Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 29, 2018 | Mar. 22, 2019 | Jul. 01, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | CONTINENTAL MATERIALS CORP | ||
Entity Central Index Key | 0000024104 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 29, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-29 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 8,690,000 | ||
Entity Common Stock, Shares Outstanding | 1,680,223 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
Consolidated Statements of Income | ||
Net sales | $ 163,983 | $ 152,810 |
Type of Revenue [Extensible List] | us-gaap:ProductMember | us-gaap:ProductMember |
Costs and expenses: | ||
Cost of sales (exclusive of depreciation, depletion and amortization) | $ 136,176 | $ 124,715 |
Depreciation, depletion and amortization | 2,633 | 2,554 |
Selling and administrative | 26,229 | 22,643 |
Charges related to cessation of mining an aggregates deposit | 6,840 | |
Charges related to write off of deferred development | 627 | |
Gain on disposition of property and equipment | (919) | (118) |
Operating (loss) income | (7,603) | 3,016 |
Interest income | 76 | 79 |
Interest expense | (539) | (366) |
Other income, net | 25 | 110 |
(Loss) income before income taxes | (8,041) | 2,839 |
Benefit (provision) for income taxes | 2,185 | (1,021) |
Net (loss) income | $ (5,856) | $ 1,818 |
Basic and diluted (loss) income per share (in dollar per share) | $ (3.45) | $ 1.08 |
Average shares outstanding (in shares) | 1,697 | 1,680 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
Operating activities | ||
Net (loss) income | $ (5,856,000) | $ 1,818,000 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation, depletion and amortization | 2,633,000 | 2,554,000 |
Write-off of deferred development costs | 5,409,000 | |
Write-off of prepaid royalties associated with the Pueblo aggregates deposit | 627,000 | |
Deferred income tax provision | (1,798,000) | |
Compensation of Board of Directors paid by issuance of treasury shares | 315,000 | 326,000 |
Provision for doubtful accounts | 165,000 | 134,000 |
Gain on disposition of property and equipment | (919,000) | (118,000) |
Changes in working capital items: | ||
Receivables | (1,187,000) | (1,970,000) |
Inventories | 3,639,000 | 286,000 |
Prepaid expenses | 116,000 | (94,000) |
Accounts payable and accrued expenses | (110,000) | 864,000 |
Income taxes payable and refundable | (437,000) | 682,000 |
Other | 95,000 | (95,000) |
Net cash used by operating activities | 2,692,000 | 4,387,000 |
Investing activities: | ||
Capital expenditures | (2,700,000) | (5,781,000) |
Cash proceeds from sale of property and equipment | 1,430,000 | 126,000 |
Net cash used in investing activities | (1,270,000) | (5,655,000) |
Financing activities: | ||
Borrowings on the revolving bank loan | 33,100,000 | 32,100,000 |
Repayments on the revolving bank loan | (34,400,000) | (30,600,000) |
Principal repayments of capital lease obligations | (30,000) | |
Payments to acquire treasury stock | 5,000 | 26,000 |
Net cash (used) provided by financing activities | (1,335,000) | 1,474,000 |
Net decrease in cash and cash equivalents | 87,000 | 206,000 |
Cash and cash equivalents: | ||
Beginning of period | 507,000 | 301,000 |
End of period | 594,000 | 507,000 |
Cash paid during the year for: | ||
Interest, net | 468,000 | 403,000 |
Income taxes, net | 50,000 | $ 339,000 |
Capital expenditures purchased through capital lease obligation | $ 200,000 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 29, 2018 | Dec. 30, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 594 | $ 507 |
Receivables less allowance of $560 and $240 for fiscal 2018 and 2017, respectively | 24,375 | 24,227 |
Receivable for insured losses | 874 | |
Inventories | 16,720 | 20,359 |
Prepaid expenses | 1,785 | 1,901 |
Refundable income taxes | 494 | 57 |
Other current assets | 2,500 | |
Total current assets | 47,342 | 47,051 |
Land and improvements | 2,781 | 2,781 |
Buildings and improvements | 20,158 | 20,574 |
Machinery and equipment | 77,991 | 78,062 |
Mining properties | 6,383 | 11,792 |
Less accumulated depreciation and depletion | (90,142) | (90,385) |
Property, plant and equipment | 17,171 | 22,824 |
Other assets | ||
Goodwill | 7,229 | 7,229 |
Deferred income taxes | 3,414 | 1,616 |
Other assets | 547 | 3,769 |
Total assets | 75,703 | 82,489 |
Current liabilities: | ||
Revolving bank loan payable | 2,200 | 3,500 |
Accounts payable | 7,002 | 8,492 |
Accrued expenses | ||
Compensation | 2,638 | 2,274 |
Reserve for self-insured losses | 2,451 | 1,880 |
Liability for unpaid claims covered by insurance | 874 | |
Profit sharing | 1,065 | 1,429 |
Reclamation | 1,061 | 981 |
Other | 2,899 | 3,318 |
Total current liabilities | 20,190 | 21,874 |
Accrued reclamation | 5,479 | 5,185 |
Other long-term liabilities | 1,258 | 1,108 |
Commitments and contingencies (Note 6) | ||
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 | 1,930 | 1,887 |
Retained earnings | 61,131 | 66,987 |
Treasury shares, 876,409 and 892,097 at cost | (14,928) | (15,195) |
Total shareholders' equity | 48,776 | 54,322 |
Total liabilities and shareholders' equity | $ 75,703 | $ 82,489 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 29, 2018 | Dec. 30, 2017 |
Consolidated Balance Sheets | ||
Receivables, allowance (in dollars) | $ 560 | $ 240 |
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 | 876,409 | 892,097 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Common Stock [Member] | Capital in excess of par | Retained Earnings [Member] | Treasury Stock [Member] | Total |
Balance at at Dec. 31, 2016 | $ 643 | $ 1,765 | $ 65,169 | $ 15,373 | |
Balance at (in shares) at Dec. 31, 2016 | 2,574,264 | 903,097 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income | 1,818 | $ 1,818 | |||
Compensation of Board of Directors by issuance of treasury shares | 122 | $ (204) | |||
Compensation of Board of Directors by issuance of treasury shares (in shares) | (12,000) | ||||
Purchase of treasury shares | $ 26 | ||||
Purchase of treasury shares (in shares) | 1,000 | 1,000 | |||
Balance at at Dec. 30, 2017 | $ 643 | 1,887 | 66,987 | $ 15,195 | $ 54,322 |
Balance (in shares) at Dec. 30, 2017 | 2,574,264 | 892,097 | |||
Consolidated Statements of Shareholders' Equity | |||||
Net income | (5,856) | $ (5,856) | |||
Compensation of Board of Directors by issuance of treasury shares | 43 | $ (272) | |||
Compensation of Board of Directors by issuance of treasury shares (in shares) | (16,000) | ||||
Purchase of treasury shares | $ 5 | ||||
Purchase of treasury shares (in shares) | 312 | 0 | |||
Balance at 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 |
NATURE OF BUSINESS AND SUMMARY
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 29, 2018 | |
ACCOUNTING POLICIES | |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Continental Materials Corporation (the Company) is a Delaware corporation, incorporated in 1954. The Company operates primarily within two industry groups, Heating, Ventilation and Air Conditioning (HVAC) and Construction Products. The Company has identified two reportable segments in each of the two industry groups: the Heating and Cooling segment and the Evaporative Cooling segment in the HVAC industry group and the Concrete, Aggregates and Construction Supplies (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 produces and sells evaporative coolers from the Company’s wholly-owned subsidiary, Phoenix Manufacturing, Inc. (PMI) of Phoenix, Arizona. 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 (the three companies collectively 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. 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. PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include Continental Materials Corporation and all of its subsidiaries (the Company). Intercompany transactions and balances have been eliminated. All subsidiaries of the Company are wholly-owned. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which removed the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance was adopted in the fourth quarter of fiscal 2017 in connection with our annual impairment testing. No impairment charges resulted from our impairment testing. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This new revenue standard creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. Subsequently, the FASB has issued various ASUs to provide further clarification around certain aspects of ASC 606. The Company adopted this standard in the first quarter of fiscal 2018. The adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems of controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. See additional discussion of the Company’s revenue recognition policies and practices below. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), requiring that the statement of cash flows explain the change in total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This standard was adopted by the Company in the first quarter of 2018 and did not have a material impact to the consolidated statement of cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This new standard supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for the Company in the first quarter of fiscal 2019. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which includes new transition guidance for the adoption of ASU 2016-02. Such guidance creates an additional transition method allowing entities to use the effective date of ASU 2016-02 as the date of initial application on transition. Under this method, entities will not be required to recast comparative periods when transitioning to the new guidance. Entities will also not be required to present comparative period disclosures under the new guidance in the period of adoption. The Company expects to select this new transition method upon its adoption in the first quarter of 2019. The Company is currently in the process of summarizing lease information to ensure compliance with the standard. This process is expected to continue through the effective date and will include analysis of contractual arrangements, evaluation of related disclosures and, potentially, changes/modifications to processes, accounting systems, and internal controls to ensure compliance. The Company expects that adoption of ASU 2016-02 will have a significant impact on its Consolidated Balance Sheets and disclosures, but does not anticipate a material impact on its consolidated cash flow or consolidated results of operations. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of December 29, 2018 and December 30, 2017 and the reported amounts of revenues and expenses during both of the two fiscal years in the period ended December 29, 2018. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company considers all highly-liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value. The Company has reclassified negative cash balances to Accounts Payable. FAIR VALUE OF FINANCIAL INSTRUMENTS 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 and 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 the 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 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 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 year. INVENTORIES Inventories are valued at the lower of cost or net realizable value and are reviewed periodically for excess or obsolete stock with a provision recorded, where appropriate. Cost for inventory in the HVAC industry group is determined using the last-in, first-out (LIFO) method. These inventories represent approximately 65% of total inventories at December 29, 2018 and 77% at December 30, 2017. The cost of all other inventory is determined by the first-in, first-out (FIFO) or average cost methods. Some commodity prices such as copper, steel, cement and diesel fuel have experienced significant fluctuations in recent years. Cement and diesel fuel prices are principally relevant to the CACS segment while steel prices and copper prices are principally relevant to our two HVAC businesses. The general effect of using LIFO is that higher prices are not reflected in the inventory carrying value. Current costs are reflected in the cost of sales. The inventories of the businesses using either FIFO or an average costing method for valuing inventories turn over frequently and at any point in time the amount of cement or fuel inventory is not significant. As a result of these circumstances, the commodity fluctuations have primarily affected the cost of sales with little effect on the valuation of inventory. Due to the nature of our products, obsolescence is not typically a significant exposure, however our HVAC businesses will from time to time contend with some slow-moving inventories or parts that are no longer used due to engineering changes. At December 29, 2018 and December 30, 2017, inventory reserves were approximately 6.8% and 1.8% of the total FIFO inventory value, respectively. The increase between years is due to management’s decision to increase valuation reserves as it works to streamline the number of products sold. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method as follows: Land improvements 5 to 31 years Buildings and improvements 10 to 31 years Leasehold improvements Shorter of the term of the lease or useful life Machinery and equipment 3 to 20 years Depletion of rock and sand deposits and amortization of deferred development costs are computed by the units-of-production method based upon estimated recoverable quantities of rock and sand. The estimated recoverable quantities are periodically reassessed. The cost of property sold or retired and the related accumulated depreciation, depletion and amortization are removed from the accounts and the resulting gain or loss is reflected in operating income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized and depreciated over their estimated useful lives. OTHER ASSETS The Company annually assesses goodwill for potential impairment at the end of each year. In addition, the Company will reassess the recorded goodwill to determine if impairment has occurred if events arise or circumstances change in the relevant reporting segments or in their industries. No goodwill impairment was recognized for any of the periods presented. In 2016 the Company paid $2,500,000 related to an aggregate property near Colorado Springs. As the Company negotiated with the State of Colorado to obtain the necessary mining permits the amount was held in an escrow account and is included in other assets as of December 30, 2017. During 2018 the Company was denied the mining permits by the State of Colorado for a second time. See Note 16 for additional discussion. The Company is in process of dissolving the escrow account and collecting the funds, therefore, the amount is included in other current assets as of December 29, 2018. The Company is party to three aggregate property leases which require royalty payments. The leased gravel operation in Pueblo, Colorado is currently the subject of litigation for which the Company filed its Third Amended Complaint on November 16, 2018 in which it dropped its claim to recover royalty overpayments but seeks to recover $1,470,000 in Prepayments. The Company wrote off the remaining royalty overpayment of $627,000, previously reported as Other assets on the Consolidated Balance Sheet, as of December 29, 2018 due to filing of the Third Amended Complaint. See Note 2 for further discussion. RETIREMENT PLANS The Company and its subsidiaries have a contributory profit sharing retirement plan for specific employees. The plans allow qualified employees to make tax deferred contributions pursuant to Internal Revenue Code Section 401(k). The Company may make annual contributions, at its discretion, based primarily on profitability. In addition, any individuals whose compensation is in excess of the amount eligible for the Company matching contribution to the 401(k) plan as established by Section 401 of the Internal Revenue Code, participate in an unfunded Supplemental Profit Sharing Plan. This plan accrues an amount equal to the difference between the amount the person would have received as Company contributions to his account under the 401(k) plan had there been no limitations and the amount the person will receive under the 401(k) plan giving effect to the limitations. Costs under the plans are charged to operations as incurred. As of December 29, 2018 and December 30, 2017, the unfunded liabilities related to the Supplemental Profit Sharing Plan were $1,001,000 and $1,027,000, respectively. RESERVE FOR SELF-INSURED AND INSURED LOSSES The Company’s risk management program provides for certain levels of loss retention for workers’ compensation, automobile liability, healthcare plan coverage and general and product liability claims. The components of the reserve for self-insured losses have been recorded in accordance with Generally Accepted Accounting Principles (GAAP) requirements that an estimated loss from a loss contingency shall be accrued if information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. The recorded reserve represents management’s best estimate of the future liability related to these claims up to the associated deductible. GAAP also requires an entity to accrue the gross amount of a loss even if the entity has purchased insurance to cover the loss. Therefore the Company has recorded losses for workers’ compensation, automobile liability, medical plan coverage and general and product liability claims in excess of the deductible amounts, i.e., amounts covered by insurance contracts, in “Liability for unpaid claims covered by insurance” with a corresponding “Receivable for insured losses” on the balance sheet. The components of the liability represent both unpaid settlements and management’s best estimate of the future liability related to open claims. Management has evaluated the creditworthiness of our insurance carriers and determined that recovery of the recorded losses is probable and, therefore, the receivable from insurance has been recorded for the full amount of the insured losses. The amount of claims and related insured losses at December 29, 2018 was $874,000. RECLAMATION In connection with permits to mine properties in Colorado, the Company is obligated to reclaim the mined areas whether the property is owned or leased. The Company records a reserve for future reclamation work to be performed at its various aggregate operations based upon an estimate of the total expense that would be paid to a third party to reclaim the disturbed areas. Reclamation expense is determined during the interim periods using the units-of-production method. At each fiscal year-end, a more formal and complete analysis is performed and the expense and reserve is adjusted to reflect the estimated cost to reclaim the then disturbed and unreclaimed areas. The assessment of the reclamation liability may be done more frequently if events or circumstances arise that may indicate a change in estimated costs, recoverable material or period of mining activity. As part of the year-end analysis, the Company engages an independent specialist to assist in reevaluating the estimates of both the quantities of recoverable material and the cost of reclamation. Most of the reclamation on any mining property is generally performed concurrent with mining or soon after each section of the deposit is mined. The Company’s reserve for reclamation activities was $6,540,000 at December 29, 2018 and $6,165,000 at December 30, 2017. The Company classifies a portion of the reserve as a current liability, $1,061,000 at December 29, 2018 and $981,000 at December 30, 2017 based upon historical expenditures and the anticipated reclamation timeframe for the Pueblo aggregate operation which is still under litigation as discussed in Note 2. REVENUE RECOGNITION Effective December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments, which creates a single source of revenue guidance for all companies in all industries and is more principles-based than previous revenue guidance. The Company adopted the standard using the modified retrospective approach. The adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems or controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. Sales are recognized when control of the promised goods or services transfers to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s payment terms generally range between 30 to 90 days after invoice is billed to the customer. Sales are reported net of sales tax. Shipping and other transportation costs paid by the Company and rebilled to the buyer are recorded gross (as both sales and cost of sales). The Company generally recognizes revenue from the sale of products at the time the products are shipped. While the return of products is generally not allowed, some large customers have been granted the right to return a certain amount at the end of the normal selling season for seasonal products. Sales returns and allowances are estimated based on current program terms and historical experience. Provisions for estimated returns, discounts, volume rebates and other price adjustments are provided for in the same period the related revenues are recognized and are netted against revenues. The Company is responsible for warranties related to the manufacture of its HVAC products and estimates the future warranty claims based upon historical experience and management estimates. The Company reviews warranty and related claims activities and records provisions, as necessary. Changes in the aggregated product warranty liability for the fiscal years 2018 and 2017 were as follows (amounts in thousands): 2018 2017 Beginning balance $ 132 $ 118 Warranty related expenditures (148) (211) Warranty expense accrued 120 225 Ending balance $ 104 $ 132 The Company does not perform installation services except for installation of electronic access and security systems in the Door segment. These installation service contracts are generally short-term in nature, usually less than 30 days. It was determined for the installation service contracts there are two performance obligations, the equipment and the installation services. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone selling price. Revenue is recognized at a point in time as each performance obligation is completed. No maintenance or service contracts are offered by the Company. 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 December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the United States. The Tax Act significantly revised the U.S. tax code by, among other items, reducing the Company’s federal tax rate from 34% to 21%, providing for the full expensing of certain depreciable property and eliminating the corporate Alternative Minimum Tax (AMT). The Tax Act repeals AMT and allows for all existing credit carryforwards to be used to offset regular tax liability for tax years beginning after December 31, 2017. Additionally, for tax years 2018, 2019 and 2020, to the extent that the AMT credit carryover exceeds the regular tax liability, 50% of the excess AMT credit is refundable. Any remaining credits will be fully refundable in 2021. For state tax purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. California Enterprise Zone credits can be used through 2023 while Colorado credits can be carried forward for 7 years. The Company has established a valuation reserve related to a portion of the California Enterprise Zone credit not expected to be utilized prior to expiration. The Company’s income tax returns are subject to audit by the Internal Revenue Service (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 December 29, 2018 or December 30, 2017. CONCENTRATIONS Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and temporary cash investments. The Company did not have any temporary cash investments in either fiscal 2018 or 2017. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. In many instances in the CACS segment and in the Heating and Cooling segment (as it relates to the fan coil product line); the Company retains lien rights on the properties served until the receivable is collected. The Company writes off accounts when all efforts to collect the receivable have been exhausted. The Company maintains allowances for potential credit losses based upon the aging of accounts receivable, management’s assessment of individual accounts and historical experience. Such losses have been within management’s expectations. See Note 15 for a description of the Company’s customer base. All long-lived assets are in the United States. No customer accounted for 10% or more of total sales of the Company in fiscal 2018 or 2017. One customer in the Heating and Cooling segment accounted for 16.1% and 18.0% of consolidated accounts receivable at December 29, 2018 and at December 30, 2017, respectively. Substantially all of the Heating and Cooling Segment’s factory employees are covered by a collective bargaining agreement through the Carpenters Local 721 Union under a contract that expires on December 31, 2022. The Company considers relations with its employees and with their union to be good. IMPAIRMENT OF LONG-LIVED ASSETS In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value is required. In the fiscal quarters ended March 31, 2018 and June 30, 2018 the Company wrote off a total of $6,840,000 of deferred development related to a granite mining property south of Colorado Springs. See Note 16 for additional discussion. The company wrote off $627,000 of royalty overpayments related to the leased gravel operation in Pueblo, Colorado as of December 29, 2018. See Note 2 for additional discussion. FISCAL YEAR END The Company’s fiscal year-end is the Saturday nearest December 31. Fiscal 2018 and fiscal 2017 each consisted of 52 weeks. |
CESSATION OF MINING AT LEASED P
CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE | 12 Months Ended |
Dec. 29, 2018 | |
DISCONTINUED OPERATIONS | |
CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE | 2. CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE On September 15, 2016 a Partial Summary Judgment Order 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 Fee Sand and Gravel Lease (“Lease”) between the Company as Lessee and Valco, Inc. (“Valco”) as Lessor 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 declaratory judgment and damages pursuant to the Lease on the grounds that Agreed Sand and Gravel Reserves of 50 million tons did not exist, and for other relief including return of approximately $1,470,000 in royalty payments made by the Company to Valco in excess of tonnage actually produced (“Prepayments”). Based on information obtained through discovery, the Company alleges, in addition to the abovementioned claims, nondisclosure or concealment by Valco of material facts concerning the existence of Agreed Sand and Gravel Reserves of 50 million tons, and breach of warranty concerning the same. Valco asserted counterclaims against the Company alleging breach of contract and seeking declaratory judgment regarding the Company’s refusal to make further royalty payments under the Lease. In the ordinary course of business and absent any breach by Valco, the Company is required to make quarterly royalty payments amounting to not less than $300,000 in a calendar year. In response to Valco’s breaches of contract, the Company stopped making royalty payments at the start of the 2015 calendar year. The Company has asserted partial failure of consideration as an affirmative defense to Valco’s counterclaims to offset the alleged back-due quarterly royalty payments and the amount due on quarterly royalty payments in the future. The Partial Summary Judgment Order resolved many of the Company’s claims in Valco’s favor, but did not resolve Valco’s counterclaims or the Company’s affirmative defense. During the third quarter of 2016, the Company recorded a $632,000 write-down representing the portion of the royalty overpayment paid prior to the statutorily allowed period because of litigation risk attendant to recovering that amount. The Company sought certification of the Partial Summary Judgment Order because it and its legal counsel believe the court improperly resolved factual issues in its Partial Summary Judgment Order that should have been decided by a jury. On February 23, 2017, the Partial Summary Judgment Order was certified for immediate appeal, and all other claims, counterclaims and affirmative defenses were stayed pending the resolution of that appeal. The Company filed a notice of appeal which was denied on July 2, 2018 for lack of jurisdiction and remanded to the trial court for further proceedings. Subsequently, the trial court vacated its September 15, 2016 Partial Summary Judgment Order and set the matter for trial by jury on all issues on January 28, 2019. The Company filed its Third Amended Complaint on November 16, 2018 in which it dropped its claim to recover royalty overpayments but seeks to recover $1,470,000 in Prepayments. The Company wrote off the remaining royalty overpayment of $627,000, previously reported as Other assets on the Consolidated Balance Sheet, as of December 29, 2018 due to filing of the Third Amended Complaint. At the trial preparation conference on January 18, 2019, the court informed the parties that the trial would be rescheduled due to an ongoing shutdown of the federal government. The jury trial on all issues has been rescheduled for May 13, 2019. The Company has paid royalties on approximately 17,700,000 tons, including the Prepayments, 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 financial effect on the Company; however, 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. |
INVENTORIES
INVENTORIES | 12 Months Ended |
Dec. 29, 2018 | |
INVENTORIES | |
INVENTORIES | 3. INVENTORIES Inventories consisted of the following (amounts in thousands): December 29, 2018 December 30, 2017 Finished goods $ 5,448 $ 8,391 Work in process 1,365 1,198 Raw materials and supplies 9,907 10,770 $ 16,720 $ 20,359 If inventories valued on the LIFO basis were valued at current costs, inventories would be higher by $7,176,000 and $6,677,000 at December 29, 2018 and December 30, 2017, respectively. Reductions in inventories during 2018 resulted in liquidations of LIFO quantities by charging cost of goods sold with LIFO costs significantly below current costs. By matching these older costs with current revenues, 2018 net loss decreased by approximately $968,000, net of tax. Inventory valuation reserves at December 29, 2018 and December 30, 2017 were $1,747,000 and $518,000, respectively. The increase between years is due to management’s decision to increase reserves as it works to streamline products sold. |
GOODWILL AND AMORTIZABLE INTANG
GOODWILL AND AMORTIZABLE INTANGIBLE ASSETS | 12 Months Ended |
Dec. 29, 2018 | |
AMORTIZABLE INTANGIBLE ASSETS | |
GOODWILL AND AMORTIZABLE INTANGIBLE ASSETS | 4. GOODWILL AND AMORTIZABLE INTANGIBLE ASSETS As of December 29, 2018 the Company has recorded $7,229,000 of goodwill consisting of $6,229,000 related to the CACS segment and $1,000,000 related to the Door segment. The Company assesses goodwill for potential impairment at the end of each year. For the CACS segment, the Company engages the services of an investment banking firm to assist management in determining the fair value of the reporting unit. For the Door segment, the Company prepares a discounted cash flow analysis to estimate the fair value of the reporting unit. In addition, if events occur or circumstances change in the relevant reporting segments or in their industries the Company will then reassess the recorded goodwill to determine if impairment has occurred. No goodwill impairment was recognized for any of the periods presented. The valuation of goodwill and other intangibles is considered a significant estimate. Future economic conditions could negatively impact the value of the business which could trigger an impairment that would materially impact earnings. There were no changes in recorded goodwill for either of the years ended December 29, 2018 or December 30, 2017. |
REVOLVING BANK LOAN
REVOLVING BANK LOAN | 12 Months Ended |
Dec. 29, 2018 | |
REVOLVING BANK LOAN | |
REVOLVING BANK LOAN | 5. REVOLVING BANK LOAN The Company entered into an Amended and Restated Credit Agreement (the “Credit Agreement”) effective November 18, 2011. The Company entered into the Tenth Amendment to Credit Agreement effective March 22, 2019. The Company had previously entered into nine separate amendments to the Credit Agreement. Cumulatively, the amendments were entered into by the Company to, among other things, (i) modify certain of the financial covenants, (ii) adjust the amount of the Revolving Commitment, (iii) terminate the Term Loan Commitment upon the repayment in full of the outstanding principal balance (and accrued interest thereon) of the Term Loan, (iv) modify the Borrowing Base calculation to provide for borrowing availability in respect of new Capital Expenditures, (v) decrease the interest rates on the Revolving Loans, (vi) extend the maturity date and (vii) decrease the Letter of Credit fee rate. Borrowings under the Credit Agreement are secured by the Company’s accounts receivable, inventories, machinery, equipment, vehicles, certain real estate and the common stock of all of the Company’s subsidiaries. Borrowings under the Credit Agreement bear interest based on a London Interbank Offered Rate (LIBOR) or prime rate based option. The Credit Agreement either limits or requires prior approval by the lender of additional borrowings, acquisition of stock of other companies, purchase of treasury shares and payment of cash dividends. Payment of accrued interest is due monthly or at the end of the applicable LIBOR period. The Credit Agreement as amended provides for the following: · The Revolving Commitment is $20,000,000. · Borrowings under the Revolving Commitment are limited to (a) 80% of eligible accounts receivable, (b) the lesser of 50% of eligible inventories and $8,500,000 plus (c) 80% of new qualifying Capital Expenditures not to exceed $5,500,000 in any fiscal year (excluding the aggregate amount of any Capital Expenditures financed with the proceeds of a Revolving Line advance). · The Minimum Fixed Charge Coverage Ratio is not permitted to be below 1.06 to 1.0 for each trailing twelve month period measured at the end of each Fiscal Quarter. · The maturity date of the credit facility is May 1, 2020. · Interest rate pricing for the revolving credit facility is currently LIBOR plus 2.25% or the prime rate. Definitions under the Credit Agreement as amended are as follows: · Fixed Charge Coverage Ratio is defined as, for any computation period, the ratio of (a) the sum for such period of (i) EBITDA, as defined, minus (ii) the sum of income taxes paid in cash, the amount expended related to the development of the mining property discussed in Note 12 and all unfinanced capital expenditures to (b) the sum for such period of interest expense related to the Credit Agreement. · EBITDA means for any Computation Period (or another time period to the extent expressly provided for in the Credit Agreement) the sum of the following with respect to the Company and its Subsidiaries each as determined in accordance with GAAP: (a) Consolidated Net Income, plus (b) federal, state and other income taxes deducted in the determination of Consolidated Net Income, plus (c) Interest Expense deducted in the determination of Consolidated Net Income, plus (d) depreciation, depletion and amortization expense deducted in the determination of Consolidated Net Income, plus (e) non-recurring fees and costs paid by the Company in respect of the following: (i) fees and due diligence costs associated with the Company’s permitted acquisitions; (ii) legal fees and costs associated with the Valco trial preparation; (iii) executive recruitment fees for the Company’s new Chief Financial Officer and Chief Operating Officer; and (iv) additional fees and costs associated with the exploration of the Company’s Hitch Rack Ranch facility in Colorado Springs, Colorado to determine the suitability for mining and the pursuit of mining permits, plus (f) any other non-cash charges and any extraordinary charges deducted in the determination of Consolidated Net Income, including any asset impairment charges (including write downs of goodwill), minus (g) any gains from Asset Dispositions, any extraordinary gains and any gains from discontinued operations included in the determination of Consolidated Net Income. Outstanding funded revolving debt was $2,200,000 as of December 29, 2018 compared to $3,500,000 as of December 30, 2017. The highest balance outstanding during 2018 and 2017 was $9,800,000 and $10,000,000 respectively. Average outstanding funded debt was $6,058,000 and $5,909,000 for 2018 and 2017, respectively. At December 29, 2018, the Company had outstanding letters of credit (LOC) totaling $4,745,000. At all times since the inception of the Credit Agreement, the Company has had sufficient qualifying and eligible assets such that the available borrowing capacity exceeded the cash needs of the Company and this situation is expected to continue for the foreseeable future. The Company believes that its existing cash balance, anticipated cash flow from operations and borrowings available under the Credit Agreement will be sufficient to cover expected cash needs, including planned capital expenditures, for the next twelve months. The Company expects to be in compliance with all debt covenants, as amended, throughout the facility’s remaining term. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 29, 2018 | |
COMMITMENTS AND CONTINGENCIES. | |
COMMITMENTS AND CONTINGENCIES | 6. COMMITMENTS AND CONTINGENCIES The Company is involved in litigation matters related to its business. In the Company’s opinion, none of these proceedings, when concluded, will have a material adverse effect on the Company’s consolidated results of operations, cash flows or financial condition as the Company has established adequate accruals for matters that are probable and estimable. The Company does not accrue estimated future legal costs related to the defense of these matters but rather expenses legal costs as incurred. Also see Note 2 for discussion of litigation regarding the Pueblo sand and gravel lease. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 29, 2018 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | 7. SHAREHOLDERS’ EQUITY Four hundred thousand shares of preferred stock ($.50 par value) are authorized and unissued. The Company purchased 1,000 shares of its common stock from a former employee to become treasury stock during fiscal year 2017. There were no such purchases in fiscal year 2018. Under the 2010 Non-Employee Directors Stock Plan (the “Plan”) the Company reserved 150,000 treasury shares representing the maximum number of shares allowed to be granted to non-employee directors in lieu of the base director retainer fee. The Company issued a total of 16,000 shares to the eight eligible board members effective January 16, 2018 as full payment for their 2017 retainer fee. The Company issued a total of 12,000 shares to the eight eligible board members effective March 8, 2017 as full payment for their 2017 retainer fee. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 12 Months Ended |
Dec. 29, 2018 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 8. EARNINGS PER SHARE The Company does not have any common stock equivalents, warrants or other convertible securities outstanding, therefore there are no differences between the calculation of basic and diluted EPS for the fiscal years 2018 or 2017. |
RENTAL EXPENSE, LEASES AND COMM
RENTAL EXPENSE, LEASES AND COMMITMENTS | 12 Months Ended |
Dec. 29, 2018 | |
RENTAL EXPENSE, LEASES AND COMMITMENTS | |
RENTAL EXPENSE, LEASES AND COMMITMENTS | 9. RENTAL EXPENSE, LEASES AND COMMITMENTS The Company leases certain of its facilities and equipment and is required to pay the related taxes, insurance and certain other expenses. Rental expense was $4,044,000 and $3,779,000 for 2018 and 2017, respectively. Future minimum rental commitments under non-cancelable operating leases for 2019 and thereafter are as follows: 2019 – $1,827,000; 2020 – $1,495,000; 2021 – $1,400,000; 2022 – $1,360,000; 2023 – $823,000 and thereafter – $1,323,000. The commitments do not include any amounts related to minimum royalty payments due on a contested aggregates property lease in conjunction with the Pueblo, Colorado operation as discussed in Note 2. The commitments do include amounts expected to be reimbursed to the Company by related party tenants as discussed in Note 13. These related party amounts for 2019 and thereafter are as follows: 2019 – $143,000; 2020 – $145,000; 2021 – $147,000; 2022 – $150,000; 2023 – $152,000 and thereafter – $579,000. |
RETIREMENT PLANS
RETIREMENT PLANS | 12 Months Ended |
Dec. 29, 2018 | |
RETIREMENT PLANS | |
RETIREMENT PLANS | 10. RETIREMENT PLANS As discussed in Note 1, the Company maintains a defined contribution retirement benefit plan for eligible employees. Total plan expenses charged to continuing operations were $951,000 and $1,537,000 in 2018 and 2017, respectively. |
CURRENT ECONOMIC CONDITIONS
CURRENT ECONOMIC CONDITIONS | 12 Months Ended |
Dec. 29, 2018 | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | |
SEASONALITY AND CURRENT ECONOMIC CONDITIONS | 11. CURRENT ECONOMIC CONDITIONS Construction activity in the Colorado Springs, Colorado vicinity is expected to continue to rise from the levels seen during 2018. Pricing is expected to increase although slow some from prior years as material costs are expected to level off compared to increases seen in the past couple of years. Pricing on larger bid jobs will remain competitive. The markets for products manufactured or fabricated by the Heating and Cooling, Evaporative Cooling and Door segments are expected to remain fairly constant compared with the 2018 levels although sales of fan coils in the Heating and Cooling segment are anticipated to grow as construction spending in the lodging industry continues to increase during 2019. As has historically been the case, sales of all segments, other than the Door segment, are influenced by weather conditions. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 29, 2018 | |
INCOME TAXES | |
INCOME TAXES | 12. 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 December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the United States. The Tax Act significantly revised the U.S. tax code by, among other items, reducing the Company’s federal tax rate from 34% to 21%, providing for the full expensing of certain depreciable property and eliminating the corporate alternative minimum tax (AMT). In accordance with GAAP, the Company recorded a $27,000 income tax benefit for the period ending December 30, 2017, primarily related to the re-measurement of the Company’s deferred tax items. The (benefit) provision for income taxes is summarized as follows (amounts in thousands): 2018 2017 Federal: Current $ (387) $ 988 Deferred (1,454) 27 State: Current 1 32 Deferred (345) (26) $ (2,185) $ 1,021 The percentage effect of an item on the statutory tax rate in a given year will fluctuate based upon the magnitude of the pre-tax profit or loss in that year. At December 30, 2017 the Company’s deferred tax items were revalued for the estimated impact of the Tax Act legislation. The effect of this revaluation was to reduce the Company’s effective tax rate 1.0%. The difference between the tax rate on income for financial statement purposes and the federal statutory tax rate was as follows: 2018 2017 Statutory tax rate (21.0) % 34.0 % Percentage depletion (0.9) (4.7) Non-deductible expenses 0.4 1.7 Valuation allowance for tax assets 1.2 2.5 State income taxes, net of federal benefit (4.5) 2.0 Domestic production deduction — (0.3) Revaluation of deferred items for new Tax Act — (1.0) Other (2.4) 1.8 (27.2) % 36.0 % For financial statement purposes, deferred tax assets and liabilities are recorded at a blend of the current statutory federal and states’ tax rates – 25.74%. The principal temporary differences and their related deferred taxes are as follows (amounts in thousands): 2018 2017 Deferred tax assets Reserves for self-insured losses $ 466 $ 328 Accrued reclamation 1,445 1,386 Unfunded supplemental profit sharing plan liability 263 275 Asset valuation reserves 685 293 Future state tax credits 833 863 Net state operating loss carryforwards 226 126 Federal AMT carryforward 387 620 Federal NOL carryforward 468 — Other 700 701 5,473 4,592 Deferred tax liabilities Depreciation 1,200 859 Deferred development 116 1,298 Prepaid royalties — 161 Other 443 458 1,759 2,776 Net deferred tax asset before valuation allowance 3,714 1,816 Valuation allowance Beginning balance (200) (130) (Increase) decrease during the period (100) (70) Ending Balance (300) (200) Net deferred tax asset $ 3,414 $ 1,616 The deduction of charitable contributions made during 2018 and 2017 was limited by the level of taxable income; however, no valuation reserve was established for the amount carried forward as the Company expects to be able to utilize these deductions in future years. The Tax Act repeals AMT and allows any existing AMT credit carryforwards to be used to offset regular tax obligations for a three year period beginning in 2018. Any AMT credit carryforwards that are not utilized to offset regular tax obligations will be 100 percent refundable by 2021. For State purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. Of the $833,000 of state tax credits recorded by the Company at December 29, 2018, $792,000 relates to California Enterprise Zone hiring credits earned in prior years. California has repealed the credit and limited its use to tax years through 2023. At December 29, 2018 and December 30, 2017 the Company carried valuation reserves of $430,000 ($300,000 tax effected) and $303,000 ($200,000), respectively, related to the carry forward of the California Enterprise Zone hiring credits due to the uncertainty that the Company will be able to utilize the credits prior to their expiration in 2023. The realization of the deferred tax assets is subject to our ability to generate sufficient taxable income during the periods in which the temporary differences become realizable. In evaluating whether a valuation allowance is required, we consider all available positive and negative evidence, including prior operating results, the nature and reason of any losses, our forecast of future taxable income and the dates, if any, on which any deferred tax assets are expected to expire. These assumptions require a significant amount of judgment, including estimates of future taxable income. The estimates are based on our best judgment at the time made based on current and projected circumstances and conditions. As a result of the evaluation of the realizability of our deferred tax assets as of December 29, 2018, we concluded that it was more likely than not that all of our deferred tax assets would be realized to the extent not reserved for by a valuation allowance. The Company accounts for uncertainty in income taxes recognized in its financial statements by applying GAAP’s recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The financial statement effects of a tax position are initially recognized when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. A tax position that meets the more-likely-than-not recognition threshold should initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon effective settlement with a taxing authority. There were no unrecognized tax benefits at either December 29, 2018 or December 30, 2017. We file income tax returns in the United States Federal and various state jurisdictions. Federal and state income tax returns are subject to examination based upon the statute of limitations in effect for the various jurisdictions. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 29, 2018 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 13. RELATED PARTY TRANSACTIONS A director of the Company is a partner in a law firm engaged to represent the Company in various legal matters including the lawsuit filed by the Company related to the sand and gravel lease discussed in Note 2. For the year ending December 29, 2018 the Company has paid the director’s firm $474,000 for services rendered. During fiscal 2017 the same director’s firm was paid $510,000. The corporate office leases space in Chicago, Illinois that is shared with three organizations related to the Company’s principal shareholders. Each of the organizations pays its pro-rata share of rent and other expenses based on a square footage allocation. See Note 9 for additional discussion. Furthermore, the Company purchases insurance coverage for workers’ compensation, general and umbrella liability together with another company controlled by the Company’s principal shareholders to minimize insurance costs. Allocation of the expense of the program is either provided by the underwriter or based upon a formula that considers, among other things, sales levels, loss exposure and claim experience. Claims under the self-insured portion of the policies are charged directly to the incurring party. Amounts receivable from these organizations at December 29, 2018 and December 30, 2017 were $28,000 and $14,000, respectively. |
UNAUDITED QUARTERLY FINANCIAL D
UNAUDITED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Dec. 29, 2018 | |
UNAUDITED QUARTERLY FINANCIAL DATA | |
UNAUDITED QUARTERLY FINANCIAL DATA | 14. UNAUDITED QUARTERLY FINANCIAL DATA The following table and footnotes provide summarized unaudited fiscal quarterly financial data for 2018 and 2017 (amounts in thousands, except per share amounts): First Second Third Fourth Quarter Quarter Quarter Quarter 2018 Sales $ 36,873 $ 43,300 $ 40,978 $ 42,832 Gross profit 5,528 8,205 6,233 7,841 Depreciation, depletion and amortization 676 707 682 568 Net (loss) income (6,193) 2,113 (1,236) (540) Basic and Diluted (loss) income per share (3.65) 1.24 (0.73) (0.32) First Second Third Fourth Quarter Quarter Quarter Quarter 2017 Sales $ 34,103 $ 39,887 $ 38,627 $ 40,193 Gross profit 6,031 8,153 7,201 6,710 Depreciation, depletion and amortization 638 677 617 622 Net income (422) 1,028 835 377 Basic and Diluted income per share (0.25) 0.61 0.50 0.22 Earnings per share are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share may not equal the total for the year. |
INDUSTRY SEGMENT INFORMATION
INDUSTRY SEGMENT INFORMATION | 12 Months Ended |
Dec. 29, 2018 | |
INDUSTRY SEGMENT INFORMATION | |
INDUSTRY SEGMENT INFORMATION | 15. INDUSTRY SEGMENT INFORMATIO The Company operates primarily in two industry groups, HVAC and Construction Products. The Company has identified two reportable segments in each of the two 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, WFC of Colton, California. The Evaporative Cooling segment primarily produces and sells evaporative coolers from the Company’s wholly-owned subsidiary, 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 by the CACS segment from numerous locations along the Southern portion of the Front Range of Colorado operated by the Company’s wholly-owned subsidiaries collectively referred to as TMC. The Door segment sells hollow metal and wood doors, door frames and related hardwares, lavatory fixtures and electronic access and security systems from the Company’s wholly-owned subsidiary, MDHI, which operates out of facilities in Pueblo and Colorado Springs, Colorado. Sales of these latter two segments are highly concentrated in the Southern Front Range area in Colorado although door sales are also made throughout the United States. 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. 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 following table presents information about reported segments for the fiscal years 2018 and 2017 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 Unallocated Construction Construction and Evaporative Combined Corporate Supplies Doors Products Cooling Cooling HVAC (a) Total Year Ended December 29, 2018 Revenues from external customers $ 70,246 $ 20,158 $ 90,404 $ 45,953 $ 27,525 $ 73,478 $ 101 $ 163,983 Depreciation, depletion and amortization 1,462 171 1,633 588 361 949 51 2,633 Operating (loss) income (6,717) 2,233 (4,484) 613 318 931 (4,050) (7,603) Segment assets 35,351 8,003 43,354 19,668 9,335 29,003 3,346 75,703 Capital expenditures 1,672 119 1,791 752 312 1,064 45 2,900 Construction Products Industry HVAC Industry Concrete, Aggregates & Combined Heating Unallocated Construction Construction and Evaporative Combined Corporate Supplies Doors Products Cooling Cooling HVAC (a) Total Year Ended December 30, 2017 Revenues from external customers $ 66,407 $ 18,652 $ 85,059 $ 42,517 $ 25,216 $ 67,733 $ 18 $ 152,810 Depreciation, depletion and amortization 1,405 152 1,557 550 409 959 38 2,554 Operating income (loss) 2,656 1,861 4,517 2,140 (550) 1,590 (3,091) 3,016 Segment assets 39,020 7,360 46,380 21,543 11,896 33,439 2,670 82,489 Capital expenditures 4,566 135 4,701 804 230 1,034 46 5,781 (a) Includes unallocated corporate office expenses and assets which consist primarily of cash and cash equivalents, prepaid expenses, property, plant and equipment. 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. |
WRITE OFF OF DEFERRED DEVELOPME
WRITE OFF OF DEFERRED DEVELOPMENT | 12 Months Ended |
Dec. 29, 2018 | |
WRITE OFF OF DEFERRED DEVELOPMENT | |
WRITE OFF OF DEFERRED DEVELOPMENT | 16. WRITE OFF OF DEFERRED DEVELOPMENT During July 2015, TMC began development of a granite mining property south of Colorado Springs. Prior to beginning the development process, the Company deposited $2,500,000 in an escrow account per agreement with the land owner. This amount was previously included in Other long-term assets on the Consolidated Balance Sheet. The development costs included drilling the property to ascertain its suitability for mining, engineering studies and legal expenses related to the preparation of TMC’s application to obtain the required mining permits from the State of Colorado and El Paso County. TMC made its initial application for a mining permit from the state of Colorado in 2016. TMC filed its second application to the state in November 2017, which was rejected on April 26, 2018. The Company wrote off all capitalized costs associated with the permit application in the first quarter of 2018. As of December 30, 2017 the Company had capitalized $5,430,000 of deferred development which was included in Property, plant and equipment on the Consolidated Balance Sheet. As of March 31, 2018 TMC had invested $6,308,000 in the project. This amount plus an estimated $626,000 of additional expenses incurred during April 2018, a total of $6,934,000, was written off as of March 31, 2018. During the second quarter of 2018, final billings and adjustments related to the permit application resulted in a net recovery of $94,000 reducing the total write-off to $6,840,000 as of June 30, 2018. As of December 29, 2018 the $2,500,000 escrow balance mentioned above was included in Other current assets as the Company has begun the process to settle the account and recover the funds. |
SUBSEQUENT EVENT - SETTLEMENT R
SUBSEQUENT EVENT - SETTLEMENT RECEIPT | 12 Months Ended |
Dec. 29, 2018 | |
SUBSEQUENT EVENT - SETTLEMENT RECEIPT | |
SUBSEQUENT EVENT - SETTLEMENT RECEIPT | 17. SUBSEQUENT EVENT – 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. |
SUBSEQUENT EVENT - DISPOSITION
SUBSEQUENT EVENT - DISPOSITION OF ASSETS | 12 Months Ended |
Dec. 29, 2018 | |
SUBSEQUENT EVENT - DISPOSITION OF ASSETS | |
SUBSEQUENT EVENT ? DISPOSITION OF ASSETS | 18. SUBSEQUENT EVENT – DISPOSITION OF ASSETS On February 1, 2019, the Company sold substantially all of the real property, tangible personal property and executory contracts of the Transit Mix Concrete Company ready-mix business to Aggregate Industries — WCR, Inc. (the Buyer), a Colorado corporation for $27,129,000. The purchase price was paid to the Company on the Closing Date less certain amounts to be held in escrow, as provided in the Asset Purchase Agreement (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 additional 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. Among other things, the Purchase Agreement includes customary representations, warranties, covenants and indemnities of the Company and of the Buyer, including a customary agreement by the Company not to compete for five years after the Closing Date in the manufacture, sale, distribution and/or supply of ready mix concrete or similar products or services within Colorado Springs or Pueblo, Colorado, or the area within a 150 mile radius from the city limits of the two cities. Additionally, as part of the Purchase Agreement, the Company agreed to change the corporate name of Transit Mix Concrete to a name which does not include “Transit Mix Concrete”. The Company retained the aggregates operations and retail building materials business of Transit Mix and all related assets and liabilities. These operations include the Pike View 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. |
SCHEDULE II - VALUATION AND QUA
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | 12 Months Ended |
Dec. 29, 2018 | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | |
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES | SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (c) (e for the fiscal years 2018 and 2017 COLUMN A COLUMN B COLUMN C(1) COLUMN D COLUMN E Balance at Additions Beginning of Charged to Costs Deductions - Balance at End of Description Period and Expenses Describe Period Year 2018 Allowance for doubtful accounts (c) $ 240,000 $ 165,000 $ (155,000) (a) $ 560,000 Inventory valuation reserve (c) $ 518,000 $ 1,544,000 $ 315,000 (b) $ 1,747,000 Reserve for self-insured losses $ 1,881,000 $ 5,483,000 $ 4,913,000 (d) $ 2,451,000 Year 2017 Allowance for doubtful accounts (c) $ 220,000 $ 134,000 $ 114,000 (a) $ 240,000 Inventory valuation reserve (c) $ 312,000 $ 282,000 $ 76,000 (b) $ 518,000 Reserve for self-insured losses $ 1,861,000 $ 5,034,000 $ 5,014,000 (d) $ 1,881,000 Notes: (a) Accounts written off, net of recoveries. (b) Amounts written off upon disposal of assets. (c) Reserve deducted in the balance sheet from the asset to which it applies. (d) Payments of self-insured claims including healthcare claims accrued and paid in connection with the Company’s self-insured employee healthcare benefit plan. (e) Column C (2) has been omitted as the answer would be “none”. |
NATURE OF BUSINESS AND SUMMAR_2
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 29, 2018 | |
ACCOUNTING POLICIES | |
PRINCIPLES OF CONSOLIDATION | PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include Continental Materials Corporation and all of its subsidiaries (the Company). Intercompany transactions and balances have been eliminated. All subsidiaries of the Company are wholly-owned. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350), which removed the requirement to compare the implied fair value of goodwill with its carrying amount as part of step 2 of the goodwill impairment test. As a result, under the ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This guidance was adopted in the fourth quarter of fiscal 2017 in connection with our annual impairment testing. No impairment charges resulted from our impairment testing. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This new revenue standard creates a single source of revenue guidance for all companies in all industries and is more principles-based than current revenue guidance. Subsequently, the FASB has issued various ASUs to provide further clarification around certain aspects of ASC 606. The Company adopted this standard in the first quarter of fiscal 2018. The adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems of controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. See additional discussion of the Company’s revenue recognition policies and practices below. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), requiring that the statement of cash flows explain the change in total cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This standard was adopted by the Company in the first quarter of 2018 and did not have a material impact to the consolidated statement of cash flows. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This new standard supersedes existing lease guidance to require lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. The standard will be effective for the Company in the first quarter of fiscal 2019. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements, which includes new transition guidance for the adoption of ASU 2016-02. Such guidance creates an additional transition method allowing entities to use the effective date of ASU 2016-02 as the date of initial application on transition. Under this method, entities will not be required to recast comparative periods when transitioning to the new guidance. Entities will also not be required to present comparative period disclosures under the new guidance in the period of adoption. The Company expects to select this new transition method upon its adoption in the first quarter of 2019. The Company is currently in the process of summarizing lease information to ensure compliance with the standard. This process is expected to continue through the effective date and will include analysis of contractual arrangements, evaluation of related disclosures and, potentially, changes/modifications to processes, accounting systems, and internal controls to ensure compliance. The Company expects that adoption of ASU 2016-02 will have a significant impact on its Consolidated Balance Sheets and disclosures, but does not anticipate a material impact on its consolidated cash flow or consolidated results of operations. |
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of December 29, 2018 and December 30, 2017 and the reported amounts of revenues and expenses during both of the two fiscal years in the period ended December 29, 2018. Actual results could differ from those estimates. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS The Company considers all highly-liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying amount of cash and cash equivalents approximates fair value. The Company has reclassified negative cash balances to Accounts Payable. |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS 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 and 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 the 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 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 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 year. |
INVENTORIES | INVENTORIES Inventories are valued at the lower of cost or net realizable value and are reviewed periodically for excess or obsolete stock with a provision recorded, where appropriate. Cost for inventory in the HVAC industry group is determined using the last-in, first-out (LIFO) method. These inventories represent approximately 65% of total inventories at December 29, 2018 and 77% at December 30, 2017. The cost of all other inventory is determined by the first-in, first-out (FIFO) or average cost methods. Some commodity prices such as copper, steel, cement and diesel fuel have experienced significant fluctuations in recent years. Cement and diesel fuel prices are principally relevant to the CACS segment while steel prices and copper prices are principally relevant to our two HVAC businesses. The general effect of using LIFO is that higher prices are not reflected in the inventory carrying value. Current costs are reflected in the cost of sales. The inventories of the businesses using either FIFO or an average costing method for valuing inventories turn over frequently and at any point in time the amount of cement or fuel inventory is not significant. As a result of these circumstances, the commodity fluctuations have primarily affected the cost of sales with little effect on the valuation of inventory. Due to the nature of our products, obsolescence is not typically a significant exposure, however our HVAC businesses will from time to time contend with some slow-moving inventories or parts that are no longer used due to engineering changes. At December 29, 2018 and December 30, 2017, inventory reserves were approximately 6.8% and 1.8% of the total FIFO inventory value, respectively. The increase between years is due to management’s decision to increase valuation reserves as it works to streamline the number of products sold. |
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method as follows: Land improvements 5 to 31 years Buildings and improvements 10 to 31 years Leasehold improvements Shorter of the term of the lease or useful life Machinery and equipment 3 to 20 years Depletion of rock and sand deposits and amortization of deferred development costs are computed by the units-of-production method based upon estimated recoverable quantities of rock and sand. The estimated recoverable quantities are periodically reassessed. The cost of property sold or retired and the related accumulated depreciation, depletion and amortization are removed from the accounts and the resulting gain or loss is reflected in operating income. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized and depreciated over their estimated useful lives. |
OTHER ASSETS | OTHER ASSETS The Company annually assesses goodwill for potential impairment at the end of each year. In addition, the Company will reassess the recorded goodwill to determine if impairment has occurred if events arise or circumstances change in the relevant reporting segments or in their industries. No goodwill impairment was recognized for any of the periods presented. In 2016 the Company paid $2,500,000 related to an aggregate property near Colorado Springs. As the Company negotiated with the State of Colorado to obtain the necessary mining permits the amount was held in an escrow account and is included in other assets as of December 30, 2017. During 2018 the Company was denied the mining permits by the State of Colorado for a second time. See Note 16 for additional discussion. The Company is in process of dissolving the escrow account and collecting the funds, therefore, the amount is included in other current assets as of December 29, 2018. The Company is party to three aggregate property leases which require royalty payments. The leased gravel operation in Pueblo, Colorado is currently the subject of litigation for which the Company filed its Third Amended Complaint on November 16, 2018 in which it dropped its claim to recover royalty overpayments but seeks to recover $1,470,000 in Prepayments. The Company wrote off the remaining royalty overpayment of $627,000, previously reported as Other assets on the Consolidated Balance Sheet, as of December 29, 2018 due to filing of the Third Amended Complaint. See Note 2 for further discussion. |
RETIREMENT PLANS | RETIREMENT PLANS The Company and its subsidiaries have a contributory profit sharing retirement plan for specific employees. The plans allow qualified employees to make tax deferred contributions pursuant to Internal Revenue Code Section 401(k). The Company may make annual contributions, at its discretion, based primarily on profitability. In addition, any individuals whose compensation is in excess of the amount eligible for the Company matching contribution to the 401(k) plan as established by Section 401 of the Internal Revenue Code, participate in an unfunded Supplemental Profit Sharing Plan. This plan accrues an amount equal to the difference between the amount the person would have received as Company contributions to his account under the 401(k) plan had there been no limitations and the amount the person will receive under the 401(k) plan giving effect to the limitations. Costs under the plans are charged to operations as incurred. As of December 29, 2018 and December 30, 2017, the unfunded liabilities related to the Supplemental Profit Sharing Plan were $1,001,000 and $1,027,000, respectively. |
RESERVE FOR SELF-INSURED AND INSURED LOSSES | RESERVE FOR SELF-INSURED AND INSURED LOSSES The Company’s risk management program provides for certain levels of loss retention for workers’ compensation, automobile liability, healthcare plan coverage and general and product liability claims. The components of the reserve for self-insured losses have been recorded in accordance with Generally Accepted Accounting Principles (GAAP) requirements that an estimated loss from a loss contingency shall be accrued if information available prior to issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. The recorded reserve represents management’s best estimate of the future liability related to these claims up to the associated deductible. GAAP also requires an entity to accrue the gross amount of a loss even if the entity has purchased insurance to cover the loss. Therefore the Company has recorded losses for workers’ compensation, automobile liability, medical plan coverage and general and product liability claims in excess of the deductible amounts, i.e., amounts covered by insurance contracts, in “Liability for unpaid claims covered by insurance” with a corresponding “Receivable for insured losses” on the balance sheet. The components of the liability represent both unpaid settlements and management’s best estimate of the future liability related to open claims. Management has evaluated the creditworthiness of our insurance carriers and determined that recovery of the recorded losses is probable and, therefore, the receivable from insurance has been recorded for the full amount of the insured losses. The amount of claims and related insured losses at December 29, 2018 was $874,000 |
RECLAMATION | RECLAMATION In connection with permits to mine properties in Colorado, the Company is obligated to reclaim the mined areas whether the property is owned or leased. The Company records a reserve for future reclamation work to be performed at its various aggregate operations based upon an estimate of the total expense that would be paid to a third party to reclaim the disturbed areas. Reclamation expense is determined during the interim periods using the units-of-production method. At each fiscal year-end, a more formal and complete analysis is performed and the expense and reserve is adjusted to reflect the estimated cost to reclaim the then disturbed and unreclaimed areas. The assessment of the reclamation liability may be done more frequently if events or circumstances arise that may indicate a change in estimated costs, recoverable material or period of mining activity. As part of the year-end analysis, the Company engages an independent specialist to assist in reevaluating the estimates of both the quantities of recoverable material and the cost of reclamation. Most of the reclamation on any mining property is generally performed concurrent with mining or soon after each section of the deposit is mined. The Company’s reserve for reclamation activities was $6,540,000 at December 29, 2018 and $6,165,000 at December 30, 2017. The Company classifies a portion of the reserve as a current liability, $1,061,000 at December 29, 2018 and $981,000 at December 30, 2017 based upon historical expenditures and the anticipated reclamation timeframe for the Pueblo aggregate operation which is still under litigation as discussed in Note 2. |
REVENUE RECOGNITION | REVENUE RECOGNITION Effective December 31, 2017, the Company adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) and related amendments, which creates a single source of revenue guidance for all companies in all industries and is more principles-based than previous revenue guidance. The Company adopted the standard using the modified retrospective approach. The adoption of this standard did not result in significant changes to the Company’s accounting policies, business processes, systems or controls, or have a material impact on its financial position, consolidated results of operations or consolidated cash flows. As such, prior period financial statements were not recast and there was no cumulative effect adjustment upon adoption. Sales are recognized when control of the promised goods or services transfers to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s payment terms generally range between 30 to 90 days after invoice is billed to the customer. Sales are reported net of sales tax. Shipping and other transportation costs paid by the Company and rebilled to the buyer are recorded gross (as both sales and cost of sales). The Company generally recognizes revenue from the sale of products at the time the products are shipped. While the return of products is generally not allowed, some large customers have been granted the right to return a certain amount at the end of the normal selling season for seasonal products. Sales returns and allowances are estimated based on current program terms and historical experience. Provisions for estimated returns, discounts, volume rebates and other price adjustments are provided for in the same period the related revenues are recognized and are netted against revenues. The Company is responsible for warranties related to the manufacture of its HVAC products and estimates the future warranty claims based upon historical experience and management estimates. The Company reviews warranty and related claims activities and records provisions, as necessary. Changes in the aggregated product warranty liability for the fiscal years 2018 and 2017 were as follows (amounts in thousands): 2018 2017 Beginning balance $ 132 $ 118 Warranty related expenditures (148) (211) Warranty expense accrued 120 225 Ending balance $ 104 $ 132 The Company does not perform installation services except for installation of electronic access and security systems in the Door segment. These installation service contracts are generally short-term in nature, usually less than 30 days. It was determined for the installation service contracts there are two performance obligations, the equipment and the installation services. The transaction price for these contracts is allocated to each performance obligation based on its stated stand-alone selling price. Revenue is recognized at a point in time as each performance obligation is completed. No maintenance or service contracts are offered by the Company. |
INCOME TAXES | 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 December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was enacted in the United States. The Tax Act significantly revised the U.S. tax code by, among other items, reducing the Company’s federal tax rate from 34% to 21%, providing for the full expensing of certain depreciable property and eliminating the corporate Alternative Minimum Tax (AMT). The Tax Act repeals AMT and allows for all existing credit carryforwards to be used to offset regular tax liability for tax years beginning after December 31, 2017. Additionally, for tax years 2018, 2019 and 2020, to the extent that the AMT credit carryover exceeds the regular tax liability, 50% of the excess AMT credit is refundable. Any remaining credits will be fully refundable in 2021. For state tax purposes, net operating losses can be carried forward for various periods for the states that the Company is required to file in. California Enterprise Zone credits can be used through 2023 while Colorado credits can be carried forward for 7 years. The Company has established a valuation reserve related to a portion of the California Enterprise Zone credit not expected to be utilized prior to expiration. The Company’s income tax returns are subject to audit by the Internal Revenue Service (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 December 29, 2018 or December 30, 2017. |
CONCENTRATIONS | CONCENTRATIONS Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade receivables and temporary cash investments. The Company did not have any temporary cash investments in either fiscal 2018 or 2017. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. In many instances in the CACS segment and in the Heating and Cooling segment (as it relates to the fan coil product line); the Company retains lien rights on the properties served until the receivable is collected. The Company writes off accounts when all efforts to collect the receivable have been exhausted. The Company maintains allowances for potential credit losses based upon the aging of accounts receivable, management’s assessment of individual accounts and historical experience. Such losses have been within management’s expectations. See Note 15 for a description of the Company’s customer base. All long-lived assets are in the United States. No customer accounted for 10% or more of total sales of the Company in fiscal 2018 or 2017. One customer in the Heating and Cooling segment accounted for 16.1% and 18.0% of consolidated accounts receivable at December 29, 2018 and at December 30, 2017, respectively. Substantially all of the Heating and Cooling Segment’s factory employees are covered by a collective bargaining agreement through the Carpenters Local 721 Union under a contract that expires on December 31, 2022. The Company considers relations with its employees and with their union to be good. |
IMPAIRMENT OF LONG-LIVED ASSETS | IMPAIRMENT OF LONG-LIVED ASSETS In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation were required, the estimated future undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow value is required. In the fiscal quarters ended March 31, 2018 and June 30, 2018 the Company wrote off a total of $6,840,000 of deferred development related to a granite mining property south of Colorado Springs. See Note 16 for additional discussion. The company wrote off $627,000 of royalty overpayments related to the leased gravel operation in Pueblo, Colorado as of December 29, 2018. See Note 2 for additional discussion. |
FISCAL YEAR END | FISCAL YEAR END The Company’s fiscal year-end is the Saturday nearest December 31. Fiscal 2018 and fiscal 2017 each consisted of 52 weeks. |
NATURE OF BUSINESS AND SUMMAR_3
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 29, 2018 | |
ACCOUNTING POLICIES | |
Schedule of estimated useful lives of property, plant and equipment | Land improvements 5 to 31 years Buildings and improvements 10 to 31 years Leasehold improvements Shorter of the term of the lease or useful life Machinery and equipment 3 to 20 years |
Schedule of changes in the aggregated product warranty liability | Changes in the aggregated product warranty liability for the fiscal years 2018 and 2017 were as follows (amounts in thousands): 2018 2017 Beginning balance $ 132 $ 118 Warranty related expenditures (148) (211) Warranty expense accrued 120 225 Ending balance $ 104 $ 132 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 12 Months Ended |
Dec. 29, 2018 | |
INVENTORIES | |
Schedule of inventories | Inventories consisted of the following (amounts in thousands): December 29, 2018 December 30, 2017 Finished goods $ 5,448 $ 8,391 Work in process 1,365 1,198 Raw materials and supplies 9,907 10,770 $ 16,720 $ 20,359 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 29, 2018 | |
INCOME TAXES | |
Summary of provision (benefit) for income taxes for continuing operations | The (benefit) provision for income taxes is summarized as follows (amounts in thousands): 2018 2017 Federal: Current $ (387) $ 988 Deferred (1,454) 27 State: Current 1 32 Deferred (345) (26) $ (2,185) $ 1,021 |
Schedule of difference between the tax rate for continuing operations on income or loss for financial statement purposes and the federal statutory tax rate | 2018 2017 Statutory tax rate (21.0) % 34.0 % Percentage depletion (0.9) (4.7) Non-deductible expenses 0.4 1.7 Valuation allowance for tax assets 1.2 2.5 State income taxes, net of federal benefit (4.5) 2.0 Domestic production deduction — (0.3) Revaluation of deferred items for new Tax Act — (1.0) Other (2.4) 1.8 (27.2) % 36.0 % |
Schedule of principal temporary differences and the related deferred taxes | The principal temporary differences and their related deferred taxes are as follows (amounts in thousands): 2018 2017 Deferred tax assets Reserves for self-insured losses $ 466 $ 328 Accrued reclamation 1,445 1,386 Unfunded supplemental profit sharing plan liability 263 275 Asset valuation reserves 685 293 Future state tax credits 833 863 Net state operating loss carryforwards 226 126 Federal AMT carryforward 387 620 Federal NOL carryforward 468 — Other 700 701 5,473 4,592 Deferred tax liabilities Depreciation 1,200 859 Deferred development 116 1,298 Prepaid royalties — 161 Other 443 458 1,759 2,776 Net deferred tax asset before valuation allowance 3,714 1,816 Valuation allowance Beginning balance (200) (130) (Increase) decrease during the period (100) (70) Ending Balance (300) (200) Net deferred tax asset $ 3,414 $ 1,616 |
UNAUDITED QUARTERLY FINANCIAL_2
UNAUDITED QUARTERLY FINANCIAL DATA (Tables) | 12 Months Ended |
Dec. 29, 2018 | |
UNAUDITED QUARTERLY FINANCIAL DATA | |
Summary of unaudited fiscal quarterly financial data | The following table and footnotes provide summarized unaudited fiscal quarterly financial data for 2018 and 2017 (amounts in thousands, except per share amounts): First Second Third Fourth Quarter Quarter Quarter Quarter 2018 Sales $ 36,873 $ 43,300 $ 40,978 $ 42,832 Gross profit 5,528 8,205 6,233 7,841 Depreciation, depletion and amortization 676 707 682 568 Net (loss) income (6,193) 2,113 (1,236) (540) Basic and Diluted (loss) income per share (3.65) 1.24 (0.73) (0.32) First Second Third Fourth Quarter Quarter Quarter Quarter 2017 Sales $ 34,103 $ 39,887 $ 38,627 $ 40,193 Gross profit 6,031 8,153 7,201 6,710 Depreciation, depletion and amortization 638 677 617 622 Net income (422) 1,028 835 377 Basic and Diluted income per share (0.25) 0.61 0.50 0.22 |
INDUSTRY SEGMENT INFORMATION (T
INDUSTRY SEGMENT INFORMATION (Tables) | 12 Months Ended |
Dec. 29, 2018 | |
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 fiscal years 2018 and 2017 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 Unallocated Construction Construction and Evaporative Combined Corporate Supplies Doors Products Cooling Cooling HVAC (a) Total Year Ended December 29, 2018 Revenues from external customers $ 70,246 $ 20,158 $ 90,404 $ 45,953 $ 27,525 $ 73,478 $ 101 $ 163,983 Depreciation, depletion and amortization 1,462 171 1,633 588 361 949 51 2,633 Operating (loss) income (6,717) 2,233 (4,484) 613 318 931 (4,050) (7,603) Segment assets 35,351 8,003 43,354 19,668 9,335 29,003 3,346 75,703 Capital expenditures 1,672 119 1,791 752 312 1,064 45 2,900 Construction Products Industry HVAC Industry Concrete, Aggregates & Combined Heating Unallocated Construction Construction and Evaporative Combined Corporate Supplies Doors Products Cooling Cooling HVAC (a) Total Year Ended December 30, 2017 Revenues from external customers $ 66,407 $ 18,652 $ 85,059 $ 42,517 $ 25,216 $ 67,733 $ 18 $ 152,810 Depreciation, depletion and amortization 1,405 152 1,557 550 409 959 38 2,554 Operating income (loss) 2,656 1,861 4,517 2,140 (550) 1,590 (3,091) 3,016 Segment assets 39,020 7,360 46,380 21,543 11,896 33,439 2,670 82,489 Capital expenditures 4,566 135 4,701 804 230 1,034 46 5,781 (a) Includes unallocated corporate office expenses and assets which consist primarily of cash and cash equivalents, prepaid expenses, property, plant and equipment. |
NATURE OF BUSINESS AND SUMMAR_4
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Nature of Business (Details) | 12 Months Ended |
Dec. 29, 2018item | |
INDUSTRY SEGMENT INFORMATION | |
Number of industry groups in which the entity operates | 2 |
Number of companies collectively referred to as TMC | 3 |
Combined Construction Products | |
INDUSTRY SEGMENT INFORMATION | |
Number of reportable segments | 2 |
Combined HVAC Products | |
INDUSTRY SEGMENT INFORMATION | |
Number of reportable segments | 2 |
NATURE OF BUSINESS AND SUMMAR_5
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Fair value of financial instruments and Inventories (Details) - item | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | ||
Number of financial instruments transferred from Level 1 to Level 2 | 0 | |
Number of financial instruments transferred from Level 2 to Level 1 | 0 | |
INVENTORIES | ||
Percentage of total LIFO inventory | 65.00% | 77.00% |
Maximum inventory reserve as a percentage of FIFO inventory value | 6.80% | 1.80% |
NATURE OF BUSINESS AND SUMMAR_6
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) | 12 Months Ended |
Dec. 29, 2018 | |
Land Improvements [Member] | Minimum | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | 5 years |
Land Improvements [Member] | Maximum | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | 31 years |
Building and Building Improvements [Member] | Minimum | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | 10 years |
Building and Building Improvements [Member] | Maximum | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | 31 years |
Leasehold Improvements [Member] | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | Shorter of the term of the lease or useful life |
Machinery and Equipment [Member] | Minimum | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | 3 years |
Machinery and Equipment [Member] | Maximum | |
PROPERTY, PLANT AND EQUIPMENT | |
Estimated useful lives | 20 years |
NATURE OF BUSINESS AND SUMMAR_7
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Assets (Details) | Nov. 16, 2018USD ($) | Dec. 29, 2018USD ($)item | Dec. 30, 2017USD ($) | Dec. 31, 2016USD ($) |
Amortizable intangible assets | ||||
Goodwill impairment charges recognized | $ 0 | $ 0 | ||
Other long-term assets | $ 547,000 | $ 3,769,000 | ||
Number of aggregate property leases which require royalty payments to which the entity is a party | item | 3 | |||
Claim to recover royalty overpayments | $ 1,470,000 | |||
Wrote off the remaining royalty overpayment | $ 627,000 | |||
Charges Related to Cessation of Mining | $ 6,840,000 | |||
Aggregate property near Colorado Springs [Member] | ||||
Amortizable intangible assets | ||||
Other long-term assets | $ 2,500,000 |
NATURE OF BUSINESS AND SUMMAR_8
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Details) | 3 Months Ended | 12 Months Ended | ||
Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 29, 2018USD ($)item | Dec. 30, 2017USD ($)item | |
RETIREMENT PLANS | ||||
Unfunded liabilities related to the Supplemental Profit Sharing Plan | $ 1,001,000 | $ 1,027,000 | ||
RESERVE FOR SELF-INSURED AND INSURED LOSSES | ||||
Reserve for reclamation activities | 874,000 | |||
RECLAMATION | ||||
Reserve for reclamation activities | 6,540,000 | 6,165,000 | ||
Current portion of reserve for reclamation | 1,061,000 | 981,000 | ||
Changes in the aggregated product warranty liability | ||||
Beginning balance | $ 132,000 | 132,000 | 118,000 | |
Warranty related expenditures | (148,000) | (211,000) | ||
Warranty expense accrued | 120,000 | 225,000 | ||
Ending balance | $ 104,000 | $ 132,000 | ||
Number of performance obligations for installation service contracts | 2 | |||
IMPAIRMENT OF LONG-LIVED ASSETS | ||||
Impairment charge on other long-lived assets | $ 6,840,000 | $ 6,840,000 | ||
Charges related to cessation of mining an aggregates deposit | $ 6,840,000 | |||
Fiscal year end | ||||
Length of fiscal year | 364 days | 364 days | ||
Sales Revenue, Net [Member] | Customer Concentration Risk [Member] | ||||
Changes in the aggregated product warranty liability | ||||
Number of customers accounted for 10% or more of total sales | item | 0 | 0 | ||
Heating and Cooling | Customer Concentration Risk [Member] | ||||
Changes in the aggregated product warranty liability | ||||
Number of customers accounted for 10% or more of account receivable | item | 1 | |||
Heating and Cooling | Accounts Receivable [Member] | Customer Concentration Risk [Member] | ||||
Changes in the aggregated product warranty liability | ||||
Concentration Risk, Percentage | 16.10% | 18.00% | ||
Minimum | ||||
REVENUE RECOGNITION | ||||
Payment terms number of days | 30 days | |||
Maximum | ||||
REVENUE RECOGNITION | ||||
Payment terms number of days | 90 days |
NATURE OF BUSINESS AND SUMMAR_9
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income taxes (Details) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
INCOME TAXES | ||
Federal Income Tax rate | 21.00% | 34.00% |
Percentage of excess AMT credit refundable | 50.00% | |
COLORADO | State and Local Jurisdiction | ||
INCOME TAXES | ||
Tax credits carry-forward period | 7 years |
CESSATION OF MINING AT LEASED_2
CESSATION OF MINING AT LEASED PUEBLO GRAVEL SITE (Details) | Sep. 15, 2016USD ($)T | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Sep. 30, 2016USD ($) | Sep. 27, 2014T | Dec. 29, 2018USD ($) | Nov. 16, 2018USD ($) |
Disposition of assets | |||||||
Charges related to cessation of mining an aggregates deposit | $ 6,840,000 | ||||||
Minimum | |||||||
Disposition of assets | |||||||
Quarterly royalty payment | $ 300,000 | ||||||
Pueblo Colorado gravel operations | |||||||
Disposition of assets | |||||||
Sand and gravel reserves (in tons) | T | 50,000,000 | ||||||
Royalty overpayments | $ 1,470,000 | ||||||
Write off of prepaid royalties | $ 6,840,000 | $ 6,840,000 | $ 632,000 | ||||
Recovery amount due pending outcome of litigation | $ 1,470,000 | ||||||
Charges related to cessation of mining an aggregates deposit | $ 627,000 | ||||||
Sand and gravel tons paid for | T | 17,700,000 | ||||||
Pre payment of sand and gravel reserve | T | 50,000,000 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
INVENTORIES | ||
Finished goods | $ 5,448,000 | $ 8,391,000 |
Work in process | 1,365,000 | 1,198,000 |
Raw materials and supplies | 9,907,000 | 10,770,000 |
Inventories | 16,720,000 | 20,359,000 |
Increase in inventories, if inventories valued on the LIFO basis were valued at current costs | 7,176,000 | 6,677,000 |
Inventory valuation reserves | 1,747,000 | $ 518,000 |
Decrease in net loss due to inventory adjustment | $ (968,000) |
GOODWILL AND AMORTIZABLE INTA_2
GOODWILL AND AMORTIZABLE INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
Goodwill | ||
Goodwill | $ 7,229,000 | $ 7,229,000 |
Goodwill impairment charges recognized | 0 | 0 |
Changes recorded in value of goodwill | 0 | $ 0 |
Concrete Aggregates and Construction Supplies | ||
Goodwill | ||
Goodwill | 6,229,000 | |
Doors | ||
Goodwill | ||
Goodwill | $ 1,000,000 |
REVOLVING BANK LOAN (Details)
REVOLVING BANK LOAN (Details) | 12 Months Ended | |
Dec. 29, 2018USD ($)agreement | Dec. 30, 2017USD ($) | |
Debt Instrument [Line Items] | ||
Number of separate amendments to the Credit agreement | agreement | 9 | |
Period over which existing cash balance, anticipated cash flow from operations and borrowings available under the credit agreement will be sufficient to cover expected cash needs | 12 months | |
Minimum | Period Ending July 1, 2017 | ||
Debt Instrument [Line Items] | ||
Fixed charge coverage ratio | 1.06 | |
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 any fiscal year | $ 5,500,000 | |
Outstanding amount | 2,200,000 | $ 3,500,000 |
Highest balance outstanding during the period | 9,800,000 | 10,000,000 |
Average outstanding | 6,058,000 | $ 5,909,000 |
Outstanding amount of letters of credit total | $ 4,745,000 | |
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 | 2.25% | |
Revolving Credit Facility | Prime Rate | ||
Debt Instrument [Line Items] | ||
Variable interest rate base | prime rate |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) | 12 Months Ended |
Dec. 29, 2018lawsuit | |
LEGAL PROCEEDINGS | |
Number of proceedings having material adverse effect on the consolidated results of operations, cash flows or financial condition | 0 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) | 12 Months Ended | |
Dec. 29, 2018item$ / sharesshares | Dec. 30, 2017itemshares | |
SHAREHOLDERS' EQUITY | ||
Preferred stock, authorized shares | 400,000 | |
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.50 | |
Treasury Stock purchased | 0 | 1,000 |
Director | ||
SHAREHOLDERS' EQUITY | ||
Maximum number of shares allowed to be granted under the Plan | 150,000 | |
Number of shares issued to eligible board members | 16,000 | 12,000 |
Number of eligible board members | item | 8 | 8 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - $ / shares | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
EARNINGS PER SHARE | ||
Difference between the calculation of basic and diluted EPS (in dollars per share) | $ 0 | $ 0 |
RENTAL EXPENSE, LEASES AND CO_2
RENTAL EXPENSE, LEASES AND COMMITMENTS (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
RENTAL EXPENSE, LEASES AND COMMITMENTS | ||
2019 | $ 1,827,000 | |
2020 | 1,495,000 | |
2021 | 1,400,000 | |
2022 | 1,360,000 | |
2023 | 823,000 | |
Thereafter | 1,323,000 | |
Rental expense | 4,044,000 | $ 3,779,000 |
2019 | 143,000 | |
2020 | 145,000 | |
2021 | 147,000 | |
2022 | 150,000 | |
2023 | 152,000 | |
Thereafter | $ 579,000 |
RETIREMENT PLANS (Details)
RETIREMENT PLANS (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
RETIREMENT PLANS | ||
Total plan expenses charged to continuing operations | $ 951,000 | $ 1,537,000 |
INCOME TAXES - Deferred Tax Ass
INCOME TAXES - Deferred Tax Assets and Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
Federal: | ||
Current | $ (387,000) | $ 988,000 |
Deferred | (1,454,000) | 27,000 |
State: | ||
Current | 1,000 | 32,000 |
Deferred | (345,000) | (26,000) |
Total | $ (2,185,000) | $ 1,021,000 |
Difference between tax rate for continuing operations on income or loss for financial statement purposes and federal statutory tax rate | ||
Statutory tax rate (as a percent) | 21.00% | 34.00% |
Statutory tax rate (as a percent) | (21.00%) | |
Remeasurement of deferred tax liability, provisional benefit | $ 27,000 | |
Percentage depletion | (0.90%) | (4.70%) |
Non-deductible expenses (as a percent) | 0.40% | 1.70% |
Valuation allowance for tax assets (as a percent) | 1.20% | 2.50% |
State income taxes, net of federal benefit (as a percent) | (4.50%) | 2.00% |
Domestic production deduction | (0.30%) | |
Revaluation of deferred items for new Tax Act | (1.00%) | |
Other (as a percent) | (2.40%) | 1.80% |
Total (as a percent) | (27.20%) | 36.00% |
Current statutory federal and states tax rates (as a percent) | 25.74% | |
Deferred tax assets | ||
Reserves for self-insured losses | $ 466,000 | $ 328,000 |
Accrued reclamation | 1,445,000 | 1,386,000 |
Unfunded supplemental profit sharing plan liability | 263,000 | 275,000 |
Asset valuation reserves | 685,000 | 293,000 |
Future state tax credits | 833,000 | 863,000 |
Net state operating loss carryforwards | 226,000 | 126,000 |
Federal AMT carryforward | 387,000 | 620,000 |
Federal NOL carryforward | 468,000 | |
Other | 700,000 | 701,000 |
Total deferred tax assets | 5,473,000 | 4,592,000 |
Deferred tax liabilities | ||
Depreciation | 1,200,000 | 859,000 |
Deferred development | 116,000 | 1,298,000 |
Prepaid royalties | 161,000 | |
Other | 443,000 | 458,000 |
Total deferred tax liabilities | 1,759,000 | 2,776,000 |
Net deferred tax asset before valuation allowance | 3,714,000 | 1,816,000 |
Beginning balance | (200,000) | (130,000) |
(Increase) decrease during the period | 100,000 | 70,000 |
Ending Balance | (300,000) | (200,000) |
Net deferred tax asset | $ 3,414,000 | $ 1,616,000 |
INCOME TAXES - Additional Infor
INCOME TAXES - Additional Information (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
Net operating losses | ||
Valuation allowance related to carry forward of charitable contributions deductions | $ 0 | $ 0 |
AMT carryforward period | 3 years | |
California Enterprise Zone hiring credits | 792,000 | |
Tax Credit Carryforward Valuation Allowance Related To California Enterprise Zone | $ 430,000 | 303,000 |
Pre-tax California Enterprise Zone effect | 300,000 | $ 200,000 |
State and Local Jurisdiction | ||
Net operating losses | ||
Operating Loss Carryforwards, Valuation Allowance | $ 833,000 |
INCOME TAXES - Unrecognized tax
INCOME TAXES - Unrecognized tax benefits (Details) - USD ($) | Dec. 29, 2018 | Dec. 30, 2017 |
Interest and penalties recognized on the liability for unrecognized tax benefits | ||
Amount of unrecognized tax benefits that would affect the effective tax rates | $ 0 | $ 0 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) | 12 Months Ended | |
Dec. 29, 2018USD ($)company | Dec. 30, 2017USD ($) | |
RELATED PARTY TRANSACTIONS | ||
Amount paid for service rendered by related party | $ 474,000 | $ 510,000 |
Number of law firms | company | 3 | |
Amount of contingent fee received by related party | $ 28,000 | $ 14,000 |
UNAUDITED QUARTERLY FINANCIAL_3
UNAUDITED QUARTERLY FINANCIAL DATA (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 29, 2018 | Sep. 29, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 30, 2017 | Sep. 30, 2017 | Jul. 01, 2017 | Apr. 01, 2017 | Dec. 29, 2018 | Dec. 30, 2017 | |
UNAUDITED QUARTERLY FINANCIAL DATA | ||||||||||
Sales | $ 42,832 | $ 40,978 | $ 43,300 | $ 36,873 | $ 40,193 | $ 38,627 | $ 39,887 | $ 34,103 | $ 163,983 | $ 152,810 |
Gross profit | 7,841 | 6,233 | 8,205 | 5,528 | 6,710 | 7,201 | 8,153 | 6,031 | ||
Depreciation, depletion and amortization | 568 | 682 | 707 | 676 | 622 | 617 | 677 | 638 | 2,633 | 2,554 |
Net (loss) income | $ (540) | $ (1,236) | $ 2,113 | $ (6,193) | $ 377 | $ 835 | $ 1,028 | $ (422) | $ (5,856) | $ 1,818 |
Basic and diluted (loss) income per share (in dollar per share) | $ (0.32) | $ (0.73) | $ 1.24 | $ (3.65) | $ 0.22 | $ 0.50 | $ 0.61 | $ (0.25) | $ (3.45) | $ 1.08 |
INDUSTRY SEGMENT INFORMATION (D
INDUSTRY SEGMENT INFORMATION (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||||||
Dec. 29, 2018USD ($) | Sep. 29, 2018USD ($) | Jun. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Dec. 30, 2017USD ($) | Sep. 30, 2017USD ($) | Jul. 01, 2017USD ($) | Apr. 01, 2017USD ($) | Dec. 29, 2018USD ($)item | Dec. 30, 2017USD ($) | |
INDUSTRY SEGMENT INFORMATION | ||||||||||
Number of industry groups in which the entity operates | item | 2 | |||||||||
Revenues from external customers | $ 163,983 | $ 152,810 | ||||||||
Depreciation, depletion and amortization | $ 568 | $ 682 | $ 707 | $ 676 | $ 622 | $ 617 | $ 677 | $ 638 | 2,633 | 2,554 |
Operating (loss) income | (7,603) | 3,016 | ||||||||
Segment assets | 75,703 | 82,489 | 75,703 | 82,489 | ||||||
Capital expenditures | 2,900 | 5,781 | ||||||||
Unallocated Corporate | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Revenues from external customers | 101 | 18 | ||||||||
Depreciation, depletion and amortization | 51 | 38 | ||||||||
Operating (loss) income | (4,050) | (3,091) | ||||||||
Segment assets | 3,346 | 2,670 | 3,346 | 2,670 | ||||||
Capital expenditures | $ 45 | 46 | ||||||||
Combined Construction Products | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Number of reportable segments | item | 2 | |||||||||
Revenues from external customers | $ 90,404 | 85,059 | ||||||||
Depreciation, depletion and amortization | 1,633 | 1,557 | ||||||||
Operating (loss) income | (4,484) | 4,517 | ||||||||
Segment assets | 43,354 | 46,380 | 43,354 | 46,380 | ||||||
Capital expenditures | 1,791 | 4,701 | ||||||||
Combined Construction Products | Concrete Aggregates and Construction Supplies | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Revenues from external customers | 70,246 | 66,407 | ||||||||
Depreciation, depletion and amortization | 1,462 | 1,405 | ||||||||
Operating (loss) income | (6,717) | 2,656 | ||||||||
Segment assets | 35,351 | 39,020 | 35,351 | 39,020 | ||||||
Capital expenditures | 1,672 | 4,566 | ||||||||
Combined Construction Products | Doors | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Revenues from external customers | 20,158 | 18,652 | ||||||||
Depreciation, depletion and amortization | 171 | 152 | ||||||||
Operating (loss) income | 2,233 | 1,861 | ||||||||
Segment assets | 8,003 | 7,360 | 8,003 | 7,360 | ||||||
Capital expenditures | $ 119 | 135 | ||||||||
Combined HVAC Products | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Number of reportable segments | item | 2 | |||||||||
Revenues from external customers | $ 73,478 | 67,733 | ||||||||
Depreciation, depletion and amortization | 949 | 959 | ||||||||
Operating (loss) income | 931 | 1,590 | ||||||||
Segment assets | 29,003 | 33,439 | 29,003 | 33,439 | ||||||
Capital expenditures | 1,064 | 1,034 | ||||||||
Combined HVAC Products | Heating and Cooling | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Revenues from external customers | 45,953 | 42,517 | ||||||||
Depreciation, depletion and amortization | 588 | 550 | ||||||||
Operating (loss) income | 613 | 2,140 | ||||||||
Segment assets | 19,668 | 21,543 | 19,668 | 21,543 | ||||||
Capital expenditures | 752 | 804 | ||||||||
Combined HVAC Products | Evaporative Cooling | ||||||||||
INDUSTRY SEGMENT INFORMATION | ||||||||||
Revenues from external customers | 27,525 | 25,216 | ||||||||
Depreciation, depletion and amortization | 361 | 409 | ||||||||
Operating (loss) income | 318 | (550) | ||||||||
Segment assets | $ 9,335 | $ 11,896 | 9,335 | 11,896 | ||||||
Capital expenditures | $ 312 | $ 230 |
WRITE OFF OF DEFERRED DEVELOP_2
WRITE OFF OF DEFERRED DEVELOPMENT (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Apr. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Dec. 29, 2018 | Dec. 30, 2017 | Jun. 30, 2015 | |
WRITE OFF OF DEFERRED DEVELOPMENT | ||||||
Escrow Deposit | $ 2,500,000 | $ 2,500,000 | ||||
Capitalized deferred development | $ 5,430,000 | |||||
Amount invested in a project | $ 6,308,000 | |||||
Additional expenses incurred | $ 626,000 | |||||
Write-off of deferred development costs | $ 6,840,000 | $ 6,934,000 | $ 5,409,000 | |||
Net recovery associated with project | $ 94,000 |
SUBSEQUENT EVENT - SETTLEMENT_2
SUBSEQUENT EVENT - SETTLEMENT RECEIPT (Details) - USD ($) | Jan. 15, 2019 | Dec. 29, 2018 | Jun. 30, 2015 |
Subsequent Event - Settlement Receipt | |||
Escrow deposit | $ 2,500,000 | $ 2,500,000 | |
Subsequent Event | |||
Subsequent Event - Settlement Receipt | |||
Settlement receipt | $ 15,000,000 | ||
Escrow deposit | $ 200,000 |
SUBSEQUENT EVENT - DISPOSITIO_2
SUBSEQUENT EVENT - DISPOSITION OF ASSETS (Details) - Subsequent Event - Transit Mix Concrete | Feb. 01, 2019USD ($)citymi |
Subsequent Event - Disposition of Assets | |
Sale price | $ | $ 27,129,000 |
Period not to compete after sale | 5 years |
Number of mile radius from city limit not to compete after sale | mi | 150 |
Number of cities not to compete after sale | city | 2 |
SCHEDULE II - VALUATION AND Q_2
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (c) (e) (Details) - USD ($) | 12 Months Ended | |
Dec. 29, 2018 | Dec. 30, 2017 | |
Allowance for doubtful accounts | ||
Movement in valuation and qualifying accounts and reserves | ||
Balance at Beginning of Period | $ 240,000 | $ 220,000 |
Additions Charged to Costs and Expenses | 165,000 | 134,000 |
Deductions - Describe | (155,000) | 114,000 |
Balance at End of Period | 560,000 | 240,000 |
Inventory valuation reserve | ||
Movement in valuation and qualifying accounts and reserves | ||
Balance at Beginning of Period | 518,000 | 312,000 |
Additions Charged to Costs and Expenses | 1,544,000 | 282,000 |
Deductions - Describe | 315,000 | 76,000 |
Balance at End of Period | 1,747,000 | 518,000 |
Reserve for self-insured losses | ||
Movement in valuation and qualifying accounts and reserves | ||
Balance at Beginning of Period | 1,881,000 | 1,861,000 |
Additions Charged to Costs and Expenses | 5,483,000 | 5,034,000 |
Deductions - Describe | 4,913,000 | 5,014,000 |
Balance at End of Period | $ 2,451,000 | $ 1,881,000 |