Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 28, 2020 | May 01, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Period End Date | Mar. 28, 2020 | |
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 | 1,671,304 | |
Current Fiscal Year End Date | --01-02 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0000024104 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 4,596 | $ 178 |
Receivables, net of allowance of $634 and $494 | 18,138 | 21,555 |
Receivable for insured losses | 1,033 | 911 |
Finished goods | 7,372 | 6,419 |
Work in process | 1,014 | 1,061 |
Raw materials and supplies | 7,961 | 6,473 |
Prepaid expenses | 1,762 | 2,171 |
Refundable income taxes | 3,807 | 2,397 |
Other current assets | 111 | 4,229 |
Other current assets held for sale | 380 | 896 |
Total current assets | 46,174 | 46,290 |
Property, plant and equipment | 11,716 | 12,025 |
Right-of use assets | 4,695 | 4,978 |
Goodwill | 5,932 | 5,932 |
Intangible assets | 12,274 | 12,437 |
Deferred income taxes | 6,755 | 7,667 |
Other long-term assets | 641 | 654 |
Total assets | 88,187 | 89,983 |
Current liabilities: | ||
Revolving bank loan payable | 800 | |
Accounts payable and accrued expenses | 16,155 | 16,725 |
Short-term asset retirement obligation | 4,181 | 4,200 |
Short-term lease liabilities | 1,182 | 1,170 |
Liability for unpaid claims covered by insurance | 1,033 | 911 |
Total current liabilities | 22,551 | 23,806 |
Long-term lease liabilities | 3,695 | 3,991 |
Long-term compensation liabilities | 1,945 | 1,842 |
Asset retirement obligation | 23,855 | 23,713 |
Other long-term liabilities | 528 | 1,442 |
SHAREHOLDERS' EQUITY | ||
Common shares, $.25 par value; authorized 3,000,000 shares; issued 2,574,264 shares | 643 | 643 |
Capital in excess of par value | 1,853 | 1,853 |
Retained earnings | 47,936 | 47,232 |
Treasury shares, 898,780 and 860,910 at cost | (14,819) | (14,539) |
Total shareholders' equity | 35,613 | 35,189 |
Total liabilities and shareholders' equity | $ 88,187 | $ 89,983 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Mar. 28, 2020 | Dec. 28, 2019 |
Consolidated Balance Sheets | ||
Receivables, allowance (in dollars) | $ 634 | $ 494 |
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 | 898,780 | 860,910 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Retained Earnings - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
Consolidated Statements of Operations | ||
Net sales | $ 30,845 | $ 22,528 |
Type of Revenue [Extensible List] | us-gaap:ProductMember | us-gaap:ProductMember |
Costs and expenses: | ||
Cost of sales (exclusive of depreciation and amortization) | $ 22,565 | $ 17,847 |
Depreciation and amortization | 513 | 519 |
Selling and administrative | 7,778 | 6,792 |
Gain on legal settlement | (15,000) | |
Gain on disposition of property and equipment | (145) | (5) |
Total costs and expenses | 30,711 | 10,153 |
Operating income | 134 | 12,375 |
Interest income | 114 | 149 |
Interest expense | (101) | (71) |
Other income, net | 59 | 13 |
Income from continuing operations before income taxes | 206 | 12,466 |
Provision for income taxes | 498 | (3,366) |
Income from continuing operations | 704 | 9,100 |
Income from discontinued operations net of income tax provision of $0 and $1,562 | 4,222 | |
Net income | 704 | 13,322 |
Retained earnings, beginning of period | 47,232 | 61,131 |
Retained earnings, end of period | $ 47,936 | $ 74,453 |
Basic and diluted loss per share: | ||
Income from continuing operations | $ 0.42 | $ 5.33 |
Income from discontinued operations | 2.47 | |
Basic and diluted income per share (in dollar per share) | $ 0.42 | $ 7.80 |
Average shares outstanding (in shares) | 1,685 | 1,709 |
Consolidated Statements of Op_2
Consolidated Statements of Operations and Retained Earnings (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
Consolidated Statements of Operations | ||
Income tax provision | $ 0 | $ 1,562 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
Operating activities | ||
Net cash provided by continuing operations | $ 2,955 | $ 11,624 |
Net cash (used) provided by discontinued operations | (15) | |
Net cash provided by operating activities | 2,955 | 11,609 |
Investing activities: | ||
Capital expenditures by continuing operations | (26) | (63) |
Capital expenditures by discontinued operations | (172) | |
Cash proceeds from sale of discontinued operations | 1,918 | 24,927 |
Cash proceeds from sale of continuing operations property and equipment | 664 | 5 |
Net cash provided by investing activities | 2,556 | 24,697 |
Financing activities: | ||
Borrowings on the revolving bank loan | 3,450 | 4,050 |
Repayments on the revolving bank loan | (4,250) | (5,450) |
Repayments of finance lease obligations | (13) | (10) |
Payments to acquire treasury stock | (280) | (69) |
Net cash used by financing activities | (1,093) | (1,479) |
Net increase in cash and cash equivalents | 4,418 | 34,827 |
Cash and cash equivalents: | ||
Beginning of period | 178 | 594 |
End of period | 4,596 | 35,421 |
Cash paid during the year for: | ||
Interest, net | $ 111 | $ 72 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders’ Equity - USD ($) $ in Thousands | Common shares | Capital in excess of par | Retained earnings | Treasury shares | Total |
Balance at Dec. 29, 2018 | $ 643 | $ 1,930 | $ 61,131 | $ (14,928) | $ 48,776 |
Balance (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 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 Dec. 28, 2019 | $ 643 | 1,853 | 47,232 | $ (14,539) | 35,189 |
Balance (in shares) at Dec. 28, 2019 | 2,574,264 | 860,910 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income (loss) | 704 | 704 | |||
Purchase of treasury shares | $ (280) | (280) | |||
Purchase of treasury shares (in shares) | 37,870 | ||||
Balance at Mar. 28, 2020 | $ 643 | $ 1,853 | $ 47,936 | $ (14,819) | $ 35,613 |
Balance (in shares) at Mar. 28, 2020 | 2,574,264 | 898,780 |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 28, 2020 | |
SIGNIFICANT ACCOUNTING POLICIES | |
SIGNIFICANT ACCOUNTING POLICIES | 1. Significant Accounting Policies: 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 28, 2019 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. The results of operations for the period are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 2019 consolidated financial statements to conform to the 2020 presentation. The reclassifications had no effect on the consolidated results of operations, the net decrease 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. See Note 15. Accordingly, the operations of these businesses are presented as discontinued operations for all periods presented. Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). 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 majority of sales within the Door division do not include extended installation components. Most of the sales of MDHI that contain installation are completed within 30 days and contain two specific components, the product and the installation service. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone price. Revenue is recognized at a point in time as each performance obligation is completed. The Company does not offer maintenance or service contracts. The acquisition of Fastrac and Serenity in mid-2019 expanded the type of contracts that require analysis under Topic 606 guidelines as these operations may include extended installation services within the contracts. The company negotiates the terms of the contract and prepares a detailed project quote that might include number and type of doors, number and style of hardware, locks, electronic items and estimated installation cost. Contract price for each item of the quote is negotiated and stated in the contract. Modifications are treated as adjustments to an existing contract and are part of the changes in billing invoices. Revenue is recognized as performance obligations, per the contract agreement, are completed. Revenue for product is recognized as shipped. Revenue for installation services is recognized on a percentage of completion method with costs in excess of billings and/or billings in excess of costs being recorded as an asset or liability until recognized. Costs in excess of billings, of approximately $238,000 and $420,000, are included in Prepaid expenses and retainage on contracts of approximately $182,000 and $345,000 is included in Receivables on the Consolidated Balance Sheets as of March 28, 2020 and December 28, 2019, respectively. See Note 7, Segment reporting 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 | 3 Months Ended |
Mar. 28, 2020 | |
INCOME TAXES | |
INCOME TAXES | 2. Income Taxes 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. On March 27, 2020 Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the Act). The Act provides various relief for businesses including a temporary five-year NOL carryback for losses incurred in 2018, 2019 and 2020 as well as an NOL deduction of 100% of taxable income for the same years. The current quarter tax provision includes a $541,000 benefit representing the difference between the anticipated tax refund related to the expected NOL carryback and the value of the NOL asset previously included in Deferred income taxes on the Company’s Consolidated Balance Sheet. 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 (the “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 March 28, 2020 or December 28, 2019. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 28, 2020 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 3. Fair Value Measurements 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 then 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. Lease liabilities: Fair value was estimated based on the borrowing rates then 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 Lease liabilities represents a reasonable estimate of the corresponding fair value 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 publicly 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 3. 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 liability: 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. 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 | 3 Months Ended |
Mar. 28, 2020 | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 4. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842),” which superseded Topic 840, “Leases”. 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 | 3 Months Ended |
Mar. 28, 2020 | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | 5. Seasonality and Current Economic Conditions Certain products within the Company’s portfolio are seasonal, primarily furnaces and evaporative coolers in the HVAC segment which are sensitive to weather conditions particularly during their respective peak selling seasons. Other products within the HVAC segment, specifically fan-coils and dryer boxes, and Door segment sales are, to a significant extent, dependent on construction activity. Historically, the Company has experienced operating losses during the first quarter and typically improved in the second and third quarters reflecting more favorable weather conditions for legacy products. Fourth quarter results have typically varied based on weather conditions affecting the Company’s discontinued operations as well as in the principal markets for the Company’s heating equipment. The 2019 sale of the Company’s ready-mix and Daniels Sand operations along with the acquisitions completed in 2019 are expected to reduce the seasonality of the Company’s operations. The first quarter of 2020 has presented significant economic challenges from the effects of COVID-19. The Company cannot reasonably determine what the future impact on revenue, cash flow or earnings from operations will be. Our operations were considered essential and thus far all businesses within the portfolio continue to manufacture and sell product, but we are seeing a slowdown in demand and are anticipating potentially significant impacts through the remainder of 2020. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 28, 2020 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 6. Earnings Per Share There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month periods ended March 28, 2020 and March 30, 2019 as the Company does not have any dilutive instruments. |
INDUSTRY SEGMENT INFORMATION
INDUSTRY SEGMENT INFORMATION | 3 Months Ended |
Mar. 28, 2020 | |
INDUSTRY SEGMENT INFORMATION | |
INDUSTRY SEGMENT INFORMATION | 7. Industry Segment Information 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 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). In addition to the above reporting segments, an “Unallocated Corporate” 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 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 three-month periods ended March 28, 2020 and March 30, 2019 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 Three Months ended March 28, 2020 HVAC Doors Materials Corporate Sale Total Revenues from external customers $ 23,655 $ 5,721 $ 1,470 $ — $ — $ 30,845 Depreciation and amortization 332 73 48 61 — 513 Operating income (loss) 2,536 79 (636) (1,845) — 134 Segment assets 46,250 11,506 7,291 22,760 380 88,187 Capital expenditures (b) 12 14 — — — 26 Construction Unallocated Held for Three Months ended March 30, 2019 HVAC Doors Materials Corporate Sale Total Revenues from external customers $ 16,720 $ 4,242 $ 1,554 $ 11 $ — $ 22,528 Depreciation and amortization 411 43 52 13 — 519 Operating income (loss) (481) 379 14,044 (1,567) — 12,375 Segment assets (a) 50,822 14,248 10,463 13,554 896 89,983 Capital expenditures (b) 44 19 — — — 63 (a) Segment assets are as of December 28, 2019. (b) Capital expenditures are presented on the accrual basis of accounting. There are no differences in the basis of segmentation or in the basis of measurement of segment profit or loss from the last annual report. |
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT | 3 Months Ended |
Mar. 28, 2020 | |
FAIR VALUE MEASUREMENTS | |
Fair Value Measurement | 8. Fair Value Measurement The outstanding Phantom Equity (PE) and Phantom Equity Appreciation Rights (PEAR) awards under the Company’s Value Creation Incentive Plan (VCIP; see Note 19) were recorded at fair value using the Black-Scholes option pricing model. There were no PE or PEAR appreciation awards granted during the quarter ended March 28, 2020 or March 30, 2019. The following assumptions were used in determining the fair value of the award liability as of March 28, 2020. Risk-free interest rate 1.58% - 1.62% Dividend rate 0.00% Volatility range 24% - 38% Weighted average expected term (years) 3.8 The following table is a reconciliation for the PE and PEAR liability measured at fair value using Level 3 unobservable inputs (in thousands): Balance at December 28, 2019 $ 496 Awards related to acquired companies - Change due to vesting of awards granted 166 Change in fair value measurement of liability (52) Balance at March 28, 2020 $ 610 Contingent consideration was recorded at fair value using a Monte Carlo Simulation model. The following assumptions were used in determining the fair value of contingent consideration at March 28, 2020: Risk-free interest rate .09% - 1.6% Expected term (years) .18 - 2.33 The following table is a reconciliation for the contingent consideration liability measured at fair value using Level 3 unobservable inputs (in thousands): Balance at December 28, 2019 $ 1,482 Contingent consideration granted with acquisitions - Change in fair value measurement of liability 120 Balance at March 28, 2020 $ 1,602 The ARO liabilities were recorded at fair value using an expected present value technique. The following assumptions were used in determining the fair value of the ARO liabilities at March 28, 2020: Credit adjusted risk-free interest rate 3.66% Expected term (years) 4.5 |
NON-EMPLOYEE DIRECTORS SHARE-BA
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | 3 Months Ended |
Mar. 28, 2020 | |
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | |
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | 9. Non-Employee Directors Share Based Compensation The Company issued a total of 16,998 shares to the six eligible board members effective December 13, 2019 as partial payment for their 2020 retainer fee. 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. All shares were issued under the 2010 Non-Employee Directors Stock Plan. |
REVOLVING BANK LOAN AND LONG-TE
REVOLVING BANK LOAN AND LONG-TERM DEBT | 3 Months Ended |
Mar. 28, 2020 | |
REVOLVING BANK LOAN AND LONG-TERM DEBT | |
REVOLVING BANK LOAN AND LONG-TERM DEBT | 10. Revolving Bank Loan and Long-Term Debt The Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”) effective March 16, 2020, with the Lenders from time to time party thereto and CIBC Bank USA, as administrative agent. 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 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) 85% of eligible accounts receivable, (b) the lesser of 60% of eligible inventories and $8,500,000. · Financial Covenants include: o Minimum EBITDA for the three months ending March 31, 2020 must exceed $(525,000) o Minimum EBITDA for the three months ending June 30, 2020 must exceed $265,000 o The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.06 to 1.0 for each computation period measured at the end of each fiscal quarter, provided that the Fixed Charge Coverage Ratio shall not be tested if the average daily Excess Availability during the Fiscal Quarter exceeds $5,000,000. A computation period is the nine months ending September 30, 2020 or twelve months for all subsequent fiscal quarters · The maturity date of the credit facility is May 1, 2023. · Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.0% or the prime rate. Definitions under the Credit Agreement as amended are as follows: · Fixed Charge Coverage Ratio means, for any Computation Period, the ratio of (a) the sum (without duplication) for such period of (i) EBITDA, minus (ii) income taxes paid in cash by the Loan Parties, minus (iii) all unfinanced Capital Expenditures, minus (iv) all amounts paid in cash in respect of any Permitted Capital Securities Repurchase, to (b) the sum for such period of (i) cash Interest Expense, plus (ii) scheduled payments of principal of Funded Debt (excluding the Revolving Loans), plus (iii) cash payments made in respect of Capital Leases, plus (iv) the amount by which reclamation or similar costs paid in such period exceed the cash proceeds received from the sale of quarry assets and cash refunds of escrow balances; provided, however that for purposes hereof, to the extent during any period there are excess cash proceeds from the sale of quarry assets after netting such proceeds against the reclamation or similar costs in such period, such excess cash proceeds may be carried forward and netted against the reclamation or similar costs in a later period, plus (v) all amounts paid in respect of any earnout or other deferred payment in connection with any Permitted Acquisition. · EBITDA means, for any Computation Period (or another time period to the extent expressly provided herein), the sum of the following with respect to the Company and its Subsidiaries each as determined in accordance with GAAP: · Consolidated Net Income, plus (without duplication) each of the following items to the extent deducted in determining such Consolidated Net Income: i. federal, state and other income taxes deducted in the determination of Consolidated Net Income; ii. ii. depreciation, depletion and amortization expense deducted in the determination of Consolidated Net Income; iv. v. vi. · 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 March 28, 2020 compared to $800,000 as of December 28, 2019. The highest balance outstanding during the first three months of 2020 and 2019 was $2,950,000 and $2,200,000, respectively. Average outstanding funded debt was $1,134,000 and $802,000 for the first three months of 2020 and 2019 respectively. At March 28, 2020, 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. Management expects a trend of decreased working capital and decreased cash from continuing operations, relative to fiscal year 2019, may occur over the remainder of fiscal 2020 due to uncertainty of the impact of the COVID-19 coronavirus pandemic and related governmental reaction on economic conditions. Although no assurance can be provided that the Company will obtain forgiveness of the PPP Loan (See note 20) in whole or in part, management currently expects to use the proceeds of the PPP Loan for forgivable purposes in accordance with the CARES Act, and management expects that such proceeds will substantially fund any trend of increased working capital requirements and to offset the decreased cash from continuing operations, relative to fiscal year 2019, that may occur into the second quarter of fiscal 2020. Management cannot currently predict when the negative impacts on the Company and its businesses related to the COVID-19 coronavirus pandemic and related governmental reaction will end. Although the Company believes that its existing cash balance, anticipated cash flow from continuing operations and available borrowing capacity under the Credit Agreement and the PPP Loan will be sufficient to cover expected cash needs during the remainder of fiscal year 2020, that belief is based on the assumption that negative impacts related to the COVID-19 coronavirus pandemic and related governmental reaction will substantially improve commencing in the second quarter and continuing thereafter. The Company was not in compliance with the Fixed Coverage Charge Ratio covenant under the Credit Agreement as of December 28, 2019. The lender provided a waiver of the covenant violation for the period ended December 28, 2019. Based on the assumption that negative impacts related to the COVID-19 coronavirus pandemic and related governmental reaction will substantially improve commencing in the second quarter and continuing thereafter, the Company currently expects to be in compliance with all covenants under the Credit Agreement throughout the facility’s remaining term. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
Mar. 28, 2020 | |
LEGAL PROCEEDINGS | |
LEGAL PROCEEDINGS | 11. Legal Proceedings 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. |
DEFERRED DEVELOPMENT WRITE OFF
DEFERRED DEVELOPMENT WRITE OFF | 3 Months Ended |
Mar. 28, 2020 | |
DEFERRED DEVELOPMENT WRITE OFF | |
DEFERRED DEVELOPMENT WRITE OFF | 12. Other Assets The Company had previously paid $2,500,000 related to an aggregate property near Colorado Springs. During fiscal year 2019, the Company decided to cease negotiations with the State of Colorado to obtain mining permits for the property. The amount, less $325,000 that was not expected to be recovered, was included in Other current assets in the Consolidated Balance Sheet as of December 28, 2019. The funds were refunded to the Company during the first quarter of 2020. The Company sold the assets of its ready-mix and Daniels Sand Company operations in the first quarter of 2019. In conjunction with the transaction, certain amounts were held in escrow (see Note 15). Combined escrow amounts of $2,049,000 were included in Other current assets in the Consolidated Balance Sheet at December 28, 2019. The escrow amounts, less fees and $111,000 still in question, were received by the Company in the first quarter of 2020. |
LEASES
LEASES | 3 Months Ended |
Mar. 28, 2020 | |
LEASES | |
LEASES | 13. Leases 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 for any of the periods presented. The following table displays the undiscounted cash flows related to operating leases along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets (amounts in thousands) as of March 28, 2020: OPERATING LEASE LIABILITIES 2020 $ 1,062 2021 1,389 2022 1,307 2023 761 2024 255 Thereafter 655 Total lease payments 5,429 Less: interest (552) Present value of operating lease liabilities $ 4,877 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. Components of lease expense and other information is as follows: Three Months ended MARCH 28, MARCH 30, 2020 2019 Operating lease expense $ 356 $ 529 Short-term lease expense $ 215 $ 203 Weighted-average remaining lease term (years) 4.5 5.5 Weighted-average discount rate New leases entered into during the three month periods ended March 28, 2020 and March 30, 2019 were not material. |
SETTLEMENT RECEIPT
SETTLEMENT RECEIPT | 3 Months Ended |
Mar. 28, 2020 | |
SETTLEMENT RECEIPT | |
SETTLEMENT RECEIPT | 14. Settlement Receipt 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 $200,000. The Settlement Agreement does not contain any admission of liability, wrongdoing, or responsibility by any of the parties. |
DISPOSITIONS OF ASSETS
DISPOSITIONS OF ASSETS | 3 Months Ended |
Mar. 28, 2020 | |
DISPOSITIONS OF ASSETS | |
DISPOSITIONS OF ASSETS | 15. Disposition of Assets 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 Transit Mix Concrete Company’s (TMC) 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 December 28, 2019. The escrow funds, less nominal expenses and $111,000 under dispute, were received by the Company during the first quarter 2020. 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 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. The operations of the ready-mix and Daniels sand businesses were classified as discontinued. General corporate overhead charges were not allocated to discontinued operations. Revenue, expenses and pre-tax income reclassified to discontinued operations were as follows (amounts in thousands): Three Months ended MARCH 28, MARCH 30, 2020 2019 Revenue $ — $ 4,058 Costs and expenses — (3,900) Depreciation, depletion and amortization — (578) Selling and administrative — (304) Gain on sales of equipment — — Gain on sale of assets — 6,508 Pre-tax income $ — $ 5,784 The results of discontinued operations are summarized as follows: Three Months ended MARCH 28, MARCH 30, 2020 2019 Operating loss $ — $ (724) Gain on sale of assets — 6,508 Income tax benefit — (1,562) Income from discontinued operations $ — $ 4,222 |
ACQUISITIONS
ACQUISITIONS | 3 Months Ended |
Mar. 28, 2020 | |
ACQUISITIONS | |
ACQUISITIONS | 16. Acquisitions During fiscal 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 $12,855,000, which included a traditional post-closing working capital adjustment for $608,000, 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 $1,916,000, inventory of $1,745,000, property and equipment of $2,530,000, other assets of $256,000, intangibles of $4,000,000 and goodwill of $3,614,000 and retained liabilities of $1,205,000. The current value assigned to trade receivables represents fair market value. The working capital adjustment has been finalized on both transactions and final valuation of the fair value of assets and liabilities including receivables, inventory, fixed assets, intangibles, goodwill and accounts payable has been recorded as of December 28, 2019. There were no transaction costs related to either acquisition included in Selling and administrative expenses on the Condensed Consolidated Statements of Operations for the three month periods ended Mach 28, 2020 or March 30, 2019. 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 $11,206,000, 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 $1,202,000 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. There were no transaction costs related to the transaction included in the Condensed Consolidated Statement of Operations for the three months ended March 28, 2020 or March 30, 2019. In accordance with GAAP, the total purchase price has been allocated to the tangible and intangible net assets acquired based on their fair values. The working capital adjustment was finalized in the fourth quarter of 2019. The condensed balance sheet of InOvate at the acquisition date was as follows: Purchase price $ 11,206 Accounts receivable, net 1,448 Other tangible assets 984 Intangible assets 8,808 Right of use asset 387 Accounts payable and accrued expenses (1,353) Right of use liability (387) Total identifiable net assets 9,887 Goodwill $ 1,319 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 30, 2018. 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 MARCH 28, MARCH 30, 2020 2019 Revenue $ 30,845 $ 26,485 Pre-tax income from continuing operations $ 206 $ 13,240 Basic and diluted loss per share: Income from continuing operations $ 0.42 $ 5.66 Average shares outstanding 1,685 1,709 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 beginning of fiscal 2019. Three Months ended MARCH 28, MARCH 30, 2020 2019 Revenue $ 30,845 $ 31,334 Pre-tax income from continuing operations $ 206 $ 14,146 Revenue of the acquired companies increased total revenue by 34.6% in the first quarter of 2020. The acquired companies contributed a combined $411,000 to earnings for the current year quarter. Total goodwill added to the Consolidated Balance Sheet as of December 28, 2019 was $4,932,000. 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 $2,734,000 and $2,198,000, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 3 Months Ended |
Mar. 28, 2020 | |
INTANGIBLE ASSETS | |
INTANGIBLE ASSETS | 17. Intangible Assets Intangible assets with definite lives include trade names, intellectual property, and customer relationships. These intangible assets are amortized on a straight-line basis over their estimated useful lives. Amortizable intangible assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value may be greater than the fair value. There were no amortizable intangible assets as of March 30, 2019. See Note 16 for additional discussion of intangible assets acquired during 2019. Amortizable intangible assets on the Consolidated Balance Sheet as of March 28, 2020 were $12,274,000, net of $534,000 accumulated amortization. Amortization Expense for the quarter ended March 28, 2020 was $164,000. The estimated amortization expense for each of the next five years is $664,000. |
ARO ASSET_LIABILITY
ARO ASSET/LIABILITY | 3 Months Ended |
Mar. 28, 2020 | |
ARO ASSET/LIABILITY | |
ARO ASSET/LIABILITY | 18 . Asset Retirement Obligation The Company has recorded asset retirement obligations (AROs) for its legal obligation to complete reclamation of certain mining properties, in the Construction Materials segment, as required by its mining permits with the State of Colorado. The related ARO assets were considered 100% impaired as total carrying value including future costs to maintain and dispose of the asset will exceed the fair value and therefore were previously impaired. The following table details activity related to the Company’s ARO liabilities (amounts in thousands): MARCH 28, 2020 Beginning balance $ 27,913 Obligations settled (94) Accretion expense 217 Ending balance 28,036 Less current portion 4,181 Long-term portion $ 23,855 In connection with the third quarter 2019 decision to cease mining activities, management performed a review of remaining assets to determine which, if any, should be classified as assets held for sale (AHS). Based on this review a total of $896,000, previously reported as Machinery and equipment on the Consolidated Balance Sheet, was reclassified as AHS as of December 28, 2019. As of March 28, 2020 a total of $380,000 remains classified as AHS. |
VALUE CREATION INCENTIVE PLAN
VALUE CREATION INCENTIVE PLAN | 3 Months Ended |
Mar. 28, 2020 | |
VALUE CREATION INCENTIVE PLAN | |
VALUE CREATION INCENTIVE PLAN | 19 . Value Creation Incentive Plan The Company adopted the Continental Materials Corporation Value Creation Incentive Plan (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 March 28, 2020 total future compensation expense related to unvested awards yet to be recognized by the Company was approximately $1,595,000. This expense is expected to be recognized over a weighted-average remaining vesting period of approximately 3.8 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 months ended March 28, 2020 the Company’s net income included $114,000 of stock-based compensation. The total liability related to the PE and PEAR awards was $610,000, which includes $292,000 from an acquisition recorded at the opening balance sheet date, and is included as Long-term compensation on the Consolidated Balance Sheet as of March 28, 2019. The following table Balance at December 28, 2019 $ 496 Awards related to acquired companies - Change due to vesting of awards granted 166 Change in fair value measurement of liability (52) Balance at March 28, 2020 $ 610 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 28, 2020 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENT | 20. Subsequent Events Tender Offer On February 18, 2020, Bee Street Holdings LLC (Bee Street), commenced an unsolicited tender offer for all outstanding shares of Common Stock of the Company (Common Stock) not already owned by Bee Street. The subsequent offering period of the extended tender offer expired on April 17, 2020. Bee Street is an entity controlled by James G. Gidwitz, our chairman and Chief Executive Officer, and other members of Mr. Gidwitz’ s family. Mr. Gidwitz and three other members of the Company's Board of Directors are also board members of Bee Street. Bee Street owns 1,494,511, or approximately 89.2%, of the outstanding shares of Common Stock. Delisting and Deregistration of Common Stock On April 20, 2020, the Company, acting pursuant to authorization from its Board of Directors, issued a press release announcing its intention to voluntarily delist its Common Stock from the NYSE American Stock Exchange and to deregister its Common Stock under Section 12(g) of the Exchange Act of 1934, as amended (the “Exchange Act”) and suspend its SEC reporting obligations under Section 15(d) of the Exchange Act. The Company also provided written notice to NYSE American, LLC (the “Exchange”) on April 20, 2020 of the Company’s decision to voluntarily withdraw the listing of the Common Stock from the Exchange. On May 1, 2020, the Company filed with the SEC a Form 25 relating to the delisting of its Common Stock. The Company expects the delisting to be effective May 11, 2020, at which time the Common Stock will no longer be traded on the Exchange. On May 11, 2020, the Company filed with the SEC a Form 15 to deregister its Common Stock under Section 12(g) of the Exchange Act and suspend its reporting obligations under Section 15(d) of the Exchange Act, as the Common Stock is held by less than 300 stockholders of record. Paycheck Protection Program On April 14, 2020, the Company received proceeds of $5,487,000 from a loan by CIBC Bank USA (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Under the PPP, the Company may apply for forgiveness of the PPP Loan in an amount equal to the sum of the following costs incurred during the 8-week period beginning on the date of the first disbursement of the PPP Loan: (a) payroll costs, (b) any payment of interest on a covered obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation), (c) any payment on a covered rent obligation, and (d) any covered utility payment, calculated in accordance with the terms of the CARES Act. Although no assurance can be provided that the Company will obtain forgiveness of the PPP Loan in whole or in part, management currently expects to use the proceeds of the PPP Loan for forgivable purposes in accordance with the CARES Act. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 28, 2020 | |
Significant Accounting Policies | |
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 28, 2019 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. The results of operations for the period are not necessarily indicative of the results to be expected for the full year. Certain reclassifications have been made to the 2019 consolidated financial statements to conform to the 2020 presentation. The reclassifications had no effect on the consolidated results of operations, the net decrease 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. See Note 15. Accordingly, the operations of these businesses are presented as discontinued operations for all periods presented. |
Revenue Recognition | Revenue Recognition: The Company recognizes revenue in accordance with Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). 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 majority of sales within the Door division do not include extended installation components. Most of the sales of MDHI that contain installation are completed within 30 days and contain two specific components, the product and the installation service. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone price. Revenue is recognized at a point in time as each performance obligation is completed. The Company does not offer maintenance or service contracts. The acquisition of Fastrac and Serenity in mid-2019 expanded the type of contracts that require analysis under Topic 606 guidelines as these operations may include extended installation services within the contracts. The company negotiates the terms of the contract and prepares a detailed project quote that might include number and type of doors, number and style of hardware, locks, electronic items and estimated installation cost. Contract price for each item of the quote is negotiated and stated in the contract. Modifications are treated as adjustments to an existing contract and are part of the changes in billing invoices. Revenue is recognized as performance obligations, per the contract agreement, are completed. Revenue for product is recognized as shipped. Revenue for installation services is recognized on a percentage of completion method with costs in excess of billings and/or billings in excess of costs being recorded as an asset or liability until recognized. Costs in excess of billings, of approximately $238,000 and $420,000, are included in Prepaid expenses and retainage on contracts of approximately $182,000 and $345,000 is included in Receivables on the Consolidated Balance Sheets as of March 28, 2020 and December 28, 2019, respectively. See Note 7, Segment reporting 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) | 3 Months Ended |
Mar. 28, 2020 | |
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 three-month periods ended March 28, 2020 and March 30, 2019 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 Three Months ended March 28, 2020 HVAC Doors Materials Corporate Sale Total Revenues from external customers $ 23,655 $ 5,721 $ 1,470 $ — $ — $ 30,845 Depreciation and amortization 332 73 48 61 — 513 Operating income (loss) 2,536 79 (636) (1,845) — 134 Segment assets 46,250 11,506 7,291 22,760 380 88,187 Capital expenditures (b) 12 14 — — — 26 Construction Unallocated Held for Three Months ended March 30, 2019 HVAC Doors Materials Corporate Sale Total Revenues from external customers $ 16,720 $ 4,242 $ 1,554 $ 11 $ — $ 22,528 Depreciation and amortization 411 43 52 13 — 519 Operating income (loss) (481) 379 14,044 (1,567) — 12,375 Segment assets (a) 50,822 14,248 10,463 13,554 896 89,983 Capital expenditures (b) 44 19 — — — 63 (a) Segment assets are as of December 28, 2019. (b) Capital expenditures are presented on the accrual basis of accounting. |
FAIR VALUE MEASUREMENT (Tables)
FAIR VALUE MEASUREMENT (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Schedule of share-based payment award phantom equity awards, valuation assumptions | The following assumptions were used in determining the fair value of the award liability as of March 28, 2020. Risk-free interest rate 1.58% - 1.62% Dividend rate 0.00% Volatility range 24% - 38% Weighted average expected term (years) 3.8 |
Schedule of contingent consideration liability measured at fair value | The following table is a reconciliation for the contingent consideration liability measured at fair value using Level 3 unobservable inputs (in thousands): Balance at December 28, 2019 $ 1,482 Contingent consideration granted with acquisitions - Change in fair value measurement of liability 120 Balance at March 28, 2020 $ 1,602 |
Schedule of contingent consideration valuation techniques | The following assumptions were used in determining the fair value of contingent consideration at March 28, 2020: Risk-free interest rate .09% - 1.6% Expected term (years) .18 - 2.33 |
Schedule of ARO liabilities valuation techniques | The following assumptions were used in determining the fair value of the ARO liabilities at March 28, 2020: Credit adjusted risk-free interest rate 3.66% Expected term (years) 4.5 |
PE and PEAR awards | |
Schedule of contingent consideration liability measured at fair value | The following table is a reconciliation for the PE and PEAR liability measured at fair value using Level 3 unobservable inputs (in thousands): Balance at December 28, 2019 $ 496 Awards related to acquired companies - Change due to vesting of awards granted 166 Change in fair value measurement of liability (52) Balance at March 28, 2020 $ 610 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
LEASES | |
Summary of undiscounted cash flows related to operating leases | The following table displays the undiscounted cash flows related to operating leases along with a reconciliation to the discounted amount recorded on the Consolidated Balance Sheets (amounts in thousands) as of March 28, 2020: OPERATING LEASE LIABILITIES 2020 $ 1,062 2021 1,389 2022 1,307 2023 761 2024 255 Thereafter 655 Total lease payments 5,429 Less: interest (552) Present value of operating lease liabilities $ 4,877 |
Components of lease expense and other information | Three Months ended MARCH 28, MARCH 30, 2020 2019 Operating lease expense $ 356 $ 529 Short-term lease expense $ 215 $ 203 Weighted-average remaining lease term (years) 4.5 5.5 Weighted-average discount rate |
DISPOSITIONS OF ASSETS (Tables)
DISPOSITIONS OF ASSETS (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
DISPOSITIONS OF ASSETS | |
Summary of revenue, expenses and pre-tax income reclassified to discontinued operations, results of discontinued operations | Revenue, expenses and pre-tax income reclassified to discontinued operations were as follows (amounts in thousands): Three Months ended MARCH 28, MARCH 30, 2020 2019 Revenue $ — $ 4,058 Costs and expenses — (3,900) Depreciation, depletion and amortization — (578) Selling and administrative — (304) Gain on sales of equipment — — Gain on sale of assets — 6,508 Pre-tax income $ — $ 5,784 The results of discontinued operations are summarized as follows: Three Months ended MARCH 28, MARCH 30, 2020 2019 Operating loss $ — $ (724) Gain on sale of assets — 6,508 Income tax benefit — (1,562) Income from discontinued operations $ — $ 4,222 |
ACQUISITIONS (Tables)
ACQUISITIONS (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
ACQUISITIONS | |
Schedule of tangible and intangible net assets acquired | Purchase price $ 11,206 Accounts receivable, net 1,448 Other tangible assets 984 Intangible assets 8,808 Right of use asset 387 Accounts payable and accrued expenses (1,353) Right of use liability (387) Total identifiable net assets 9,887 Goodwill $ 1,319 |
Schedule of pro forma information | Three Months ended MARCH 28, MARCH 30, 2020 2019 Revenue $ 30,845 $ 26,485 Pre-tax income from continuing operations $ 206 $ 13,240 Basic and diluted loss per share: Income from continuing operations $ 0.42 $ 5.66 Average shares outstanding 1,685 1,709 Three Months ended MARCH 28, MARCH 30, 2020 2019 Revenue $ 30,845 $ 31,334 Pre-tax income from continuing operations $ 206 $ 14,146 |
ARO ASSET_LIABILITY (Tables)
ARO ASSET/LIABILITY (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
ARO ASSET/LIABILITY | |
Schedule of activity related to the Company’s ARO liabilities | The following table details activity related to the Company’s ARO liabilities (amounts in thousands): MARCH 28, 2020 Beginning balance $ 27,913 Obligations settled (94) Accretion expense 217 Ending balance 28,036 Less current portion 4,181 Long-term portion $ 23,855 |
VALUE CREATION INCENTIVE PLAN (
VALUE CREATION INCENTIVE PLAN (Tables) | 3 Months Ended |
Mar. 28, 2020 | |
Schedule of contingent consideration liability measured at fair value | The following table is a reconciliation for the contingent consideration liability measured at fair value using Level 3 unobservable inputs (in thousands): Balance at December 28, 2019 $ 1,482 Contingent consideration granted with acquisitions - Change in fair value measurement of liability 120 Balance at March 28, 2020 $ 1,602 |
PE and PEAR awards | |
Schedule of contingent consideration liability measured at fair value | The following table is a reconciliation for the PE and PEAR liability measured at fair value using Level 3 unobservable inputs (in thousands): Balance at December 28, 2019 $ 496 Awards related to acquired companies - Change due to vesting of awards granted 166 Change in fair value measurement of liability (52) Balance at March 28, 2020 $ 610 |
VCIP | PE and PEAR awards | |
Schedule of contingent consideration liability measured at fair value | Balance at December 28, 2019 $ 496 Awards related to acquired companies - Change due to vesting of awards granted 166 Change in fair value measurement of liability (52) Balance at March 28, 2020 $ 610 |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | |
Mar. 28, 2020 | Dec. 28, 2019 | |
Cost in excess of billings | $ 238,000 | $ 420,000 |
Retainage on contracts | $ 182,000 | $ 345,000 |
Minimum | ||
Payment terms number of days | 30 days | |
Maximum | ||
Payment terms number of days | 90 days |
INCOME TAXES - Other (Details)
INCOME TAXES - Other (Details) | 3 Months Ended |
Mar. 28, 2020USD ($) | |
INCOME TAXES | |
NOL carryback, net | $ 541,000 |
COLORADO | State and Local Jurisdiction [Member] | |
INCOME TAXES | |
Tax credits carry-forward period | 7 years |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) | Mar. 28, 2020USD ($) |
Fair Value Measurements | |
Fair value, financial instruments transferred between levels | $ 0 |
RECENTLY ISSUED ACCOUNTING PR_2
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - (Details) - USD ($) | Mar. 28, 2020 | Dec. 28, 2019 | Dec. 30, 2018 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |||
Operating right-of-use assets | $ 4,695,000 | $ 4,978,000 | |
Liabilities related to operating leases | $ 4,877,000 | ||
ASU 2016-02 | Restatement Adjustment | |||
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 | |
Mar. 28, 2020 | Mar. 30, 2019 | |
EARNINGS PER SHARE | ||
Difference between the calculation of basic and diluted EPS (in dollars per share) | $ 0 | $ 0 |
INDUSTRY SEGMENT INFORMATION (D
INDUSTRY SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | ||
Mar. 28, 2020USD ($)segmentcompany | Mar. 30, 2019USD ($) | Dec. 28, 2019USD ($) | |
INDUSTRY SEGMENT INFORMATION | |||
Number of reportable segments | segment | 3 | ||
Number of companies | company | 3 | ||
Revenues from external customers | $ 30,845 | $ 22,528 | |
Depreciation and amortization | 513 | 519 | |
Operating income (loss) | 134 | 12,375 | |
Segment assets | 88,187 | 89,983 | $ 89,983 |
Capital expenditures | 26 | 63 | |
Held for Sale | |||
INDUSTRY SEGMENT INFORMATION | |||
Segment assets | 380 | 896 | |
Unallocated Corporate | |||
INDUSTRY SEGMENT INFORMATION | |||
Revenues from external customers | 11 | ||
Depreciation and amortization | 61 | 13 | |
Operating income (loss) | (1,845) | (1,567) | |
Segment assets | 22,760 | 13,554 | |
HVAC | |||
INDUSTRY SEGMENT INFORMATION | |||
Revenues from external customers | 23,655 | 16,720 | |
Depreciation and amortization | 332 | 411 | |
Operating income (loss) | 2,536 | (481) | |
Segment assets | 46,250 | 50,822 | |
Capital expenditures | 12 | 44 | |
Doors | |||
INDUSTRY SEGMENT INFORMATION | |||
Revenues from external customers | 5,721 | 4,242 | |
Depreciation and amortization | 73 | 43 | |
Operating income (loss) | 79 | 379 | |
Segment assets | 11,506 | 14,248 | |
Capital expenditures | 14 | 19 | |
Construction Materials | |||
INDUSTRY SEGMENT INFORMATION | |||
Revenues from external customers | 1,470 | 1,554 | |
Depreciation and amortization | 48 | 52 | |
Operating income (loss) | (636) | 14,044 | |
Segment assets | $ 7,291 | $ 10,463 |
FAIR VALUE MEASUREMENT - Award
FAIR VALUE MEASUREMENT - Award Liability (Details) - PE and PEAR awards | 3 Months Ended |
Mar. 28, 2020 | |
Fair Value Assumptions of Award Liability | |
Dividend rate | 0.00% |
Volatility range, minimum | 24.00% |
Volatility range, maximum | 38.00% |
Weighted average expected term (years) | 3 years 9 months 18 days |
FAIR VALUE MEASUREMENT - Reconc
FAIR VALUE MEASUREMENT - Reconciliation (Details) $ in Thousands | 3 Months Ended |
Mar. 28, 2020USD ($) | |
FAIR VALUE MEASUREMENT | |
Beginning balance | $ 496 |
Change due to vesting of awards granted | 166 |
Change in fair value measurement of liability | (52) |
Ending balance | 610 |
PE and PEAR awards | Level 3 | |
FAIR VALUE MEASUREMENT | |
Beginning balance | 496 |
Change due to vesting of awards granted | 166 |
Change in fair value measurement of liability | (52) |
Ending balance | $ 610 |
FAIR VALUE MEASUREMENT - Contin
FAIR VALUE MEASUREMENT - Contingent Consideration (Details) | Mar. 28, 2020 |
Risk-free interest rate | Minimum | |
FAIR VALUE MEASUREMENT | |
Contingent consideration liability measurement input | 0.09 |
Risk-free interest rate | Maximum | |
FAIR VALUE MEASUREMENT | |
Contingent consideration liability measurement input | 1.6 |
Expected term (years) | Minimum | |
FAIR VALUE MEASUREMENT | |
Contingent consideration liability measurement input | 0.18 |
Expected term (years) | Maximum | |
FAIR VALUE MEASUREMENT | |
Contingent consideration liability measurement input | 2.33 |
FAIR VALUE MEASUREMENT - Reco_2
FAIR VALUE MEASUREMENT - Reconciliation For Contingent Consideration Liability (Details) - Level 3 $ in Thousands | 3 Months Ended |
Mar. 28, 2020USD ($) | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning balance | $ 1,482 |
Change in fair value measurement of liability | 120 |
Ending balance | $ 1,602 |
FAIR VALUE MEASUREMENT - ARO Li
FAIR VALUE MEASUREMENT - ARO Liabilities (Details) | Mar. 28, 2020Y |
Risk-free interest rate | |
FAIR VALUE MEASUREMENT | |
ARO measurement input | 3.66 |
Expected term (years) | |
FAIR VALUE MEASUREMENT | |
ARO measurement input | 4.5 |
NON-EMPLOYEE DIRECTORS SHARE-_2
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION (Details) - Director | Dec. 13, 2019USD ($)shares | Feb. 07, 2019directorshares |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares issued to eligible board members | 16,998 | 21,000 |
Number of eligible board members | 6 | 7 |
REVOLVING BANK LOAN AND LONG-_2
REVOLVING BANK LOAN AND LONG-TERM DEBT (Details) | 3 Months Ended | ||||
Jun. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Mar. 28, 2020USD ($) | Mar. 30, 2019USD ($) | Dec. 28, 2019USD ($) | |
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 | ||||
Borrowings as a percentage of eligible accounts receivable | 85.00% | ||||
Borrowings as a percentage of eligible inventories | 60.00% | ||||
Maximum inventory borrowings | $ 8,500,000 | ||||
Minimum EBITDA threshold amount | $ (525,000) | ||||
Minimum EBITDA threshold amount in next three months | $ 265,000 | ||||
Threshold average daily excess availability | 5,000,000 | ||||
Outstanding amount | 0 | $ 800,000 | |||
Highest balance outstanding during the period | 2,950,000 | $ 2,200,000 | |||
Average outstanding | 1,134,000 | $ 802,000 | |||
Outstanding amount of letters of credit total | $ 5,620,000 | ||||
Revolving Credit Facility [Member] | LIBOR | |||||
Debt Instrument [Line Items] | |||||
Percentage points added to the reference rate | 2.00% |
LEGAL PROCEEDINGS (Details)
LEGAL PROCEEDINGS (Details) | 3 Months Ended |
Mar. 28, 2020item | |
LEGAL PROCEEDINGS | |
Number of proceedings having material adverse effect on the consolidated results of operations, cash flows or financial condition | 0 |
DEFERRED DEVELOPMENT WRITE OFF
DEFERRED DEVELOPMENT WRITE OFF (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Mar. 28, 2020 | Dec. 28, 2019 | Jan. 15, 2019 | Jul. 31, 2015 | |
DEFERRED DEVELOPMENT WRITE OFF | ||||
Escrow Deposit | $ 2,049,000 | $ 200,000 | $ 2,500,000 | |
Write-off of deferred development costs | $ 111,000 | $ 325,000 |
LEASES (Details)
LEASES (Details) - USD ($) | 3 Months Ended | ||
Mar. 28, 2020 | Dec. 28, 2019 | Dec. 30, 2018 | |
Lessee, Lease, Description [Line Items] | |||
Operating right-of-use assets | $ 4,695,000 | $ 4,978,000 | |
Present value of operating lease liabilities | $ 4,877,000 | ||
Options to renew | true | ||
ASU 2016-02 | Restatement Adjustment | |||
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 | Mar. 28, 2020USD ($) |
Undiscounted cash flows related to operating leases | |
2020 | $ 1,062 |
2021 | 1,389 |
2022 | 1,307 |
2023 | 761 |
2024 | 255 |
Thereafter | 655 |
Total lease payments | 5,429 |
Less: interest | (552) |
Present value of operating lease liabilities | $ 4,877 |
LEASES - Additional Information
LEASES - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | |
LEASES | ||
Operating lease expense | $ 356 | $ 529 |
Short-term lease expense | $ 215 | $ 203 |
Weighted-average remaining lease term (years) | 4 years 6 months | 5 years 6 months |
Weighted-average discount rate | 6.00% | 6.10% |
SETTLEMENT RECEIPT (Details)
SETTLEMENT RECEIPT (Details) - USD ($) | Jan. 15, 2019 | Dec. 28, 2019 | Jul. 31, 2015 |
SETTLEMENT RECEIPT | |||
Settlement receipt | $ 15,000,000 | ||
Escrow deposit | $ 200,000 | $ 2,049,000 | $ 2,500,000 |
DISPOSITIONS OF ASSETS (Details
DISPOSITIONS OF ASSETS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||
Mar. 28, 2020 | Mar. 30, 2019 | Dec. 28, 2019 | Feb. 01, 2019 | Jan. 15, 2019 | Jul. 31, 2015 | |
Disposition of assets. | ||||||
Escrow Deposit | $ 2,049,000 | $ 200,000 | $ 2,500,000 | |||
Write-off of deferred development costs | $ 111,000 | $ 325,000 | ||||
Revenue, expenses and pre-tax income reclassified to discontinued operations | ||||||
Revenue | $ 4,058,000 | |||||
Costs and expenses | (3,900,000) | |||||
Depreciation, depletion and amortization | (578,000) | |||||
Selling and administrative | (304,000) | |||||
Gain on sale of assets | 6,508,000 | |||||
Pre-tax income | 5,784,000 | |||||
The results of discontinued operations | ||||||
Gain on sale of assets | 6,508,000 | |||||
Income tax benefit | 0 | (1,562,000) | ||||
Income from discontinued operations | 4,222,000 | |||||
Transit Mix Concrete | Discontinued operation | ||||||
Disposition of assets. | ||||||
Sale price | $ 27,129,000 | |||||
Escrow Deposit | $ 111,000 | $ 2,049,000 | ||||
Revenue, expenses and pre-tax income reclassified to discontinued operations | ||||||
Gain on sale of assets | 6,508,000 | |||||
The results of discontinued operations | ||||||
Operating loss | (724,000) | |||||
Gain on sale of assets | 6,508,000 | |||||
Income tax benefit | (1,562,000) | |||||
Income from discontinued operations | $ 4,222,000 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) | 12 Months Ended |
Dec. 28, 2019agreementitem | |
ACQUISITIONS | |
Number of asset purchase agreements | agreement | 3 |
Number of asset acquired operating businesses | item | 4 |
ACQUISITIONS - GFP (Details)
ACQUISITIONS - GFP (Details) - USD ($) | Jun. 03, 2019 | Mar. 28, 2020 | Mar. 30, 2019 | Dec. 28, 2019 |
ACQUISITIONS | ||||
Goodwill | $ 5,932,000 | $ 5,932,000 | ||
American Wheatley HVAC And Global Flow Products | ||||
ACQUISITIONS | ||||
Purchase price | $ 12,855,000 | |||
Estimated working capital adjustment | 608,000 | |||
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 | 1,916,000 | |||
Inventory | 1,745,000 | |||
Property and equipment | 2,530,000 | |||
Other assets | 256,000 | |||
Intangibles | 4,000,000 | |||
Goodwill | 3,614,000 | |||
Retained liabilities | $ 1,205,000 | |||
American Wheatley HVAC And Global Flow Products | Minimum | ||||
ACQUISITIONS | ||||
Earn out agreement, achievement of growth targets period | 24 months | |||
American Wheatley HVAC And Global Flow Products | Maximum | ||||
ACQUISITIONS | ||||
Earn out agreement, achievement of growth targets period | 36 months | |||
Selling and administrative expense | American Wheatley HVAC And Global Flow Products | ||||
ACQUISITIONS | ||||
Transaction costs | $ 0 | $ 0 |
ACQUISITIONS - INOVATE (Details
ACQUISITIONS - INOVATE (Details) - USD ($) | Jun. 17, 2019 | Mar. 30, 2019 | Jan. 02, 2021 | Mar. 28, 2020 | Dec. 28, 2019 |
ACQUISITIONS | |||||
Goodwill | $ 5,932,000 | $ 5,932,000 | |||
Inovate | |||||
ACQUISITIONS | |||||
Purchase price | $ 11,206,000 | ||||
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 | $ 1,202,000 | ||||
Accounts receivable, net | 1,448,000 | ||||
Other tangible assets | 984,000 | ||||
Intangible assets | 8,808,000 | ||||
Right of use asset | 387,000 | ||||
Accounts payable and accrued expenses | (1,353,000) | ||||
Right of use liability | (387,000) | ||||
Total identifiable net assets | 9,887,000 | ||||
Goodwill | $ 1,319,000 | ||||
Selling and administrative expense | Inovate | |||||
ACQUISITIONS | |||||
Transaction costs | $ 0 | $ 0 |
ACQUISITIONS - PROFORMA (Detail
ACQUISITIONS - PROFORMA (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 28, 2020 | Mar. 30, 2019 | Dec. 28, 2019 | |
ACQUISITIONS | |||
Revenue | $ 308,450,000 | $ 313,340,000 | |
Pre-tax income from continuing operations | $ 2,060,000 | 141,460,000 | |
Percentage of increase in total revenue due to revenue of the acquired companies | 34.60% | ||
Basic and diluted loss per share: | |||
Acquired companies combined earnings contribution | $ 411,000 | ||
Goodwill added due to acquisition | $ 4,932,000 | ||
Inovate | |||
ACQUISITIONS | |||
Revenue | 30,845,000 | 26,485,000 | |
Pre-tax income from continuing operations | $ 206,000 | $ 13,240,000 | |
Basic and diluted loss per share: | |||
Income from continuing operations | $ 0.42 | $ 5.66 | |
Average shares outstanding | 1,685 | 1,709 | |
Doors | |||
Basic and diluted loss per share: | |||
Goodwill added due to acquisition | 2,198,000 | ||
HVAC | Concrete Aggregates and Construction Supplies | |||
Basic and diluted loss per share: | |||
Goodwill added due to acquisition | $ 2,734,000 |
INTANGIBLE ASSETS - Amortizatio
INTANGIBLE ASSETS - Amortization (Details) - USD ($) | Mar. 28, 2020 | Mar. 30, 2019 |
INTANGIBLE ASSETS | ||
Amortizable intangible assets, net | $ 12,274,000 | $ 0 |
Accumulated amortization | 534,000 | |
Estimated amortization expense | ||
2020 | 164,000 | |
2021 | 664,000 | |
2022 | 664,000 | |
2023 | 664,000 | |
2024 | 664,000 | |
Thereafter | $ 664,000 |
ARO ASSET_LIABILITY (Details)
ARO ASSET/LIABILITY (Details) - USD ($) | 3 Months Ended | |
Mar. 28, 2020 | Dec. 28, 2019 | |
Asset Retirement Obligations, Noncurrent [Abstract] | ||
Percent impairment of ARO asset | 100.00% | |
Assets held-for-sale | $ 380,000 | $ 896,000 |
ARO ASSET_LIABILITY - ARO Liabi
ARO ASSET/LIABILITY - ARO Liabilities (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 28, 2020 | Dec. 28, 2019 | |
ARO liabilities | ||
Beginning balance | $ 27,913 | |
Obligations settled | (94) | |
Accretion expense | 217 | |
Ending balance | 28,036 | |
Less current portion | 4,181 | $ 4,200 |
Long-term portion | $ 23,855 | $ 23,713 |
VALUE CREATION INCENTIVE PLAN_2
VALUE CREATION INCENTIVE PLAN (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 28, 2020 | Dec. 28, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
PE and PEAR awards liability | $ 1,945,000 | $ 1,842,000 |
Beginning balance | 496,000 | |
Change due to vesting of awards granted | 166,000 | |
Change in fair value measurement of liability | (52,000) | |
Ending balance | $ 610,000 | 496,000 |
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 | $ 1,595,000 | |
Weighted-average remaining vesting period | 3 years 9 months 18 days | |
Stock-based compensation expense | $ 114,000 | |
PE and PEAR awards liability | 610,000 | |
PE and PEAR awards liability from acquisition | $ 292,000 | |
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 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event | May 11, 2020stockholder | Apr. 17, 2020directorshares | Apr. 14, 2020USD ($) |
Subsequent Event [Line Items] | |||
Number of stockholders on record | stockholder | 300 | ||
Loan proceeds from PPP Loan | $ | $ 5,487,000 | ||
Continental Materials Corporation | Bee Street Holdings LLC | |||
Subsequent Event [Line Items] | |||
Number of Board Members | director | 3 | ||
Number of shares owned by parent | shares | 1,494,511 | ||
Ownership percentage | 89.20% |