Willdan(US:WLDN)2024-03-07 23:58Revenue Recognition - The company recognizes revenue on fixed price contracts using the percentage-of-completion method based on direct costs incurred to date relative to estimated total direct costs [304]. - Contract revenue is recognized as work is performed, with time-and-materials and unit-based contracts recognized based on actual hours incurred at contractually agreed rates [306]. - Revenue on fixed price contracts is recognized based on the percentage-of-completion method, while time-and-materials contracts recognize revenue as work is performed [395]. - The Company recognizes the full amount of estimated loss on contracts in the period it is identified if an anticipated loss is indicated [405]. - The Company utilizes the cumulative catch-up method for revenue recognition, adjusting profit recorded to date when contract profitability estimates change [405]. - The Company estimates variable consideration for contracts, ensuring that significant reversals of cumulative revenue recognized are unlikely [403]. - The Company performs ongoing reassessments of contracts to determine if they should be combined or segmented, which can impact revenue recognition [396]. - The company recognized revenue from fixed price contracts over time, based on costs incurred relative to total estimated costs at completion [357]. Financial Performance - Contract revenue for fiscal year 2023 increased to $510,095,000, a 19% rise from $429,138,000 in 2022 [366]. - Gross profit for 2023 was $179,767,000, compared to $143,579,000 in 2022, reflecting a 25% increase [366]. - Net income for 2023 was $10,926,000, a significant recovery from a net loss of $8,448,000 in 2022 [366]. - Earnings per share for 2023 were $0.82 (basic) and $0.80 (diluted), compared to losses of $0.65 in 2022 [366]. - The company reported a comprehensive income of $10,262,000 for 2023, compared to a loss of $8,410,000 in 2022 [366]. - Net cash provided by operating activities in 2023 was $39,214,000, a substantial increase from $9,433,000 in 2022 [369]. Assets and Liabilities - Total assets increased to $415,588,000 as of December 29, 2023, compared to $409,674,000 as of December 30, 2022, reflecting a growth of approximately 1.2% [365]. - Cash and cash equivalents rose significantly to $23,397,000 from $8,806,000, marking an increase of approximately 165% [365]. - Accounts receivable increased to $69,677,000, up from $60,202,000, representing a growth of about 15% [365]. - Total current liabilities decreased to $114,680,000 from $127,169,000, a reduction of approximately 9.8% [365]. - Stockholders' equity increased to $199,845,000 from $181,502,000, reflecting a growth of about 10.1% [365]. - Retained earnings improved significantly to $14,577,000 from $3,651,000, indicating a growth of approximately 299% [365]. - Total debt decreased to $98.5 million in 2023 from $108.0 million in 2022, with long-term debt portion at $89.0 million compared to $90.5 million in the previous year [462]. Debt and Interest Rates - The outstanding amount under the Term Loan was $98.1 million, with no amounts borrowed under the Revolving Credit Facility [340]. - The Term Loan and Revolving Credit Facility mature on September 29, 2026, and are governed by the Credit Agreement [340]. - A one percentage point increase in the effective interest rate would change the annual interest expense by approximately $1.0 million in fiscal year 2023 [341]. - The Term Loan will amortize quarterly at 7.5% per annum for the first year and 10.0% per annum for the second and third years [342]. - An interest rate swap agreement for $50.0 million notional amount was entered into on November 30, 2023, to fix the variable interest rate at 4.77% [343]. - The Company entered into a new Credit Agreement on September 29, 2023, providing for a $100.0 million term loan and a $50.0 million revolving credit facility, both maturing on September 29, 2026 [464]. - The Credit Facilities allow for incremental term loans or increases in the revolving credit facility of up to $75.0 million, subject to certain conditions [464]. - Borrowings under the Credit Facilities bear interest at a margin ranging from 0.75% to 2.00% for Base Rate borrowings and 1.75% to 3.00% for SOFR borrowings, depending on the Company's Total Net Leverage Ratio [465]. Internal Controls and Audit Matters - The company maintained effective internal control over financial reporting as of December 29, 2023, as per the audit opinion [348]. - The audit identified critical matters related to estimating costs to complete on fixed price contracts, requiring significant auditor judgment [358]. - Management's estimates of future taxable income for deferred tax assets were highlighted as a critical audit matter due to the significant judgment involved [362]. Client and Market Risks - The company has a reliance on its top ten clients, which poses a risk to revenue stability [9]. - The ability to win new contracts and renew existing ones is critical for maintaining revenue streams [9]. - The company may face challenges in managing supply chain constraints, labor shortages, and rising interest rates [9]. - Contracts may be subject to renegotiation upon renewal, potentially impacting profitability [295]. General and Administrative Expenses - Total general and administrative expenses for 2023 were $157,693,000, slightly higher than $150,642,000 in 2022 [366]. - General and administrative expenses include costs related to marketing, management, and administrative personnel, totaling significant operational costs [417]. - The Company expenses general and administrative costs when incurred, impacting overall profitability [418].