified as ASC Topic 606 and the related amendments (collectively, “ASC 606”). As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance obligation. The following table reflects the Company’s two reportable segments and the types of contracts that each most commonly enters into for revenue generating activities. Segment Contract Type Revenue Recognition Method Time-and-materials Time-and-materials Energy Unit-based Unit-based Software license Unit-based Fixed price Percentage-of-completion Time-and-materials Time-and-materials Engineering and Consulting Unit-based Unit-based Fixed price Percentage-of-completion Revenue on the vast majority of the Company’s contracts is recognized over time because of the continuous transfer of control to the customer. Revenue on fixed price contracts is recognized on the percentage-of-completion method based generally on the ratio of direct costs incurred-to-date to estimated total direct costs at completion. The Company uses the percentage-of-completion method to better match the level of work performed at a certain point in time in relation to the effort that will be required to complete a project. In addition, the percentage-of-completion method is a common method of revenue recognition in the Company’s industry. Many of the Company’s fixed price contracts involve a high degree of subcontracted fixed price effort and are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete. Revenue on time-and-materials and unit-based contracts is recognized as the work is performed in accordance with the specific rates and terms of the contract. The Company recognizes revenues for time-and-materials contracts based upon the actual hours incurred during a reporting period at contractually agreed upon rates per hour and also includes in revenue all reimbursable costs incurred during a reporting period. Certain of the Company’s time-and-materials contracts are subject to maximum contract values and, accordingly, when revenue is expected to exceed the maximum contract value, these contracts are generally recognized under the percentage-of-completion method, consistent with fixed price contracts. For unit-based contracts, the Company recognizes the contract price of units of a basic production product as revenue when the production product is delivered during a period. Revenue recognition for software licenses issued by the Energy segment is generally recognized at a point in time, utilizing the unit-based revenue recognition method, upon acceptance of the software by the customer and in recognition of the fulfillment of the performance obligation. Certain additional performance obligations beyond the base software license may be separated from the gross license fee and recognized on a straight-line basis over time. Revenue for amounts that have been billed but not earned is deferred, and such deferred revenue is referred to as contract liabilities in the accompanying condensed consolidated balance sheets. To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined contract should be accounted for as one performance obligation. With respect to the Company’s contracts, it is rare that multiple contracts should be combined into a single performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. Contracts are considered to have a single performance obligation if the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts, which is mainly because the Company provides a significant service of integrating a complex set of tasks and components into a single project or capability. The Company may enter into contracts that include separate phases or elements. If each phase or element is negotiated separately based on the technical resources required and/or the supply and demand for the services being provided, the Company evaluates if the contracts should be segmented. If certain criteria are met, the contracts would be segmented which could result in revenues being assigned to the different elements or phases with different rates of profitability based on the relative value of each element or phase to the estimated total contract revenue. Contracts that cover multiple phases or elements of the project or service lifecycle (development, construction and maintenance and support) may be considered to have multiple performance obligations even when they are part of a single contract. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. For the periods presented, the value of the separate performance obligations under contracts with multiple performance obligations (generally measurement and verification tasks under certain energy performance contracts) were not material. In cases where the Company does not provide the distinct good or service on a standalone basis, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts the Company’s expected costs of satisfying a performance obligation and then adds an appropriate margin for the distinct good or service. The Company provides quality of workmanship warranties to customers that are included in the sale and are not priced or sold separately or do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications and industry standards. The Company does not consider these types of warranties to be separate performance obligations. In some cases, the Company has a master service or blanket agreement with a customer under which each task order releases the Company to perform specific portions of the overall scope in the service contract. Each task order is typically accounted for as a separate contract because the task order establishes the enforceable rights and obligations, and payment terms. Under ASC 606, variable consideration should be considered when determining the transaction price and estimates should be made for the variable consideration component of the transaction price, as well as assessing whether an estimate of variable consideration is constrained. For certain of the Company’s contracts, variable consideration can arise from modifications to the scope of services resulting from unapproved change orders or customer claims. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessments of legal enforceability, the Company’s performance, and all information (historical, current and forecasted) that is reasonably available to the Company. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. As a significant change in one or more of these estimates could affect the profitability of the Company’s contracts, the Company reviews and updates the Company’s contract-related estimates regularly through a company-wide disciplined project review process in which management reviews the progress and execution of the Company’s performance obligations and the estimate at completion (EAC). As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule and the related changes in estimates of revenues and costs. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer, among other variables. The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the full amount of estimated loss in the period it is identified. Contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights or obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from existing contracts due to the significant integration provided in the context of the contract and are accounted for as if they were part of the original contract. The effect of a contract modification that is not distinct from the existing contract on the transaction price and the Company’s measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. For contract modifications that result in the promise to deliver goods or services that are distinct from the existing contract and the increase in price of the contract is for the same amount as the standalone selling price of the additional goods or services included in the modification, the Company accounts for such contract modifications as a separate contract. The Company includes claims to vendors, subcontractors and others as a receivable and a reduction in recognized costs when enforceability of the claim is established by the contract and the amounts are reasonably estimable and probable of being recovered. The amounts are recorded up to the extent of the lesser of the amounts management expects to recover or to costs incurred. Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized using the percentage-of-completion method of revenue recognition. 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 in the accompanying condensed consolidated statements of comprehensive income. Additionally, payroll taxes, bonuses and employee benefit costs for all Company personnel are included in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income 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 allowances for doubtful accounts through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience. The Company’s historical credit losses have been minimal with governmental entities and large public utilities, but disputes may arise related to these receivable amounts. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Retainage, included in contract assets, represents amounts withheld from billings to the Company’s clients pursuant to provisions in the contracts and may not be paid to the Company until specific tasks are completed or the project is completed and, in some instances, for even longer periods. At June 28, 2019 and December 28, 2018, contract assets included retainage of approximately $4.3 million and $6.7 million, respectively. Disaggregation of Revenue The following tables provides information about disaggregated revenue of the Company’s two segments Energy and Engineering and Consulting by contract type, client type and geographical region for the six months ended June 28, 2019: Contract Type Energy Engineering and Total Time-and-materials $ $ $ Unit-based Fixed price Total $ $ $ Client Type Energy Engineering and Total Commercial $ $ $ Government Utilities Total $ $ $ Geography Energy Engineering and Total Domestic $ 159,975,000 $ 36,214,000 $ 196,189,000 Goodwill Goodwill represents the excess of costs over fair value of the assets acquired. The Company completes its 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. 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. Impairment losses for reporting units are recognized to the extent that a reporting unit’s carrying amount exceeds its fair value. The reporting units for purposes of testing goodwill impairment coincide with the Company’s reportable segments used for segment reporting purposes. Fair Value of Financial Instruments The Company uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets, Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s financial instruments consist primarily of cash, cash equivalents, accounts receivable, contract assets, other receivables, prepaid expenses and other current assets, accounts payable, accrued liabilities and contract liabilities, 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. As of June 28, 2019, debt issuance costs of $1.6 million related to the Company’s Credit Facilities were included in assets. The carrying amounts of certain other assets and contingent consideration are discounted to their present value because the time between the origination of these instruments and their expected realization or payment is greater than one year. The carrying amounts of the derivative financial instrument is valued based on Level 2 inputs. 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. On January 31, 2019, the Company entered into an interest rate swap agreement that the Company designated as cash flow hedge to fix the variable interest rate on a portion of the Company’s 2018 Term Loan Facility (as defined in Note 7 “—Debt Obligations”). The interest rate swap agreement has a total notional amount of $35.0 million, a fixed interest rate of 2.47% and expires on January 31, 2022. For further discussion of this derivative contract, see Note 13 “—Derivative Financial Instruments” below. Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP 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 condensed 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 As of June 28, 2019, the Company had $27.6 million of cash and cash equivalents. The Company’s primary source of liquidity is cash generated from operations. In addition, as of June 28, 2019, the Company had a $100.0 million term loan outstanding, a $50.0 million revolving credit facility with no borrowed amounts outstanding and $2.7 million in letters of credit issued, and a $50.0 million delayed draw term loan with no amounts outstanding, each with a syndicate of financial institutions as lenders and BMO Harris Bank, N.A. (“BMO”), as administrative agent, and scheduled to mature on June 26, 2024 (see Note 7 “—Debt Obligations” below). The Company believes that its cash and cash equivalents on hand, cash generated by operating activities and funds available under its Credit Facilities (as defined in Note 7 “—Debt Obligations”) will be sufficient to finance its operating activities for at least the next 12 months. Adoption of New Accounting Standards Stock Compensation In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of current stock compensation recognition standards to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 became effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Effective December 29, 2018, the Company adopted ASU 2018-07 and the impact did not have a material effect on the Company’s condensed consolidated financial statements. Recent Accounting Pronouncements Intangibles-Goodwill and Other In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which eliminates the requirement to compare the implied fair value of reporting unit goodwill with the carrying amount of that goodwill (commonly referred to as Step 2) from the goodwill impairment test. The new standard does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative and qualitative goodwill impairment test by comparing the fair value of each reporting unit to its carrying amount, but if the Company were required to recognize a goodwill impairment charge, under the new standard the amount of the charge would be calculated by subtracting the reporting unit’s fair value from its carrying amount. Under the prior standard, if the Company were required to recognize a goodwill impairment charge, Step 2 required us to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge was calculated by subtracting the reporting unit’s implied fair value of goodwill from its actual goodwill balance. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted, and should be applied prospectively from the date of adoption. The Company has elected to adopt the new standard for future goodwill impairment tests at the beginning of the fourth quarter of 2019 because it significantly simplifies the evaluation of goodwill for impairment. Proposed Accounting Standards A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, the Company has not yet determined the effect, if any, that the implementation of such proposed standards would have on its condensed consolidated financial statements. |
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS | 6 Months Ended |
Jun. 28, 2019 | |
BUSINESS COMBINATIONS | |
BUSINESS COMBINATIONS | 2. BUSINESS COMBINATIONS Acquisition of The Weidt Group On March 8, 2019, the Company acquired substantially all of the assets and liabilities of the energy practice division of The Weidt Group Inc. (“The Weidt Group”). The Company believes the acquisition will expand its presence in the upper Midwest and better position the Company to help utilities make their grids more resilient. Pursuant to the terms of the Asset Purchase Agreement, dated March 8, 2019, by and among the Company, WES and The Weidt Group, WES paid a cash purchase price of $22.1 million, inclusive of working capital adjustments. The Weidt Group’s financial information is included within the Energy segment. The Company expects to finalize the purchase price allocation with respect to this transaction during the first quarter of 2020. The acquisition was accounted for as a business combination 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, the expansion into new markets and the acquired company’s assembled work force. The Company estimates that the entire $12.5 million of goodwill resulting from the acquisition will be tax deductible. Consideration for the acquisition includes the following: The Weidt Group Cash paid $ 21,800,000 Other working capital adjustment 336,000 Total consideration $ 22,136,000 The following table summarizes the preliminary amounts for the acquired assets recorded at their estimated fair value as of the acquisition date: The Weidt Group Current assets $ 2,317,000 Non-current assets 1 25,000 Equipment and leasehold improvements, net 198,000 Right-of-use assets 1,730,000 Current lease liability (245,000) Non-current lease liability (1,533,000) Liabilities (612,000) Backlog 600,000 Customer relationships 3,800,000 Tradename 500,000 Developed technology 2,900,000 Goodwill 12,456,000 Net assets acquired $ 22,136,000 (1) Excluded from non-current assets are equipment and leasehold improvements, net, right-of-use assets, customer relationships, tradename, developed technology, backlog and goodwill. The following unaudited pro forma financial information for the three and six months ended June 28, 2019 and June 29, 2018 assumes that the acquisition of all the assets and liabilities of The Weidt Group occurred on December 30, 2017 and that the acquisition of all the outstanding shares of Lime Energy Co. occurred on December 31, 2016 as follows: Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, In thousands (except per share data) 2019 2018 2019 2018 Pro forma revenue $ 104,396 $ 101,322 $ 198,516 $ 193,776 Pro forma income from operations $ 2,773 $ 5,187 $ 2,485 $ 6,784 Pro forma net income 1 $ 1,640 $ 3,226 $ 1,206 $ 3,768 Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ Weighted average shares outstanding: Basic 11,100 10,809 11,037 10,788 Diluted 11,679 11,301 11,670 11,260 (1) Adjustments to pro forma net income include income from operations, amortization and interest expenses. This pro forma supplemental information does not purport to be indicative of what the Company’s operating results would have been had the acquisition of The Weidt Group transaction occurred on December 30, 2017 and the acquisition of Lime Energy Co. occurred on December 31, 2016, and may not be indicative of future operating results. There were $0.1 million and $0.3 million in acquisition related costs associated with The Weidt Group that were included in other general and administrative expenses in the condensed consolidated statements of comprehensive income for the three and six months ended June 28, 2019, respectively. During the three and six months ended June 28, 2019, the acquisition of The Weidt Group contributed $3.2 million and $4.1 million in revenue and $0.4 million and $0.5 million in income from operations, respectively. Acquisition of Lime Energy On October 1, 2018, the Company, through two of its wholly-owned subsidiaries, WES and Luna Fruit, Inc., a Delaware corporation and wholly-owned subsidiary of WES (“Merger Sub”), entered into an agreement to acquire all of the outstanding shares of capital stock of Lime Energy Co. (“Lime Energy”), pursuant to an agreement and plan of merger dated October 1, 2018 (the “Merger Agreement”), by and among WES, Merger Sub, Lime Energy, and Luna Stockholder Representative, LLC, as representative of the participating securityholders of Lime Energy. The Company believes the addition of Lime Energy’s capabilities will significantly expand and diversify its client base within the energy efficiency services market and geographic presence across the United States. Lime Energy’s financial information is included within the Energy segment. The Company expects to finalize the purchase price allocation with respect to this transaction during the fourth quarter of 2019. On November 9, 2018, the Company completed the acquisition and, pursuant to the Merger Agreement, Merger Sub was merged with and into Lime Energy, with Lime Energy surviving as a wholly-owned indirect subsidiary of the Company. The aggregate purchase price paid in the acquisition was $122.4 million, inclusive of closing holdbacks and adjustments. A portion of the purchase price was deposited into escrow accounts to secure certain potential post-closing obligations of the participating securityholders. The Company paid the purchase price for the acquisition using a combination of cash on hand (including $50.0 million of the $56.4 million in net proceeds received from the Company’s equity offering in October 2018) and proceeds from the Company’s borrowings under a term loan under its 2018 Credit Facilities (see Note 7 “—Debt Obligations” below). The acquisition was accounted for as a business combination 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, the expansion into new markets and the acquired company’s assembled work force. The Company estimates that the entire $57.5 million of goodwill resulting from the acquisition will not be tax deductible. Consideration for the acquisition includes the following: Lime Energy Cash paid $ 122,376,000 Other working capital adjustment 63,000 Total consideration $ 122,439,000 The following table summarizes the preliminary amounts for the acquired assets and liabilities recorded at their estimated fair value as of the acquisition date: Lime Energy Current assets 1 $ 45,401,000 Non-current assets 2 13,847,000 Cash 1,090,000 Equipment and leasehold improvements, net 1,892,000 Liabilities (33,603,000) Customer relationships 19,400,000 Tradename 5,970,000 Developed technology 10,200,000 Backlog 730,000 Goodwill 57,512,000 Net assets acquired $ 122,439,000 (1) Excluded from current assets is cash (2) Excluded from non-current assets are equipment and leasehold improvements, net, customer relationships, tradename, developed technology, backlog and goodwill. There were $0.2 million in acquisition related costs associated with Lime Energy included in other general and administrative expenses in the condensed consolidated statements of comprehensive income for the three and six months ended June 28, 2019. The following unaudited pro forma financial information for the three and six months ended June 28, 2019 and June 29, 2018 assumes that acquisition of all the outstanding shares of Lime Energy occurred on December 31, 2016 and that acquisition of all the assets and liabilities of The Weidt Group occurred on December 30, 2017 as follows: Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, In thousands (except per share data) 2019 2018 2019 2018 Pro forma revenue $ 104,396 $ 101,322 $ 198,516 $ 193,776 Pro forma income from operations $ 2,773 $ 5,187 $ 2,485 $ 6,784 Pro forma net income 1 $ 1,640 $ 3,226 $ 1,206 $ 3,768 Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ Weighted average shares outstanding: Basic 11,100 10,809 11,037 10,788 Diluted 11,679 11,301 11,670 11,260 (1) Adjustments to pro forma net income include income from operations, amortization and interest expenses. This pro forma supplemental information does not purport to be indicative of what the Company’s operating results would have been had the acquisition of Lime Energy transaction occurred on December 31, 2016 and had the acquisition of The Weidt Group occurred on December 30, 2017, and may not be indicative of future operating results. During the three and six months ended June 28, 2019, the acquisition of Lime Energy contributed $38.8 million and $75.4 million in revenue and $0.9 million and $1.2 million in income from operations, respectively. Acquisition of Newcomb Anderson McCormick On April 30, 2018, the Company, through its wholly-owned subsidiary, WES, acquired all of the outstanding equity interests of Newcomb Anderson McCormick, Inc. (“NAM”). NAM is an energy engineering and consulting company with offices in San Francisco and Los Angeles that provides clients with mechanical engineering expertise and comprehensive energy efficiency programs and services. Pursuant to the terms of the Stock Purchase Agreement, dated April 30, 2018, by and among the Company, WES and NAM, WES paid NAM shareholders a cash purchase price of $4.0 million, inclusive of earn-out payments and working capital adjustments. The Company finalized the purchase price allocation with respect to this transaction during the second quarter of 2019. NAM’s financial information is included within the Energy segment. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 6 Months Ended |
Jun. 28, 2019 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 3. GOODWILL AND OTHER INTANGIBLE ASSETS As of June 28, 2019, the Company had $110.2 million of goodwill, which primarily relates to the Energy segment and the acquisitions within this segment of The Weidt Group, Lime Energy, NAM, Integral Analytics and Abacus Resource Management Company (“Abacus”) and substantially all of the assets of Genesys and 360 Energy Engineers, LLC (“360 Energy”). The remaining goodwill relates to the Engineering and Consulting segment and the acquisition within this segment of Economists.com, LLC. The changes in the carrying value of goodwill by reporting unit for the six months ended June 28, 2019 were as follows: December 28, Additional Additions / June 28, Reporting Unit 2018 Purchase Cost Adjustments 2019 Energy $ 96,999,000 $ 12,456,000 $ — $ 109,455,000 Engineering and Consulting 749,000 — — 749,000 $ 97,748,000 $ 12,456,000 $ — $ 110,204,000 The gross amounts and accumulated amortization of the Company’s acquired identifiable intangible assets with finite useful lives as of June 28, 2019 included in other intangible assets, net in the accompanying condensed consolidated balance sheets, were as follows: June 28, 2019 December 28, 2018 Gross Accumulated Gross Accumulated Amortization Amount Amortization Amount Amortization Period (yrs) Backlog $ 3,114,000 $ 2,270,000 $ 2,514,000 $ 2,155,000 0.1 - 5.0 Tradename 10,801,000 3,938,000 10,301,000 3,118,000 2.5 - 6.0 Non-compete agreements 1,420,000 1,194,000 1,420,000 1,042,000 4.0 Developed technology 15,820,000 2,233,000 12,920,000 944,000 8.0 In-process research and technology 1 1,690,000 — 1,690,000 — — Customer relationships 29,019,000 4,142,000 25,219,000 2,441,000 5.0 - 8.0 $ 61,864,000 $ 13,777,000 $ 54,064,000 $ 9,700,000 (1) In-process research and technology will not be amortized until put into use. The Company’s amortization expense for acquired identifiable intangible assets with finite useful lives was $2.1 million and $4.1 million for the fiscal three and six months ended June 28, 2019 as compared to $0.7 million and $1.4 million for the fiscal three and six months ended June 29, 2018, respectively. Estimated amortization expense for acquired identifiable intangible assets for the remainder of fiscal year 2019 is $4.4 million and the succeeding years are as follows: Fiscal year: 2020 $ 8,280,000 2021 7,589,000 2022 7,402,000 2023 6,757,000 2024 3,906,000 Thereafter 9,893,000 $ 43,827,000 At the time of acquisition, the Company estimates the fair value of the acquired identifiable intangible assets based upon the facts and circumstances related to the particular intangible asset. Inherent in such estimates are judgments and estimates of future revenue, profitability, cash flows and appropriate discount rates for any present value calculations. The Company preliminarily estimates the value of the acquired identifiable intangible assets and then finalizes the estimated fair values during the purchase allocation period, which does not extend beyond 12 months from the date of acquisition. The Company tests its goodwill at least annually for possible impairment. The Company completes its 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 Company’s annual test, it regularly evaluates whether events and circumstances have occurred that may indicate a potential impairment of goodwill. No impairment was recorded during the six months ended June 28, 2019. |
EARNINGS PER SHARE (EPS)
EARNINGS PER SHARE (EPS) | 6 Months Ended |
Jun. 28, 2019 | |
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 and restricted stock awards using the treasury stock method. The following table sets forth the number of weighted-average common shares outstanding used to compute basic and diluted EPS: Three months ended Six months ended June 28, June 29, June 28, June 29, 2019 2018 2019 2018 Net income $ 1,640,000 $ 3,315,000 $ 1,223,000 $ 5,518,000 Weighted-average common shares outstanding 11,100,000 8,796,000 11,037,000 8,775,000 Effect of dilutive stock options and restricted stock awards 579,000 492,000 633,000 472,000 Weighted-average common shares outstanding-diluted 11,679,000 9,288,000 11,670,000 9,247,000 Earnings per share: Basic $ 0.15 $ $ 0.11 $ Diluted $ 0.14 $ $ 0.10 $ For the three and six months ended June 28, 2019, 156,000 and 225,000 options were excluded from the calculation of dilutive potential common shares, as compared to 202,000 and 211,000 options for the three and six months ended June 29, 2018, respectively. 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 2019 and 2018 periods, respectively. Accordingly, the inclusion of these options would have been anti-dilutive. |
EQUIPMENT AND LEASEHOLD IMPROVE
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | 6 Months Ended |
Jun. 28, 2019 | |
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | |
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | 5. EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET Equipment and leasehold improvements consisted of the following at June 28, 2019 and December 28, 2018: June 28, December 28, 2019 2018 Furniture and fixtures $ 3,783,000 $ 3,551,000 Computer hardware and software 12,922,000 10,874,000 Leasehold improvements 1,979,000 1,419,000 Equipment under finance leases 1,712,000 1,304,000 Automobiles, trucks, and field equipment 3,333,000 2,635,000 23,729,000 19,783,000 Accumulated depreciation and amortization (13,173,000) (11,785,000) Equipment and leasehold improvements, net $ 10,556,000 $ 7,998,000 Included in accumulated depreciation and amortization is $231,000 and $374,000 of amortization expense related to equipment held under finance leases in the six months ended June 28, 2019 and fiscal year 2018, respectively. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 6 Months Ended |
Jun. 28, 2019 | |
ACCRUED LIABILITIES | |
ACCRUED LIABILITIES | 6. ACCRUED LIABILITIES Accrued liabilities consist of the following: June 28, December 28, 2019 2018 Accrued bonuses $ 940,000 $ 5,273,000 Accrued interest 37,000 127,000 Paid leave bank 4,189,000 3,512,000 Compensation and payroll taxes 2,009,000 2,544,000 Accrued legal 65,000 153,000 Accrued workers’ compensation insurance 41,000 273,000 Accrued rent — 233,000 Employee withholdings 2,500,000 2,137,000 Client deposits 504,000 280,000 Accrued subcontractor costs 28,907,000 21,446,000 Other 982,000 1,423,000 Total accrued liabilities $ 40,174,000 $ 37,401,000 |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 6 Months Ended |
Jun. 28, 2019 | |
DEBT OBLIGATIONS | |
DEBT OBLIGATIONS | 7. DEBT OBLIGATIONS Debt obligations, excluding obligations under finance leases (see Note 8 “—Leases” below), consist of the following at June 28, 2019 and December 28, 2018: June 28, December 28, 2019 2018 Outstanding borrowings on term loan $ 100,000,000 $ 70,000,000 Notes payable for insurance, 11 month term, bearing interest at 4.3%, payable in monthly principal and interest installments of $92,296 through October 2019. 620,000 1,500,000 Notes payable for IBM Software, 36 month term, bearing interest at 4.656% payable in monthly principal and interest installments of $6,315 through November 2021. 162,000 211,000 Total debt obligations 100,782,000 71,711,000 Less current portion 10,643,000 8,572,000 Debt obligations, less current portion $ 90,139,000 $ 63,139,000 New Credit Facilities On June 26, 2019, the Company and certain of its subsidiaries entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) with a syndicate of financial institutions as lenders and BMO Harris Bank, N.A. (“BMO”), as administrative agent. The Credit Agreement amends and restates the Company’s prior credit agreement, which was entered into on October 1, 2018 with a syndicate of financial institutions as lenders and BMO and was scheduled to mature on October 1, 2023. The Credit Agreement provides for (i) a $100.0 million term loan (the “Term A Loan”), (ii) up to $50.0 million in delayed draw term loans (the “Delayed Draw Term Loan”), and (iii) a $50.0 million revolving credit facility (the “Revolving Credit Facility” and, collectively with the Term A Loan and the Delayed Draw Term Loan, the “Credit Facilities”), each maturing on June 26, 2024. The Company may borrow under the Delayed Draw Term Loan any time and from time to time until June 26, 2022; provided that each borrowing under the Delayed Draw Term Loan must be a minimum of $10.0 million, the Company may not make more than five borrowings under the Delayed Draw Term Loan and any borrowings made under the Delayed Draw Term Loan will permanently reduce future borrowing capacity under the Delayed Draw Term Loan. In addition, the Company must satisfy certain conditions prior to borrowing under the Delayed Draw Term Loan, including, but not limited to, that upon giving effect to such borrowing under the Delayed Draw Term Loan and any Credit Event (as defined in the Credit Agreement) in connection therewith, the Company will be in compliance with all financial covenants on a pro forma basis and the Company’s consolidated total leverage ratio will be no greater than 0.25x less than the consolidated total leverage ratio covenant compliance level in effect at the time of such borrowing. The Company may also request lenders to add incremental term loans or increase the aggregate commitment under the Revolving Credit Facility by an aggregate amount of up to $100.0 million, subject to meeting certain conditions, and only if the existing or new lenders agree to provide the additional term or revolving commitments. Borrowings under the Credit Facilities bear interest at a rate equal to either, at the Company’s option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.50% or one-month LIBOR plus 1.00% (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 0.125% to 1.00% with respect to Base Rate borrowings and 1.125% to 2.00% with respect to LIBOR borrowings. The applicable margin varies based upon the Company’s consolidated total leverage ratio. The Company will also pay commitment fees for the unused portion of the Revolving Credit Facility and the Delayed Draw Term Loan, which ranges from 0.15% to 0.35% per annum depending on the Company’s consolidated total leverage ratio, and fees on the face amount of any letters of credit outstanding under the Revolving Credit Facility, which range from 0.84% to 2.00% per annum, in each case, depending on whether such letter of credit is a performance or financial letter of credit and the Company’s consolidated total leverage ratio. The Term A Loan amortizes quarterly in installments of $2.5 million beginning with the fiscal quarter ending September 27, 2019, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024. Any Delayed Draw Term Loan will amortize quarterly in an amount equal to 2.5% of the aggregate outstanding borrowings under the Delayed Draw Term Loan, beginning with the first full fiscal quarter ending after the initial borrowing date, with a final payment of all then remaining principal and interest due on the maturity date of June 26, 2024. The amounts outstanding under the Credit Facilities may be prepaid in whole or in part at any time without penalty. Willdan Group, Inc. is the borrower under the Credit Agreement and its obligations under the Credit Agreement are guaranteed by its present and future domestic subsidiaries (other than inactive subsidiaries). In addition, subject to certain exceptions, all such obligations are secured by substantially all of the assets of Willdan Group, Inc. and the subsidiary guarantors. The Credit Agreement requires compliance with financial covenants, including a maximum total consolidated leverage ratio and a minimum fixed charge coverage ratio. The Credit Agreement also contains customary restrictive covenants including (i) restrictions on the incurrence of additional indebtedness and additional liens on property, (ii) restrictions on permitted acquisitions and other investments and (iii) limitations on asset sales, mergers and acquisitions. Further, the Credit Agreement limits the Company’s payment of future dividends and distributions and share repurchases by the Company. Subject to certain exceptions, the borrowings under the Credit Agreement are also subject to mandatory prepayment from (a) any issuances of debt or equity securities, (b) any sale or disposition of assets, (c) insurance and condemnation proceeds (d) representation and warranty insurance proceeds related to the acquisition of Lime Energy Co. or any similar insurance policy issued in connection with an acquisition and (e) excess cash flow. The Credit Agreement includes customary events of default. The Company believes that, as of June 28, 2019, it was in compliance with all covenants contained in the Credit Agreement. On January 31, 2019, the Company entered into an interest swap agreement for $35.0 million notional amount. The interest swap agreement was designated as a cash flow hedge to fix the variable interest rate on a portion of the outstanding principal amount under the Company’s 2018 Term Loan Facility. The interest swap fixed rate is 2.47% and the amortization is quarterly in an amount equal to 10% annually. The interest swap agreement expires on January 31, 2022. As of June 28, 2019, the Company’s composite interest rate, exclusive of the effects of upfront fees, undrawn fees and issuance cost amortization, was 4.40%. Prior Credit Facilities 2018 Credit Facility On October 1, 2018, in connection with the acquisition of Lime Energy, the Company entered into a credit agreement (the “2018 Credit Agreement”) with a syndicate of financial institutions as lenders, and BMO Harris Bank, N.A., as administrative agent. The 2018 Credit Agreement initially provided for up to a $90.0 million delayed draw term loan facility (the “2018 Term Loan Facility”) and a $30.0 million revolving credit facility (collectively, the “2018 Credit Facilities”), each maturing on October 1, 2023. On October 10, 2018, as a result of the Company’s completed equity offering, the amount available for borrowing under the 2018 Term Loan Facility was reduced to $70.0 million. On November 9, 2018, in connection with the closing of the acquisition of Lime Energy Co., the Company borrowed $70.0 million (the “2018 Term Loan”) under the 2018 Term Loan Facility. The proceeds of such borrowing were used to pay part of the consideration owed in connection with the acquisition along with related fees and expenses. On June 26, 2019, in connection with the Company entering into the Credit Agreement, the 2018 Credit Agreement was amended and restated. The 2018 Credit Facilities bore interest at a rate equal to either, at the Company’s option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.50% or one-month LIBOR plus 1.00% (“Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 0.25% to 3.00% with respect to Base Rate borrowings and 1.25% to 4.00% with respect to LIBOR borrowings. The applicable margin was based upon the Company’s consolidated total leverage ratio. The Company was also required to pay a commitment fee for the unused portion of the revolving credit facility, which ranged from 0.20% to 0.40% per annum depending on the Company’s consolidated total leverage ratio, and fees on the face amount of any letters of credit outstanding under the revolving credit facility, which ranged from 0.94% to 4.00% per annum, in each case, depending on whether such letter of credit was a performance or financial letter of credit and the Company’s consolidated total leverage ratio. Borrowings under the 2018 Credit Agreement were guaranteed by all of the Company’s direct and indirect domestic subsidiaries (other than inactive subsidiaries). In addition, subject to certain exceptions, all such obligations were secured by substantially all of the assets of Willdan Group, Inc. and the subsidiary guarantors. 2017 Credit Facility On January 20, 2017, the Company and each of its subsidiaries, as guarantors, entered into an Amended and Restated Credit Agreement (the “2017 Credit Agreement”) with BMO, as lender. The 2017 Credit Agreement amended and extended the Company’s prior credit agreement. The 2017 Credit Agreement provided for a $35.0 million revolving line of credit, including a $10.0 million standby letter of credit sub-facility, and was scheduled to mature on January 20, 2020. Borrowings under the 2017 Credit Agreement bore interest at a rate equal to either, at the Company’s option, (i) the highest of the prime rate, the Federal Funds Rate plus 0.5% or one-month London Interbank Offered Rate (“LIBOR”) plus 1% (the “Base Rate”) or (ii) LIBOR, in each case plus an applicable margin ranging from 0.25% to 1.00% with respect to Base Rate borrowings and 1.25% to 2.00% with respect to LIBOR borrowings. The applicable margin was based upon the consolidated leverage ratio of the Company. The Company was also required to pay a commitment fee for the unused portion of the revolving line of credit, which ranged from 0.20% to 0.35% per annum, and fees on any letters of credit drawn under the facility, which ranged from 0.94% to 1.50%, in each case, depending on the Company’s consolidated leverage ratio. Borrowings under the 2017 Credit Agreement were guaranteed by all of the Company’s direct and indirect subsidiaries and secured by substantially all of the Company’s and the Guarantors’ assets. On October 1, 2018, in connection with the Company entering into the 2018 Credit Agreement, the 2017 Credit Agreement was terminated. 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 December 28, 2018, the Company elected to finance its insurance premiums for the 2019 fiscal year. Included in the Company’s insurance renewal terms are individual stop loss amount of $100,000 and an aggregate of 125%. The unpaid balance of the financed premiums totaled $0.6 million for the six months ended June 28, 2019 and $1.5 million for the fiscal year ended December 28, 2018. |
LEASES
LEASES | 6 Months Ended |
Jun. 28, 2019 | |
LEASES | |
LEASES | 8. LEASES The Company is obligated under finance leases for certain furniture and office equipment that expire at various dates through the year 2022. The Company also leases certain office facilities under non-cancelable operating leases that expire at various dates through the year 2027. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB issued this update to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The updated guidance is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Change in Accounting Policy On January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842) using the modified retrospective method. Under this guidance, the net present value of future lease payments are recorded as right-of-use assets and lease liabilities. In addition, the Company elected the ‘package of practical expedients’ permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification. In addition, the Company elected not to utilize the hindsight practical expedient to determine the lease term for existing leases. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company did not recognize right-of-use assets or lease liabilities, including not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition. The Company also elected the practical expedient to not separate lease and non-lease components for our facilities leases. Adoption of the new standard resulted in the recording of additional right-of-use assets and operating lease liabilities of approximately $10.9 million and $11.9 million, respectively, as of January 1, 2019. The adoption of Topic 842 did not impact the Company’s retained earnings, consolidated net earnings or cash flows. From time to time, the Company enters into non-cancelable leases for some of our facility and equipment needs. These leases allow the Company to conserve cash by paying a monthly lease rental fee for the use of facilities and equipment rather than purchasing them. The Company’s leases have remaining terms ranging from one to eight years, some of which may include options to extend the leases for up to five years, and some of which may include options to terminate the leases within one year. Currently, all of the Company’s leases contain fixed payment terms. The Company may decide to cancel or terminate a lease before the end of its term, in which case we are typically liable to the lessor for the remaining lease payments under the term of the lease. Additionally, all of our month-to-month leases are cancelable by the Company or the lessor, at any time and are not included in our right-of-use asset or lease liability. As of June 28, 2019, the Company had no leases with residual value guarantees. Typically, the Company has purchase options on the equipment underlying its long-term leases. The Company may exercise some of these purchase options when the need for equipment is on-going and the purchase option price is attractive. Nonperformance-related default covenants, cross-default provisions, subjective default provisions and material adverse change clauses contained in material lease agreements, if any, are also evaluated to determine whether those clauses affect lease classification in accordance with “ASC” Topic 842-10-25. Leases are accounted for as operating or financing leases, depending on the terms of the lease. Financing Leases The Company leases certain equipment under financing leases. The economic substance of the leases is a financing transaction for acquisition of equipment and leasehold improvements. Accordingly, the right-of-use assets for these leases are included in the balance sheets in equipment and leasehold improvements, net of accumulated depreciation, with a corresponding amount recorded in current portion of financing lease obligations or noncurrent portion of financing lease obligations, as appropriate. The financing lease assets are amortized over the life of the lease or, if shorter, the life of the leased asset, on a straight-line basis and included in depreciation expense. The interest associated with financing lease obligations is included in interest expense. Right-of-use assets Operating leases are included in right-of-use assets, and current portion of lease liability and noncurrent portion of lease liability, as appropriate. Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate to calculate present value, the Company determines this rate, by estimating the Company’s incremental borrowing rate, at the lease commencement date. The right-of-use asset also includes any lease payments made and initial direct costs incurred at lease commencement and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The following is a summary of the lease expense recorded for the three and six months ended June 28, 2019: Three Months Ended Six Months Ended June 28, 2019 June 28, 2019 Operating lease cost $ 1,181,000 $ 2,270,000 Finance lease cost: Amortization of assets $ 124,000 $ 231,000 Interest on lease liabilities 9,000 18,000 Total net lease cost $ 1,314,000 $ 2,519,000 The following is a summary of lease information presented on the Company’s condensed consolidated balance sheet as of June 28, 2019 and for the six months then ended: June 28, 2019 Operating leases: Right-of-use assets $ 12,036,000 Lease liability 4,056,000 Lease liability, less current portion 8,944,000 Total lease liabilities $ 13,000,000 Finance leases (included in equipment and leasehold improvements, net): Equipment and leasehold improvements, net $ 1,712,000 Accumulated depreciation (1,015,000) Total equipment and leasehold improvements, net $ 697,000 Finance lease obligations $ 396,000 Finance lease obligations, less current portion 261,000 Total finance lease obligations $ 657,000 Weighted average remaining lease term (in years): Operating Leases 3.53 Finance Leases 1.69 Weighted average discount rate: Operating Leases 5.49 % Finance Leases 5.01 % The following is a summary of other information and supplemental cash flow information related to finance and operating leases for six months ended June 28, 2019: Six Months Ended June 28, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 2,345,000 Operating cash flow from finance leases 64,000 Financing cash flow from finance leases 300,000 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 1,223,000 The following is a summary of the maturities of lease liabilities as of June 28, 2019 were as follows: Operating Finance Fiscal year: Remainder of 2019 $ 2,413,000 $ 191,000 2020 3,919,000 394,000 2021 3,048,000 99,000 2022 2,271,000 4,000 2023 1,164,000 — 2024 and thereafter 1,790,000 — Total lease payments $ 14,605,000 $ 688,000 Less: Imputed interest (1,605,000) (31,000) Total lease obligations 13,000,000 657,000 Less: Current obligations 4,056,000 396,000 Noncurrent lease obligations $ 8,944,000 $ 261,000 The imputed interest for finance lease obligations represents the interest component of finance leases that will be recognized as interest expense in future periods. The financing component for operating lease obligations represents the effect of discounting the operating lease payments to their present value. Capital Leases Prior to the adoption of ASU No. 2016-02, Leases (Topic 842) , the Company leased certain equipment under capital leases. The economic substance of these leases was a financing transaction for purchase of the equipment and leasehold improvements, accordingly, the leases were included in the balance sheets in equipment and leasehold improvement, net of accumulated depreciation, with a corresponding amount recorded in current portion of lease obligations or noncurrent portion of lease obligations, as appropriate. The capital lease assets were amortized on a straight-line basis over the life of the lease or, if shorter, the life of the leased asset, and were included in depreciation expense in the statements of operations. The interest associated with capital leases was included in interest expense in the statements of operations. As of December 28, 2018, the Company had $0.5 million of capital lease obligations outstanding, $0.3 million of which was classified as a current liability. As of December 28, 2018, $0.5 million of leased assets were capitalized in equipment and leasehold improvements, net of accumulated depreciation. |
COMMITMENTS
COMMITMENTS | 6 Months Ended |
Jun. 28, 2019 | |
COMMITMENTS | |
COMMITMENTS | 9. COMMITMENTS 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 all employees. Employees may elect to contribute up to 50% of their 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 also has a defined contribution plan (the “Plan”) covering employees who have completed three months of service and who have attained 21 years of age. During the six months ended June 28, 2019, the Company elected to make matching contributions equal to 50% of the participants’ contributions to the Plan up to 6% of the individual participant’s compensation. Under the defined contribution plan, the Company may make discretionary matching contributions to employee accounts. The Company made matching contributions of approximately $1.2 million during the six months ended June 28, 2019. The Company has a discretionary bonus plan for regional managers, division managers and others as determined by the president and chief executive officer of the Company. 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 and other executive officers. 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 former member 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 | 6 Months Ended |
Jun. 28, 2019 | |
INCOME TAXES | |
INCOME TAXES | 10. 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. During each fiscal year, management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize existing deferred tax assets. Beginning in fiscal year 2017, the Company determined that it was more-likely-than-not that the entire California net operating loss will not be utilized prior to expiration. Significant pieces of objective evidence evaluated included the Company’s history of utilization of California net operating losses in prior years for each of its subsidiaries, as well as the Company’s forecasted amount of net operating loss utilization for certain members of the combined group. As a result, the Company recorded a valuation allowance in the amount of $86,000 at the end of fiscal year 2018 related to California net operating losses. There was no change to the valuation allowance during the six month period ended June 28, 2019. For acquired business entities, if the Company identifies changes to acquired deferred tax asset valuation allowances or liabilities related to uncertain tax positions during the measurement period and they relate to new information obtained about facts and circumstances that existed as of the acquisition date, those changes are considered a measurement period adjustment and the Company records the offset to goodwill. The Company records all other changes to deferred tax asset valuation allowances and liabilities related to uncertain tax positions in current period income tax expense. 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 June 28, 2019, the Company recorded a liability of $0.4 million for uncertain tax positions related to miscellaneous tax deductions taken in open tax years. Included in this amount are $0.4 million of tax benefits that, if recognized, would affect the effective tax rate. Interest and penalties of $0.1 million have been recorded related to unrecognized tax benefits as of June 28, 2019. Based on management’s estimates and determination of an effective tax rate for the year, the Company recorded an income tax benefit of $0.1 million and $1.0 million for the three and six months ended June 28, 2019, as compared to an income tax expense of $0.9 million and $0.6 million for the three and six months ended June 29, 2018, respectively. During the three and six months ended June 28, 2019, the difference between the effective tax rate and the federal statutory rate is primarily attributable to the recognition of tax deductions related to the vesting of performance-based restricted stock units, exercise of non-qualified stock options and disqualifying dispositions arising from the sale of employee stock purchase and incentive stock options. The income tax benefit related to these deductions has been included as a reduction of 498.6% to the Company’s effective tax rate for the six months ended June 28, 2019. The effective tax rate also varies from the federal statutory rate due to the impact of state income tax expense and certain expenses that are non-deductible for tax purposes, including meals and entertainment, excess compensation for covered employees and compensation expense related to employee stock purchase and incentive stock options. During the six months ended June 28, 2019, the Internal Revenue Service continued its audit of the Company’s tax return for the fiscal year ended December 30, 2016. The Company is unable to determine the impact of this examination due to the audit process having not been completed. |
SEGMENT INFORMATION
SEGMENT INFORMATION | 6 Months Ended |
Jun. 28, 2019 | |
SEGMENT INFORMATION | |
SEGMENT INFORMATION | 11. SEGMENT INFORMATION The Company’s two segments are Energy and Engineering and Consulting. The Company’s chief operating decision maker, which continues to be its chief executive officer, receives and reviews financial information in this format. The Company’s principal segment, Energy, consists of the business of its subsidiary WES. WES provides energy efficiency consulting services to utilities, public agencies, municipalities, private industry and non-profit organizations. The Engineering and Consulting segment includes the operation of the Company’s remaining subsidiaries, Willdan Engineering, Willdan Infrastructure, Public Agency Resources and Willdan Financial Services. The Engineering and Consulting segment offers a broad range of engineering and planning services to the Company’s public and private sector clients, 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 financing 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 Annual Report on Form 10-K for the year ended December 28, 2018. There were no intersegment sales in the three month periods ended June 28, 2019 and June 29, 2018. The Company’s chief operating decision maker 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 and six months ended June 28, 2019 and as of and for the fiscal three and six months ended June 29, 2018 is as follows: Engineering Unallocated Consolidated Energy & Consulting Corporate Intersegment Total Fiscal Three Months Ended June 28, 2019 Contract revenue $ 85,283,000 $ 19,113,000 $ — $ — $ 104,396,000 Depreciation and amortization 2,558,000 308,000 — — 2,866,000 Interest expense, net — — 1,221,000 — 1,221,000 Segment profit (loss) before income tax expense 2,133,000 2,412,000 (2,975,000) — 1,570,000 Income tax expense (benefit) 590,000 667,000 (1,327,000) — (70,000) Net income (loss) 1,544,000 1,746,000 (1,650,000) — 1,640,000 Segment assets 1 183,080,000 23,690,000 157,752,000 (23,130,000) 341,392,000 Fiscal Three Months Ended June 29, 2018 Contract revenue $ 41,726,000 $ 18,107,000 $ — $ — $ 59,833,000 Depreciation and amortization 910,000 201,000 — — 1,111,000 Interest expense 27,000 3,000 — — 30,000 Segment profit (loss) before income tax expense 2,870,000 1,517,000 (203,000) — 4,184,000 Income tax expense (benefit) 596,000 315,000 (42,000) — 869,000 Net income (loss) 2,274,000 1,202,000 (161,000) — 3,315,000 Segment assets 1 60,020,000 18,705,000 82,560,000 (23,130,000) 138,155,000 Fiscal Six Months Ended June 28, 2019 Contract revenue $ 159,975,000 $ 36,214,000 $ — $ — $ 196,189,000 Depreciation and amortization 4,928,000 592,000 — — 5,520,000 Interest expense, net — — 2,342,000 — 2,342,000 Segment profit (loss) before income tax expense 647,000 4,017,000 (4,438,000) — 226,000 Income tax expense (benefit) 179,000 1,110,000 (2,286,000) — (997,000) Net income (loss) 468,000 2,907,000 (2,152,000) — 1,223,000 Segment assets 1 183,080,000 23,690,000 157,752,000 (23,130,000) 341,392,000 Fiscal Six Months Ended June 29, 2018 Contract revenue $ 79,058,000 $ 35,370,000 $ — $ — $ 114,428,000 Depreciation and amortization 1,767,000 408,000 — — 2,175,000 Interest expense 47,000 6,000 — — 53,000 Segment profit (loss) before income tax expense 3,133,000 3,404,000 (392,000) — 6,145,000 Income tax expense (benefit) 320,000 347,000 (40,000) — 627,000 Net income (loss) 2,813,000 3,057,000 (352,000) — 5,518,000 Segment assets 1 60,020,000 18,705,000 82,560,000 (23,130,000) 138,155,000 (1) Segment assets represent segment assets, net of intercompany receivables. |
CONTINGENCIES
CONTINGENCIES | 6 Months Ended |
Jun. 28, 2019 | |
CONTINGENCIES | |
CONTINGENCIES | 12. 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. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 28, 2019 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | 13. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses certain interest rate derivative contracts to hedge interest rate exposures on its variable rate debt. The Company’s hedging program is not designated for trading or speculative purposes. The Company recognizes derivative instruments as either assets or liabilities on the accompanying consolidated balance sheets at fair value. The Company records changes in the fair value (i.e., gains or losses) of the derivatives that have been designated as cash flow hedges in its consolidated balance sheets as accumulated other comprehensive income (loss) and in its condensed consolidated statements of comprehensive (loss) income as a loss or gain on cash flow hedge valuation. On January 31, 2019, the Company entered into an interest rate swap agreement that the Company designated as cash flow hedge to fix the variable interest rate on a portion of the Company’s 2018 Term Loan Facility. The interest rate swap agreement total notional amount of $35.0 million, has a fixed interest rate of 2.47% and expires on January 31, 2022. As of June 28, 2019, the effective portion of the Company’s interest rate swap agreement designated as a cash flow hedge before tax effects was $0.6 million, of which no amounts were reclassified from accumulated other comprehensive income to interest expense in the six months ended June 28, 2019. The Company expects to reclassify $0.2 million from accumulated other comprehensive income to interest expense within the next twelve months. The fair values of the Company’s outstanding derivatives designated as hedging instruments were as follows: Fair Value of Derivative Instruments as of Balance Sheet Location June 28, 2019 December 28, 2018 Interest rate swap agreement(s) Accrued liabilities $ (175,000) $ — Interest rate swap agreement(s) Other noncurrent (liabilities) assets $ (430,000) $ — The impact of the effective portions of derivative instruments in cash flow hedging relationships and fair value relationships on other comprehensive income was $0.2 million and $0.4 million for the three and six months ended June 28, 2019. The accumulated balances and reporting period activities for the three and six months ended June 28, 2019 related to reclassifications out of accumulated other comprehensive income (loss) are summarized as follows: (Loss) on Accumulated Other Derivative Instruments Comprehensive Loss Balances at December 28, 2018 $ — $ — Other comprehensive loss before reclassifications (219,000) (219,000) Amounts reclassified from accumulated other comprehensive income: Interest rate contracts, net of tax 1 — — Net current-period other comprehensive loss (219,000) (219,000) Balances at March 29, 2019 $ $ Other comprehensive loss before reclassifications (219,000) (219,000) Amounts reclassified from accumulated other comprehensive income: Interest rate contracts, net of tax 1 — — Net current-period other comprehensive loss (219,000) (219,000) Balances at June 28, 2019 $ $ (1) This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 28, 2019 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 14. SUBSEQUENT EVENTS The Company evaluates subsequent events in accordance with ASC Topic 855, Subsequent Events. The Company evaluates subsequent events up until the date the condensed consolidated financial statements are issued. On July 2, 2019, the Company acquired substantially all of the assets of Onsite Energy Corporation (“Onsite energy”), an energy efficiency services and project implementation firm based in Carlsbad, California, that specializes in energy upgrades and commissioning for industrial facilities. Pursuant to the terms of the Asset Purchase Agreement, dated July 2, 2019, by and between WES and Onsite Energy, WES will pay a maximum aggregate purchase price of $26.4 million, subject to certain holdback and working capital adjustments, to be paid in cash. Onsite Energy’s financial information will be included within the Energy segment beginning in the third quarter of fiscal 2019. The Company expects to finalize the purchase price allocation with respect to this transaction during the second quarter of fiscal 2020. |
BASIS OF PRESENTATION, ORGANI_2
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Policies) | 6 Months Ended |
Jun. 28, 2019 | |
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 (“SEC”) 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 condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2018. The condensed consolidated statement of stockholders' equity includes repurchases of |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of Willdan Group, Inc. (“WGI”) and its wholly-owned subsidiaries, Willdan Energy Solutions (“WES”), Willdan Engineering, Willdan Infrastructure, Public Agency Resources and Willdan Financial Services and their respective subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company accounts for variable interest entities in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation. Under ASC 810, a variable interest entity (“VIE”) is created when any of the following criteria are present: (a) the equity investment at risk in the entity is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by other parties, including the equity holders; (b) the entity ’ s equity holders as a group either (i) lack the direct or indirect ability to make decisions about the entity, (ii) are not obligated to absorb expected losses of the entity or (iii) do not have the right to receive expected residual returns of the entity; or (c) the entity ’ s equity holders have voting rights that are not proportionate to their economic interests, and the activities of the entity involve or are conducted on behalf of the equity holder with disproportionately few voting rights. If an entity is deemed to be a VIE pursuant to ASC 810, the enterprise that has both (i) the power to direct the activities of a VIE that most significantly impact the entity ’ s economic performance and (ii) the obligation to absorb the expected losses of the entity or right to receive benefits from the entity that could be potentially significant to the VIE is considered the primary beneficiary and must consolidate the VIE. In accordance with ASC 810, the Company performs ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. As of June 28, 2019, the Company had one VIE—Genesys Engineering, P.C. (“Genesys”). Pursuant to New York law, the Company does not own capital stock of Genesys and does not have control over the professional decision making of Genesys’ engineering services. The Company, however, has entered into an administrative services agreement with Genesys pursuant to which WES, the Company’s wholly-owned subsidiary, will provide Genesys with ongoing administrative, operational and other non-professional support services. The Company manages Genesys and has the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a VIE. Management also concluded there is no noncontrolling interest related to the consolidation of Genesys because management determined that (i) the shareholder of Genesys does not have more than a nominal amount of equity investment at risk, (ii) WES absorbs the expected losses of Genesys through its deferral of Genesys’ service fees owed to WES, and the Company has, since entering into the administrative services agreement, had to continuously defer the service fees for Genesys, and (iii) the Company believes Genesys will continue to have a shortfall on payment of its service fees for the foreseeable future, leaving no expected residual returns for the shareholder. |
Segment Information | Segment Information WGI is a holding company with six wholly-owned subsidiaries. The Company presents segment information externally consistent with the manner in which the Company ’ s chief operating decision maker reviews information to assess performance and allocate resources. WGI performs administrative functions on behalf of its subsidiaries, such as treasury, legal, accounting, information systems, human resources and certain business development activities, and earns revenue that is only incidental to the activities of the enterprise. As a result, WGI does not meet the definition of an operating segment. The Company’s two segments are Energy and Engineering and Consulting. The Company’s principal segment, Energy, consists of the business of its subsidiary, WES, which offers energy and sustainability consulting services to utilities public agencies and private industry. The Company’s Engineering and Consulting segment includes the operation of the Company’s remaining direct subsidiaries, Willdan Engineering, Willdan Infrastructure, Public Agency Resources and Willdan Financial Services. Willdan Engineering provides civil engineering-related construction management, building and safety, city engineering, city planning, geotechnical, material testing and other engineering consulting services to its clients. Willdan Infrastructure, which was launched in fiscal year 2013, provides engineering services to larger rail, port, water, mining and other civil engineering projects. Public Agency Resources primarily provides staffing to Willdan Engineering. Willdan Financial Services provides economic and financial consulting to public agencies. See Note 11 “—Segment Information” for segment information for the current and prior period. |
Contract Assets and Liabilities | Contract Assets and Liabilities Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized using the percentage-of-completion method of revenue recognition. Contract assets include unbilled amounts typically resulting from revenue under long-term contracts when the percentage-of-completion method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer and right to payment is not unconditional. In addition, contract assets include retainage amounts withheld from billings to the Company’s clients pursuant to provisions in the contracts. Contract liabilities consist of advance payments and billings in excess of revenue recognized and deferred revenue. The increase in contract assets and contract liabilities for the six months ended June 28, 2019 were primarily attributable to normal business operations. |
Off-Balance Sheet Arrangements | Off‑Balance Sheet Arrangements The Company does not have any off‑balance sheet financing arrangements or liabilities. Finally, the Company does not have any majority‑owned subsidiaries or any interests in, or relationships with, any special‑purpose entities that are not included in the condensed consolidated financial statements. The Company has, however, entered into an administrative services agreement with Genesys pursuant to which WES, the Company’s wholly-owned subsidiary, will provide Genesys with ongoing administrative, operational and other non-professional support services. The Company manages Genesys and has the power to direct the activities that most significantly impact Genesys’ performance, in addition to being obligated to absorb expected losses from Genesys. Accordingly, the Company is the primary beneficiary of Genesys and consolidates Genesys as a variable interest entity. |
Contract Accounting | Contract Accounting The Company enters into contracts with its clients that contain various types of pricing provisions, including fixed price, time-and-materials and unit-based provisions. The Company recognizes revenues in accordance with ASU 2014-09, Revenue from Contracts with Customer, codified as ASC Topic 606 and the related amendments (collectively, “ASC 606”). As such, the Company identifies a contract with a customer, identifies the performance obligations in the contract, determines the transaction price, allocates the transaction price to each performance obligation in the contract and recognizes revenues when (or as) the Company satisfies a performance obligation. The following table reflects the Company’s two reportable segments and the types of contracts that each most commonly enters into for revenue generating activities. Segment Contract Type Revenue Recognition Method Time-and-materials Time-and-materials Energy Unit-based Unit-based Software license Unit-based Fixed price Percentage-of-completion Time-and-materials Time-and-materials Engineering and Consulting Unit-based Unit-based Fixed price Percentage-of-completion Revenue on the vast majority of the Company’s contracts is recognized over time because of the continuous transfer of control to the customer. Revenue on fixed price contracts is recognized on the percentage-of-completion method based generally on the ratio of direct costs incurred-to-date to estimated total direct costs at completion. The Company uses the percentage-of-completion method to better match the level of work performed at a certain point in time in relation to the effort that will be required to complete a project. In addition, the percentage-of-completion method is a common method of revenue recognition in the Company’s industry. Many of the Company’s fixed price contracts involve a high degree of subcontracted fixed price effort and are relatively short in duration, thereby lowering the risks of not properly estimating the percent complete. Revenue on time-and-materials and unit-based contracts is recognized as the work is performed in accordance with the specific rates and terms of the contract. The Company recognizes revenues for time-and-materials contracts based upon the actual hours incurred during a reporting period at contractually agreed upon rates per hour and also includes in revenue all reimbursable costs incurred during a reporting period. Certain of the Company’s time-and-materials contracts are subject to maximum contract values and, accordingly, when revenue is expected to exceed the maximum contract value, these contracts are generally recognized under the percentage-of-completion method, consistent with fixed price contracts. For unit-based contracts, the Company recognizes the contract price of units of a basic production product as revenue when the production product is delivered during a period. Revenue recognition for software licenses issued by the Energy segment is generally recognized at a point in time, utilizing the unit-based revenue recognition method, upon acceptance of the software by the customer and in recognition of the fulfillment of the performance obligation. Certain additional performance obligations beyond the base software license may be separated from the gross license fee and recognized on a straight-line basis over time. Revenue for amounts that have been billed but not earned is deferred, and such deferred revenue is referred to as contract liabilities in the accompanying condensed consolidated balance sheets. To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined contract should be accounted for as one performance obligation. With respect to the Company’s contracts, it is rare that multiple contracts should be combined into a single performance obligation. This evaluation requires significant judgment and the decision to combine a group of contracts or separate a single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. Contracts are considered to have a single performance obligation if the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts, which is mainly because the Company provides a significant service of integrating a complex set of tasks and components into a single project or capability. The Company may enter into contracts that include separate phases or elements. If each phase or element is negotiated separately based on the technical resources required and/or the supply and demand for the services being provided, the Company evaluates if the contracts should be segmented. If certain criteria are met, the contracts would be segmented which could result in revenues being assigned to the different elements or phases with different rates of profitability based on the relative value of each element or phase to the estimated total contract revenue. Contracts that cover multiple phases or elements of the project or service lifecycle (development, construction and maintenance and support) may be considered to have multiple performance obligations even when they are part of a single contract. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. For the periods presented, the value of the separate performance obligations under contracts with multiple performance obligations (generally measurement and verification tasks under certain energy performance contracts) were not material. In cases where the Company does not provide the distinct good or service on a standalone basis, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts the Company’s expected costs of satisfying a performance obligation and then adds an appropriate margin for the distinct good or service. The Company provides quality of workmanship warranties to customers that are included in the sale and are not priced or sold separately or do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications and industry standards. The Company does not consider these types of warranties to be separate performance obligations. In some cases, the Company has a master service or blanket agreement with a customer under which each task order releases the Company to perform specific portions of the overall scope in the service contract. Each task order is typically accounted for as a separate contract because the task order establishes the enforceable rights and obligations, and payment terms. Under ASC 606, variable consideration should be considered when determining the transaction price and estimates should be made for the variable consideration component of the transaction price, as well as assessing whether an estimate of variable consideration is constrained. For certain of the Company’s contracts, variable consideration can arise from modifications to the scope of services resulting from unapproved change orders or customer claims. Variable consideration is included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessments of legal enforceability, the Company’s performance, and all information (historical, current and forecasted) that is reasonably available to the Company. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. As a significant change in one or more of these estimates could affect the profitability of the Company’s contracts, the Company reviews and updates the Company’s contract-related estimates regularly through a company-wide disciplined project review process in which management reviews the progress and execution of the Company’s performance obligations and the estimate at completion (EAC). As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule and the related changes in estimates of revenues and costs. Management must make assumptions and estimates regarding labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer, among other variables. The Company recognizes adjustments in estimated profit on contracts under the cumulative catch-up method. Under this method, the impact of the adjustment on profit recorded to date is recognized in the period the adjustment is identified. Revenue and profit in future periods of contract performance is recognized using the adjusted estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the full amount of estimated loss in the period it is identified. Contracts are often modified to account for changes in contract specifications and requirements. The Company considers contract modifications to exist when the modification either creates new rights or obligations or changes the existing enforceable rights or obligations. Most of the Company’s contract modifications are for goods or services that are not distinct from existing contracts due to the significant integration provided in the context of the contract and are accounted for as if they were part of the original contract. The effect of a contract modification that is not distinct from the existing contract on the transaction price and the Company’s measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. For contract modifications that result in the promise to deliver goods or services that are distinct from the existing contract and the increase in price of the contract is for the same amount as the standalone selling price of the additional goods or services included in the modification, the Company accounts for such contract modifications as a separate contract. The Company includes claims to vendors, subcontractors and others as a receivable and a reduction in recognized costs when enforceability of the claim is established by the contract and the amounts are reasonably estimable and probable of being recovered. The amounts are recorded up to the extent of the lesser of the amounts management expects to recover or to costs incurred. Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized using the percentage-of-completion method of revenue recognition. 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 in the accompanying condensed consolidated statements of comprehensive income. Additionally, payroll taxes, bonuses and employee benefit costs for all Company personnel are included in general and administrative expenses in the accompanying condensed consolidated statements of comprehensive income 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 allowances for doubtful accounts through specific identification of amounts considered to be uncollectible and potential write-offs, plus a non-specific allowance for other amounts for which some potential loss has been determined to be probable based on current and past experience. The Company’s historical credit losses have been minimal with governmental entities and large public utilities, but disputes may arise related to these receivable amounts. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded when received. Retainage, included in contract assets, represents amounts withheld from billings to the Company’s clients pursuant to provisions in the contracts and may not be paid to the Company until specific tasks are completed or the project is completed and, in some instances, for even longer periods. At June 28, 2019 and December 28, 2018, contract assets included retainage of approximately $4.3 million and $6.7 million, respectively. Disaggregation of Revenue The following tables provides information about disaggregated revenue of the Company’s two segments Energy and Engineering and Consulting by contract type, client type and geographical region for the six months ended June 28, 2019: Contract Type Energy Engineering and Total Time-and-materials $ $ $ Unit-based Fixed price Total $ $ $ Client Type Energy Engineering and Total Commercial $ $ $ Government Utilities Total $ $ $ Geography Energy Engineering and Total Domestic $ 159,975,000 $ 36,214,000 $ 196,189,000 |
Goodwill | Goodwill Goodwill represents the excess of costs over fair value of the assets acquired. The Company completes its 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. 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. Impairment losses for reporting units are recognized to the extent that a reporting unit’s carrying amount exceeds its fair value. The reporting units for purposes of testing goodwill impairment coincide with the Company’s reportable segments used for segment reporting purposes. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company uses the three-tier hierarchy of fair value measurement, which prioritizes the inputs. These tiers include: Level 1 (the highest priority), defined as observable inputs, such as quoted prices in active markets, Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3 (the lowest priority), defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s financial instruments consist primarily of cash, cash equivalents, accounts receivable, contract assets, other receivables, prepaid expenses and other current assets, accounts payable, accrued liabilities and contract liabilities, 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. As of June 28, 2019, debt issuance costs of $1.6 million related to the Company’s Credit Facilities were included in assets. The carrying amounts of certain other assets and contingent consideration are discounted to their present value because the time between the origination of these instruments and their expected realization or payment is greater than one year. The carrying amounts of the derivative financial instrument is valued based on Level 2 inputs. 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. On January 31, 2019, the Company entered into an interest rate swap agreement that the Company designated as cash flow hedge to fix the variable interest rate on a portion of the Company’s 2018 Term Loan Facility (as defined in Note 7 “—Debt Obligations”). The interest rate swap agreement has a total notional amount of $35.0 million, a fixed interest rate of 2.47% and expires on January 31, 2022. For further discussion of this derivative contract, see Note 13 “—Derivative Financial Instruments” below. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP 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 condensed 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 As of June 28, 2019, the Company had $27.6 million of cash and cash equivalents. The Company’s primary source of liquidity is cash generated from operations. In addition, as of June 28, 2019, the Company had a $100.0 million term loan outstanding, a $50.0 million revolving credit facility with no borrowed amounts outstanding and $2.7 million in letters of credit issued, and a $50.0 million delayed draw term loan with no amounts outstanding, each with a syndicate of financial institutions as lenders and BMO Harris Bank, N.A. (“BMO”), as administrative agent, and scheduled to mature on June 26, 2024 (see Note 7 “—Debt Obligations” below). The Company believes that its cash and cash equivalents on hand, cash generated by operating activities and funds available under its Credit Facilities (as defined in Note 7 “—Debt Obligations”) will be sufficient to finance its operating activities for at least the next 12 months. |
Adoption of New Accounting Standards | Adoption of New Accounting Standards Stock Compensation In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of current stock compensation recognition standards to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 became effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Effective December 29, 2018, the Company adopted ASU 2018-07 and the impact did not have a material effect on the Company’s condensed consolidated financial statements. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Intangibles-Goodwill and Other In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350), which eliminates the requirement to compare the implied fair value of reporting unit goodwill with the carrying amount of that goodwill (commonly referred to as Step 2) from the goodwill impairment test. The new standard does not change how a goodwill impairment is identified. The Company will continue to perform its quantitative and qualitative goodwill impairment test by comparing the fair value of each reporting unit to its carrying amount, but if the Company were required to recognize a goodwill impairment charge, under the new standard the amount of the charge would be calculated by subtracting the reporting unit’s fair value from its carrying amount. Under the prior standard, if the Company were required to recognize a goodwill impairment charge, Step 2 required us to calculate the implied value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination and the amount of the charge was calculated by subtracting the reporting unit’s implied fair value of goodwill from its actual goodwill balance. The new standard is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted, and should be applied prospectively from the date of adoption. The Company has elected to adopt the new standard for future goodwill impairment tests at the beginning of the fourth quarter of 2019 because it significantly simplifies the evaluation of goodwill for impairment. Proposed Accounting Standards A variety of proposed or otherwise potential accounting standards are currently being studied by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, the Company has not yet determined the effect, if any, that the implementation of such proposed standards would have on its condensed consolidated financial statements. |
BASIS OF PRESENTATION, ORGANI_3
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | |
Schedule of contracts by reportable segments and type of contracts | Segment Contract Type Revenue Recognition Method Time-and-materials Time-and-materials Energy Unit-based Unit-based Software license Unit-based Fixed price Percentage-of-completion Time-and-materials Time-and-materials Engineering and Consulting Unit-based Unit-based Fixed price Percentage-of-completion |
Schedule of disaggregation of revenue | Contract Type Energy Engineering and Total Time-and-materials $ $ $ Unit-based Fixed price Total $ $ $ Client Type Energy Engineering and Total Commercial $ $ $ Government Utilities Total $ $ $ Geography Energy Engineering and Total Domestic $ 159,975,000 $ 36,214,000 $ 196,189,000 |
BUSINESS COMBINATIONS (Tables)
BUSINESS COMBINATIONS (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
The Weidt Group | |
Schedule of consideration for the acquisition | The Weidt Group Cash paid $ 21,800,000 Other working capital adjustment 336,000 Total consideration $ 22,136,000 |
Schedule of amounts for the acquired assets and liabilities recorded at their estimated fair value as of the acquisition date | The Weidt Group Current assets $ 2,317,000 Non-current assets 1 25,000 Equipment and leasehold improvements, net 198,000 Right-of-use assets 1,730,000 Current lease liability (245,000) Non-current lease liability (1,533,000) Liabilities (612,000) Backlog 600,000 Customer relationships 3,800,000 Tradename 500,000 Developed technology 2,900,000 Goodwill 12,456,000 Net assets acquired $ 22,136,000 (1) Excluded from non-current assets are equipment and leasehold improvements, net, right-of-use assets, customer relationships, tradename, developed technology, backlog and goodwill. |
Schedule of unaudited pro forma financial information | Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, In thousands (except per share data) 2019 2018 2019 2018 Pro forma revenue $ 104,396 $ 101,322 $ 198,516 $ 193,776 Pro forma income from operations $ 2,773 $ 5,187 $ 2,485 $ 6,784 Pro forma net income 1 $ 1,640 $ 3,226 $ 1,206 $ 3,768 Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ Weighted average shares outstanding: Basic 11,100 10,809 11,037 10,788 Diluted 11,679 11,301 11,670 11,260 (1) Adjustments to pro forma net income include income from operations, amortization and interest expenses. |
Lime Energy | |
Schedule of consideration for the acquisition | Lime Energy Cash paid $ 122,376,000 Other working capital adjustment 63,000 Total consideration $ 122,439,000 |
Schedule of amounts for the acquired assets and liabilities recorded at their estimated fair value as of the acquisition date | Lime Energy Current assets 1 $ 45,401,000 Non-current assets 2 13,847,000 Cash 1,090,000 Equipment and leasehold improvements, net 1,892,000 Liabilities (33,603,000) Customer relationships 19,400,000 Tradename 5,970,000 Developed technology 10,200,000 Backlog 730,000 Goodwill 57,512,000 Net assets acquired $ 122,439,000 (1) Excluded from current assets is cash (2) Excluded from non-current assets are equipment and leasehold improvements, net, customer relationships, tradename, developed technology, backlog and goodwill. |
Schedule of unaudited pro forma financial information | Three Months Ended Six Months Ended June 28, June 29, June 28, June 29, In thousands (except per share data) 2019 2018 2019 2018 Pro forma revenue $ 104,396 $ 101,322 $ 198,516 $ 193,776 Pro forma income from operations $ 2,773 $ 5,187 $ 2,485 $ 6,784 Pro forma net income 1 $ 1,640 $ 3,226 $ 1,206 $ 3,768 Earnings per share: Basic $ $ $ $ Diluted $ $ $ $ Weighted average shares outstanding: Basic 11,100 10,809 11,037 10,788 Diluted 11,679 11,301 11,670 11,260 (1) Adjustments to pro forma net income include income from operations, amortization and interest expenses. |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of changes in the carrying value of goodwill by reporting unit | December 28, Additional Additions / June 28, Reporting Unit 2018 Purchase Cost Adjustments 2019 Energy $ 96,999,000 $ 12,456,000 $ — $ 109,455,000 Engineering and Consulting 749,000 — — 749,000 $ 97,748,000 $ 12,456,000 $ — $ 110,204,000 |
Schedule of gross amounts and accumulated amortization of the Company's acquired identifiable intangible assets with finite useful lives | June 28, 2019 December 28, 2018 Gross Accumulated Gross Accumulated Amortization Amount Amortization Amount Amortization Period (yrs) Backlog $ 3,114,000 $ 2,270,000 $ 2,514,000 $ 2,155,000 0.1 - 5.0 Tradename 10,801,000 3,938,000 10,301,000 3,118,000 2.5 - 6.0 Non-compete agreements 1,420,000 1,194,000 1,420,000 1,042,000 4.0 Developed technology 15,820,000 2,233,000 12,920,000 944,000 8.0 In-process research and technology 1 1,690,000 — 1,690,000 — — Customer relationships 29,019,000 4,142,000 25,219,000 2,441,000 5.0 - 8.0 $ 61,864,000 $ 13,777,000 $ 54,064,000 $ 9,700,000 (1) In-process research and technology will not be amortized until put into use. |
Schedule of estimated amortization expense for acquired identifiable intangible assets | Fiscal year: 2020 $ 8,280,000 2021 7,589,000 2022 7,402,000 2023 6,757,000 2024 3,906,000 Thereafter 9,893,000 $ 43,827,000 |
EARNINGS PER SHARE ("EPS") (Tab
EARNINGS PER SHARE ("EPS") (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
EARNINGS PER SHARE (EPS) | |
Schedule of number of weighted-average common shares outstanding used to compute basic and diluted EPS | Three months ended Six months ended June 28, June 29, June 28, June 29, 2019 2018 2019 2018 Net income $ 1,640,000 $ 3,315,000 $ 1,223,000 $ 5,518,000 Weighted-average common shares outstanding 11,100,000 8,796,000 11,037,000 8,775,000 Effect of dilutive stock options and restricted stock awards 579,000 492,000 633,000 472,000 Weighted-average common shares outstanding-diluted 11,679,000 9,288,000 11,670,000 9,247,000 Earnings per share: Basic $ 0.15 $ $ 0.11 $ Diluted $ 0.14 $ $ 0.10 $ |
EQUIPMENT AND LEASEHOLD IMPRO_2
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET | |
Schedule of equipment and leasehold improvements | June 28, December 28, 2019 2018 Furniture and fixtures $ 3,783,000 $ 3,551,000 Computer hardware and software 12,922,000 10,874,000 Leasehold improvements 1,979,000 1,419,000 Equipment under finance leases 1,712,000 1,304,000 Automobiles, trucks, and field equipment 3,333,000 2,635,000 23,729,000 19,783,000 Accumulated depreciation and amortization (13,173,000) (11,785,000) Equipment and leasehold improvements, net $ 10,556,000 $ 7,998,000 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
ACCRUED LIABILITIES | |
Schedule of accrued liabilities | June 28, December 28, 2019 2018 Accrued bonuses $ 940,000 $ 5,273,000 Accrued interest 37,000 127,000 Paid leave bank 4,189,000 3,512,000 Compensation and payroll taxes 2,009,000 2,544,000 Accrued legal 65,000 153,000 Accrued workers’ compensation insurance 41,000 273,000 Accrued rent — 233,000 Employee withholdings 2,500,000 2,137,000 Client deposits 504,000 280,000 Accrued subcontractor costs 28,907,000 21,446,000 Other 982,000 1,423,000 Total accrued liabilities $ 40,174,000 $ 37,401,000 |
DEBT OBLIGATIONS (Tables)
DEBT OBLIGATIONS (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
DEBT OBLIGATIONS | |
Schedule of debt obligations, excluding obligations under capital leases | June 28, December 28, 2019 2018 Outstanding borrowings on term loan $ 100,000,000 $ 70,000,000 Notes payable for insurance, 11 month term, bearing interest at 4.3%, payable in monthly principal and interest installments of $92,296 through October 2019. 620,000 1,500,000 Notes payable for IBM Software, 36 month term, bearing interest at 4.656% payable in monthly principal and interest installments of $6,315 through November 2021. 162,000 211,000 Total debt obligations 100,782,000 71,711,000 Less current portion 10,643,000 8,572,000 Debt obligations, less current portion $ 90,139,000 $ 63,139,000 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
LEASES | |
Summary of the lease expense | Three Months Ended Six Months Ended June 28, 2019 June 28, 2019 Operating lease cost $ 1,181,000 $ 2,270,000 Finance lease cost: Amortization of assets $ 124,000 $ 231,000 Interest on lease liabilities 9,000 18,000 Total net lease cost $ 1,314,000 $ 2,519,000 |
Summary of lease information presented on the Company’s condensed consolidated balance sheet | June 28, 2019 Operating leases: Right-of-use assets $ 12,036,000 Lease liability 4,056,000 Lease liability, less current portion 8,944,000 Total lease liabilities $ 13,000,000 Finance leases (included in equipment and leasehold improvements, net): Equipment and leasehold improvements, net $ 1,712,000 Accumulated depreciation (1,015,000) Total equipment and leasehold improvements, net $ 697,000 Finance lease obligations $ 396,000 Finance lease obligations, less current portion 261,000 Total finance lease obligations $ 657,000 Weighted average remaining lease term (in years): Operating Leases 3.53 Finance Leases 1.69 Weighted average discount rate: Operating Leases 5.49 % Finance Leases 5.01 % |
Summary of other information and supplemental cash flow information related to finance and operating leases | Six Months Ended June 28, 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flow from operating leases $ 2,345,000 Operating cash flow from finance leases 64,000 Financing cash flow from finance leases 300,000 Right-of-use assets obtained in exchange for lease liabilities: Operating leases 1,223,000 |
Summary of the maturities of operating lease liabilities | Operating Finance Fiscal year: Remainder of 2019 $ 2,413,000 $ 191,000 2020 3,919,000 394,000 2021 3,048,000 99,000 2022 2,271,000 4,000 2023 1,164,000 — 2024 and thereafter 1,790,000 — Total lease payments $ 14,605,000 $ 688,000 Less: Imputed interest (1,605,000) (31,000) Total lease obligations 13,000,000 657,000 Less: Current obligations 4,056,000 396,000 Noncurrent lease obligations $ 8,944,000 $ 261,000 |
Summary of the maturities of finance lease liabilities | The following is a summary of the maturities of lease liabilities as of June 28, 2019 were as follows: Operating Finance Fiscal year: Remainder of 2019 $ 2,413,000 $ 191,000 2020 3,919,000 394,000 2021 3,048,000 99,000 2022 2,271,000 4,000 2023 1,164,000 — 2024 and thereafter 1,790,000 — Total lease payments $ 14,605,000 $ 688,000 Less: Imputed interest (1,605,000) (31,000) Total lease obligations 13,000,000 657,000 Less: Current obligations 4,056,000 396,000 Noncurrent lease obligations $ 8,944,000 $ 261,000 |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
SEGMENT INFORMATION | |
Schedule of financial information with respect to the reportable segments | Engineering Unallocated Consolidated Energy & Consulting Corporate Intersegment Total Fiscal Three Months Ended June 28, 2019 Contract revenue $ 85,283,000 $ 19,113,000 $ — $ — $ 104,396,000 Depreciation and amortization 2,558,000 308,000 — — 2,866,000 Interest expense, net — — 1,221,000 — 1,221,000 Segment profit (loss) before income tax expense 2,133,000 2,412,000 (2,975,000) — 1,570,000 Income tax expense (benefit) 590,000 667,000 (1,327,000) — (70,000) Net income (loss) 1,544,000 1,746,000 (1,650,000) — 1,640,000 Segment assets 1 183,080,000 23,690,000 157,752,000 (23,130,000) 341,392,000 Fiscal Three Months Ended June 29, 2018 Contract revenue $ 41,726,000 $ 18,107,000 $ — $ — $ 59,833,000 Depreciation and amortization 910,000 201,000 — — 1,111,000 Interest expense 27,000 3,000 — — 30,000 Segment profit (loss) before income tax expense 2,870,000 1,517,000 (203,000) — 4,184,000 Income tax expense (benefit) 596,000 315,000 (42,000) — 869,000 Net income (loss) 2,274,000 1,202,000 (161,000) — 3,315,000 Segment assets 1 60,020,000 18,705,000 82,560,000 (23,130,000) 138,155,000 Fiscal Six Months Ended June 28, 2019 Contract revenue $ 159,975,000 $ 36,214,000 $ — $ — $ 196,189,000 Depreciation and amortization 4,928,000 592,000 — — 5,520,000 Interest expense, net — — 2,342,000 — 2,342,000 Segment profit (loss) before income tax expense 647,000 4,017,000 (4,438,000) — 226,000 Income tax expense (benefit) 179,000 1,110,000 (2,286,000) — (997,000) Net income (loss) 468,000 2,907,000 (2,152,000) — 1,223,000 Segment assets 1 183,080,000 23,690,000 157,752,000 (23,130,000) 341,392,000 Fiscal Six Months Ended June 29, 2018 Contract revenue $ 79,058,000 $ 35,370,000 $ — $ — $ 114,428,000 Depreciation and amortization 1,767,000 408,000 — — 2,175,000 Interest expense 47,000 6,000 — — 53,000 Segment profit (loss) before income tax expense 3,133,000 3,404,000 (392,000) — 6,145,000 Income tax expense (benefit) 320,000 347,000 (40,000) — 627,000 Net income (loss) 2,813,000 3,057,000 (352,000) — 5,518,000 Segment assets 1 60,020,000 18,705,000 82,560,000 (23,130,000) 138,155,000 (1) Segment assets represent segment assets, net of intercompany receivables. |
DERIVATIVE FINANCIAL INSTRUME_2
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 28, 2019 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of fair values of outstanding derivatives designated as hedging instuments | Fair Value of Derivative Instruments as of Balance Sheet Location June 28, 2019 December 28, 2018 Interest rate swap agreement(s) Accrued liabilities $ (175,000) $ — Interest rate swap agreement(s) Other noncurrent (liabilities) assets $ (430,000) $ — |
Schedule of accumulated other comprehensive income (loss) | (Loss) on Accumulated Other Derivative Instruments Comprehensive Loss Balances at December 28, 2018 $ — $ — Other comprehensive loss before reclassifications (219,000) (219,000) Amounts reclassified from accumulated other comprehensive income: Interest rate contracts, net of tax 1 — — Net current-period other comprehensive loss (219,000) (219,000) Balances at March 29, 2019 $ $ Other comprehensive loss before reclassifications (219,000) (219,000) Amounts reclassified from accumulated other comprehensive income: Interest rate contracts, net of tax 1 — — Net current-period other comprehensive loss (219,000) (219,000) Balances at June 28, 2019 $ $ (1) This accumulated other comprehensive component is reclassified to “Interest expense” in our consolidated statements of income. |
BASIS OF PRESENTATION, ORGANI_4
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY (Details) | 6 Months Ended |
Jun. 28, 2019state | |
Basis of Presentation | |
Length of quarters ending on the Friday closest to March 31, June 30 and September 30 | 91 days |
Organizations na operations of the Company | |
Number of states in which the business operates | 24 |
Minimum | |
Basis of Presentation | |
Length of quarter ending on the Friday closest to December 31 | 91 days |
Maximum | |
Basis of Presentation | |
Length of quarter ending on the Friday closest to December 31 | 98 days |
BASIS OF PRESENTATION, ORGANI_5
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY - Fiscal Years (Details) | 6 Months Ended |
Jun. 28, 2019entity | |
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY | |
Number of VIE | 1 |
BASIS OF PRESENTATION, ORGANI_6
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY - Accounting for Contracts (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 28, 2019USD ($) | Jun. 29, 2018USD ($) | Jun. 28, 2019USD ($)subsidiarysegment | Jun. 29, 2018USD ($) | Dec. 28, 2018USD ($) | |
Accounting for Contracts | |||||
Number of reportable segments | segment | 2 | ||||
Costs of contract revenue | |||||
Payroll taxes, bonuses and employee benefit costs for all Company personnel | $ 15,437,000 | $ 10,725,000 | $ 30,406,000 | $ 20,750,000 | |
Retained accounts receivable | 4,300,000 | 4,300,000 | $ 6,700,000 | ||
Facilities costs | $ 2,047,000 | $ 1,386,000 | 3,819,000 | $ 2,595,000 | |
Revenue Or Cost Of The Entity As An Agent | $ 0 | ||||
Number of Wholly Owned Subsidiaries | subsidiary | 6 | ||||
Cost of Sales | |||||
Costs of contract revenue | |||||
Payroll taxes, bonuses and employee benefit costs for all Company personnel | $ 0 | ||||
Facilities costs | $ 0 |
BASIS OF PRESENTATION, ORGANI_7
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY - Disaggregation of Revenue (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 28, 2019USD ($) | Jun. 29, 2018USD ($) | Jun. 28, 2019USD ($)segment | Jun. 29, 2018USD ($) | |
Disaggregation of Revenue [Line Items] | ||||
Number of Reportable Segments | segment | 2 | |||
Revenue | $ 104,396,000 | $ 59,833,000 | $ 196,189,000 | $ 114,428,000 |
Domestic | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 196,189,000 | |||
Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 159,975,000 | |||
Energy | Domestic | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 159,975,000 | |||
Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 36,214,000 | |||
Engineering and Consulting | Domestic | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 36,214,000 | |||
Commercial | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 18,661,000 | |||
Commercial | Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 16,035,000 | |||
Commercial | Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 2,626,000 | |||
Government | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 56,775,000 | |||
Government | Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 23,445,000 | |||
Government | Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 33,330,000 | |||
Utilities | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 120,753,000 | |||
Utilities | Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 120,495,000 | |||
Utilities | Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 258,000 | |||
Time-and-materials | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 35,002,000 | |||
Time-and-materials | Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 7,348,000 | |||
Time-and-materials | Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 27,654,000 | |||
Unit-based | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 127,792,000 | |||
Unit-based | Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 120,629,000 | |||
Unit-based | Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 7,163,000 | |||
Fixed price | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 33,395,000 | |||
Fixed price | Energy | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | 31,998,000 | |||
Fixed price | Engineering and Consulting | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue | $ 1,397,000 |
BASIS OF PRESENTATION, ORGANI_8
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY - Fair Value of Financial Instruments (Details) - USD ($) $ in Millions | Jun. 28, 2019 | Jan. 31, 2019 |
Assets | ||
Basis of Presentation | ||
Debt issuance costs | $ 1.6 | |
Interest swap agreement | Cash flow hedge | ||
Basis of Presentation | ||
Notional amount | $ 35 | |
Fixed rate (in percent) | 2.47% |
BASIS OF PRESENTATION, ORGANI_9
BASIS OF PRESENTATION, ORGANIZATION AND OPERATIONS OF THE COMPANY - Liquidity (Details) - USD ($) | 6 Months Ended | |||||
Jun. 28, 2019 | Jun. 26, 2019 | Dec. 28, 2018 | Oct. 10, 2018 | Oct. 01, 2018 | Jan. 20, 2017 | |
Liquidity | ||||||
Cash and cash equivalents | $ 27,602,000 | $ 15,259,000 | ||||
Debt, Long-term and Short-term, Combined Amount | 100,782,000 | 71,711,000 | ||||
Amount outstanding | $ 2,700,000 | |||||
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 | |||||
Revolving Credit Facility | ||||||
Liquidity | ||||||
Maximum borrowing capacity | $ 50,000,000 | |||||
Revolving Credit Facility | BMO | ||||||
Liquidity | ||||||
Debt, Long-term and Short-term, Combined Amount | $ 0 | |||||
Maximum borrowing capacity | 50,000,000 | $ 35,000,000 | ||||
Delayed Draw Term Loan Facility | ||||||
Liquidity | ||||||
Debt, Long-term and Short-term, Combined Amount | 100,000,000 | $ 70,000,000 | ||||
Maximum borrowing capacity | $ 50,000,000 | |||||
Delayed Draw Term Loan Facility | BMO | ||||||
Liquidity | ||||||
Maximum borrowing capacity | 100,000,000 | $ 70,000,000 | $ 90,000,000 | |||
Delayed Draw Term Loan Facility | Syndicate financial institutions | ||||||
Liquidity | ||||||
Debt, Long-term and Short-term, Combined Amount | 0 | |||||
Maximum borrowing capacity | $ 50,000,000 |
BUSINESS COMBINATIONS (Details)
BUSINESS COMBINATIONS (Details) - USD ($) | Nov. 09, 2018 | Oct. 01, 2018 | Apr. 30, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | Dec. 28, 2018 |
BUSINESS COMBINATIONS | ||||||
Par value (in dollars per share) | $ 0.01 | $ 0.01 | ||||
Cash paid | $ 21,800,000 | $ 2,994,000 | ||||
Lime Energy | ||||||
BUSINESS COMBINATIONS | ||||||
Proceeds from equity raise | $ 50,000,000 | |||||
Aggregate Purchase price | 122,400,000 | $ 122,439,000 | ||||
Cash paid at closing | $ 56,400,000 | |||||
Cash paid | $ 122,376,000 | |||||
NAM | Maximum | ||||||
BUSINESS COMBINATIONS | ||||||
Aggregate Purchase price | $ 4,000,000 |
BUSINESS COMBINATIONS (Acquisit
BUSINESS COMBINATIONS (Acquisitions) (Details) - USD ($) $ / shares in Units, shares in Thousands | Mar. 08, 2019 | Nov. 09, 2018 | Oct. 01, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | Dec. 28, 2018 |
Consideration for acquisitions | ||||||||
Cash paid | $ 21,800,000 | $ 2,994,000 | ||||||
Allocation of acquired assets | ||||||||
Goodwill | $ 110,204,000 | 110,204,000 | $ 97,748,000 | |||||
Unaudited pro forma financial information | ||||||||
Pro forma revenue | 104,396,000 | $ 101,322,000 | 198,516,000 | 193,776,000 | ||||
Pro forma income from operations | 2,773,000 | 5,187,000 | 2,485,000 | 6,784,000 | ||||
Pro forma net income | $ 1,640,000 | $ 3,226,000 | $ 1,206,000 | $ 3,768,000 | ||||
Earnings per share: | ||||||||
Basic (in dollars per share) | $ 0.15 | $ 0.30 | $ 0.11 | $ 0.35 | ||||
Diluted (in dollars per share) | $ 0.14 | $ 0.29 | $ 0.10 | $ 0.33 | ||||
Weighted average shares outstanding: | ||||||||
Basic (in shares) | 11,100 | 10,809 | 11,037 | 10,788 | ||||
Diluted (in shares) | 11,679 | 11,301 | 11,670 | 11,260 | ||||
Revenue and Income from operations | ||||||||
Revenues. | $ 104,396,000 | $ 59,833,000 | $ 196,189,000 | $ 114,428,000 | ||||
Income from operations | 2,773,000 | $ 4,205,000 | 2,539,000 | 6,179,000 | ||||
The Weidt Group | ||||||||
Consideration for acquisitions | ||||||||
Cash paid | $ 21,800,000 | |||||||
Cash paid, working capital adjustment | 336,000 | |||||||
Total consideration | 22,136,000 | |||||||
Allocation of acquired assets | ||||||||
Current assets | 2,317,000 | |||||||
Non-current assets | 25,000 | |||||||
Equipment and leasehold improvements, net | 198,000 | |||||||
Right-of-use asset | 1,730,000 | |||||||
Current lease liability | (245,000) | |||||||
Non-current lease liability | (1,533,000) | |||||||
Liabilities | (612,000) | |||||||
Goodwill | 12,456,000 | |||||||
Net assets acquired | 22,136,000 | |||||||
Revenue and Income from operations | ||||||||
Acquisition costs | 100,000 | 300,000 | ||||||
Revenues. | 3,200,000 | 4,100,000 | ||||||
Income from operations | 400,000 | 500,000 | ||||||
The Weidt Group | Customer relationships | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | 3,800,000 | |||||||
The Weidt Group | Tradename | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | 500,000 | |||||||
The Weidt Group | Developed technology | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | 2,900,000 | |||||||
The Weidt Group | Backlog | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | $ 600,000 | |||||||
Lime Energy | ||||||||
Consideration for acquisitions | ||||||||
Cash paid | $ 122,376,000 | |||||||
Cash paid, working capital adjustment | 63,000 | |||||||
Total consideration | $ 122,400,000 | 122,439,000 | ||||||
Allocation of acquired assets | ||||||||
Current assets | 45,401,000 | |||||||
Non-current assets | 13,847,000 | |||||||
Cash | 1,090,000 | |||||||
Equipment and leasehold improvements, net | 1,892,000 | |||||||
Liabilities | (33,603,000) | |||||||
Goodwill | 57,512,000 | |||||||
Net assets acquired | 122,439,000 | |||||||
Unaudited pro forma financial information | ||||||||
Pro forma revenue | 198,516,000 | 193,776,000 | ||||||
Pro forma income from operations | 2,485,000 | 6,784,000 | ||||||
Pro forma net income | $ 1,206,000 | $ 3,768,000 | ||||||
Earnings per share: | ||||||||
Basic (in dollars per share) | $ 0.11 | $ 0.35 | ||||||
Diluted (in dollars per share) | $ 0.10 | $ 0.33 | ||||||
Weighted average shares outstanding: | ||||||||
Basic (in shares) | 11,037 | 10,788 | ||||||
Diluted (in shares) | 11,670 | 11,260 | ||||||
Revenue and Income from operations | ||||||||
Revenues. | 38,800,000 | $ 75,400,000 | ||||||
Income from operations | 900,000 | 1,200,000 | ||||||
Lime Energy | Other General And Administrative Expense [Member] | ||||||||
Revenue and Income from operations | ||||||||
Acquisition costs | $ 200,000 | $ 200,000 | ||||||
Lime Energy | Customer relationships | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | 19,400,000 | |||||||
Lime Energy | Tradename | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | 5,970,000 | |||||||
Lime Energy | Developed technology | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | 10,200,000 | |||||||
Lime Energy | Backlog | ||||||||
Allocation of acquired assets | ||||||||
Intangible assets | $ 730,000 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS - Carrying Value of Goodwill by Reporting Unit (Details) | 6 Months Ended |
Jun. 28, 2019USD ($) | |
Changes in carrying value of goodwill | |
Goodwill at beginning of period | $ 97,748,000 |
Additional Purchase Cost | 12,456,000 |
Goodwill at end of period | 110,204,000 |
Energy | |
Changes in carrying value of goodwill | |
Goodwill at beginning of period | 96,999,000 |
Additional Purchase Cost | 12,456,000 |
Goodwill at end of period | 109,455,000 |
Engineering and Consulting | |
Changes in carrying value of goodwill | |
Goodwill at beginning of period | 749,000 |
Goodwill at end of period | $ 749,000 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Gross Amount and Amortization (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 28, 2019 | Jun. 29, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | Dec. 28, 2018 | |
Goodwill and other intangible assets | |||||
Gross Amount | $ 61,864,000 | $ 61,864,000 | $ 54,064,000 | ||
Accumulated Amortization | 13,777,000 | 13,777,000 | 9,700,000 | ||
Amortization expense for acquired identifiable intangible assets | 2,100,000 | $ 700,000 | 4,100,000 | $ 1,400,000 | |
Remainder of fiscal year 2018 | 4,400,000 | 4,400,000 | |||
Estimated amortization expense for acquired identifiable intangible assets | |||||
2020 | 8,280,000 | 8,280,000 | |||
2021 | 7,589,000 | 7,589,000 | |||
2022 | 7,402,000 | 7,402,000 | |||
2023 | 6,757,000 | 6,757,000 | |||
2024 | 3,906,000 | 3,906,000 | |||
Thereafter | 9,893,000 | 9,893,000 | |||
Total estimated amortization expense | 43,827,000 | 43,827,000 | |||
Goodwill impairment | |||||
Goodwill impairment | 0 | ||||
Backlog | |||||
Goodwill and other intangible assets | |||||
Gross Amount | 3,114,000 | 3,114,000 | 2,514,000 | ||
Accumulated Amortization | 2,270,000 | $ 2,270,000 | $ 2,155,000 | ||
Backlog | Minimum | |||||
Goodwill and other intangible assets | |||||
Amortization Period (in years) | 1 month 6 days | 1 month 6 days | |||
Backlog | Maximum | |||||
Goodwill and other intangible assets | |||||
Amortization Period (in years) | 5 years | 5 years | |||
Tradename | |||||
Goodwill and other intangible assets | |||||
Gross Amount | 10,801,000 | $ 10,801,000 | $ 10,301,000 | ||
Accumulated Amortization | 3,938,000 | $ 3,938,000 | $ 3,118,000 | ||
Tradename | Minimum | |||||
Goodwill and other intangible assets | |||||
Amortization Period (in years) | 2 years 6 months | 2 years 6 months | |||
Tradename | Maximum | |||||
Goodwill and other intangible assets | |||||
Amortization Period (in years) | 6 years | 6 years | |||
Non-compete agreements | |||||
Goodwill and other intangible assets | |||||
Gross Amount | 1,420,000 | $ 1,420,000 | $ 1,420,000 | ||
Accumulated Amortization | 1,194,000 | $ 1,194,000 | $ 1,042,000 | ||
Amortization Period (in years) | 4 years | 4 years | |||
Developed technology | |||||
Goodwill and other intangible assets | |||||
Gross Amount | 15,820,000 | $ 15,820,000 | $ 12,920,000 | ||
Accumulated Amortization | 2,233,000 | $ 2,233,000 | $ 944,000 | ||
Amortization Period (in years) | 8 years | 8 years | |||
In-process research and technology | |||||
Goodwill and other intangible assets | |||||
Gross Amount | 1,690,000 | $ 1,690,000 | $ 1,690,000 | ||
Customer relationships | |||||
Goodwill and other intangible assets | |||||
Gross Amount | 29,019,000 | 29,019,000 | 25,219,000 | ||
Accumulated Amortization | $ 4,142,000 | $ 4,142,000 | $ 2,441,000 | ||
Customer relationships | Minimum | |||||
Goodwill and other intangible assets | |||||
Amortization Period (in years) | 5 years | 5 years | |||
Customer relationships | Maximum | |||||
Goodwill and other intangible assets | |||||
Amortization Period (in years) | 8 years | 8 years |
EARNINGS PER SHARE (EPS) (Detai
EARNINGS PER SHARE (EPS) (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 28, 2019 | Mar. 29, 2019 | Jun. 29, 2018 | Mar. 30, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | |
Earnings per share | ||||||
Net income | $ 1,640,000 | $ (417,000) | $ 3,315,000 | $ 2,203,000 | $ 1,223,000 | $ 5,518,000 |
Weighted-average common shares outstanding (in shares) | 11,100,000 | 8,796,000 | 11,037,000 | 8,775,000 | ||
Effect of dilutive stock options and restricted stock awards (in shares) | 579,000 | 492,000 | 633,000 | 472,000 | ||
Weighted-average common shares outstanding-diluted (in shares) | 11,679,000 | 9,288,000 | 11,670,000 | 9,247,000 | ||
Earnings per share: | ||||||
Basic | $ 0.15 | $ 0.38 | $ 0.11 | $ 0.63 | ||
Diluted | $ 0.14 | $ 0.36 | $ 0.10 | $ 0.60 | ||
Anti-dilutive securities excluded from the computation of earnings per share | ||||||
Number of awards excluded from calculation of dilutive potential common shares (in shares) | 156,000 | 225,000 | ||||
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) | 202,000 | 211,000 |
EQUIPMENT AND LEASEHOLD IMPRO_3
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET (Details) - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 | Jun. 29, 2018 |
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Equipment and leasehold improvements, net | $ 23,729,000 | $ 19,783,000 | |
Accumulated depreciation and amortization | (13,173,000) | (11,785,000) | |
Total equipment and leasehold improvements, net | 10,556,000 | 7,998,000 | |
Furniture and fixtures | |||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Equipment and leasehold improvements, net | 3,783,000 | 3,551,000 | |
Computer hardware and software | |||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Equipment and leasehold improvements, net | 12,922,000 | 10,874,000 | |
Leasehold improvements | |||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Equipment and leasehold improvements, net | 1,979,000 | 1,419,000 | |
Equipment | |||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Equipment and leasehold improvements, net | 1,712,000 | 1,304,000 | |
Automobiles, trucks, and field equipment | |||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Equipment and leasehold improvements, net | 3,333,000 | $ 2,635,000 | |
Equipment finance lease | |||
EQUIPMENT AND LEASEHOLD IMPROVEMENTS | |||
Accumulated depreciation and amortization | $ (231,000) | $ (374,000) |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 |
ACCRUED LIABILITIES | ||
Accrued bonuses | $ 940,000 | $ 5,273,000 |
Accrued interest | 37,000 | 127,000 |
Paid leave bank | 4,189,000 | 3,512,000 |
Compensation and payroll taxes | 2,009,000 | 2,544,000 |
Accrued legal | 65,000 | 153,000 |
Accrued workers' compensation insurance | 41,000 | 273,000 |
Accrued rent | 233,000 | |
Employee withholdings | 2,500,000 | 2,137,000 |
Client deposits | 504,000 | 280,000 |
Accrued subcontractor costs | 28,907,000 | 21,446,000 |
Other | 982,000 | 1,423,000 |
Total accrued liabilities | $ 40,174,000 | $ 37,401,000 |
DEBT - Obligations (Details)
DEBT - Obligations (Details) - USD ($) | 6 Months Ended | |
Jun. 28, 2019 | Dec. 28, 2018 | |
Debt Obligations | ||
Total debt obligations | $ 100,782,000 | $ 71,711,000 |
Notes payable | 10,643,000 | 8,572,000 |
Debt obligations, less current portion | 90,139,000 | 63,139,000 |
Revolving Credit Facility | BMO | ||
Debt Obligations | ||
Total debt obligations | 0 | |
Delayed Draw Term Loan Facility | ||
Debt Obligations | ||
Total debt obligations | 100,000,000 | 70,000,000 |
Notes payable for insurance | ||
Debt Obligations | ||
Short-term Debt | $ 620,000 | 1,500,000 |
Maturity term | 11 months | |
Interest rate (as a percent) | 4.30% | |
Monthly principal and interest installment (in dollars) | $ 92,296 | |
Notes payable for IBM | ||
Debt Obligations | ||
Notes payable | $ 162,000 | $ 211,000 |
Maturity term | 36 months | |
Interest rate (as a percent) | 4.656% | |
Monthly principal and interest installment (in dollars) | $ 6,315 |
DEBT - Line of credit (Details)
DEBT - Line of credit (Details) - USD ($) | Jun. 26, 2019 | Jan. 31, 2019 | Dec. 28, 2018 | Oct. 01, 2018 | Sep. 09, 2018 | Jan. 20, 2017 | Sep. 27, 2019 | Jun. 28, 2019 | Jun. 28, 2019 | Oct. 10, 2018 |
Debt Instrument [Line Items] | ||||||||||
Borrowings under term loan facility and line of credit | $ 100,000,000 | |||||||||
Fee on unused commitments (as a percent) | 0.25% | |||||||||
Percent of annual amortization | 4.40% | |||||||||
Amount outstanding | $ 2,700,000 | 2,700,000 | ||||||||
Stop loss amount | $ 100,000 | |||||||||
Percent of stop loss | 125.00% | |||||||||
Unpaid balance of financed premiums | $ 1,500,000 | 600,000 | 600,000 | |||||||
Prior Credit Facility [Member] | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Commitment fee (as a percent) | 1.50% | |||||||||
Prior Credit Facility [Member] | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Commitment fee (as a percent) | 0.94% | |||||||||
Prior Credit Facility [Member] | Federal Funds Effective Swap Rate | Base rate | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 0.50% | |||||||||
Prior Credit Facility [Member] | Base rate | LIBOR | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 1.00% | |||||||||
Prior Credit Facility [Member] | Base rate | LIBOR | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 0.25% | |||||||||
Prior Credit Facility [Member] | LIBOR | Base rate | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 1.00% | |||||||||
Prior Credit Facility [Member] | LIBOR | Base rate | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 2.00% | |||||||||
Prior Credit Facility [Member] | LIBOR | Base rate | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 1.25% | |||||||||
Revolving Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 50,000,000 | |||||||||
Revolving Credit Facility | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 35,000,000 | $ 50,000,000 | 50,000,000 | |||||||
The aggregate amount under the revolving line of credit | $ 100,000,000 | |||||||||
Revolving Credit Facility | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Commitment fee (as a percent) | 0.35% | |||||||||
Revolving Credit Facility | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Commitment fee (as a percent) | 0.20% | |||||||||
Standby letter of credit sub-facility | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 10,000,000 | |||||||||
New Credit Facilities | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Fee on unused commitments (as a percent) | 0.35% | 0.40% | ||||||||
Commitment fee (as a percent) | 2.00% | 4.00% | ||||||||
New Credit Facilities | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Fee on unused commitments (as a percent) | 0.15% | 0.20% | ||||||||
Commitment fee (as a percent) | 0.84% | 0.94% | ||||||||
New Credit Facilities | Federal Funds Effective Swap Rate | Base rate | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 0.50% | 0.50% | ||||||||
New Credit Facilities | Base rate | LIBOR | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 1.00% | 1.00% | ||||||||
New Credit Facilities | Base rate | LIBOR | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 1.00% | 4.00% | ||||||||
New Credit Facilities | Base rate | LIBOR | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 0.125% | 1.25% | ||||||||
New Credit Facilities | LIBOR | Base rate | Maximum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 2.00% | 3.00% | ||||||||
New Credit Facilities | LIBOR | Base rate | Minimum | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Spread on floating interest rate (as a percent) | 1.125% | 0.25% | ||||||||
Revolving Credit Facility Member Two | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 30,000,000 | |||||||||
Delayed Draw Term Loan Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 50,000,000 | |||||||||
Line of credit facility minimum borrowing under each tranche | 10,000,000 | |||||||||
Annual amortization of debt (as a Percent) | 2.50% | |||||||||
Delayed Draw Term Loan Facility | BMO | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 90,000,000 | $ 100,000,000 | $ 100,000,000 | $ 70,000,000 | ||||||
Borrowings under term loan facility and line of credit | $ 70,000,000 | |||||||||
Delayed Draw Term Loan Facility | Forecast | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Quarterly installments | $ 2,500,000 | |||||||||
Delayed Draw Term Loan Facility | Interest swap agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Notional amount | $ 35,000,000 | |||||||||
Fixed rate (in percent) | 2.47% | |||||||||
Percent of annual amortization | 10.00% | |||||||||
Composite interest rate | 4.40% | |||||||||
Term A and Delayed Draw Term Loan Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Maximum borrowing capacity | $ 100,000,000 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) | Jan. 01, 2019 |
LEASES | |
Lease practical expedients package | true |
Lease practical expedients use of hindsight | false |
LEASES - Change in accounting p
LEASES - Change in accounting policy (Details) - USD ($) | Jan. 01, 2019 | Jun. 28, 2019 |
Leases | ||
Right-of-use assets | $ 12,036,000 | |
Operating lease liability | 13,000,000 | |
Operating lease, option to extend | true | |
Operating lease, option to terminate | true | |
Residual value guarantee | $ 0 | |
Minimum | ||
Leases | ||
Operating lease, remaining lease term | 1 year | |
Maximum | ||
Leases | ||
Operating lease, remaining lease term | 8 years | |
Operating lease, extension term | 5 years | |
Operating lease, terminate term | 1 year | |
Accounting Standards Update 2016-02 | ||
Leases | ||
Right-of-use assets | $ 10,900,000 | |
Operating lease liability | $ 11,900,000 |
LEASES - Lease expense (Details
LEASES - Lease expense (Details) - USD ($) | 3 Months Ended | 6 Months Ended |
Jun. 28, 2019 | Jun. 28, 2019 | |
Lease cost | ||
Operating lease cost | $ 1,181,000 | $ 2,270,000 |
Amortization of assets | 124,000 | 231,000 |
Interest on lease liabilities | 9,000 | 18,000 |
Total Lease Cost | $ 1,314,000 | $ 2,519,000 |
LEASES - Impact of Adoption (De
LEASES - Impact of Adoption (Details) - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 |
Operating leases: | ||
Right-of-use assets | $ 12,036,000 | |
Lease liability | 4,056,000 | |
Lease liability, less current portion | 8,944,000 | |
Total lease obligations | 13,000,000 | |
Finance leases (included in equipment and leasehold improvements, net): | ||
Equipment and leasehold improvements, net | 23,729,000 | $ 19,783,000 |
Accumulated depreciation and amortization | (13,173,000) | (11,785,000) |
Total equipment and leasehold improvements, net | 10,556,000 | 7,998,000 |
Finance lease obligations | 396,000 | 320,000 |
Finance lease obligations, less current portion | 261,000 | 224,000 |
Total lease obligations | $ 657,000 | $ 500,000 |
Operating Leases | 3 years 6 months 11 days | |
Finance Leases | 1 year 8 months 9 days | |
Operating Leases, discount rate | 5.49% | |
Finance Leases, discount rate | 5.01% | |
Finance leased assets | ||
Finance leases (included in equipment and leasehold improvements, net): | ||
Equipment and leasehold improvements, net | $ 1,712,000 | |
Accumulated depreciation and amortization | (1,015,000) | |
Total equipment and leasehold improvements, net | $ 697,000 |
LEASES - Supplemental cash flow
LEASES - Supplemental cash flow information (Details) - USD ($) | 6 Months Ended | |
Jun. 28, 2019 | Jun. 29, 2018 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flow from operating leases | $ 2,345,000 | |
Operating cash flow from finance leases | 64,000 | |
Financing cash flow from finance leases | 300,000 | $ 207,000 |
Right-of-Use Asset Obtained in Exchange for Operating Lease Liability | $ 1,223,000 |
LEASES - Maturities of lease li
LEASES - Maturities of lease liabilities (Details) - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 |
Operating | ||
Remainder of 2019 | $ 2,413,000 | |
2020 | 3,919,000 | |
2021 | 3,048,000 | |
2022 | 2,271,000 | |
2023 | 1,164,000 | |
2024 and thereafter | 1,790,000 | |
Total lease payments | 14,605,000 | |
Less: Imputed interest | (1,605,000) | |
Total lease obligations | 13,000,000 | |
Lease liability | 4,056,000 | |
Noncurrent lease obligations | 8,944,000 | |
Finance | ||
Remainder of 2019 | 191,000 | |
2020 | 394,000 | |
2021 | 99,000 | |
2022 | 4,000 | |
Total lease payments | 688,000 | |
Less: Imputed interest | (31,000) | |
Total lease obligations | 657,000 | $ 500,000 |
Finance lease obligations | 396,000 | 320,000 |
Finance lease obligations, less current portion | $ 261,000 | $ 224,000 |
LEASES - Capital Leases (Detail
LEASES - Capital Leases (Details) - USD ($) | Jun. 28, 2019 | Dec. 28, 2018 |
LEASES | ||
Capital lease obligations | $ 657,000 | $ 500,000 |
Finance lease obligations | $ 396,000 | 320,000 |
New Right of Use Assets - Finance Leases | $ 500,000 |
COMMITMENTS - Employee Benefit
COMMITMENTS - Employee Benefit Plans (Details) | 6 Months Ended |
Jun. 28, 2019USD ($) | |
Employee Benefit Plans | |
Maximum employee contribution as a percentage of compensation under 401 (k) Plan | 50.00% |
Service period (in months) | 3 months |
Attained age (in years) | 21 years |
Defined Contribution Plan, Employer Matching Contribution, Percent of Match | 50.00% |
Defined Contribution Plan, Employer Matching Contribution, Percent of Employees' Gross Pay | 6.00% |
Employer matching contributions | $ 1,200,000 |
Post-Employment Health Benefits | |
Unamortized compensation cost | $ 0 |
INCOME TAXES - Operating Loss C
INCOME TAXES - Operating Loss Carryovers and Unrecognized Tax Benefits (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 28, 2019 | Jun. 29, 2018 | Jun. 28, 2019 | Jun. 29, 2018 | Dec. 28, 2018 | |
INCOME TAXES | |||||
Valuation reserve related to California net operating losses | $ 86,000 | ||||
Valuation allowance change | $ 0 | ||||
Unrecognized tax benefits | $ 400,000 | 400,000 | |||
Liability for uncertain tax positions | 400,000 | 400,000 | |||
Interest and penalties related to unrecognized tax benefits | 100,000 | ||||
Income tax expense (benefit) | $ (70,000) | $ 869,000 | $ (997,000) | $ 627,000 | |
Reduction in effective tax rate | 498.60% |
SEGMENT INFORMATION (Details)
SEGMENT INFORMATION (Details) | 3 Months Ended | 6 Months Ended | |||||
Jun. 28, 2019USD ($) | Mar. 29, 2019USD ($) | Jun. 29, 2018USD ($) | Mar. 30, 2018USD ($) | Jun. 28, 2019USD ($)segment | Jun. 29, 2018USD ($) | Dec. 28, 2018USD ($) | |
SEGMENT INFORMATION | |||||||
Number of operating segments | segment | 2 | ||||||
Number of reporting segments | segment | 2 | ||||||
Segment reconciliation | |||||||
Contract revenue | $ 104,396,000 | $ 59,833,000 | $ 196,189,000 | $ 114,428,000 | |||
Depreciation and amortization | 2,866,000 | 1,111,000 | 5,520,000 | 2,175,000 | |||
Interest expense, net | 1,221,000 | 30,000 | 2,342,000 | 53,000 | |||
Segment profit (loss) before income tax expense | 1,570,000 | 4,184,000 | 226,000 | 6,145,000 | |||
Income tax expense (benefit) | (70,000) | 869,000 | (997,000) | 627,000 | |||
Net income (loss) | 1,640,000 | $ (417,000) | 3,315,000 | $ 2,203,000 | 1,223,000 | 5,518,000 | |
Segment assets(1) | 341,392,000 | 138,155,000 | 341,392,000 | 138,155,000 | $ 301,836,000 | ||
Energy | |||||||
Segment reconciliation | |||||||
Contract revenue | 159,975,000 | ||||||
Engineering and Consulting | |||||||
Segment reconciliation | |||||||
Contract revenue | 36,214,000 | ||||||
Reporting Segments | Energy | |||||||
Segment reconciliation | |||||||
Contract revenue | 85,283,000 | 41,726,000 | 159,975,000 | 79,058,000 | |||
Depreciation and amortization | 2,558,000 | 910,000 | 4,928,000 | 1,767,000 | |||
Interest expense, net | 27,000 | 47,000 | |||||
Segment profit (loss) before income tax expense | 2,133,000 | 2,870,000 | 647,000 | 3,133,000 | |||
Income tax expense (benefit) | 590,000 | 596,000 | 179,000 | 320,000 | |||
Net income (loss) | 1,544,000 | 2,274,000 | 468,000 | 2,813,000 | |||
Segment assets(1) | 183,080,000 | 60,020,000 | 183,080,000 | 60,020,000 | |||
Reporting Segments | Engineering and Consulting | |||||||
Segment reconciliation | |||||||
Contract revenue | 19,113,000 | 18,107,000 | 36,214,000 | 35,370,000 | |||
Depreciation and amortization | 308,000 | 201,000 | 592,000 | 408,000 | |||
Interest expense, net | 3,000 | 6,000 | |||||
Segment profit (loss) before income tax expense | 2,412,000 | 1,517,000 | 4,017,000 | 3,404,000 | |||
Income tax expense (benefit) | 667,000 | 315,000 | 1,110,000 | 347,000 | |||
Net income (loss) | 1,746,000 | 1,202,000 | 2,907,000 | 3,057,000 | |||
Segment assets(1) | 23,690,000 | 18,705,000 | 23,690,000 | 18,705,000 | |||
Unallocated Corporate | |||||||
Segment reconciliation | |||||||
Interest expense, net | 1,221,000 | 2,342,000 | |||||
Segment profit (loss) before income tax expense | (2,975,000) | (203,000) | (4,438,000) | (392,000) | |||
Income tax expense (benefit) | (1,327,000) | (42,000) | (2,286,000) | (40,000) | |||
Net income (loss) | (1,650,000) | (161,000) | (2,152,000) | (352,000) | |||
Segment assets(1) | 157,752,000 | 82,560,000 | 157,752,000 | 82,560,000 | |||
Intersegment | |||||||
Segment reconciliation | |||||||
Contract revenue | 0 | 0 | |||||
Segment assets(1) | $ (23,130,000) | $ (23,130,000) | $ (23,130,000) | $ (23,130,000) |
DERIVATIVE FINANCIAL INSTRUME_3
DERIVATIVE FINANCIAL INSTRUMENTS (Details) - Interest swap agreement - USD ($) $ in Millions | 6 Months Ended | 12 Months Ended | |
Jun. 28, 2019 | Jan. 01, 2021 | Jan. 31, 2019 | |
Delayed Draw Term Loan Facility | |||
Derivative [Line Items] | |||
Notional amount | $ 35 | ||
Fixed rate (in percent) | 2.47% | ||
Cash flow hedge | |||
Derivative [Line Items] | |||
Notional amount | $ 35 | ||
Fixed rate (in percent) | 2.47% | ||
Effective portion of interest rate swap designated as cash flow hedge before tax effect | $ 0.6 | ||
Accumulated other comprehensive income to interest expense | $ 0 | ||
Cash flow hedge | Forecast | |||
Derivative [Line Items] | |||
Accumulated other comprehensive income to interest expense | $ 0.2 |
DERIVATIVE FINANCIAL INSTRUME_4
DERIVATIVE FINANCIAL INSTRUMENTS - Fair Values (Details) - Designated as hedging instruments - Interest swap agreement | Jun. 28, 2019USD ($) |
Accrued liabilities | |
Derivatives, Fair Value [Line Items] | |
Fair value of Derivative Instruments | $ (175,000) |
Other noncurrent (liabilities) assets | |
Derivatives, Fair Value [Line Items] | |
Fair value of Derivative Instruments | $ (430,000) |
DERIVATIVE FINANCIAL INSTRUME_5
DERIVATIVE FINANCIAL INSTRUMENTS - Others (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended |
Jun. 28, 2019 | Jun. 28, 2019 | |
Cash flow hedge | ||
Derivative [Line Items] | ||
Effective portion | $ 0.2 | $ 0.4 |
Fair Value Hedging [Member] | ||
Derivative [Line Items] | ||
Effective portion | $ 0.2 |
DERIVATIVE FINANCIAL INSTRUME_6
DERIVATIVE FINANCIAL INSTRUMENTS -Accumulated balances and reporting period activities (Details) - USD ($) | 3 Months Ended | |
Jun. 28, 2019 | Mar. 29, 2019 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Balances | $ 143,994,000 | $ 144,289,000 |
Balances | 147,525,000 | 143,994,000 |
Accumulated Other Comprehensive Loss/Gain | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Balances | (219,000) | |
Other comprehensive loss before reclassifications | (219,000) | (219,000) |
Net current-period other comprehensive loss | (219,000) | (219,000) |
Balances | (438,000) | (219,000) |
(Loss) on Derivative Instruments | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Balances | (219,000) | |
Other comprehensive loss before reclassifications | (219,000) | (219,000) |
Net current-period other comprehensive loss | (219,000) | (219,000) |
Balances | $ (438,000) | $ (219,000) |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ in Millions | Jul. 02, 2019USD ($) |
Subsequent Event | Onsite Energy Corporation | Willdan Energy Solutions | |
Subsequent Event [Line Items] | |
Aggregate Purchase price | $ 26.4 |