Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Oct. 01, 2016 | Nov. 10, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | CONTINENTAL MATERIALS CORP | |
Entity Central Index Key | 24,104 | |
Document Type | 10-Q | |
Document Period End Date | Oct. 1, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 1,671,167 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Oct. 01, 2016 | Jan. 02, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 240 | $ 547 |
Receivables, net | 21,426 | 22,715 |
Receivable for insured losses | 32 | |
Inventories | ||
Finished goods | 9,443 | 7,446 |
Work in process | 1,310 | 1,459 |
Raw materials and supplies | 9,837 | 10,741 |
Prepaid expenses | 3,204 | 2,138 |
Refundable income taxes | 70 | |
Total current assets | 45,492 | 45,116 |
Property, plant and equipment | 19,357 | 17,639 |
Other assets | ||
Goodwill | 7,229 | 7,229 |
Amortizable intangible assets, net | 0 | 21 |
Deferred income taxes | 3,329 | 3,149 |
Other assets | 1,115 | 2,601 |
Total assets | 76,522 | 75,755 |
Current liabilities: | ||
Revolving bank loan payable | 1,000 | 6,200 |
Accounts payable and accrued expenses | 16,805 | 15,267 |
Liability for unpaid claims covered by insurance | 32 | |
Income taxes | 835 | |
Total current liabilities | 18,672 | 21,467 |
Other long-term liabilities | 5,981 | 5,872 |
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 | 1,765 | 1,817 |
Retained earnings | 64,834 | 61,483 |
Treasury shares, 915,097, at cost | (15,373) | (15,527) |
Total shareholders' equity | 51,869 | 48,416 |
Total liabilities and shareholders' equity | $ 76,522 | $ 75,755 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Oct. 01, 2016 | Jan. 02, 2016 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Common shares, par value (in dollars per share) | $ 0.25 | $ 0.25 |
Common shares, authorized shares | 3,000,000 | 3,000,000 |
Common shares, issued shares | 2,574,264 | 2,574,264 |
Treasury, shares | 915,097 | 915,097 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Oct. 01, 2016 | Oct. 03, 2015 | Oct. 01, 2016 | Oct. 03, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS | ||||
Net sales | $ 37,647 | $ 36,165 | $ 114,596 | $ 101,715 |
Costs and expenses: | ||||
Cost of sales (exclusive of depreciation, depletion and amortization) | 29,609 | 29,257 | 89,899 | 82,620 |
Depreciation, depletion and amortization | 607 | 640 | 1,897 | 1,937 |
Selling and administrative | 5,527 | 5,464 | 17,406 | 16,001 |
Charges related to cessation of mining an aggregate deposit | 632 | 632 | ||
Gain on disposition of property and equipment | (89) | (161) | (281) | (220) |
Total costs and expenses | 36,286 | 35,200 | 109,553 | 100,338 |
Operating income | 1,361 | 965 | 5,043 | 1,377 |
Interest income | 285 | 9 | 310 | 28 |
Interest expense | (83) | (111) | (316) | (327) |
Other income, net | 16 | 43 | 41 | 70 |
Income before income taxes | 1,579 | 906 | 5,078 | 1,148 |
Provision for income taxes | 537 | 344 | 1,727 | 436 |
Net income | 1,042 | 562 | 3,351 | 712 |
Retained earnings, beginning of period | 63,792 | 60,220 | 61,483 | 60,070 |
Retained earnings, end of period | $ 64,834 | $ 60,782 | $ 64,834 | $ 60,782 |
Basic and diluted income per share | $ 0.62 | $ 0.34 | $ 2.01 | $ 0.43 |
Average shares outstanding (in shares) | 1,672 | 1,662 | 1,669 | 1,661 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Oct. 01, 2016 | Oct. 03, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
Net cash provided (used) by operating activities | $ 8,205 | $ (1) |
Investing activities: | ||
Capital expenditures | (3,617) | (1,379) |
Cash proceeds from sale of property and equipment | 305 | 220 |
Net cash used in investing activities | (3,312) | (1,159) |
Financing activities: | ||
(Repayments) borrowings on the revolving bank loan, net | (5,200) | |
(Repayments) borrowings on the revolving bank loan, net | 900 | |
Net cash (used) provided by financing activities | (5,200) | 900 |
Net decrease in cash and cash equivalents | (307) | (260) |
Cash and cash equivalents: | ||
Beginning of period | 547 | 675 |
End of period | 240 | 415 |
Cash paid during the nine months for: | ||
Interest, net | 32 | 293 |
Income taxes, net | $ 1,003 | $ 3 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 9 Months Ended |
Oct. 01, 2016 | |
BASIS OF PRESENTATION | |
BASIS OF PRESENTATION | 1. 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 January 2, 2016 has been derived from the audited consolidated balance sheet of the Company as of that date. The interim condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s latest annual report on Form 10-K. In the opinion of management, the condensed consolidated financial statements include all adjustments (none of which were other than normal recurring adjustments) necessary for a fair statement of the results for the interim periods and to ensure the financial statements are not misleading. Certain reclassifications have been made to the 2015 consolidated financial statements to conform to the 2016 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. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Oct. 01, 2016 | |
INCOME TAXES | |
INCOME TAXES | 2. Income taxes are accounted for under the asset and liability method that requires deferred income taxes to reflect the future tax consequences attributable to differences between the tax and financial reporting bases of assets and liabilities. Deferred tax assets and liabilities recognized are based on the tax rates in effect in the year in which differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, based on available positive and negative evidence, it is “more likely than not” (greater than a 50% likelihood) that some or all of the net deferred tax assets will not be realized. The Company has established a valuation reserve related to the carry-forward of all charitable contributions deductions arising from prior years. For Federal tax purposes, net operating losses can be carried forward for a period of 20 years while alternative minimum tax credits can be carried forward indefinitely. For state tax purposes, net operating losses can be carried forward for periods ranging from 5 to 20 years for the states that the Company is required to file in. California Enterprise Zone credits can be carried forward indefinitely while Colorado credits can be carried forward for 7 years. 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. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Oct. 01, 2016 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 3. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs supported by little or no market activity that are significant to the fair value of the assets or liabilities. Unobservable inputs reflect the assumptions that market participants would use when pricing the asset or liability including assumptions about risk. The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying balance sheet: Cash and Cash Equivalents: The carrying amount approximates fair value and was valued as Level 1. Revolving Bank Loan Payable: Fair value is estimated based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities and determined through the use of a discounted cash flow model. The carrying amount of the Revolving Bank Loan Payable represents a reasonable estimate of the corresponding fair value as the Company’s debt is held at variable interest rates and was valued as Level 2. There were no transfers between fair value measurement levels of any financial instruments in the current quarter. |
RECENTLY ISSUED ACCOUNTING PRON
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Oct. 01, 2016 | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | 4. The Company implemented ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which changes how deferred taxes are classified on organizations’ balance sheets. The change has been applied for all periods presented. The effect of implementation is to report a consolidated non-current net asset of $3,329,000 and $3,149,000 in the condensed consolidated balance sheets as of October 1, 2016 and January 2, 2016, respectively. There are no other significant prospective accounting pronouncements that are expected to have a material effect on the Company’s consolidated financial statements. |
SEASONALITY AND CURRENT ECONOMI
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | 9 Months Ended |
Oct. 01, 2016 | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | 5. Operating results for the first nine months of 2016 are not necessarily indicative of performance for the entire year due to the seasonality of most of the Company’s products. Historically, sales of the Evaporative Cooling segment are higher in the first and second quarters, sales of the Concrete, Aggregates and Construction Supplies (CACS) segment are higher in the second and third quarters and sales of the Heating and Cooling segment are higher in the third and fourth quarters. Sales of the Door segment are generally more evenly spread throughout the year. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Oct. 01, 2016 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 6. There is no difference in the calculation of basic and diluted earnings per share (EPS) for the three-month or nine-month periods ended October 1, 2016 and October 3, 2015 as the Company does not have any dilutive instruments. |
INDUSTRY SEGMENT INFORMATION
INDUSTRY SEGMENT INFORMATION | 9 Months Ended |
Oct. 01, 2016 | |
INDUSTRY SEGMENT INFORMATION | |
INDUSTRY SEGMENT INFORMATION | 7. The Company operates primarily in two industry groups, Heating, Ventilation and Air Conditioning (HVAC) and Construction Products. The Company has identified two reportable segments within each of the industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the CACS segment and the Door segment in the Construction Products industry group. The Heating and Cooling segment primarily produces and sells gas-fired wall furnaces, console heaters and fan coils from the Company’s wholly-owned subsidiary, Williams Furnace Co. (WFC) of Colton, California. The Evaporative Cooling segment primarily produces and sells evaporative coolers from the Company’s wholly-owned subsidiary, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona. Sales of these two segments are nationwide, but are concentrated in the southwestern United States. Concrete, aggregates and construction supplies are offered from numerous locations along the Southern Front Range of Colorado operated by the Company’s wholly-owned subsidiaries Castle Concrete Company and Transit Mix Concrete Co., of Colorado Springs and Transit Mix of Pueblo, Inc. of Pueblo, Colorado (the three companies collectively are referred to as TMC). The Door segment sells hollow metal and wood doors, door frames and related hardware, lavatory fixtures and electronic access and security systems from the Company’s wholly-owned subsidiary, McKinney Door and Hardware, Inc. (MDHI), which operates out of facilities in Pueblo and Colorado Springs, Colorado. Sales of these two segments are highly concentrated in the Southern Front Range of Colorado although door sales are also made throughout the United States. 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 nine-month and three-month periods ended October 1, 2016 and October 3, 2015 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands): Construction Products Industry HVAC Industry Concrete, Aggregates & Combined Heating Combined Construction Construction and Evaporative HVAC Unallocated Supplies Doors Products Cooling Cooling Products Corporate Total Nine Months ended October 1, 2016 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating income (loss) Segment assets Capital expenditures — Three Months ended October 1, 2016 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating income (loss) Segment assets Capital expenditures — Construction Products Industry HVAC Industry Concrete, Aggregates & Combined Heating Combined Unallocated Construction Construction and Evaporative HVAC Corporate Supplies Doors Products Cooling Cooling Products (a) Total Nine Months ended October 3, 2015 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating (loss) income Segment assets (a) Capital expenditures (b) — Three Months ended October 3, 2015 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating income (loss) Segment assets (a) Capital expenditures (b) — — (a) Segment assets are as of January 2, 2016. (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. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Oct. 01, 2016 | |
DISCONTINUED OPERATIONS | |
DISCONTINUED OPERATIONS | 8. On September 15, 2016 a Partial Summary Judgment was issued regarding the Company’s previously disclosed litigation, Continental Materials Corporation v. Valco, Inc., Civil Action No. 2014-cv-2510, filed in the United States District Court for the District of Colorado. The suit regards a sand and gravel lease between the Company and Valco, Inc. (“Valco”) that calls for the payment of royalties over the life of the lease on an agreed 50,000,000 tons of sand and gravel reserves. In the suit the Company sought, among other things, to reform the sand and gravel lease in regard to the agreed amount of sand and gravel reserves and to recover approximately $1,282,000 of royalty overpayments included in other long-term assets. The Partial Summary Judgment resolved many of the Company’s claims in Valco’s favor, but the Company’s claim for the return of royalty overpayments made during the statutorily allowed period is still pending. The Company has concluded that recovery of the overpayments in excess of approximately $650,000 is not likely due to the statute of limitations and has therefore recorded a $632,000 write-down to the long-term asset during the third quarter of 2016. The Company and its legal counsel believe there are grounds to appeal the Partial Summary Judgment regarding this and the other claims of the suit as the court improperly resolved factual issues that should have been decided by a jury. The Company and its legal counsel believe there is a likelihood that some, or all, of the issues resolved by the Partial Summary Judgment may be reversed on appeal and remanded for trial by jury although there can be no assurance that an appeal will result in reversal. The Company paid royalties on approximately 17,700,000 tons, including the overpayments, of the 50,000,000 tons of sand and gravel reserves through the end of the third quarter of 2014. The impact of these proceedings could have a material effect although the Company does not believe that there is a reasonable basis for estimating the financial impact, if any, of the final outcome of these proceedings and accordingly no accrual or reserve has been recorded in compliance with accounting principles generally accepted in the United States of America. In addition, on September 30, 2016 Valco filed a motion seeking to add three new counterclaims alleging damages in excess of $5,900,000. The Company has vigorously opposed the motion which has not yet been ruled upon. |
AMORTIZABLE INTANGIBLE ASSETS
AMORTIZABLE INTANGIBLE ASSETS | 9 Months Ended |
Oct. 01, 2016 | |
AMORTIZABLE INTANGIBLE ASSETS | |
AMORTIZABLE INTANGIBLE ASSETS | 9. Identifiable amortizable intangible assets as of October 1, 2016 include a restrictive land covenant and customer relationships. At October 1, 2016, these assets were collectively carried at zero, net of $720,000 accumulated amortization. The pre-tax amortization expense for intangible assets during the quarter ended October 1, 2016 was zero compared to $11,000 for the quarter ended October 3, 2015 and $21,000 and $34,000 for the nine months ended October 1, 2016 and October 3, 2015, respectively. Based upon the intangible assets recorded on the balance sheet at October 1, 2016, amortization expense after the third quarter of 2016 will be zero. |
NON-EMPLOYEE DIRECTORS SHARE-BA
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | 9 Months Ended |
Oct. 01, 2016 | |
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | |
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION | 10. The Company issued a total of 12,000 shares to the eight eligible board members effective April 6, 2016 as full payment for their 2016 retainer fee. The Company issued a total of 12,000 shares to the eight eligible board members effective January 15, 2015 as full payment for their 2015 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 | 9 Months Ended |
Oct. 01, 2016 | |
REVOLVING BANK LOAN AND LONG-TERM DEBT | |
REVOLVING BANK LOAN AND LONG-TERM DEBT | 11. The Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) effective November 18, 2011. The Company entered into the Fifth Amendment to Credit Agreement effective March 20, 2015 and the Sixth Amendment to Credit Agreement effective August 10, 2015. Effective March 24, 2016 the Company entered into the Seventh Amendment to Credit Agreement. The Company had previously entered into four separate amendments to the Credit Agreement. Cumulatively, the amendments were entered into by the Company to, among other things, (i) modify certain of the financial covenants, (ii) increase the Revolving Commitment to $20,000,000, (iii) terminate the Term Loan Commitment upon the repayment in full of the outstanding principal balance (and accrued interest thereon) of the Term Loan, (iv) modify the Borrowing Base calculation to provide for borrowing availability in respect of new Capital Expenditures, (v) decrease the interest rates on the Revolving Loans and (vi) extend the maturity date to May 1, 2018. 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) 80% of eligible accounts receivable, (b) the lesser of 50% of eligible inventories and $8,500,000 plus (c) 80% of new Capital Expenditures not to exceed $5,500,000 with respect to each of Fiscal Years 2016 and 2017. · The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.15 to 1.0 for the twelve month period ending October 1, 2016 and each Fiscal Quarter end thereafter. · The Company must not permit Tangible Net Worth as of the last day of any Computation Period to be less than $31,000,000 (provided that the required amount of Tangible Net Worth shall increase (but not decrease) by an amount equal to 50% of the Consolidated Net Income for the immediately preceding Fiscal Year beginning with fiscal 2016). Therefore, the required Tangible Net Worth as of October 1, 2016 is $31,707,000. · The Balance Sheet Leverage Ratio as of the last day of any Computation Period may not exceed 1.00 to 1.00. · The maturity date of the credit facility is May 1, 2018. · Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.50% or the prime rate plus .25%. Definitions under the Credit Agreement as amended are as follows: · Minimum Tangible Net Worth is defined as net worth plus subordinated debt, minus intangible assets (goodwill, intellectual property, prepaid expenses, deposits and deferred charges), minus all obligations owed to the Company or any of its subsidiaries by any affiliate or any of its subsidiaries and minus all loans owed by its officers, stockholders, subsidiaries or employees. · Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA, as defined, minus (ii) the sum of income taxes paid in cash and all unfinanced capital expenditures to (b) the sum for such period of interest expense. · Balance Sheet Leverage Ratio is defined as the ratio of Total Debt to Tangible Net Worth. · EBITDA means for any Computation Period (or another time period to the extent expressly provided for in the Credit Agreement) the sum of the following with respect to the Company and its Subsidiaries each as determined in accordance with GAAP: (a) Consolidated Net Income, plus (b) federal, state and other income taxes deducted in the determination of Consolidated Net Income, plus (c) Interest Expense deducted in the determination of Consolidated Net Income, plus (d) depreciation, depletion and amortization expense deducted in the determination of Consolidated Net Income, plus (e) charges deducted in the determination of Consolidated Net Income in 2014 (not to exceed $5,757,000 in the aggregate) directly related to the closing and reclamation of the Pueblo aggregates mining site, plus (f) any other non-cash charges and any extraordinary charges deducted in the determination of Consolidated Net Income, including any asset impairment charges (including write downs of goodwill), minus (g) any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations included in the determination of Consolidated Net Income. Outstanding funded revolving debt was $1,000,000 as of October 1, 2016 compared to $6,200,000 as of January 2, 2016. The highest balance outstanding during the first nine months of 2016 and 2015 was $7,500,000 and $6,800,000, respectively. Average outstanding funded debt was $4,548,000 and $4,901,000 for the first nine months of 2016 and 2015, respectively. At October 1, 2016, the Company had outstanding letters of credit totaling $5,415,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future. The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months except for the expenditures related to a royalty agreement and the acquisition of the necessary equipment needed to begin mining an aggregates property near Colorado Springs should Transit Mix succeed in obtaining the required mining permits from the State of Colorado and El Paso County. As of October 1, 2016 the Company has invested and capitalized approximately $2,400,000 of deferred development expenditures related to this aggregates property. The Company expects to arrange for term or mortgage financing to fund the acquisition of the necessary equipment needed to begin mining the property should the permits be granted. The Company expects to be in compliance with all debt covenants, as amended, throughout the facility’s remaining term. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended |
Oct. 01, 2016 | |
LEGAL PROCEEDINGS | |
LEGAL PROCEEDINGS | 12. The Company is involved in litigation matters related to its business, principally product liability matters related to the gas-fired heating products and fan coil products in the Heating and Cooling segment. 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, cash flows 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 theses matters but rather expenses legal costs as incurred. Additionally, see Note 8 for discussion of litigation regarding the Pueblo sand and gravel lease. |
INDUSTRY SEGMENT INFORMATION (T
INDUSTRY SEGMENT INFORMATION (Tables) | 9 Months Ended |
Oct. 01, 2016 | |
INDUSTRY SEGMENT INFORMATION | |
Schedule of information about reported segments along with the items necessary to reconcile the segment information to totals reported in financial statements | The following table presents information about reported segments for the nine-month and three-month periods ended October 1, 2016 and October 3, 2015 along with the items necessary to reconcile the segment information to the totals reported in the financial statements (amounts in thousands): Construction Products Industry HVAC Industry Concrete, Aggregates & Combined Heating Combined Construction Construction and Evaporative HVAC Unallocated Supplies Doors Products Cooling Cooling Products Corporate Total Nine Months ended October 1, 2016 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating income (loss) Segment assets Capital expenditures — Three Months ended October 1, 2016 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating income (loss) Segment assets Capital expenditures — Construction Products Industry HVAC Industry Concrete, Aggregates & Combined Heating Combined Unallocated Construction Construction and Evaporative HVAC Corporate Supplies Doors Products Cooling Cooling Products (a) Total Nine Months ended October 3, 2015 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating (loss) income Segment assets (a) Capital expenditures (b) — Three Months ended October 3, 2015 Revenues from external customers $ $ $ $ $ $ $ $ Depreciation, depletion and amortization Operating income (loss) Segment assets (a) Capital expenditures (b) — — (a) Segment assets are as of January 2, 2016. (b) Capital expenditures are presented on the accrual basis of accounting. |
INCOME TAXES (Details)
INCOME TAXES (Details) | 9 Months Ended |
Oct. 01, 2016 | |
Internal Revenue Service (IRS) | |
Net operating losses | |
Net operating losses carryforward period | 20 years |
State and Local Jurisdiction | Minimum | |
Net operating losses | |
Net operating losses carryforward period | 5 years |
State and Local Jurisdiction | Maximum | |
Net operating losses | |
Net operating losses carryforward period | 20 years |
INCOME TAXES - Other (Details)
INCOME TAXES - Other (Details) | 9 Months Ended |
Oct. 01, 2016 | |
State and Local Jurisdiction | COLORADO | |
Tax credits | |
Tax credits carry-forward period | 7 years |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) $ in Thousands | Oct. 01, 2016USD ($) |
Fair Value Measurements | |
Fair value, financial instruments transferred between levels | $ 0 |
RECENTLY ISSUED ACCOUNTING PR22
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) | Oct. 01, 2016 | Jan. 02, 2016 |
Accounting Standards Update 2015-17 | Restatement Adjustment | ||
Noncurrent assets, net | $ 3,329,000 | $ 3,149,000 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - $ / shares | 3 Months Ended | 9 Months Ended | ||
Oct. 01, 2016 | Oct. 03, 2015 | Oct. 01, 2016 | Oct. 03, 2015 | |
EARNINGS PER SHARE | ||||
Difference between the calculation of basic and diluted EPS (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 |
INDUSTRY SEGMENT INFORMATION (D
INDUSTRY SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Oct. 01, 2016USD ($) | Oct. 03, 2015USD ($) | Oct. 01, 2016USD ($)item | Oct. 03, 2015USD ($) | Jan. 02, 2016USD ($) | |
INDUSTRY SEGMENT INFORMATION | |||||
Number of industry groups in which the entity operates | item | 2 | ||||
Number of reportable segments | item | 2 | ||||
Revenues from external customers | $ 37,647 | $ 36,165 | $ 114,596 | $ 101,715 | |
Depreciation, depletion and amortization | 607 | 640 | 1,897 | 1,937 | |
Operating income (loss) | 1,361 | 965 | 5,043 | 1,377 | |
Segment assets | 76,522 | 75,755 | 76,522 | 75,755 | $ 75,755 |
Capital expenditures | 841 | 859 | 3,617 | 1,379 | |
Concrete Aggregates and Construction Supplies | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 18,156 | 16,759 | 51,267 | 41,414 | |
Depreciation, depletion and amortization | 316 | 330 | 1,020 | 1,007 | |
Operating income (loss) | 1,010 | 686 | 2,881 | (170) | |
Segment assets | 35,205 | 31,791 | 35,205 | 31,791 | |
Capital expenditures | 565 | 647 | 2,798 | 825 | |
Doors | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 4,467 | 4,271 | 13,212 | 13,140 | |
Depreciation, depletion and amortization | 32 | 31 | 95 | 94 | |
Operating income (loss) | 543 | 274 | 1,390 | 1,068 | |
Segment assets | 6,695 | 6,471 | 6,695 | 6,471 | |
Capital expenditures | 54 | 106 | 32 | ||
Heating and Cooling | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 9,605 | 9,473 | 27,390 | 24,493 | |
Depreciation, depletion and amortization | 138 | 142 | 415 | 427 | |
Operating income (loss) | 408 | 692 | 1,205 | 994 | |
Segment assets | 20,563 | 22,628 | 20,563 | 22,628 | |
Capital expenditures | 208 | 146 | 584 | 355 | |
Evaporative Cooling | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 5,416 | 5,658 | 22,715 | 22,656 | |
Depreciation, depletion and amortization | 118 | 123 | 356 | 369 | |
Operating income (loss) | 259 | 154 | 2,077 | 1,850 | |
Segment assets | 11,115 | 12,730 | 11,115 | 12,730 | |
Capital expenditures | 14 | 66 | 129 | 167 | |
Unallocated Corporate | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 3 | 4 | 12 | 12 | |
Depreciation, depletion and amortization | 3 | 14 | 11 | 40 | |
Operating income (loss) | (859) | (841) | (2,510) | (2,365) | |
Segment assets | 2,944 | 2,135 | 2,944 | 2,135 | |
Construction Products Industry | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 22,623 | 21,030 | 64,479 | 54,554 | |
Depreciation, depletion and amortization | 348 | 361 | 1,115 | 1,101 | |
Operating income (loss) | 1,553 | 960 | 4,271 | 898 | |
Segment assets | 41,900 | 38,262 | 41,900 | 38,262 | |
Capital expenditures | 619 | 647 | 2,904 | 857 | |
HVAC Industry | |||||
INDUSTRY SEGMENT INFORMATION | |||||
Revenues from external customers | 15,021 | 15,131 | 50,105 | 47,149 | |
Depreciation, depletion and amortization | 256 | 265 | 771 | 796 | |
Operating income (loss) | 667 | 846 | 3,282 | 2,844 | |
Segment assets | 31,678 | 35,358 | 31,678 | 35,358 | |
Capital expenditures | $ 222 | $ 212 | $ 713 | $ 522 |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - Pueblo Colorado gravel operations | Sep. 30, 2016USD ($)claim | Oct. 01, 2016USD ($) | Sep. 27, 2014USD ($)T |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Sand and gravel reserves (in tons) | T | 50,000,000 | ||
Royalty overpayments | $ 1,282,000 | ||
Write off of prepaid royalties | $ 632,000 | ||
Sand and gravel tons paid for | T | 17,700,000 | ||
Reserve on overpaid royalties | 0 | ||
Number of counterclaims | claim | 3 | ||
Minimum | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Royalty overpayments | $ 650,000 | ||
Amount of possible exposure to the entity | $ 5,900,000 |
AMORTIZABLE INTANGIBLE ASSETS (
AMORTIZABLE INTANGIBLE ASSETS (Details) - USD ($) | Oct. 02, 2016 | Oct. 01, 2016 | Oct. 03, 2015 | Oct. 01, 2016 | Oct. 03, 2015 | Jan. 02, 2016 |
Amortizable intangible assets | ||||||
Amortizable intangible assets, net | $ 0 | $ 0 | $ 21,000 | |||
Accumulated amortization | 720,000 | 720,000 | ||||
Amortization expense | $ 0 | $ 11,000 | $ 21,000 | $ 34,000 | ||
Scenario forecast | ||||||
Amortizable intangible assets | ||||||
Amortization expense | $ 0 |
NON-EMPLOYEE DIRECTORS SHARE-27
NON-EMPLOYEE DIRECTORS SHARE-BASED COMPENSATION (Details) - Director | Apr. 06, 2016directorshares | Jan. 15, 2015directorshares |
SHAREHOLDERS' EQUITY | ||
Number of shares issued to eligible board members | shares | 12,000 | 12,000 |
Number of eligible board members | director | 8 | 8 |
REVOLVING BANK LOAN AND LONG-28
REVOLVING BANK LOAN AND LONG-TERM DEBT (Details) | Mar. 24, 2016USD ($) | Oct. 01, 2016USD ($) | Oct. 03, 2015USD ($) | Oct. 01, 2016USD ($) | Jan. 03, 2015USD ($) | Jan. 02, 2016USD ($) |
Debt Instrument [Line Items] | ||||||
Minimum tangible net worth threshold, percentage of the consolidated net income | 50.00% | |||||
Tangible net worth | $ 31,707,000 | $ 31,707,000 | ||||
Maximum balance sheet leverage ratio | 1 | |||||
Maximum debt instruments charges | $ 5,757,000 | |||||
Period over which existing cash balance, anticipated cash flow from operations and borrowings available under the credit agreement will be sufficient to cover expected cash needs | 12 months | |||||
Period Ending July 04, 2015 | ||||||
Debt Instrument [Line Items] | ||||||
Minimum tangible net worth threshold, base amount | $ 31,000,000 | |||||
Minimum | Period Ending June 28, 2014 | ||||||
Debt Instrument [Line Items] | ||||||
Fixed charge coverage ratio | 1.15 | |||||
Revolving Credit Facility | ||||||
Debt Instrument [Line Items] | ||||||
Maximum revolving credit facility line | $ 20,000,000 | |||||
Borrowings as a percentage of capital expenditures | 80.00% | |||||
Annual capital expenditures for fiscal year 2016, maximum | $ 5,500,000 | |||||
Annual capital expenditures for fiscal year 2017, maximum | $ 5,500,000 | |||||
Outstanding amount | $ 1,000,000 | $ 1,000,000 | $ 6,200,000 | |||
Highest balance outstanding during the period | 7,500,000 | $ 6,800,000 | ||||
Average outstanding | 4,548,000 | $ 4,901,000 | ||||
Outstanding amount of letters of credit total | $ 5,415,000 | $ 5,415,000 | ||||
Revolving Credit Facility | Minimum | ||||||
Debt Instrument [Line Items] | ||||||
Borrowings as a percentage of eligible accounts receivable | 80.00% | |||||
Borrowings as a percentage of eligible inventories | 50.00% | |||||
Maximum inventory borrowings | $ 8,500,000 | |||||
Revolving Credit Facility | LIBOR | ||||||
Debt Instrument [Line Items] | ||||||
Variable interest rate base | LIBOR | |||||
Percentage points added to the reference rate | 2.50% | |||||
Revolving Credit Facility | Prime Rate | ||||||
Debt Instrument [Line Items] | ||||||
Variable interest rate base | prime rate | |||||
Percentage points added to the reference rate | 0.25% |
LEGAL PROCEEDINGS (Details)
LEGAL PROCEEDINGS (Details) | 9 Months Ended |
Oct. 01, 2016item | |
LEGAL PROCEEDINGS | |
Number of proceedings having material adverse effect on the consolidated results of operations, cash flows or financial condition | 0 |