Exhibit 99.1
CSI ELECTRICAL CONTRACTORS, INC.
YEARS ENDED DECEMBER 31, 2018 AND 2017
CSI ELECTRICAL CONTRACTORS, INC.
YEARS ENDED DECEMBER 31, 2018 AND 2017
CONTENTS
Page | |
Accountant's report | 1 |
Financial statements: | |
Balance sheet | 2-3 |
Statement of income and retained earnings | 4 |
Statement of cash flows | 5-6 |
Notes to financial statements | 7-14 |
STEVEN E. MEADOWS JOHN R. FRIES | MEADOWS&FRIES, LLP CERTIFIED PUBLIC ACCOUNTANTS 2677 N. MAIN ST., SUITE 540 SANTA ANA. CALIFORNIA 92705 TELEPHONE (714) 568-5245 FAX (714) 285-9483 smeadows@meadowsfries.com | MEMBERS. AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
|
To the Management of CSI Electrical Contractors, Inc.
Santa Fe Springs, California
Report on the Financial Statements
We have audited the accompanying financial statements of CSI Electrical Contractors, Inc., a California corporation, which comprise the balance sheet as of December 31, 2018 and 2017, and the related statements of income, retained earnings, and cash flows for the year then ended, and the related notes to the financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CSI Electrical Contractors, Inc., as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the Unites States of America.
/s/ Meadows & Fries, LLP
March 1, 2019
1 |
CSI ELECTRICAL CONTRACTORS, INC.
BALANCE SHEET – DECEMBER 31, 2018 AND 2017
December 31, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Current assets : | ||||||||
Cash and cash equivalents | $ | 4,726,531 | $ | 4,684,370 | ||||
Contract receivable (notes 1 and 2) | 92,978,576 | 74,759,201 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts (note 3) | 10,996,076 | 7,171,358 | ||||||
Officer advance | - | 39,735 | ||||||
Prepaid charges and other assets | 601,790 | 742,351 | ||||||
Cash value of life insurance | 1,524,695 | 1,835,166 | ||||||
Total Current Assets | 110,827,668 | 89,232,181 | ||||||
Property and equipment, net of accumulated depreciation (note 4) | 3,249,848 | 3,459,810 | ||||||
Other assets : | ||||||||
Note receivable (note 5) | 75,526 | 74,745 | ||||||
Other | 103,454 | 86,950 | ||||||
Total Other Assets | 178,980 | 161,695 | ||||||
$ | 114,256,496 | $ | 92,853,686 |
The accompanying notes are an integral part of these financial statement
2 |
CSI ELECTRICAL CONTRACTORS, INC.
BALANCE SHEET – DECEMBER 31, 2018 AND 2017 (Continued)
December 31, | ||||||||
2018 | 2017 | |||||||
LIABILITIES AND STOCKHOLDER'S EQUITY | ||||||||
Current liabilities : | ||||||||
Current maturities of long term debt (note 8) | $ | 830,768 | $ | 765,610 | ||||
Bank lines of credit (note 7) | 7,977,715 | 15,692,792 | ||||||
Accounts payable | 33,505,716 | 18,331,847 | ||||||
Billings in excess of costs and estimated earnings on uncompleted contracts (note 3) | 26,642,648 | 23,161,576 | ||||||
Accrued salaries and benefits | 6,011,143 | 4,699,445 | ||||||
Compensated absences | 988,376 | 825,753 | ||||||
Accrued union benefits | 4,789,916 | 3,049,321 | ||||||
Franchise tax payable | - | 42,957 | ||||||
Other accruals | 30,402 | - | ||||||
Total Current Liabilities | 80,776,684 | 66,569,301 | ||||||
Longs-term debt, less current maturities (note 8) | 1,395,014 | 1,084,976 | ||||||
Stockholders' equity : | ||||||||
Common stock, 8,000 and 8,615 shares issued and outstanding, respectively | 8,000 | 38,500 | ||||||
Retained earnings | 32,076,798 | 25,160,909 | ||||||
Total Stockholders' Equity | 32,084,798 | 25,199,409 | ||||||
$ | 114,256,496 | $ | 92,853,686 |
The accompanying notes are an integral part of these financial statement
3 |
CSI ELECTRICAL CONTRACTORS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 2018 AND 2017
Year ended December 31, | ||||||||||||||||
2018 | 2017 | |||||||||||||||
Contract revenues earned | $ | 302,475,710 | 100.0 | % | $ | 233,043,845 | 100.0 | % | ||||||||
Cost of revenues earned | 244,065,835 | 80.7 | 186,199,065 | 79.9 | ||||||||||||
Gross profit | 58,409,875 | 19.3 | 46,844,780 | 20.1 | ||||||||||||
Indirect expenses | 12,369,675 | 4.1 | 9,068,661 | 3.9 | ||||||||||||
Selling, general and administrative expense | 32,207,791 | 10.6 | 28,353,110 | 12.2 | ||||||||||||
Income from operations | 13,832,409 | 4.6 | 9,423,009 | 4.0 | ||||||||||||
Other income and (expense): | ||||||||||||||||
Other income | 15 | 0.0 | 61 | 0.0 | ||||||||||||
Gain on the sale of assets and disposition of equipment | 11,302 | 0.0 | 1,214 | 0.0 | ||||||||||||
Interest income | 538 | 0.0 | 3,065 | 0.0 | ||||||||||||
Interest expense | (384,582 | ) | (0.1 | ) | (462,662 | ) | (0.2 | ) | ||||||||
Total other income | (372,727 | ) | (0.1 | ) | (458,322 | ) | (0.2 | ) | ||||||||
Income before state income taxes | 13,459,682 | 4.4 | 8,964,687 | 3.8 | ||||||||||||
Provision for state income taxes | 13,294 | 0.0 | 118,358 | 0.1 | ||||||||||||
Net income | 13,446,388 | 4.4 | % | 8,846,329 | 3.8 | % | ||||||||||
Beginning retained earnings | 25,160,909 | 20,443,496 | ||||||||||||||
Shareholder distributions (note 9) | (4,719,841 | ) | (4,128,916 | ) | ||||||||||||
Common stock repurchase | (1,810,658 | ) | - | |||||||||||||
Ending retained earnings | $ | 32,076,798 | $ | 25,160,909 |
The accompanying notes are an integral part of these financial statement
4 |
CSI ELECTRICAL CONTRACTORS, INC.
STATEMENT OF CASH FLOW
YEARS ENDED DECEMBER 31, 2018 AND 2017
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities : | ||||||||
Net income | $ | 13,446,388 | $ | 8,846,329 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 867,332 | 759,052 | ||||||
Decrease (increase) in: | ||||||||
Contracts receivable | (18,219,375 | ) | (21,348,557 | ) | ||||
Costs and estimated earnings in excess of billings | (3,824,718 | ) | 1,679,567 | |||||
Supplies inventory | - | 125,839 | ||||||
Prepaid charges and other assets | 140,561 | (466,448 | ) | |||||
Increase (decrease) in: | ||||||||
Bank overdraft | - | (1,097,133 | ) | |||||
Accounts payable | 15,173,869 | 445,559 | ||||||
Billings in excess of costs and estimated earnings | 3,481,072 | 9,882,681 | ||||||
Accrued salaries and benefits | 1,311,698 | 806,208 | ||||||
Compensated absences | 162,623 | 49,353 | ||||||
Accrued union benefits | 1,740,595 | 89,574 | ||||||
Other accruals | 30,402 | (608,624 | ) | |||||
Franchise tax payable | (42,957 | ) | - | |||||
Net cash provided by operating activities | 14,267,490 | (836,600 | ) | |||||
Cash flows from investing activities : | ||||||||
Shareholder distributions | (4,719,841 | ) | (4,128,916 | ) | ||||
Decrease (increase) in cash value of life insurance | 310,471 | (243,177 | ) | |||||
Acquisition of property and equipment | (788,999 | ) | (1,341,939 | ) | ||||
Disposition of property and equipment, net | 131,629 | (73,703 | ) | |||||
Net cash used by investing activities | (5,066,740 | ) | (5,787,735 | ) | ||||
Cash flows from financing activities : | ||||||||
Increase in notes receivable | (781 | ) | (7,565 | ) | ||||
Increase in other assets | (16,504 | ) | - | |||||
Decrease (increase) in officer advances | 39,735 | (39,735 | ) | |||||
Increase (decrease) in bank line of credit | $ | (7,715,077 | ) | $ | 12,028,741 |
The accompanying notes are an integral part of these financial statement
5 |
CSI ELECTRICAL CONTRACTORS, INC.
STATEMENT OF CASH FLOW (Continued)
YEARS ENDED DECEMBER 31, 2018 AND 2017
Year ended December 31, | ||||||||
2018 | 2017 | |||||||
Cash flows from financing activities (continued) : | ||||||||
Balance forward | (7,692,627 | ) | 11,981,441 | |||||
Common stock repurchase | (1,841,158 | ) | - | |||||
Proceeds from the issuance of long-term debt | 1,489,049 | - | ||||||
Capital lease proceeds | - | 32,687 | ||||||
Repayments of long-term debt | (1,113,853 | ) | (770,783 | ) | ||||
Net cash used by financing activities | (9,158,589 | ) | 11,243,345 | |||||
Net increase in cash and cash equivalents | 42,161 | 4,619,010 | ||||||
Cash at beginning of year | 4,684,370 | 65,360 | ||||||
Cash at end of year | $ | 4,726,531 | $ | 4,684,370 | ||||
Supplementary cash flow disclosures: | ||||||||
Interest paid | $ | 387,458 | $ | 440,257 | ||||
State income taxes paid | $ | 78,927 | $ | 35,843 |
The accompanying notes are an integral part of these financial statement
6 |
CSI ELECTRICAL CONTRACTORS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2018 AND 2017
1. | Nature of Operations and Significant Accounting Policies |
Nature of operations:
CSI Electrical Contractors, Inc., is an electrical subcontracting company. Work is performed under fixed price and cost-plus fee contracts. The length of the Company's contracts varies but is typically less than one year, therefore assets and liabilities are classified as current and noncurrent.
Use of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue and cost recognition:
Revenues from fixed-price construction contracts are recognized on the percentage-of-completion method, measured by the percentage of direct costs incurred to date to the estimated total direct costs for each contract. Management considers this the best available measure of progress on these contracts. Revenues from cost-plus-fee contacts are recognized on the basis of costs incurred during the period plus the fee earned, measured by the cost-to-cost method.
Contract costs include all direct material and labor costs. Indirect costs are costs related to contract performance such as indirect labor, union benefits, equipment, supplies, tools and repairs. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, and estimated profitability may result in revisions to costs and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, contract penalty provisions, claims, change orders, and settlements are accounted for as changes in estimates in the current period.
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1. | Nature of Operations and Significant Accounting Policies (Continued) |
The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts" represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts" represents billings in excess of revenues recognized.
Contracts receivable:
Contracts receivables are based on contracted prices. The Company provides an allowance for doubtful collections which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal contract receivables are due 30 days after the issuance of the invoice. Contract retentions are due 30 days after completion of the project and acceptance by the owner. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer.
Property and equipment:
Property and equipment are recorded at cost and are being depreciated over their estimated useful lives ranging from 3 to 7 years, by use of the straight-line and declining balance methods.
Income taxes:
As of January 1, 2008 the Company elected to be taxed as an S-Corporation. California franchise tax is computed at 1.5% of estimated taxable income, less current year research credits of $160,973 and refunds of $45,957 relating to under accrual of 2017 credits.
2. | Contracts Receivable |
December 31, | ||||||||
2018 | 2017 | |||||||
Contracts receivable | ||||||||
Billed: | ||||||||
Completed contracts | $ | 4,610,721 | $ | 5,244,503 | ||||
Contracts in progress | 69,841,370 | 58,604,764 | ||||||
Retainage | 18,526,485 | 10,909,934 | ||||||
92,978,576 | 74,759,201 | |||||||
Less: Allowances for doubtful collections | - | - | ||||||
92,978,576 | 74,759,201 |
8 |
3. | Costs and Estimated Earnings on Uncompleted Contracts |
December 31, | ||||||||
2018 | 2017 | |||||||
Costs incurred on uncompleted contracts | $ | 307,564,228 | $ | 299,734,420 | ||||
Estimated earnings | 51,281,012 | 56,139,802 | ||||||
358,845,240 | 355,874,222 | |||||||
Less: billings to date | 374,491,812 | 371,864,440 | ||||||
$ | (15,646,572 | ) | $ | (15,990,218 | ) | |||
Included in the accompanying balance sheet | ||||||||
under the following captions: | ||||||||
Costs and estimated earnings in excess of | ||||||||
billings on uncompleted contracts | $ | 10,996,076 | $ | 7,171,358 | ||||
Billings in excess of costs and estimated | ||||||||
earnings on uncompleted contracts | (26,642,648 | ) | (23,161,576 | ) | ||||
$ | (15,646,572 | ) | $ | (15,990,218 | ) |
4. | Property and Equipment |
December 31, | ||||||||
2018 | 2017 | |||||||
Assets | ||||||||
Leasehold improvements | $ | 3,263,190 | $ | 3,137,558 | ||||
Furniture and fixtures | 1,313,987 | 1,224,919 | ||||||
Computer equipment | 2,618,490 | 2,468,461 | ||||||
Machinery and equipment | 1,957,507 | 1,784,289 | ||||||
Transportation equipment | 524,496 | 559,077 | ||||||
9,677,670 | 9,174,304 | |||||||
Less accumulated depreciation | (6,427,822 | ) | (5,714,494 | ) | ||||
Net property and equipment | $ | 3,249,848 | $ | 3,459,810 |
5. | Note Receivable |
Notes receivable consist of short-term advances to a Company officer and an entity unrelated to the Company.
6. | Related-Party Transactions |
On October 9, 2002 the Company entered into an agreement to lease it's corporate office facility from a California limited liability company, of which the Company's president has a majority interest. The term of the agreement is 21 years with a single 5 year renewal option. The lease provides monthly payments of $32,400 for the first 36 months, $34,500 for the next 60 months and $36,180 for the remaining term. On April 2, 2018 the Company entered into a lease amendment providing for monthly payments of $42,120 commencing May 1, 2018 and continuing for the remaining lease term. Lease expense under this agreement totaled $487,620 and $434,160 for the years ended December 31, 2018 and 2017, respectively.
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7. | Bank Lines of Credit |
On November 20, 2018 and August 19, 2016 the Company negotiated a $28,000,000 and $18,000,000, respectively, revolving line of credit with MUFG Bank. The line is secured by the assets of the corporation, require payment of interest only and is scheduled to mature on April 30, 2019. The interest rate is variable based on 2.35 percentage points above the Bank's LIBOR rate.
The agreement includes various financial covenants, including a minimum net worth, debt to equity and current ratios, and company profitability. The agreements also place restrictions on shareholder loan repayments.
At December 31, 2018 and 2017, $7,977,715 and $15,692,792, respectively, was advanced on the line. The Company was in compliance with all loan covenants.
Additionally, on October 3, 2018 MUFG Union Bank has issued a Standby Letter of Credit in the amount of $1,490,000 and $950,000 in 2017 in favor of Zurich American Insurance Company relating to the Company's high deductible workers compensation plan.
8. | Long-Term Debt |
Long-term debt at December 31, 2018 and 2017, consists of the following:
December 31, | ||||||||
2018 | 2017 | |||||||
Capital lease, payable to Toyota Commercial Finance in 60 monthly installments of $610.67, including interest at a rate of 4.59% per annum. $1.00 bargain purchase at lease end. | $ | 23,971 | $ | 30,508 | ||||
Commercial loan payable to MUFG Union bank. Maximum principal $1,000,000, payable in 48 equal installments beginning on July 31, 2016, plus interest payable monthly, at 2.75 percentage points above the bank's LIBOR rate. Loan matures June 30, 2020. | 355,500 | 612,250 | ||||||
Auto loan payable in 72 monthly installments of $2,370, including interest at a rate of .99%, through February 2024. | 126,401 | - | ||||||
Auto loan payable to JP Morgan Chase Bank, payable in monthly installments of $1,817 including interest at a rate of 2.34% per annum, through April 2021, respectively. | - | 65,986 |
10 |
8. | Long-Term Debt (Continued) |
December 31, | ||||||||
2018 | 2017 | |||||||
Software lease installment agreement, payable to Everbank Commercial Finance, Inc., payable in quarterly installments of $7,567, including interest at 7.17% through September 2018 | - | 21,074 | ||||||
Note payable to Union Bank, payable in monthly installments of interest only, at a rate of 2.6% above the Bank's Adjusted Treasury Rate, beginning March 31, 2013. 60 equal principal reduction payments began on August 31, 2013 | - | 183,333 | ||||||
Note payable to former shareholder and officer for the repurchase of 7.14% of Company common stock, payable beginning on September 17, 2018 in 60 monthly installments of $30,547, including interest at 5% per annum. | 1,079,837 | - | ||||||
Note payable to former shareholder and officer for the repurchase of 12.5% of Company common stock, payable beginning on December 31, 2016 in five annual installments of $344,234, including interest at 5% per annum. | 640,073 | 937,435 | ||||||
2,225,782 | 1,850,586 | |||||||
Less current maturity | (830,768 | ) | (765,610 | ) | ||||
$ | 1,395,014 | $ | 1,084,976 |
Maturities of long-term debt are as follows:
As of December 31, | ||||
2018 | ||||
Year ended December 31, | ||||
2019 | $ | 830,768 | ||
2020 | 740,405 | |||
2021 | 307,217 | |||
2022 | 318,849 | |||
2023 | 24,465 | |||
Thereafter | 4,078 | |||
$ | 2,225,782 |
9. | Shareholder Distributions |
As part of the decision to elect S-Corporation status for income tax reporting, it is the Company's policy to distribute cash to each shareholder, in part, as reimbursement for the individual income tax liability resulting from the pass through of the Company's taxable income.
For the year ended December 31, 2018 a total of $4,719,841 has been distributed. Of this amount $1,440,105 reimbursed the shareholders for their 2017 individual income tax liability and $3,240,003 reimbursed shareholders for 2018 federal and state safe-harbor installments of individual income taxes.
For the year ended December 31, 2017 $4,128,916 has been distributed representing the four safe harbor installments of 2017 federal income taxes and the full amount of 2017 California income taxes estimated to be due.
11 |
10. | Operating lease Agreements |
The Company rents vehicles, equipment and satellite office facilities under various operating leases. Total rent expense under all operating leases was approximately $2,056,400 and $1,824,900 for the year ended December 31, 2018 and 2017, respectively.
Minimum rents due under the leases are as follows:
As of December 31, | ||||
2018 | ||||
Twelve months ended December 31, | ||||
2019 | $ | 2,129,820 | ||
2020 | 1,514,336 | |||
2021 | 1,133,866 | |||
2022 | 431,088 | |||
2023 | 169,350 | |||
$ | 5,378,460 |
11. | Backlog |
The following schedule summarizes changes in backlog on contracts for the years ended December 31, 2018 and 2017. Backlog represents the amount of revenue the Company expects to realize from work preformed on uncompleted contracts in progress at year end and from contractual agreements on which work has not yet begun.
Backlog balance at December 31, 2016 | $ | 97,016,576 | ||
Contract adjustments | 56,943,443 | |||
New contracts during the period | 213,564,227 | |||
367,524,246 | ||||
Less contract revenue earned during the period | (233,043,845 | ) | ||
Backlog balance at December 31, 2017 | $ | 134,480,401 | ||
Contract adjustments | 79,995,607 | |||
New contracts during the period | 308,336,729 | |||
522,812,737 | ||||
Less contract revenue earned during the period | (302,915,352 | ) | ||
Backlog balance at December 31, 2018 | $ | 219,897,385 |
12. | Contingent Liability |
On October 21, 2013 a former employee filed a case claiming to be the representative of a class of all non-exempt electricians employed by the Company over the last four years. The case involves seven causes of action, one of which has been dismissed. The Company estimates there are 400 persons in the class. In June, 2017 the Superior Court of California, County of Los Angeles issued an order denying class certification on two of the claims.
The plaintiff appealed that ruling and in September 2018, the Court of Appeals affirmed the trial court's ruling. A status conference is scheduled for June 2019 at which time the remainder of the plaintiff's claims will be discussed.
12 |
12. | Contingent Liability (Continued) |
Company counsel has indicated it is not possible to predict a range of potential loss in the event a class is certified and a violation of the Labor Code is found. Counsel is confident however that a motion for summary judgment could be granted eliminating any potential Company liability.
In July 2017 a wage and hour class action was brought in Fresno County Superior Court alleging seven causes of action including Failure to Pay Wages. An initial Case Management Conference has been set for April 5, 2019. Company Counsel has advised that the Company will vigorously defend this case and cannot predict a potential outcome until the court has ruled on whether the case can proceed on a class action basis.
In July, 2018 a third-tier subcontractor filed a case alleging breach of contract. The Company has filed a cross complaint against their subcontractor demanding indemnification per the subcontract. The case is currently scheduled for mediation. A trial date is set for December 2019.
The Company has been served with several Notices to Cure relating to delays in construction from an ongoing project. Assessment of liquidated damages has been threatened. The Company has responded to the Notices and is preparing its own claim for damages related to breach of contract. Company counsel has indicated it is too early to assess potential damages.
13. | Surety Bonds |
The Company, as a condition for entering into some of it's construction contracts, had outstanding surety bonds approximating $66,581,028 and $7,951,802 as of December 31, 2018 and 2017, respectively. The bonds are collateralized by the personal guarantee of the shareholder and his spouse.
14. | Profit Sharing Plan |
The Company has a defined contribution 401(k) profit sharing plan covering all full-time employees who have met certain requirements as to length of service, age, and who are not members of a collective bargaining unit. The plan assets are held by a life insurance company as trustee. The Company contributes to each participant's account a matching contribution equal to 50% of the participant's deferred salary that does not exceed 6% of compensation, once the participant has obtained one year of service. Additionally, the Company makes an annual discretionary contribution to the plan.
For the year ended December 31, 2018 and 2017 the Company declared $390,772 and $299,451 in matching and $1,191,628 and $728,160 in discretionary plan contributions, respectively.
15. | Common Stock Repurchase |
On June 30, 2016 the Company repurchased 12.5% of it's common stock from a former officer and shareholder for a total purchase price of $1,696,338. The amount is payable $169,634 on June 30, 2016, with the balance payable in five annual installments, payable on December 31, of $344,234, including interest at a rate of 5% per annum. The note is secured by a stock pledge agreement. At December 31, 2018 and 2017, $640,073 and $937,435, respectively, was due on the note.
The Repurchase Agreement also provides for a contingent liability for open litigation claims against the Company in the amount of $3,000,000 to cover fees, settlements and liabilities from January 1, 2016 until resolved. Upon final resolution 12.5% of any positive balance will be due and payable and will increase the promissory note.
On August 17, 2018 the Company agreed to repurchase 7.14% of it's common stock from a retiring officer and shareholder for a total purchase price of $1,841,158, with an effective date of January 2. 2018. The amount is payable $167,203 on July 1, 2018 with the balance payable in 60 monthly installments of $30,547 beginning on September 1, 2018, including interest at a rate of 5% per annum. At December 31, 2018 $1,079,837 was due on the note.
16. | Subsequent Events |
Upon evaluation, the Company notes that there were no material subsequent events between the date of the financial statements and the date that the financial statements were issued or available to be issued.
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17. | Multiemployer Defined Benefit Plan |
The Company contributes to multiemployer defined benefit pension plans under the terms of bargaining agreements that cover its union represented employees. The risk of participating in these multiemployer plans are different from single-employer plans in the following aspects:
a. Assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.
b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating members.
c. If Entity A chooses to stop participating in some of its multiemployer plans, Entity A may be required to pay those plan an amount based on the unfunded status of the plan, referred to as a withdrawal penalty.
The Company's participation in these plans for the annual period ended December 31, 2018 and 2017 is outlined in the table below. The Pension Protection Act (PPA) zone status is based on information that Company received from the plan and is certified by the plan's actuary. The FIP/RP column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented.
2018 | 2017 | ||||||||||
Pension | EIN | PPA | FIP/RP | PPA | FIP/RP | Surcharge | Expiration Date | ||||
Fund | Plan Number | Zone Status | Status | Zone Status | Status | 2018 | 2017 | 2016 | 2015 | Imposed | of Agreement |
IBEW NECA | 95-6392774 | Adopted | Adopted | Various through | |||||||
So Calif | 001 | Critical | 4/26/2018 | Critical | Dec 2013 | $24,563,904 | $26,782,569 | $18,857,108 | $18,218,852 | No | May 31, 2020 |
IBEW 639/413 | 95-6209008 | ||||||||||
Central CA | 001 | Green | None | Green | None | 90,298 | 993,061 | 588,078 | 97,909 | No | May 31, 2019 |
IBEW 428 | 95-6123049 | ||||||||||
Kern County | 001 | Green | None | Green | None | 1,541,072 | 986,806 | 4,879,819 | 719,769 | No | Nov 30, 2020 |
IBEW 569 | 95-6101801 | ||||||||||
San Diego | 001 | Green | None | Green | None | 303,552 | 157,202 | 65,447 | 100,403 | No | May 31, 2020 |
IBEW 952 | 95-6397996 | Adopted | Adopted | ||||||||
Ventura Cnty | 001 | Endangered | 5/18/2018 | Critical | Sep -10 | 93,468 | 203,780 | 523,510 | 984,555 | Yes | Sept 30, 2020 |
IBEW 9 | 43-6159056 | ||||||||||
So Calif | 001 | Green | None | Green | None | 702,366 | 421,118 | 501,873 | 364,669 | No | Nov 30, 2019 |
IBEW 100 | 94-6216336 | ||||||||||
Fresno Cnty | 001 | Green | None | Green | None | 964,493 | 2,069,739 | 2,293,437 | 1,728,039 | No | May 31, 2021 |
IBEW 595 | N/A | ||||||||||
Stockton CA | 001 | Green | None | Green | None | 723,863 | 1,581,192 | 1,106,123 | 28,211 | No | May 31, 2019 |
IBEW 332 | N/A | ||||||||||
San Jose | 001 | Green | None | Green | None | 5,447,325 | 2,452,320 | 2,409,988 | 2,066,076 | No | May 31, 2021 |
IBEW 6 | 94-6062674 | ||||||||||
San Francisco | 001 | Green | None | Green | None | 44,302 | - | 101,601 | 173,928 | No | May 31, 2022 |
IBEW 340 | 94-2773478 | ||||||||||
Sacramento | 001 | N/A | None | N/A | None | - | - | - | 573,894 | No | May 31, 2021 |
14 |