Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 28, 2019 | Nov. 05, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 28, 2019 | |
Entity Registrant Name | CONTINENTAL MATERIALS CORPORATION | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Interactive Data Current | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 1,710,698 | |
Current Fiscal Year End Date | --12-28 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0000024104 | |
Amendment Flag | false |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 28, 2019 | Dec. 29, 2018 |
Current assets: | ||
Cash and cash equivalents | $ 4,297,000 | $ 594,000 |
Receivables, net | 20,754,000 | 15,321,000 |
Receivable for insured losses | 840,000 | 874,000 |
Finished goods | 4,193,000 | 5,448,000 |
Work in process | 1,564,000 | 1,365,000 |
Raw materials and supplies | 7,191,000 | 7,993,000 |
Prepaid expenses | 2,227,000 | 1,785,000 |
Refundable income taxes | 2,400,000 | 494,000 |
Other current assets | 4,552,000 | 2,500,000 |
Other current assets held for sale | 10,968,000 | |
Total current assets | 48,018,000 | 47,342,000 |
Property, plant and equipment | 11,729,000 | 10,431,000 |
Other assets | ||
Right-of use assets | 5,258,000 | |
Goodwill | 6,011,000 | 1,000,000 |
Intangible assets | 12,991,000 | |
Deferred income taxes | 7,823,000 | 3,414,000 |
Other long-term assets | 666,000 | 448,000 |
Other long-term assets held for sale | 13,068,000 | |
Total assets | 92,496,000 | 75,703,000 |
Current liabilities: | ||
Revolving bank loan payable | 2,200,000 | |
Accounts payable and accrued expenses | 20,341,000 | 12,299,000 |
Short-term asset retirement obligation | 4,946,000 | 1,017,000 |
Short-term lease liabilities | 1,129,000 | |
Liability for unpaid claims covered by insurance | 840,000 | 874,000 |
Other current liabilities held for sale | 3,800,000 | |
Total current liabilities | 27,256,000 | 20,190,000 |
Long-term lease liabilities | 4,168,000 | |
Long-term compensation liability | 456,000 | |
Asset retirement obligation | 21,018,000 | 5,252,000 |
Other long-term liabilities | 2,303,000 | 1,193,000 |
Other long-term liabilities held for sale | 292,000 | |
SHAREHOLDERS' EQUITY | ||
Common shares, $.25 par value; authorized 3,000,000 shares; issued 2,574,264 shares | 643,000 | 643,000 |
Capital in excess of par value | 2,013,000 | 1,930,000 |
Retained earnings | 49,333,000 | 61,131,000 |
Treasury shares, 862,201 and 876,409 at cost | (14,694,000) | (14,928,000) |
Total shareholders' equity | 37,295,000 | 48,776,000 |
Total liabilities and shareholders' equity | $ 92,496,000 | $ 75,703,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 28, 2019 | Dec. 29, 2018 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common shares, par value (in dollars per share) | $ 0.25 | $ 0.25 |
Common shares, authorized shares | 3,000,000 | 3,000,000 |
Common shares, issued shares | 2,574,264 | 2,574,264 |
Treasury, shares | 862,201 | 876,409 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 28, 2019 | Sep. 29, 2018 | Sep. 28, 2019 | Sep. 29, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS | ||||
Net sales | $ 31,987 | $ 23,965 | $ 79,773 | $ 72,932 |
Type of Revenue [Extensible List] | us-gaap:ProductMember | us-gaap:ProductMember | us-gaap:ProductMember | us-gaap:ProductMember |
Costs and expenses: | ||||
Cost of sales (exclusive of depreciation, depletion and amortization) | $ 24,452 | $ 18,740 | $ 63,834 | $ 56,728 |
Depreciation, depletion and amortization | 597 | 393 | 1,369 | 1,203 |
Selling and administrative | 8,102 | 6,100 | 23,991 | 15,938 |
Charges related to write-off of deferred development | 6,840 | |||
Impairment related to cessation of mining an aggregate deposit | 20,217 | 20,217 | ||
Loss on legal settlement (Note 20) | 6,400 | 6,400 | ||
Gain on legal settlement (Note 14) | (14,781) | |||
Gain (loss) on disposition of property and equipment | 125 | (308) | ||
Total costs and expenses | 59,893 | 25,233 | 100,722 | 80,709 |
Operating loss | (27,906) | (1,268) | (20,949) | (7,777) |
Interest income | 39 | 14 | 349 | 59 |
Interest expense | (100) | (140) | (274) | (415) |
Other income (loss), net | (16) | (70) | 42 | (29) |
Loss from continuing operations before income taxes | (27,983) | (1,464) | (20,832) | (8,162) |
Benefit for income taxes | (7,699) | (366) | (5,730) | (2,040) |
Net loss from continuing operations | (20,284) | (1,098) | (15,102) | (6,122) |
(Loss) Income from discontinued operations net of income tax (benefit) provision | (138) | 3,304 | 806 | |
Net loss | (20,284) | (1,236) | (11,798) | (5,316) |
Retained earnings, beginning of period | 69,617 | 62,907 | 61,131 | 66,987 |
Retained earnings, end of period | $ 49,333 | $ 61,671 | $ 49,333 | $ 61,671 |
Basic and diluted loss per share: | ||||
Loss from continuing operations | $ (11.85) | $ (0.65) | $ (8.82) | $ (3.61) |
(Loss) income from discontinued operations | (0.08) | 1.93 | 0.47 | |
Basic and diluted (loss) income per share (in dollar per share) | $ (11.85) | $ (0.73) | $ (6.89) | $ (3.13) |
Average shares outstanding (in shares) | 1,712 | 1,698 | 1,712 | 1,697 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 28, 2019 | Sep. 29, 2018 | Sep. 28, 2019 | Sep. 29, 2018 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS | ||||
Income tax (benefit) provision | $ 0 | $ (46) | $ 1,255 | $ 268 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 28, 2019 | Sep. 29, 2018 | |
Operating activities | ||
Net cash provided (used) by continuing operations | $ 5,492 | $ (1,459) |
Net cash provided (used) by discontinued operations | 294 | (797) |
Net cash provided (used) by operating activities | 5,786 | (2,256) |
Investing activities: | ||
Capital expenditures by continuing operations | (973) | (963) |
Capital expenditures by discontinued operations | (172) | (1,439) |
Payments for acquisitions | (23,213) | |
Cash proceeds from sale of discontinued operations | 23,679 | |
Cash proceeds from sale of continuing operations property and equipment | 956 | |
Cash proceeds from sale of discontinued operations property and equipment | 1,403 | |
Net cash provided (used) in investing activities | 277 | (999) |
Financing activities: | ||
Borrowings on the revolving bank loan | 12,550 | 27,600 |
Repayments on the revolving bank loan | (14,750) | (24,400) |
Repayments of finance lease obligations | (36) | |
Payments to acquire treasury stock | (124) | |
Net cash (used) provided by financing activities | (2,360) | 3,200 |
Net increase (decrease) in cash and cash equivalents | 3,703 | (55) |
Cash and cash equivalents: | ||
Beginning of period | 594 | 507 |
End of period | 4,297 | 452 |
Cash paid during the year for: | ||
Interest, net | 284 | 404 |
Contingent consideration from acquisitions | 1,540 | |
Income taxes, net | $ 1,840 | $ 50 |
CONDENSED STATEMENT OF CHANGES
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common shares | Capital in excess of par | Retained earnings | Treasury shares | Total |
Balance at at Dec. 30, 2017 | $ 643 | $ 1,887 | $ 66,987 | $ (15,195) | $ 54,322 |
Balance at (in shares) at Dec. 30, 2017 | 2,574,264 | 892,097 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | (6,193) | (6,193) | |||
Compensation of Board of Directors by issuance of treasury shares | 43 | $ 271 | 314 | ||
Compensation of Board of Directors by issuance of treasury shares (in shares) | (16,000) | ||||
Purchase of treasury shares (in shares) | 112 | ||||
Balance at at Mar. 31, 2018 | $ 643 | 1,930 | 60,794 | $ (14,924) | 48,443 |
Balance (in shares) at Mar. 31, 2018 | 2,574,264 | 876,209 | |||
Balance at at Dec. 30, 2017 | $ 643 | 1,887 | 66,987 | $ (15,195) | 54,322 |
Balance at (in shares) at Dec. 30, 2017 | 2,574,264 | 892,097 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | (5,316) | ||||
Balance at at Sep. 29, 2018 | $ 643 | 1,930 | 61,671 | $ (14,928) | 49,316 |
Balance (in shares) at Sep. 29, 2018 | 2,574,264 | 876,409 | |||
Balance at at Mar. 31, 2018 | $ 643 | 1,930 | 60,794 | $ (14,924) | 48,443 |
Balance at (in shares) at Mar. 31, 2018 | 2,574,264 | 876,209 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | 2,113 | 2,113 | |||
Balance at at Jun. 30, 2018 | $ 643 | 1,930 | 62,907 | $ (14,924) | 50,556 |
Balance (in shares) at Jun. 30, 2018 | 2,574,264 | 876,209 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | (1,236) | (1,236) | |||
Purchase of treasury shares | $ (4) | (4) | |||
Purchase of treasury shares (in shares) | 200 | ||||
Balance at at Sep. 29, 2018 | $ 643 | 1,930 | 61,671 | $ (14,928) | 49,316 |
Balance (in shares) at Sep. 29, 2018 | 2,574,264 | 876,409 | |||
Balance at at Dec. 29, 2018 | $ 643 | 1,930 | 61,131 | $ (14,928) | 48,776 |
Balance at (in shares) at Dec. 29, 2018 | 2,574,264 | 876,409 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | 13,322 | 13,322 | |||
Compensation of Board of Directors by issuance of treasury shares | 83 | $ 358 | 441 | ||
Compensation of Board of Directors by issuance of treasury shares (in shares) | (21,000) | ||||
Purchase of treasury shares | $ (69) | (69) | |||
Purchase of treasury shares (in shares) | 3,368 | ||||
Balance at at Mar. 30, 2019 | $ 643 | 2,013 | 74,453 | $ (14,639) | 62,470 |
Balance (in shares) at Mar. 30, 2019 | 2,574,264 | 858,777 | |||
Balance at at Dec. 29, 2018 | $ 643 | 1,930 | 61,131 | $ (14,928) | 48,776 |
Balance at (in shares) at Dec. 29, 2018 | 2,574,264 | 876,409 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | (11,798) | ||||
Balance at at Sep. 28, 2019 | $ 643 | 2,013 | 49,333 | $ (14,694) | 37,295 |
Balance (in shares) at Sep. 28, 2019 | 2,574,264 | 862,201 | |||
Balance at at Mar. 30, 2019 | $ 643 | 2,013 | 74,453 | $ (14,639) | 62,470 |
Balance at (in shares) at Mar. 30, 2019 | 2,574,264 | 858,777 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | (4,836) | (4,836) | |||
Purchase of treasury shares | $ (29) | (29) | |||
Purchase of treasury shares (in shares) | 1,752 | ||||
Balance at at Jun. 29, 2019 | $ 643 | 2,013 | 69,617 | $ (14,668) | 57,605 |
Balance (in shares) at Jun. 29, 2019 | 2,574,264 | 860,529 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | (20,284) | (20,284) | |||
Purchase of treasury shares | $ (26) | (26) | |||
Purchase of treasury shares (in shares) | 1,672 | ||||
Balance at at Sep. 28, 2019 | $ 643 | $ 2,013 | $ 49,333 | $ (14,694) | $ 37,295 |
Balance (in shares) at Sep. 28, 2019 | 2,574,264 | 862,201 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Sep. 28, 2019 | |
BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | 1. Basis of Presentation: Basis of Presentation : The unaudited interim condensed consolidated financial statements included herein are prepared pursuant to the Securities and Exchange Commission (the “Commission”) rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual consolidated financial statements have been omitted. The condensed consolidated balance sheet of Continental Materials Corporation (the “Company”) as of December 29, 2018 has been derived from the audited consolidated balance sheet of the Company as of that date. The interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest annual report on Form 10-K. In the opinion of management, the condensed consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair statement of the results for the interim periods and to ensure the financial statements are not misleading. Certain reclassifications have been made to the 2018 consolidated financial statements to conform to the 2019 presentation. The reclassifications had no effect on the consolidated results of operations, the net change in cash or the total assets, liabilities or shareholders’ equity of the Company. During the quarter ended March 30, 2019 the Company sold substantially all of the assets of Transit Mix Concrete Company’s ready-mix business and Daniels sand operation. The assets and liabilities related to these operations are presented as held for sale in accordance with generally accepted accounting principles. See Note 15. Accordingly, the operations of these businesses are presented as discontinued operations for all periods presented. Revenue Recognition : Effective December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments, which creates a single source of revenue guidance for all companies in all industries and is more principles-based than previous revenue guidance. The Company adopted the standard using the modified retrospective approach. The adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems or controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. Sales are recognized when control of the promised goods or services transfers to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s payment terms generally range between 30 to 90 days after invoice is billed to the customer. Sales are reported net of sales tax. Shipping and other transportation costs paid by the Company and rebilled to the buyer are recorded gross (as both sales and cost of sales). The Company generally recognizes revenue from the sale of products at the time the products are shipped. While the return of products is generally not allowed, some large customers have been granted the right to return a certain amount at the end of the normal selling season for seasonal products. Sales returns and allowances are estimated based on current program terms and historical experience. Provisions for estimated returns, discounts, volume rebates and other price adjustments are provided for in the same period the related revenues are recognized and are netted against revenues. The Company is responsible for warranties related to the manufacture of its HVAC products and estimates the future warranty claims based upon historical experience and management estimates. The Company reviews warranty and related claims activities and records provisions as necessary. The Company performs installation services for certain projects within its Door segment. Management determined there are two performance obligations related to most of these contracts, the equipment and the installation services. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone selling price. Revenue is recognized at a point in time as each performance obligation is completed. No maintenance or service contracts are offered by the Company. Certain reclassifications have been made to prior period financial information in order to conform to the current period’s presentation, including a change to the Company’s reporting segments. See Note 7 for further information and for disaggregation of revenue by segment. Leases Effective December 30, 2018 (the beginning of fiscal 2019) the Company adopted ASU No. 2016-02, Leases (Topic 842), which superseded Topic 840, “Leases”. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components for asset categories, except office space, and to exclude short-term leases from its Consolidated Balance Sheet. For the office space lease category the election was made to report lease and non-lease components separately as the non-lease components are billed and paid separately and are not a fixed amount over the lease term. The implicit discount rate of leases is used to calculate present values when available. When an implicit discount rate is not readily available an incremental borrowing rate is used to calculate present values. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 28, 2019 | |
INCOME TAXES | |
INCOME TAXES | 2. Income taxes are accounted for under the asset and liability method that requires deferred income taxes to reflect the future tax consequences attributable to differences between the tax and financial reporting bases of assets and liabilities. Deferred tax assets and liabilities recognized are based on the tax rates in effect in the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, based on available positive and negative evidence, it is “more likely than not” (greater than a 50% likelihood) that some or all of the net deferred tax assets will not be realized. The Tax Cuts and Jobs Act, enacted December 22, 2017, eliminated the corporate Alternative Minimum Tax (AMT) and allows for all existing credit carryforwards to be used to offset regular tax liability for tax years beginning after December 31, 2017. Additionally, for tax years 2018, 2019 and 2020, to the extent that the AMT credit carryover exceeds the regular tax liability, 50% of the excess AMT credit is refundable. Any remaining credits will be fully refundable in 2021. For state tax purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. California Enterprise Zone credits can be used through 2023 while Colorado credits can be carried forward for 7 years. The Company has established a valuation reserve related to a portion of the California Enterprise Zone credit not expected to be utilized prior to expiration. The Company’s income tax returns are subject to audit by the Internal Revenue Service (IRS) and state tax authorities. The amounts recorded for income taxes reflect the Company’s tax positions based on research and interpretations of complex laws and regulations. The Company accrues liabilities related to uncertain tax positions taken or expected to be taken in its tax returns. The Company did not identify any such uncertain tax positions as of September 28, 2019 or December 29, 2018. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 28, 2019 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 3. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the assumptions that market participants would use when pricing the asset or liability including assumptions about risk. The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheet: Cash and Cash Equivalents: The carrying amount approximates fair value and was valued as Level 1. Revolving Bank Loan Payable: Fair value is estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of the Revolving Bank Loan Payable represents a reasonable estimate of the corresponding fair value as the Company’s debt is held at variable interest rates and was valued as Level 2. Phantom equity and phantom equity appreciation liability awards: Fair value is estimated based on the use of a Black-Scholes option pricing model based on publically available inputs. The carrying amount of the liability represents a reasonable estimate of the vested portion of the corresponding fair value of the awards granted and was valued as Level 2. Contingent consideration: Fair value is estimated based on the use of a Monte Carlo Simulation model based on significant inputs that are not observable in the market, which are considered Level 3 inputs in accordance with ASC Topic 820. ARO for asset impairment: Fair value is estimated using an expected present value technique using estimated cash flows over a period of time and then discounting the expected cash flows using a credit-adjusted risk-free interest rate using significant inputs that are not observable in the market, which are considered Level 3 inputs in accordance with ASC Topic 820. There were no transfers between fair value measurement levels of any financial instruments in the current quarter. |
RECENTLY ISSUED ACCOUNTING PRON
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 28, 2019 | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 4. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This new revenue standard created a single source of revenue guidance for all companies in all industries and is more principles-based than prior revenue guidance. Subsequently, the FASB issued various ASUs to provide further clarification around certain aspects of ASC 606. This standard was adopted by the Company in the first quarter of fiscal 2018. See Note 1 for further discussion of the Company’s revenue recognition policies and practices. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), requiring that the statement of cash flows explain the change in total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This standard was adopted by the Company in the first quarter of fiscal 2018 and did not have a material impact to the consolidated statement of cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which superseded Leases (Topic 840). The new accounting standard was effective for the Company beginning on December 30, 2018 (the beginning of fiscal 2019) and required the recognition on the balance sheet of right-of-use assets (ROU) and lease liabilities for all long-term leases, including operating leases. The Company elected the optional transition method and adopted the new guidance on December 30, 2018 on a modified retrospective basis with no restatement of prior period amounts. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components for most asset categories and to exclude short-term leases from its Consolidated Balance Sheet. The Company’s adoption of the new standard resulted in the recognition of ROUs of $5,353,000 and liabilities of $5,427,000 related to operating leases, with no material cumulative effect adjustment to equity as of the date of adoption. In connection with the adoption of this guidance, as required, the Company reclassified deferred rent liabilities as reductions to lease assets. Adoption of the new standard did not have a material impact on the Company’s Consolidated Statements of Income or Cash Flows. See Note 13. There are no other significant prospective accounting pronouncements that are expected to have a material effect on the Company’s consolidated financial statements. |
SEASONALITY AND CURRENT ECONOMI
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | 9 Months Ended |
Sep. 28, 2019 | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | 5. Historically, operating results of the Company for the first half of the year were not necessarily indicative of performance for the entire year due to the seasonality of most of the Company’s products. Management believes the recent disposal and acquisition activity should help smooth the seasonality of the Company’s portfolio and make operating results more consistent. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 28, 2019 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 6. There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month or nine-month periods ended September 28, 2019 and September 29, 2018 as the Company does not have any dilutive instruments. |
INDUSTRY SEGMENT INFORMATION
INDUSTRY SEGMENT INFORMATION | 9 Months Ended |
Sep. 28, 2019 | |
INDUSTRY SEGMENT INFORMATION | |
INDUSTRY SEGMENT INFORMATION | 7. The Company sold substantially all of the assets of its ready mix concrete and Daniels sand operations in the first quarter of 2019. See Note 15. During the second quarter of 2019, the Company acquired the assets of four operating businesses through three separate transactions. See Note 16 for additional discussion of the acquisitions. In conjunction with these transactions management reviewed its segment reporting structure and determined it was no longer appropriate for the consolidated business going forward. The segment reporting was revised to align with the way the Company’s decision makers evaluate, manage and allocates resources to the operating businesses after the sale of the concrete and aggregates assets of the Company’s wholly-owned subsidiaries (collectively referred to as TMC) and the acquisitions discussed below. Segment information for prior periods has been reclassified to conform to current segment reporting structure. The Company operates primarily in the Building Products industry group. Within this industry group the Company has identified three reportable segments: the HVAC segment, the Door segment and the Construction Materials segment. The HVAC segment produces and sells a variety of products including wall furnaces, fan coils, evaporative coolers, boiler room equipment and dryer boxes and related accessories from the Company’s wholly-owned subsidiaries, Williams Furnace Co. (WFC) of Colton, California, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona, Global Flow Products /American HVAC (GFP) of Broken Arrow, Oklahoma, and Inovate Dryer Technologies (Inovate) of Jupiter, Florida. Sales of this segment are nationwide although WFC and PMI sales are more concentrated in the southwestern United States. The Door segment sells hollow metal and wood doors, door frames and related hardware, sliding door systems and electronic access and security systems from the Company’s wholly-owned subsidiaries: McKinney Door and Hardware, Inc. (MDHI), Fastrac Building Supply (Fastrac) and Serenity Sliding Door Systems (Serenity), which operate out of facilities in Pueblo and Colorado Springs, Colorado. Sales of this segment are concentrated in Colorado, California and the Northwestern United States although door sales are also made throughout the United States. The Construction Materials segment offers aggregates and construction supplies from locations along the Southern Front Range of Colorado operated by the Company’s wholly-owned subsidiaries, Castle Aggregates and Castle Rebar & Supply of Colorado Springs, and TMOP Legacy Company (formerly Transit Mix of Pueblo, Inc.) of Pueblo, Colorado (the three companies collectively are referred to as the Castle Companies). During the quarter ended September 28, 2019 the Company determined to cease mining at its Pikeview aggregates quarry as continuing mining operations was no longer in the best interest of the consolidated portfolio. Accordingly, the Company recognized a $20,217,000 charge to record the reclamation liability associated with the property. The Company expects most of the reclamation to be completed by an outside party over approximately the next five years. See Note 19 for additional discussion. In addition to the above reporting segments, an “Unallocated Corporate and Other” classification is used to report the unallocated expenses of the corporate office, which provides treasury, insurance and tax services as well as strategic business planning and general management services. Expenses related to the corporate information technology group are allocated to all locations, including the corporate office. The classification also includes expenses related to a property held by the Company which are not material to the consolidated Company. The Company evaluates the performance of its segments and allocates resources to them based on a number of criteria including operating income, return on investment and other strategic objectives. Operating income is determined by deducting operating expenses from all revenues. In computing operating income, none of the following has been added or deducted: unallocated corporate expenses, interest, other income or loss or income taxes. The following table presents information about reported segments for the nine-month and three-month periods ended September 28, 2019 and September 29, 2018 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands): Construction Unallocated Held for HVAC Doors Materials Corporate Sale Total Nine Months ended September 28, 2019 Revenues from external customers $ 57,712 $ 17,483 $ 4,579 $ 0 $ — $ 79,773 Depreciation, depletion and amortization 842 199 276 54 — 1,369 Operating income (loss) (837) 1,288 (15,105) (6,295) — (20,949) Segment assets 53,540 13,607 9,799 15,550 — 92,496 Capital expenditures 479 72 407 15 — 973 Three Months ended September 28, 2019 Revenues from external customers $ 23,702 $ 6,787 $ 1,515 $ (16) $ — $ 31,987 Depreciation, depletion and amortization 320 111 142 26 — 597 Operating income (loss) 1,499 295 (28,288) (1,412) — (27,906) Segment assets 53,540 13,607 9,799 15,550 — 92,496 Capital expenditures (b) 286 (36) 275 — — 525 Construction Unallocated Held for HVAC Doors Materials Corporate Sale Total Nine Months ended September 29, 2018 Revenues from external customers $ 52,294 $ 14,824 $ 5,746 $ 68 $ — $ 72,932 Depreciation, depletion and amortization 809 123 238 33 — 1,203 Operating income (loss) 83 1,787 (6,439) (3,208) — (7,777) Segment assets (a) 29,003 8,003 11,315 3,346 24,036 75,703 Capital expenditures 642 94 181 46 — 963 Three Months ended September 29, 2018 Revenues from external customers $ 17,163 $ 4,746 $ 2,021 $ 35 $ — $ 23,965 Depreciation, depletion and amortization 268 41 74 10 — 393 Operating income (loss) (511) 431 121 (1,309) — (1,268) Segment assets (a) 29,003 8,003 11,315 3,346 24,036 75,703 Capital expenditures (b) 377 61 142 (5) — 575 (a) Segment assets are as of December 29, 2018. (b) Capital expenditures are presented on the accrual basis of accounting. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 28, 2019 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | 8. On October 16, 2019 an Order of Dismissal was entered regarding the Company’s previously disclosed litigation, Continental Materials Corporation v. Valco, Inc., Civil Action No. 2014-cv-2510, filed in the United States District Court for the District of Colorado. The suit regarded a Fee Sand and Gravel Lease (Lease) between the Company as Lessee and Valco, Inc. (Valco) as Lessor that called for the payment of royalties over the life of the Lease on an agreed 50,000,000 tons of sand and gravel reserves. In the suit the Company sought declaratory judgment and damages pursuant to the Lease on the grounds that Agreed Sand and Gravel Reserves of 50 million tons did not exist, and for other relief including return of approximately $1,470,000 in royalty payments made by the Company to Valco in excess of tonnage actually produced (Prepayments). Based on information obtained through discovery, the Company alleged, in addition to the abovementioned claims, nondisclosure or concealment by Valco of material facts concerning the existence of Agreed Sand and Gravel Reserves of 50 million tons, and breach of warranty concerning the same. Valco asserted counterclaims against the Company alleging breach of contract and seeking declaratory judgment regarding the Company’s refusal to make further royalty payments under the Lease. In the ordinary course of business and absent any breach by Valco, the Company was required to make quarterly royalty payments amounting to not less than $300,000 in a calendar year. In response to Valco’s breaches of contract, the Company stopped making royalty payments at the start of the 2015 calendar year. Subsequent to the end of the third quarter, on October 9, 2019, the Company and Valco filed a Joint Notice of Settlement stating that the parties had reached a settlement agreement resolving all claims. Trial had previously been scheduled for October 21, 2019. On October 16, 2019, the Company and Valco filed a Stipulated Motion for Dismissal with Prejudice which stated: the parties “agree that this matter, including all claims and counterclaims, dismissed with prejudice and without costs, each party to bear its own attorneys’ fees.” The Court entered the Order of Dismissal with Prejudice on October 16, 2019. See Note 20 for additional discussion. |
NON-EMPLOYEE DIRECTORS SHARE-BA
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | 9 Months Ended |
Sep. 28, 2019 | |
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | |
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | 9. The Company issued a total of 21,000 shares to the seven eligible board members effective February 7, 2019 as full payment for their 2019 retainer fee. The Company issued a total of 16,000 shares to the eight eligible board members effective January 16, 2018 as full payment for their 2018 retainer fee. All shares were issued under the 2010 Non-Employee Directors Stock Plan and pursuant to private offering exemptions available under Regulation D or Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). |
REVOLVING BANK LOAN AND LONG-TE
REVOLVING BANK LOAN AND LONG-TERM DEBT | 9 Months Ended |
Sep. 28, 2019 | |
REVOLVING BANK LOAN AND LONG-TERM DEBT | |
REVOLVING BANK LOAN AND LONG-TERM DEBT | 10. The Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) effective November 18, 2011. The Company entered into the Tenth Amendment to Credit Agreement effective March 22, 2019. The Company had previously entered into nine separate amendments to the Credit Agreement. Cumulatively, the amendments were entered into by the Company to, among other things, (i) modify certain of the financial covenants, (ii) adjust the amount of the Revolving Commitment, (iii) terminate the Term Loan Commitment upon the repayment in full of the outstanding principal balance (and accrued interest thereon) of the Term Loan, (iv) modify the Borrowing Base calculation to provide for borrowing availability in respect of new Capital Expenditures, (v) decrease the interest rates on the Revolving Loans, (vi) extend the maturity date and (vii) decrease the Letter of Credit fee rate. Borrowings under the Credit Agreement are secured by the Company’s accounts receivable, inventories, machinery, equipment, vehicles, certain real estate and the common stock of all of the Company’s subsidiaries. Borrowings under the Credit Agreement bear interest based on a London Interbank Offered Rate (LIBOR) or prime rate based option. The Company was not in compliance with the Fixed Coverage Charge Ratio as of September 28, 2019. The lender has provided a waiver of the covenant violation for the period ended September 28, 2019. The Company and the lender will work to address terms of the existing loan agreement prior to the end of the fiscal year ending December 28, 2019. The Credit Agreement either limits or requires prior approval by the lender of additional borrowings, acquisition of stock of other companies, purchase of treasury shares and payment of cash dividends. Payment of accrued interest is due monthly or at the end of the applicable LIBOR period. The Credit Agreement as amended provides for the following: · The Revolving Commitment is $20,000,000. · Borrowings under the Revolving Commitment are limited to (a) 80% of eligible accounts receivable, (b) the lesser of 50% of eligible inventories and $8,500,000 plus (c) 80% of new qualifying Capital Expenditures not to exceed $5,500,000 in any fiscal year (excluding the aggregate amount of any Capital Expenditures financed with the proceeds of a Revolving Line Advance). · The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.06 to 1.0 for each trailing twelve month period measured at the end of each Fiscal Quarter. · The maturity date of the credit facility is May 1, 2020. · Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.25% or the prime rate. Definitions under the Credit Agreement as amended are as follows: · Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA, as defined, minus (ii) the sum of income taxes paid in cash, the amount expended related to the development of the mining property discussed in Note 12 and all unfinanced capital expenditures to (b) the sum for such period of interest expense related to the Credit Agreement. · EBITDA means for any Computation Period (or another time period to the extent expressly provided for in the Credit Agreement) the sum of the following with respect to the Company and its Subsidiaries each as determined in accordance with GAAP: (a) Consolidated Net Income, plus (b) federal, state and other income taxes deducted in the determination of Consolidated Net Income, plus (c) Interest Expense deducted in the determination of Consolidated Net Income, plus (d) depreciation, depletion and amortization expense deducted in the determination of Consolidated Net Income, plus (e) non-recurring fees and costs paid by the Company in respect of the following: (i) fees and due diligence costs associated with the Company’s permitted acquisitions; (ii) legal fees and costs associated with the Valco trial preparation; (iii) executive recruitment fees for the Company’s new Chief Financial Officer and Chief Operating Officer; and (iv) additional fees and costs associated with the exploration of the Company’s Hitch Rack Ranch facility in Colorado Springs, Colorado to determine the suitability for mining and the pursuit of mining permits, plus (f) any other non-cash charges and any extraordinary charges deducted in the determination of Consolidated Net Income, including any asset impairment charges (including write downs of goodwill), minus (g) any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations included in the determination of Consolidated Net Income. Outstanding funded revolving debt was zero as of September 28, 2019 compared to $2,200,000 as of December 29, 2018. The highest balance outstanding during the first nine months of 2019 and 2018 was $2,200,000 and $9,800,000, respectively. Average outstanding funded debt was $405,000 and $6,188,000 for the first nine months of 2019 and 2018, respectively. At September 28, 2019, the Company had outstanding letters of credit totaling $5,620,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future. The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended |
Sep. 28, 2019 | |
LEGAL PROCEEDINGS | |
LEGAL PROCEEDINGS | 11. The Company is involved in litigation matters related to its business. In the Company’s opinion, none of these proceedings, when concluded, will have a material adverse effect on the Company’s consolidated results of operations or financial condition as the Company has established adequate accruals for matters that are probable and estimable. The Company does not accrue estimated future legal costs related to the defense of these matters but rather expenses legal costs as incurred. See Note 8 for additional discussion. |
WRITE OFF OF DEFERRED DEVELOPME
WRITE OFF OF DEFERRED DEVELOPMENT | 9 Months Ended |
Sep. 28, 2019 | |
WRITE OFF OF DEFERRED DEVELOPMENT | |
WRITE OFF OF DEFERRED DEVELOPMENT | 12. During July 2015, TMC began development of a granite mining property south of Colorado Springs. Prior to beginning the development process, the Company deposited $2,500,000 in an escrow account per agreement with the land owner. This amount was previously included in Other long-term assets on the Consolidated Balance Sheet. The development costs included drilling the property to ascertain its suitability for mining, engineering studies and legal expenses related to the preparation of TMC’s application to obtain the required mining permits from the State of Colorado and El Paso County. TMC made its initial application for a mining permit from the state of Colorado in 2016. TMC filed its second application to the state in November 2017, which was rejected on April 26, 2018. The Company wrote off all capitalized costs associated with the permit application in the first half of 2018, a total of $6,840,000. As of September 28, 2019 and December 29, 2018 the $2,500,000 escrow balance mentioned above was included in Other current assets as the Company has begun the process to settle the account and recover the funds. |
LEASES
LEASES | 9 Months Ended |
Sep. 28, 2019 | |
LEASES | |
LEASES | 13. The Company adopted ASU No. 2016-02 Leases (Topic 842) on December 30, 2018 (the beginning of fiscal 2019), resulting in the recognition of operating right-of-use assets of $5,353,000 and operating lease liabilities of $5,427,000. The Company has entered into lease arrangements for office space, manufacturing facilities, water rights and certain equipment. A number of the leases include one or more options to renew the lease terms, purchase the leased property or terminate the lease. The exercise of these options is at the Company’s discretion and is therefore recognized on the balance sheet when it is reasonably certain the Company will exercise such options. Substantially all of the Company’s leases are considered operating leases. Finance leases were not material as of September 28, 2019 or for the three months ended September 28, 2019. The following table displays the undiscounted cash flows related to operating leases as of September 28, 2019, along with a reconciliation to the discounted amount recorded on the September 28, 2019 Consolidated Balance Sheet (amounts in thousands): OPERATING LEASE LIABILITIES 2019 $ 342 2020 1,402 2021 1,389 2022 1,307 2023 761 Thereafter 910 Total lease payments 6,111 Less: interest (814) Present value of operating lease liabilities $ 5,297 Short-term lease cost represents the Company’s cost with respect to leases with a duration of 12 months or less and are not reflected on the Company’s Consolidated Balance Sheet. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. For the three and nine months ended September 28, 2019 operating lease cost was $628,000 and $1,459,000, respectively, including $274,000 and $484,000 of short-term lease costs. Cash paid for amounts included in the measurement of lease liabilities for the three and nine months ended September 28, 2019 was $396,000 and $1,014,000, respectively. New leases entered into during the three and nine month periods ended September 28, 2019 resulted in the recognition of operating right-of-use assets and lease liabilities of $60,000 and $649,000, respectively. At September 28, 2019 the weighted-average remaining lease term and discount rate for operating leases was 4.9 years and 6.0%, respectively. |
LEGAL SETTLEMENT
LEGAL SETTLEMENT | 9 Months Ended |
Sep. 28, 2019 | |
LEGAL SETTLEMENT | |
LEGAL SETTLEMENT | 14. On January 15, 2019, the Company reached an amicable resolution to a business dispute by way of a settlement agreement. Pursuant to the settlement agreement, the Company received $15,000,000. The other party and the Company further agreed to set up a joint escrow account to support certain conditions in the agreement. The Company’s contribution to the escrow account was approximately $200,000. The Settlement Agreement does not contain any admission of liability, wrongdoing, or responsibility by any of the parties. |
SALE OF TMC ASSETS
SALE OF TMC ASSETS | 9 Months Ended |
Sep. 28, 2019 | |
SALE OF TMC ASSETS | |
SALE OF TMC ASSETS | 15. On February 1, 2019, the Company and certain of its subsidiaries sold substantially all of the real property, tangible personal property and executory contracts of TMC’s ready-mix business and the operations of Daniels Sand Company (Daniels) to Aggregate Industries — WCR, Inc. (the Buyer), a Colorado corporation for $27,129,000. The purchase price was paid to the Company on February 1, 2019 less certain amounts to be held in escrow, as provided in the Asset Purchase Agreement among the Company parties and the Buyer (Purchase Agreement), to secure the Company’s obligations to pay its working capital adjustment and indemnification obligations under the Purchase Agreement. The escrow also retained amounts to be held pending the subdivision of certain real property to be sold to the Buyer at a subsequent date as included in the Purchase Agreement. Combined escrow amounts of $2,049,000 were included in Other current assets in the Consolidated Balance Sheet at September 28, 2019. The Company retained the aggregates operations and retail building materials business of TMC and all related assets and liabilities. These operations include the Pikeview quarry (see Note 19) business located in Colorado Springs, the aggregates mining business located in Pueblo, the sand and gravel mining business located in Fremont County, and the retail building materials business at sites located in Colorado Springs and Pueblo. In the quarter ended March 30, 2019, the Company recorded a $6,508,000 pre-tax gain on the sale of TMC assets. During the quarter ending June 29, 2019 the working capital adjustment was finalized and resulted in the Company paying a net $1,248,000 to the Buyer. This adjustment, plus an adjustment to transaction fees, reduced the pre-tax gain on the sale to $5,283,000. The operations of the ready-mix and Daniels sand businesses were classified as discontinued operations and assets held for sale for all periods presented. General corporate overhead charges were not allocated to discontinued operations. Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Revenue $ - $ 17,013 $ 4,058 $ 48,219 Costs and expenses - 16,005 3,900 44,457 Depreciation, depletion and amortization - 288 578 862 Selling and administrative - 907 304 2,718 Gain on sales of equipment - 3 - 892 (Loss) gain on sale of assets - - 5,283 - Pre-tax (loss) income $ - $ (184) $ 4,559 $ 1,075 The results of discontinued operations are summarized as follows: Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Operating income (loss) $ - $ (184) $ (724) $ 1,075 Gain on sale of assets - — 5,283 — Income tax (benefit) provision - (46) 1,255 268 Loss (income) from discontinued operations $ - $ (138) $ 3,304 $ 806 The assets and liabilities held for sale related to TMC’s ready-mix and Daniels sand businesses were as follows: SEPTEMBER 28, DECEMBER 29, 2019 2018 Accounts receivable, net $ — $ 9,054 Inventory — 1,914 Property, plant and equipment, net — 6,741 Other assets — 6,327 Total assets held for sale $ — $ 24,036 Accounts payable and accrued expenses $ $ 3,800 Other long-term liabilities — 292 Total liabilities held for sale $ — $ 4,092 |
ASSETS ACQUISITIONS
ASSETS ACQUISITIONS | 9 Months Ended |
Sep. 28, 2019 | |
ASSETS ACQUISITIONS | |
ASSETS ACQUISITIONS | 16. During the quarter ended June 29, 2019 the Company completed three different asset purchase transactions, acquiring the assets of four operating businesses. On May 20, 2019 the Company acquired the assets of Serenity and Fastrac, both based in Colorado Springs, Colorado, using available cash reserves. Serenity is a proprietary sliding door system providing superior sound attenuation, sold primarily into healthcare markets across the country. Fastrac is a leading supplier of commercial doors and hardware to healthcare and hospitality customers across the country. Serenity continues to operate as a stand-alone business while Fastrac operations were consolidated with the Company’s existing portfolio company, McKinney Door and Hardware, which has similar operations. The results of the acquisition of Serenity and Fastrac are included in the Company’s Consolidated Financial Statements from the date of acquisition. Both companies are included in the Door segment for reporting purposes. On June 3, 2019 the Company acquired the assets of American Wheatley HVAC and Global Flow Products (together “GFP”), based in Broken Arrow, Oklahoma using available cash reserves. GFP sells American Wheatley HVAC branded products, including a broad line of ASME pressure vessels, custom fabricated products, valves, strainers and other hydronic accessories to commercial HVAC customers. The results of the acquisition of GFP are included in the Company’s Consolidated Financial Statements from the date of acquisition. GFP is included in the HVAC segment for reporting purposes. These two transactions are not considered material individually. However, they are considered material in the aggregate. The total purchase price paid for these transactions was $12,685,000, subject to a traditional post-closing working capital adjustment currently estimated to be $778,000, with approximately $12,163,000 paid in cash at closing. The Company will pay additional contingent consideration, if earned, in the form of an earn out amount pursuant to the terms of earn out agreements in amounts of up to $4,300,000, the payment of which is subject to certain conditions and the successful achievement of gross profit growth targets for the acquired businesses following the closing of the transactions over a period of twenty-four (24) to thirty-six (36) months. Approximately $1,300,000 has been accrued based on estimated fair values of these earn out agreements. We acquired trade receivables of $1,787,000, inventory of $1,269,000, property and equipment of $2,530,000, other assets of $250,000, intangibles of $4,302,000 and goodwill of $3,675,000 and retained liabilities of $1,128,000. The current value assigned to trade receivables represents anticipated fair market value. These values are management’s current estimates of fair value and may change as additional information becomes available over the next several months. The working capital adjustment has not been finalized on either transaction and work continues on final valuation of the fair value of assets and liabilities including receivables, inventory, fixed assets, intangibles, goodwill and accounts payable. Transaction costs, included in Selling and administrative expenses on the Condensed Consolidated Statements of Operations for the three and nine month periods ended September 28, 2019, were $66,000 and $1,177,000, respectively. On June 17, 2019 the Company acquired the assets of Inovate, a supplier of commercial and residential dryer and HVAC venting systems and components. The total purchase price for the net assets acquired was $11,505,000, including a post-closing working capital adjustment of $84,000, with approximately $11,050,000 paid in cash at closing, using available cash reserves. The Company will pay additional contingent consideration, if earned, in the form of an earn out amount pursuant to the terms of an earn out agreement in an amount of up to $1,250,000, the payment of which is subject to certain conditions and the successful achievement of gross profit growth targets for the acquired business following the closing of the transaction over a period of twelve (12) months. Approximately $240,000 has been accrued based on an estimated fair value of this earn out agreement. The results of the acquisition of Inovate are included in the Company’s Consolidated Financial Statements from the date of acquisition. Transaction costs included in Selling and administrative expense on the Condensed Consolidated Statement of Operations for the three and nine months ended September 28, 2019 were $39,000 and $515,000, respectively. In accordance with GAAP, the total purchase price has been allocated to the tangible and intangible net assets acquired based on management’s preliminary estimates of their fair values and may change as additional information becomes available over the next several months. The working capital adjustment was finalized although work continues on final valuation of the fair value of assets and liabilities including receivables, inventory, fixed assets, intangibles, goodwill and accounts payable. The condensed balance sheet of Inovate at the acquisition date was as follows: Purchase price $ 11,505 Accounts receivable, net 1,448 Other tangible assets 578 Intangible assets 8,808 Accounts payable and accrued expenses (665) Total identifiable net assets 10,169 Goodwill $ 1,336 Accounts receivable are valued at anticipated fair market value and are not materially different from contracted value. The following table presents selected unaudited pro forma information for the Company assuming the acquisition of Inovate had occurred as of December 31, 2017. This pro forma information does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods. Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Revenue $ 31,987 $ 27,407 $ 87,575 $ 83,573 Pre-tax (loss) income from continuing operations $ (27,983) $ (669) $ (19,706) $ (6,074) Basic and diluted (loss) earnings per share: From continuing operations $ (11.85) $ (0.28) $ (8.34) $ (2.53) Average shares outstanding 1,712 1,698 1,712 1,697 Per ASC 805, the chart below summaries the comparative financial statements for revenue and earnings as if all the acquisitions occurred at the beginning of the respective period. Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Revenue $ 31,987 $ 30,982 $ 96,751 $ 92,170 Pre-tax (loss) income from continuing operations $ (27,983) $ 75 $ (17,526) $ (4,026) Revenue of the acquired companies increased total revenue by 24.3% in the third quarter of 2019. The impact of the acquired companies on earnings for the current year quarter was not material. Total goodwill added to the Consolidated Balance Sheet due to acquisition activity during the second quarter of 2019 was $5,011,000. The goodwill is attributable to the skills and technical talent of the established work force at each of the acquired businesses and synergies expected to be achieved from integrating the individual acquired business operations in to the Company’s existing consolidated business portfolio. This amount is attributable to the HVAC and Door segments in the amounts of $2,817,000 and $2,194,000, respectively. The goodwill amounts are not final and are subject to change as additional information is obtained over the coming months. Additionally, goodwill deductible for tax purposes is still being determined. |
AMORTIZABLE INTANGIBLE ASSETS
AMORTIZABLE INTANGIBLE ASSETS | 9 Months Ended |
Sep. 28, 2019 | |
AMORTIZABLE INTANGIBLE ASSETS. | |
AMORTIZABLE INTANGIBLE ASSETS | 17. Identifiable amortizable intangible assets as of September 28, 2019 include trade names, intellectual property and customer related intangibles. These intangibles were all related to acquisition activity in the second quarter 2019 and are still in the process of being finalized. The amounts are subject to change as additional information is obtained over the coming months. See Note 16 for additional discussion. Collectively, these assets were carried at $12,991,000, net of $119,000 accumulated amortization as of September 28, 2019. The pre-tax amortization expense for intangible assets during the quarters ended September 28, 2019 and September 29, 2018 was $119,000 and zero, respectively. Based upon the intangible assets recorded on the balance sheet at September 28, 2019, amortization expense for the next five years is estimated to be as follows: 2019 – $337,000; 2020 through 2023 – $675,000 each year. |
EQUITY COMPENSATION
EQUITY COMPENSATION | 9 Months Ended |
Sep. 28, 2019 | |
EQUITY COMPENSATION | |
EQUITY COMPENSATION | 18. The Company adopted the Continental Materials Corporation Value Creation Incentive Plan (the “VCIP”) effective July 1, 2019. The VCIP is designed to attract and retain key management personnel by providing an incentive and reward for selected executive officers and employees of the Company. The VCIP involves only the payment of cash, not the issuance of common stock, based on appreciation of Phantom Equity or Phantom Equity Appreciation Rights (PE or PEARs, respectively) of the defined business unit, over a certain period of time. Fair value of the PE or PEAR awards was measured as of the balance sheet date presented. The awards vest over a period of four or five years and are payable over a three-year period following vesting. At September 28, 2019 total future compensation expense related to unvested awards yet to be recognized by the Company was approximately $2,796,000. This expense is expected to be recognized over a weighted-average remaining vesting period of approximately 4.3 years. The Company used the Black-Scholes option pricing model as its method for determining fair value of the awards. The compensation expense related to the awards is recognized over the vesting period for each award. For the three and nine month periods ended September 28, 2019 the Company’s net loss included $156,000 of stock-based compensation. The total liability related to the PE and PEAR awards was $456,000, which includes $300,000 from an acquisition recorded at the opening balance sheet date, and is included as Long-term compensation on the Consolidated Balance Sheet as of September 28, 2019. |
RECLAMATION ACCRUAL
RECLAMATION ACCRUAL | 9 Months Ended |
Sep. 28, 2019 | |
RECLAMATION ACCRUAL | |
RECLAMATION ACCRUAL | 19. During the quarter ended September 28, 2019 the Company made a strategic decision to cease mining operations at its Pikeview quarry in Colorado Springs, Colorado as it was no longer in the best economic interest of the consolidated portfolio to continue operations. The Company has a legal obligation to complete reclamation of the property as required by its mining permits with the State of Colorado. Generally accepted accounting principles require the recognition of a liability in the period in which it is incurred if a reasonable estimate of fair value can be made. Prior to cessation of mining, reclamation was performed concurrently by backfilling mined areas with overfill from current mining. The reclamation costs were reported as operating expense as the Company could not reasonably estimate the ultimate liability. Since the Company will no longer perform concurrent reclamation and can now reasonably estimate the cost of final reclamation, an asset retirement obligation (ARO) has been recorded as of September 28, 2019. The ARO liability of $20,950,000 represents the estimated fair value of the total reclamation costs. The fair value of the liability was calculated by applying an expected present value technique using estimated cash flows over a period of time and then discounting the expected cash flows using a credit-adjusted risk-free interest rate. The related ARO asset was considered 100% impaired as total carrying value including future costs to maintain and dispose of the asset will exceed the fair value. Therefore, the Company also recorded an impairment charge of $20,217,000 related to the asset. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 28, 2019 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENT | 20. Subsequent to the end of the third quarter of 2019, on October 15, 2019, the Company completed the acquisition from Valco of certain real property located in Pueblo, Colorado for $9 million in connection with the full and final settlement of the previously disclosed litigation between the Company and Valco. A portion of the settlement was for the property purchase and a portion was attributed to the settlement of the litigation. As the litigation claim was a known event prior to the current quarter balance sheet date, the Company has recognized the portion of the agreement related to the legal settlement in the financial statements for the period ended September 28, 2019. Since the asset purchase agreement was not a known event prior to the balance sheet date it was not recorded in the financial statements for the period ended September 28, 2019. The Company has engaged a third party to perform a valuation of the land. As the valuation has not been completed, the Company used its best estimate to allocate the final settlement to the property and settlement expense. Considering a current offer to purchase a portion of the land and research on similar properties in the same area the Company estimates the land value to be approximately $2,600,000 leaving a value of $6,400,000 as legal settlement expense which has been recognized in the Statement of Operations for the period ended September 28, 2019 and was included in accrued expenses on the Condensed Consolidated Balance for the same period end. The property purchase will be reported by the Company in the fourth quarter. These amounts are management’s best estimate and are subject to change as additional information is received. See Note 8 for additional discussion. |
BASIS OF PRESENTATION (Policies
BASIS OF PRESENTATION (Policies) | 9 Months Ended |
Sep. 28, 2019 | |
BASIS OF PRESENTATION | |
Basis of Presentation | Basis of Presentation : The unaudited interim condensed consolidated financial statements included herein are prepared pursuant to the Securities and Exchange Commission (the “Commission”) rules and regulations for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally accompanying the annual consolidated financial statements have been omitted. The condensed consolidated balance sheet of Continental Materials Corporation (the “Company”) as of December 29, 2018 has been derived from the audited consolidated balance sheet of the Company as of that date. The interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest annual report on Form 10-K. In the opinion of management, the condensed consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair statement of the results for the interim periods and to ensure the financial statements are not misleading. Certain reclassifications have been made to the 2018 consolidated financial statements to conform to the 2019 presentation. The reclassifications had no effect on the consolidated results of operations, the net change in cash or the total assets, liabilities or shareholders’ equity of the Company. During the quarter ended March 30, 2019 the Company sold substantially all of the assets of Transit Mix Concrete Company’s ready-mix business and Daniels sand operation. The assets and liabilities related to these operations are presented as held for sale in accordance with generally accepted accounting principles. See Note 15. Accordingly, the operations of these businesses are presented as discontinued operations for all periods presented. |
Revenue Recognition | Revenue Recognition : Effective December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments, which creates a single source of revenue guidance for all companies in all industries and is more principles-based than previous revenue guidance. The Company adopted the standard using the modified retrospective approach. The adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems or controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. Sales are recognized when control of the promised goods or services transfers to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s payment terms generally range between 30 to 90 days after invoice is billed to the customer. Sales are reported net of sales tax. Shipping and other transportation costs paid by the Company and rebilled to the buyer are recorded gross (as both sales and cost of sales). The Company generally recognizes revenue from the sale of products at the time the products are shipped. While the return of products is generally not allowed, some large customers have been granted the right to return a certain amount at the end of the normal selling season for seasonal products. Sales returns and allowances are estimated based on current program terms and historical experience. Provisions for estimated returns, discounts, volume rebates and other price adjustments are provided for in the same period the related revenues are recognized and are netted against revenues. The Company is responsible for warranties related to the manufacture of its HVAC products and estimates the future warranty claims based upon historical experience and management estimates. The Company reviews warranty and related claims activities and records provisions as necessary. The Company performs installation services for certain projects within its Door segment. Management determined there are two performance obligations related to most of these contracts, the equipment and the installation services. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone selling price. Revenue is recognized at a point in time as each performance obligation is completed. No maintenance or service contracts are offered by the Company. Certain reclassifications have been made to prior period financial information in order to conform to the current period’s presentation, including a change to the Company’s reporting segments. See Note 7 for further information and for disaggregation of revenue by segment. |
Leases | Leases Effective December 30, 2018 (the beginning of fiscal 2019) the Company adopted ASU No. 2016-02, Leases (Topic 842), which superseded Topic 840, “Leases”. As allowed under the new accounting standard, the Company elected to apply practical expedients to carry forward the original lease determinations, lease classifications and accounting of initial direct costs for all asset classes at the time of adoption. The Company also elected not to separate lease components from non-lease components for asset categories, except office space, and to exclude short-term leases from its Consolidated Balance Sheet. For the office space lease category the election was made to report lease and non-lease components separately as the non-lease components are billed and paid separately and are not a fixed amount over the lease term. The implicit discount rate of leases is used to calculate present values when available. When an implicit discount rate is not readily available an incremental borrowing rate is used to calculate present values. |
INDUSTRY SEGMENT INFORMATION (T
INDUSTRY SEGMENT INFORMATION (Tables) | 9 Months Ended |
Sep. 28, 2019 | |
INDUSTRY SEGMENT INFORMATION | |
Schedule of information about reported segments along with the items necessary to reconcile the segment information to totals reported in financial statements | The following table presents information about reported segments for the nine-month and three-month periods ended September 28, 2019 and September 29, 2018 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands): Construction Unallocated Held for HVAC Doors Materials Corporate Sale Total Nine Months ended September 28, 2019 Revenues from external customers $ 57,712 $ 17,483 $ 4,579 $ 0 $ — $ 79,773 Depreciation, depletion and amortization 842 199 276 54 — 1,369 Operating income (loss) (837) 1,288 (15,105) (6,295) — (20,949) Segment assets 53,540 13,607 9,799 15,550 — 92,496 Capital expenditures 479 72 407 15 — 973 Three Months ended September 28, 2019 Revenues from external customers $ 23,702 $ 6,787 $ 1,515 $ (16) $ — $ 31,987 Depreciation, depletion and amortization 320 111 142 26 — 597 Operating income (loss) 1,499 295 (28,288) (1,412) — (27,906) Segment assets 53,540 13,607 9,799 15,550 — 92,496 Capital expenditures (b) 286 (36) 275 — — 525 Construction Unallocated Held for HVAC Doors Materials Corporate Sale Total Nine Months ended September 29, 2018 Revenues from external customers $ 52,294 $ 14,824 $ 5,746 $ 68 $ — $ 72,932 Depreciation, depletion and amortization 809 123 238 33 — 1,203 Operating income (loss) 83 1,787 (6,439) (3,208) — (7,777) Segment assets (a) 29,003 8,003 11,315 3,346 24,036 75,703 Capital expenditures 642 94 181 46 — 963 Three Months ended September 29, 2018 Revenues from external customers $ 17,163 $ 4,746 $ 2,021 $ 35 $ — $ 23,965 Depreciation, depletion and amortization 268 41 74 10 — 393 Operating income (loss) (511) 431 121 (1,309) — (1,268) Segment assets (a) 29,003 8,003 11,315 3,346 24,036 75,703 Capital expenditures (b) 377 61 142 (5) — 575 (a) Segment assets are as of December 29, 2018. Capital expenditures are presented on the accrual basis of accounting. |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 28, 2019 | |
LEASES | |
Summary of undiscounted cash flows related to operating leases | The following table displays the undiscounted cash flows related to operating leases as of September 28, 2019, along with a reconciliation to the discounted amount recorded on the September 28, 2019 Consolidated Balance Sheet (amounts in thousands): OPERATING LEASE LIABILITIES 2019 $ 342 2020 1,402 2021 1,389 2022 1,307 2023 761 Thereafter 910 Total lease payments 6,111 Less: interest (814) Present value of operating lease liabilities $ 5,297 |
SALE OF TMC ASSETS (Tables)
SALE OF TMC ASSETS (Tables) | 9 Months Ended |
Sep. 28, 2019 | |
SALE OF TMC ASSETS | |
Summary of revenue, expenses and pre-tax income reclassified to discontinued operations, results of discontinued operations and assets and liabilities held for sale | Revenue, expenses and pre-tax income reclassified to discontinued operations were as follows (amounts in thousands): Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Revenue $ - $ 17,013 $ 4,058 $ 48,219 Costs and expenses - 16,005 3,900 44,457 Depreciation, depletion and amortization - 288 578 862 Selling and administrative - 907 304 2,718 Gain on sales of equipment - 3 - 892 (Loss) gain on sale of assets - - 5,283 - Pre-tax (loss) income $ - $ (184) $ 4,559 $ 1,075 The results of discontinued operations are summarized as follows: Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Operating income (loss) $ - $ (184) $ (724) $ 1,075 Gain on sale of assets - — 5,283 — Income tax (benefit) provision - (46) 1,255 268 Loss (income) from discontinued operations $ - $ (138) $ 3,304 $ 806 The assets and liabilities held for sale related to TMC’s ready-mix and Daniels sand businesses were as follows: SEPTEMBER 28, DECEMBER 29, 2019 2018 Accounts receivable, net $ — $ 9,054 Inventory — 1,914 Property, plant and equipment, net — 6,741 Other assets — 6,327 Total assets held for sale $ — $ 24,036 Accounts payable and accrued expenses $ $ 3,800 Other long-term liabilities — 292 Total liabilities held for sale $ — $ 4,092 |
ASSETS ACQUISITIONS (Tables)
ASSETS ACQUISITIONS (Tables) | 9 Months Ended |
Sep. 28, 2019 | |
ASSETS ACQUISITIONS | |
Schedule of tangible and intangible net assets acquired | Purchase price $ 11,505 Accounts receivable, net 1,448 Other tangible assets 578 Intangible assets 8,808 Accounts payable and accrued expenses (665) Total identifiable net assets 10,169 Goodwill $ 1,336 |
Schedule of pro forma information | Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Revenue $ 31,987 $ 27,407 $ 87,575 $ 83,573 Pre-tax (loss) income from continuing operations $ (27,983) $ (669) $ (19,706) $ (6,074) Basic and diluted (loss) earnings per share: From continuing operations $ (11.85) $ (0.28) $ (8.34) $ (2.53) Average shares outstanding 1,712 1,698 1,712 1,697 Per ASC 805, the chart below summaries the comparative financial statements for revenue and earnings as if all the acquisitions occurred at the beginning of the respective period. Three Months ended Nine Months ended SEPTEMBER 28, SEPTEMBER 29, SEPTEMBER 28, SEPTEMBER 29, 2019 2018 2019 2018 Revenue $ 31,987 $ 30,982 $ 96,751 $ 92,170 Pre-tax (loss) income from continuing operations $ (27,983) $ 75 $ (17,526) $ (4,026) |
BASIS OF PRESENTATION (Details)
BASIS OF PRESENTATION (Details) | 9 Months Ended |
Sep. 28, 2019item | |
Number of performance obligations for installation service contracts | 2 |
Minimum | |
Payment terms number of days | 30 days |
Maximum | |
Payment terms number of days | 90 days |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) $ in Thousands | Sep. 28, 2019USD ($) |
Fair Value Measurements | |
Fair value, financial instruments transferred between levels | $ 0 |
RECENTLY ISSUED ACCOUNTING PR_2
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - (Details) - USD ($) | Sep. 28, 2019 | Dec. 30, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating right-of-use assets | $ 5,258,000 | |
Liabilities related to operating leases | $ 5,297,000 | |
ASU 2016-02 | Restatement Adjustment [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Operating right-of-use assets | $ 5,353,000 | |
Liabilities related to operating leases | $ 5,427,000 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Sep. 28, 2019 | Sep. 29, 2018 | Sep. 28, 2019 | Sep. 29, 2018 | |
EARNINGS PER SHARE | ||||
Difference between the calculation of basic and diluted EPS (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 |
INDUSTRY SEGMENT INFORMATION (D
INDUSTRY SEGMENT INFORMATION (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 28, 2019USD ($) | Sep. 29, 2018USD ($) | Sep. 28, 2019USD ($)segmentcompany | Sep. 29, 2018USD ($) | Dec. 29, 2018USD ($) | |
INDUSTRY SEGMENT INFORMATION | |||||
Number of operating segments | segment | 4 | ||||
Number of reportable segments | segment | 3 | ||||
Number of companies that comprise TMC | company | 3 | ||||
Revenues from external customers | $ 31,987,000 | $ 23,965,000 | $ 79,773,000 | $ 72,932,000 | |
Depreciation, depletion and amortization | 597,000 | 393,000 | 1,369,000 | 1,203,000 | |
Operating income (loss) | (27,906,000) | (1,268,000) | (20,949,000) | (7,777,000) | |
Segment assets | 92,496,000 | 75,703,000 | 92,496,000 | 75,703,000 | $ 75,703,000 |
Capital expenditures | 525,000 | 575,000 | 973,000 | 963,000 | |
Reclamation liability related to Pikeview aggregates quarry | 20,217,000 | 20,217,000 | |||
Held for Sale | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Segment assets | 24,036,000 | 24,036,000 | |||
Unallocated Corporate | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | (16,000) | 35,000 | 0 | 68,000 | |
Depreciation, depletion and amortization | 26,000 | 10,000 | 54,000 | 33,000 | |
Operating income (loss) | (1,412,000) | (1,309,000) | (6,295,000) | (3,208,000) | |
Segment assets | $ 15,550,000 | 3,346,000 | 15,550,000 | 3,346,000 | |
Capital expenditures | (5,000) | 15,000 | 46,000 | ||
Minimum | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Expected reclamation period | 5 years | ||||
HVAC | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | $ 23,702,000 | 17,163,000 | 57,712,000 | 52,294,000 | |
Depreciation, depletion and amortization | 320,000 | 268,000 | 842,000 | 809,000 | |
Operating income (loss) | 1,499,000 | (511,000) | (837,000) | 83,000 | |
Segment assets | 53,540,000 | 29,003,000 | 53,540,000 | 29,003,000 | |
Capital expenditures | 286,000 | 377,000 | 479,000 | 642,000 | |
Doors | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 6,787,000 | 4,746,000 | 17,483,000 | 14,824,000 | |
Depreciation, depletion and amortization | 111,000 | 41,000 | 199,000 | 123,000 | |
Operating income (loss) | 295,000 | 431,000 | 1,288,000 | 1,787,000 | |
Segment assets | 13,607,000 | 8,003,000 | 13,607,000 | 8,003,000 | |
Capital expenditures | (36,000) | 61,000 | 72,000 | 94,000 | |
Construction Materials | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 1,515,000 | 2,021,000 | 4,579,000 | 5,746,000 | |
Depreciation, depletion and amortization | 142,000 | 74,000 | 276,000 | 238,000 | |
Operating income (loss) | (28,288,000) | 121,000 | (15,105,000) | (6,439,000) | |
Segment assets | 9,799,000 | 11,315,000 | 9,799,000 | 11,315,000 | |
Capital expenditures | $ 275,000 | $ 142,000 | $ 407,000 | $ 181,000 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) | Oct. 16, 2019USD ($)T |
Minimum | |
Disposition of assets. | |
Quarterly royalty payment | $ 300,000 |
Pueblo Colorado gravel operations | |
Disposition of assets. | |
Sand and gravel reserves (in tons) | T | 50,000,000 |
Royalty overpayments | $ 1,470,000 |
NON-EMPLOYEE DIRECTORS SHARE-_2
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION (Details) - Eligible board members | Feb. 07, 2019directorshares | Jan. 16, 2018directorshares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued to eligible board members | shares | 21,000 | 16,000 |
Number of eligible board members | director | 7 | 8 |
REVOLVING BANK LOAN AND LONG-_2
REVOLVING BANK LOAN AND LONG-TERM DEBT (Details) | 9 Months Ended | ||
Sep. 28, 2019USD ($)agreement | Sep. 29, 2018USD ($) | Dec. 29, 2018USD ($) | |
Debt Instrument [Line Items] | |||
Number of separate amendments to the Credit agreement | agreement | 9 | ||
Period over which existing cash balance, anticipated cash flow from operations and borrowings available under the credit agreement will be sufficient to cover expected cash needs | 12 months | ||
Minimum | Period Ending June 28, 2014 [Member] | |||
Debt Instrument [Line Items] | |||
Fixed charge coverage ratio | 1.06 | ||
Revolving Credit Facility [Member] | |||
Debt Instrument [Line Items] | |||
Maximum revolving credit facility line | $ 20,000,000 | ||
Outstanding amount | 0 | $ 2,200,000 | |
Highest balance outstanding during the period | 2,200,000 | $ 9,800,000 | |
Average outstanding | 405,000 | $ 6,188,000 | |
Outstanding amount of letters of credit total | 5,620,000 | ||
Revolving Credit Facility [Member] | Minimum | |||
Debt Instrument [Line Items] | |||
Maximum inventory borrowings | $ 8,500,000 | ||
Revolving Credit Facility [Member] | Maximum | |||
Debt Instrument [Line Items] | |||
Borrowings as a percentage of eligible accounts receivable | 80.00% | ||
Borrowings as a percentage of eligible inventories | 50.00% | ||
Borrowings as a percentage of capital expenditures | 80.00% | ||
Annual capital expenditures for fiscal year 2016, maximum | $ 5,500,000 | ||
Revolving Credit Facility [Member] | LIBOR | |||
Debt Instrument [Line Items] | |||
Variable interest rate base | LIBOR | ||
Percentage points added to the reference rate | 2.25% |
LEGAL PROCEEDINGS (Details)
LEGAL PROCEEDINGS (Details) | 9 Months Ended |
Sep. 28, 2019item | |
LEGAL PROCEEDINGS | |
Number of proceedings having material adverse effect on the consolidated results of operations, cash flows or financial condition | 0 |
WRITE OFF OF DEFERRED DEVELOP_2
WRITE OFF OF DEFERRED DEVELOPMENT (Details) - USD ($) | 6 Months Ended | 9 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Sep. 28, 2019 | Dec. 29, 2018 | Jan. 15, 2019 | Jul. 31, 2015 | |
WRITE OFF OF DEFERRED DEVELOPMENT | |||||
Escrow Deposit | $ 200,000 | $ 2,500,000 | |||
Write-off of deferred development costs | $ 6,840,000 | $ 2,500,000 | $ 2,500,000 |
LEASES (Details)
LEASES (Details) - USD ($) | 9 Months Ended | |
Sep. 28, 2019 | Dec. 30, 2018 | |
Lessee, Lease, Description [Line Items] | ||
Operating right-of-use assets | $ 5,258,000 | |
Present value of operating lease liabilities | $ 5,297,000 | |
Options to renew | true | |
ASU 2016-02 | Restatement Adjustment [Member] | ||
Lessee, Lease, Description [Line Items] | ||
Operating right-of-use assets | $ 5,353,000 | |
Present value of operating lease liabilities | $ 5,427,000 |
LEASES - Operating Leases (Deta
LEASES - Operating Leases (Details) $ in Thousands | Sep. 28, 2019USD ($) |
Undiscounted cash flows related to operating leases | |
2019 | $ 342 |
2020 | 1,402 |
2021 | 1,389 |
2022 | 1,307 |
2023 | 761 |
Thereafter | 910 |
Total lease payments | 6,111 |
Less: interest | (814) |
Present value of operating lease liabilities | $ 5,297 |
LEASES - Additional Information
LEASES - Additional Information (Details) | 3 Months Ended | 9 Months Ended |
Sep. 28, 2019USD ($) | Sep. 28, 2019USD ($) | |
LEASES | ||
Operating lease cost | $ 628,000 | $ 1,459,000 |
Short-term lease costs | 274,000 | 484,000 |
Cash paid, lease liabilities | 396,000 | 1,014,000 |
Right-of-use assets | 60,000 | 60,000 |
Lease liabilities | $ 649,000 | $ 649,000 |
Weighted-average remaining lease term | 4 years 10 months 24 days | 4 years 10 months 24 days |
Weighted-average discount rate | 6.00% | 6.00% |
LEGAL SETTLEMENT (Details)
LEGAL SETTLEMENT (Details) - USD ($) | Jan. 15, 2019 | Jul. 31, 2015 |
LEGAL SETTLEMENT | ||
Settlement receipt | $ 15,000,000 | |
Escrow deposit | $ 200,000 | $ 2,500,000 |
SALE OF TMC ASSETS (Details)
SALE OF TMC ASSETS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||||||
Sep. 28, 2019 | Jun. 29, 2019 | Mar. 30, 2019 | Sep. 29, 2018 | Sep. 28, 2019 | Sep. 29, 2018 | Feb. 01, 2019 | Jan. 15, 2019 | Jul. 31, 2015 | |
Disposition of assets. | |||||||||
Escrow Deposit | $ 200,000 | $ 2,500,000 | |||||||
Payment as working capital adjustment | $ 1,248,000 | ||||||||
Revenue, expenses and pre-tax income reclassified to discontinued operations | |||||||||
Revenue | $ 17,013,000 | $ 4,058,000 | $ 48,219,000 | ||||||
Costs and expenses | 16,005,000 | 3,900,000 | 44,457,000 | ||||||
Depreciation, depletion and amortization | 288,000 | 578,000 | 862,000 | ||||||
Selling and administrative | 907,000 | 304,000 | 2,718,000 | ||||||
Gain on sales of equipment | 3,000 | 892,000 | |||||||
(Loss) gain on sale of assets | 5,283,000 | ||||||||
Pre-tax (loss) income | (184,000) | 4,559,000 | 1,075,000 | ||||||
The results of discontinued operations | |||||||||
Operating income (loss) | (184,000) | ||||||||
(Loss) gain on sale of assets | 5,283,000 | ||||||||
Income tax (benefit) provision | $ 0 | (46,000) | 1,255,000 | 268,000 | |||||
Loss (income) from discontinued operations | $ (138,000) | 3,304,000 | 806,000 | ||||||
Transit Mix Concrete | Discontinued operation | |||||||||
Disposition of assets. | |||||||||
Sale price | $ 27,129,000 | ||||||||
Escrow Deposit | $ 2,049,000 | ||||||||
Revenue, expenses and pre-tax income reclassified to discontinued operations | |||||||||
(Loss) gain on sale of assets | $ 6,508,000 | 5,283,000 | |||||||
The results of discontinued operations | |||||||||
Operating income (loss) | (724,000) | 1,075,000 | |||||||
(Loss) gain on sale of assets | $ 6,508,000 | 5,283,000 | |||||||
Income tax (benefit) provision | 1,255,000 | 268,000 | |||||||
Loss (income) from discontinued operations | $ 3,304,000 | $ 806,000 |
SALE OF TMC ASSETS - Assets and
SALE OF TMC ASSETS - Assets and Liabilities Held for Sale (Details) $ in Thousands | Dec. 29, 2018USD ($) |
Disposal Group, Including Discontinued Operation, Balance Sheet Disclosures [Abstract] | |
Accounts receivable, net | $ 9,054 |
Inventory | 1,914 |
Property, plant and equipment, net | 6,741 |
Other assets | 6,327 |
Total assets held for sale | 24,036 |
Accounts payable and accrued expenses | 3,800 |
Other long-term liabilities | 292 |
Total liabilities held for sale | $ 4,092 |
ASSETS ACQUISITIONS (Details)
ASSETS ACQUISITIONS (Details) | 9 Months Ended |
Sep. 28, 2019agreementitem | |
ASSETS ACQUISITIONS | |
Number of asset purchase agreements | agreement | 3 |
Number of asset acquired operating businesses | item | 4 |
ASSETS ACQUISITIONS - GFP (Deta
ASSETS ACQUISITIONS - GFP (Details) - USD ($) | Jun. 03, 2019 | Sep. 28, 2019 | Sep. 28, 2019 | Jun. 30, 2019 | Dec. 29, 2018 |
Business Acquisition [Line Items] | |||||
Goodwill | $ 6,011,000 | $ 6,011,000 | $ 1,000,000 | ||
American Wheatley HVAC And Global Flow Products | |||||
Business Acquisition [Line Items] | |||||
Purchase price | $ 12,685,000 | ||||
Estimated working capital adjustment | 778,000 | ||||
Consideration paid in cash | 12,163,000 | ||||
Contingent liability | 4,300,000 | ||||
Accrual For Earn Out Agreement Achievement Of Growth Targets | $ 1,300,000 | ||||
Trade receivables | 1,787,000 | ||||
Inventory | 1,269,000 | ||||
Property and equipment | 2,530,000 | ||||
Other assets | 250,000 | ||||
Intangibles | 4,302,000 | ||||
Goodwill | 3,675,000 | ||||
Retained liabilities | $ 1,128,000 | ||||
American Wheatley HVAC And Global Flow Products | Minimum | |||||
Business Acquisition [Line Items] | |||||
Earn out agreement, achievement of growth targets period | 24 months | ||||
American Wheatley HVAC And Global Flow Products | Maximum | |||||
Business Acquisition [Line Items] | |||||
Earn out agreement, achievement of growth targets period | 36 months | ||||
Selling and administrative expense | American Wheatley HVAC And Global Flow Products | |||||
Business Acquisition [Line Items] | |||||
Transaction costs | $ 66,000 | $ 1,177,000 |
ASSETS ACQUISITIONS - INOVATE (
ASSETS ACQUISITIONS - INOVATE (Details) - USD ($) | Jun. 17, 2019 | Sep. 28, 2019 | Sep. 28, 2019 | Jun. 30, 2019 | Dec. 29, 2018 |
Business Acquisition [Line Items] | |||||
Goodwill | $ 6,011,000 | $ 6,011,000 | $ 1,000,000 | ||
Inovate | |||||
Business Acquisition [Line Items] | |||||
Post-closing working capital adjustment | $ 84,000 | ||||
Consideration paid in cash | 11,050,000 | ||||
Contingent liability | $ 1,250,000 | ||||
Earn out agreement, achievement of growth targets period | 12 months | ||||
Accrual based on fair value of earnout agreement | $ 240,000 | ||||
Purchase price | $ 11,505,000 | ||||
Accounts receivable, net | 1,448,000 | ||||
Other tangible assets | 578,000 | ||||
Intangible assets | 8,808,000 | ||||
Accounts payable and accrued expenses | (665,000) | ||||
Total identifiable net assets | 10,169,000 | ||||
Goodwill | $ 1,336,000 | ||||
Selling and administrative expense | Inovate | |||||
Business Acquisition [Line Items] | |||||
Transaction costs | $ 39,000 | $ 515,000 |
ASSETS ACQUISITIONS - PROFORMA
ASSETS ACQUISITIONS - PROFORMA (Details) - USD ($) $ / shares in Units, shares in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 28, 2019 | Jun. 29, 2019 | Sep. 29, 2018 | Sep. 28, 2019 | Sep. 29, 2018 | |
Business Acquisition [Line Items] | |||||
Revenue | $ 3,198,700 | $ 3,098,200 | $ 9,675,100 | $ 9,217,000 | |
Pre-tax (loss) income from continuing operations | $ (2,798,300) | 7,500 | $ (1,752,600) | (402,600) | |
Percentage of increase in total revenue due to revenue of the acquired companies | 24.30% | 24.30% | |||
Basic and diluted (loss) earnings per share: | |||||
Goodwill added due to acquisition | $ 5,011,000 | ||||
Inovate | |||||
Business Acquisition [Line Items] | |||||
Revenue | $ 31,987,000 | 27,407,000 | $ 87,575,000 | 83,573,000 | |
Pre-tax (loss) income from continuing operations | $ (27,983,000) | $ (669,000) | $ (19,706,000) | $ (6,074,000) | |
Basic and diluted (loss) earnings per share: | |||||
From continuing operations | $ (11.85) | $ (0.28) | $ (8.34) | $ (2.53) | |
Average shares outstanding | 1,712 | 1,698 | 1,712 | 1,697 | |
Doors | |||||
Basic and diluted (loss) earnings per share: | |||||
Goodwill added due to acquisition | $ 2,194,000 | ||||
HVAC | Concrete Aggregates and Construction Supplies | |||||
Basic and diluted (loss) earnings per share: | |||||
Goodwill added due to acquisition | $ 2,817,000 |
AMORTIZABLE INTANGIBLE ASSETS (
AMORTIZABLE INTANGIBLE ASSETS (Details) - USD ($) | 3 Months Ended | |
Sep. 28, 2019 | Sep. 29, 2018 | |
AMORTIZABLE INTANGIBLE ASSETS. | ||
Intangible assets | $ 12,991,000 | |
Accumulated amortization | 119,000 | |
Pre-tax amortization expense | 119,000 | $ 0 |
Estimated amortization expense | ||
2019 | 337,000 | |
2020 | 675,000 | |
2021 | 675,000 | |
2022 | 675,000 | |
2023 | $ 675,000 |
EQUITY COMPENSATION (Details)
EQUITY COMPENSATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |
Sep. 28, 2019 | Sep. 28, 2019 | Dec. 28, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
PE and PEAR awards liability | $ 456,000 | $ 456,000 | |
VCIP | PE or PEARs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Payment period following vesting | 3 years | ||
Total future compensation expense related to unvested awards yet to be recognized | 2,796,000 | $ 2,796,000 | |
Weighted-average remaining vesting period | 4 years 3 months 18 days | ||
Stock-based compensation expense | $ 156,000 | $ 156,000 | |
PE and PEAR awards liability | $ 456,000 | ||
PE and PEAR awards liability from acquisition | $ 300,000 | ||
VCIP | Maximum | PE or PEARs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 5 years | ||
VCIP | Minimum | PE or PEARs | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period | 4 years |
RECLAMATION ACCRUAL (Details)
RECLAMATION ACCRUAL (Details) | 9 Months Ended |
Sep. 28, 2019USD ($) | |
Asset Retirement Obligations, Noncurrent [Abstract] | |
Estimated fair value of the total reclamation costs | $ 20,950,000 |
Percent impairment of ARO asset | 100.00% |
Mine Reclamation and Closing Liability, Noncurrent | $ 20,217,000 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - USD ($) | Oct. 15, 2019 | Sep. 28, 2019 | Sep. 28, 2019 |
Subsequent Event [Line Items] | |||
Loss Related To Litigation Settlement | $ 6,400,000 | $ 6,400,000 | |
Valco | |||
Subsequent Event [Line Items] | |||
Land | $ 2,600,000 | 2,600,000 | |
Loss Related To Litigation Settlement | $ 6,400,000 | ||
Valco | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Purchase of the previously leased land | $ 9,000,000 |