UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (IRS Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has
submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is
a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 13, 2021,
ATLAS TECHNICAL CONSULTANTS, INC.
Form 10-Q
For the Quarter and Year to Date Ended July 2, 2021
TABLE OF CONTENTS
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”) of Atlas Technical Consultants, Inc. (the “Company”) that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Quarterly Report are based on our current expectations and beliefs concerning future developments and their potential effects on us. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included elsewhere in this report. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to:
| ● | the effect, impact, potential duration or other implications of the COVID-19 pandemic and any expectations we may have with respect thereto; |
| ● | the adequacy of our efforts to mitigate cybersecurity risks and threats, especially with employees working remotely due to the COVID-19 pandemic; |
| ● | our ability to raise financing in the future; |
| ● | our success in retaining or recruiting, or changes required in, our officers, key employees or directors; |
| ● | our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business, as a result of which they would then receive expense reimbursements; |
| ● | our public securities’ potential liquidity and trading; |
| ● | changes adversely affecting the business in which we are engaged; |
| ● | the risks associated with cyclical demand for our services and vulnerability to industry, regional and national downturns; |
| ● | fluctuations in our revenue and operating results; |
| ● | unfavorable conditions or further disruptions in the capital and credit markets; |
| ● | our ability to generate cash, service indebtedness and incur additional indebtedness; |
| ● | competition from existing and new competitors; |
| ● | our ability to integrate any businesses we acquire and achieve projected synergies; |
| ● | our failure to maintain appropriate internal controls over financial reporting and disclosure controls and procedures; |
| ● | risks related to legal proceedings or claims, including liability claims; |
| ● | our dependence on third-party contractors to provide various services; |
| ● | our ability to obtain additional capital on commercially reasonable terms to fund acquisitions, expansions and our working capital needs and our ability to obtain debt or equity financing on satisfactory terms; |
| ● | safety and environmental requirements and other governmental regulations that may subject us to unanticipated costs and/or liabilities; |
| ● | general economic conditions and demand for our services; and |
| ● | our ability to fulfill our public company obligations. |
Should one or more of these risks or uncertainties materialize, they could cause our actual results to differ materially from the forward-looking statements. Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not take any statement regarding past trends or activities as a representation that the trends or activities will continue in the future. Accordingly, you should not put undue reliance on these statements.
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ATLAS TECHNICAL CONSULTANTS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
| July 2, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Unbilled receivables, net | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Other long-term assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, REDEEMABLE PREFERRED STOCK, SHAREHOLDERS’ EQUITY AND MEMBERS’ CAPITAL | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Current maturities of long-term debt | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net of current maturities and loan costs | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| COMMITMENTS AND CONTINGENCIES (NOTE 13) | ||||||||
| Redeemable preferred stock | ||||||||
| Members’ Capital | - | - | ||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | - | |||||||
| Additional paid in capital | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Retained (deficit) | ( | ) | ( | ) | ||||
| Total shareholders’ equity/members’ capital | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES, REDEEMABLE PREFERRED STOCK. SHAREHOLDERS’ EQUITY AND MEMBERS’ CAPITAL | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1
ATLAS TECHNICAL CONSULTANTS, INC. AND SUBSIDIARIES
UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Three Months Ended | Six Months Ended, | |||||||||||||||
| July 2, 2021 | June 30, 2020 | July 2, 2021 | June 30, 2020 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Operating income (loss) | ( | ) | ||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax expense | ( | ) | ( | ) | ||||||||||||
| Net (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Provision for non-controlling interest | ||||||||||||||||
| Redeemable preferred stock dividends | ( | ) | ( | ) | ( | ) | ||||||||||
| Net (loss) attributable to Class A common stock shareholders/members | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (Loss) Per Class A Common Share | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Weighted average of shares outstanding: | ||||||||||||||||
| Class A common shares (basic and diluted) | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
2
ATLAS TECHNICAL CONSULTANTS, INC. AND SUBSIDIARIES
UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
| For the six months ended | ||||||||
| July 2, 2021 | June 30, 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Equity based compensation expense | ||||||||
| Interest expense, paid in kind | ||||||||
| Gain on sale of property and equipment | ( | ) | ( | ) | ||||
| Write-off of deferred financing costs related to debt extinguishment | ||||||||
| Amortization of deferred financing costs | ||||||||
| Provision for bad debts | ( | ) | ||||||
| Changes in assets & liabilities: | ||||||||
| Decrease in accounts receivable and unbilled receivable | ||||||||
| (Increase) decrease in prepaid expenses | ( | ) | ||||||
| Decrease (increase) in other current assets | ( | ) | ||||||
| Increase (decrease) in trade accounts payable | ( | ) | ||||||
| (Decrease) in accrued liabilities | ( | ) | ( | ) | ||||
| (Decrease) in other current and long-term liabilities | ( | ) | ( | ) | ||||
| (Increase) in other long-term assets | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Proceeds from disposal of property and equipment | ||||||||
| Purchase of business, net of cash acquired | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of debt | ||||||||
| Payment of loan acquisition costs | ( | ) | ( | ) | ||||
| Repayments of debt | ( | ) | ( | ) | ||||
| Net payments on revolving line of credit | ( | ) | ||||||
| Proceeds from issuance of redeemable preferred stock | ||||||||
| Repayment of redeemable preferred stock | ( | ) | ||||||
| Payments of redeemable preferred stock dividends | ( | ) | ( | ) | ||||
| Issuance of common stock | ||||||||
| Member distributions | ( | ) | ||||||
| Distributions to non-controlling interests | ( | ) | ||||||
| Payment to shareholders associated with Atlas Business Combination | ( | ) | ||||||
| Payment of contingent earn-out | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and equivalents | ( | ) | ( | ) | ||||
| Cash and equivalents - beginning of period | ||||||||
| Cash and equivalents - end of period | $ | $ | ||||||
| Supplemental information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Taxes | ||||||||
| Capital assets financed | ||||||||
| Contingent consideration share settled | ||||||||
| Dividends due on redeemable preferred stock | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
ATLAS TECHNICAL CONSULTANTS, INC. AND SUBSIDIARIES
UNAUDITED STATEMENTS OF SHAREHOLDERS’ EQUITY AND MEMBERS’ CAPITAL
(in thousands)
| Class A Common Stock | Class B Common Stock | Additional Paid in | Members' | Non- Controlling | Retained | Total Shareholders' | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Capital | Interests | Earnings | Equity | ||||||||||||||||||||||||||||
| Balance at December 31, 2019 | $ | $ | ||||||||||||||||||||||||||||||||||
| Member distributions | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Equity based compensation | ||||||||||||||||||||||||||||||||||||
| Net (loss) prior to Atlas Business Combination | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Recapitalization in connection with Atlas Business Combination | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net (loss) post Atlas Business Combination | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends on redeemable preferred stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at March 31, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Equity based compensation | ||||||||||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||||||||||
| Dividends on redeemable preferred stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at June 30, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Balance at December 31, 2020 | $ | $ | $ | ( | ) | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||
| Equity based compensation | ||||||||||||||||||||||||||||||||||||
| Conversion of shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Dividends on redeemable preferred stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at April 2, 2021 | $ | $ | $ | ( | ) | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Distributions to non-controlling interests | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Equity based compensation | ||||||||||||||||||||||||||||||||||||
| Conversion of shares | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net (loss) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Issuance of shares | ||||||||||||||||||||||||||||||||||||
| Balance at July 2, 2021 | $ | $ | - | $ | ( | ) | - | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
4
ATLAS TECHNICAL CONSULTANTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Organization
Atlas Technical Consultants, Inc. (the “Company”, “We”, or “Atlas” and formerly named Boxwood Merger Corp. (“Boxwood”)) was a blank check company, incorporated in Delaware on June 28, 2017. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization, or other similar business transaction, one or more operating businesses or assets.
On February 14, 2020 (the “Closing Date”), the Company consummated its acquisition of Atlas Intermediate Holdings LLC, a Delaware limited liability company (“Atlas Intermediate”), pursuant to the Unit Purchase Agreement, dated as of August 12, 2019, as amended on January 22, 2020 (the “Purchase Agreement”), by and among the Company, Atlas TC Holdings LLC, a wholly-owned subsidiary of the Company and a Delaware limited liability company (“Holdings”), Atlas TC Buyer LLC, a wholly-owned subsidiary of Holdings and a Delaware limited liability company (the “Buyer”), Atlas Intermediate and Atlas Technical Consultants Holdings LP, a Delaware limited partnership (the “Seller”). The acquisition of Atlas Intermediate pursuant to the Purchase Agreement, together with the other transactions contemplated by the Purchase Agreement is referred to herein as the “Atlas Business Combination.”
Following the consummation of the Atlas Business Combination, the combined company is organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which the Company’s only direct assets will consist of common units of Holdings (“Holdings Units”). The Company is the sole manager of Holdings in accordance with the terms of the Amended and Restated Limited Liability Company Agreement of Holdings (the “Holdings LLC Agreement”) entered into in connection with the consummation of the Atlas Business Combination.
The Company has approximately 145 offices in 41 states, employs approximately 3,600 employees and is headquartered in Austin, Texas.
The Company provides public and private sector clients with comprehensive support in managing infrastructure improvement and environmental programs including testing, inspection & certification (TIC) services, complete array of environmental (ENV) services, program/construction/quality management (PCQM) services, as well as engineering & design (E&D) services.
Services are provided throughout the United States and its territories to a broad base of clients, with no single client representing 10% or more of our revenues for either the three or six months ended July 2, 2021 or June 30, 2020. Services are rendered primarily on a time and materials and cost-plus basis with approximately 90% of our contracts on that basis and the remainder represented by firm fixed price contracts.
5
Basis of Presentation
The acquisition of Atlas Intermediate has been accounted for as a reverse recapitalization. Under this method of accounting, Atlas is treated as the acquired company and Atlas Intermediate is treated as the acquirer for financial reporting purposes. Therefore, the consolidated financial results include information regarding Atlas Intermediate as the Company’s predecessor entity. Thus, the financial statements included in this report reflect (i) the historical operating results of Atlas Intermediate prior to the Atlas Business Combination; (ii) the combined results of the Company, which does not have any operating results and includes only certain costs such as the compensation for the Company’s board of directors (the “Board”), certain legal fees and taxes, and Atlas Intermediate following the Atlas Business Combination; (iii) the assets, liabilities and members’ capital of Atlas Intermediate at their historical costs; and (iv) the Company’s equity and earnings per share presented for the period from the Closing Date.
The accompanying interim statements of the Company have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair statement of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year or for any other period. These interim statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K that the Company filed with the SEC on March 23, 2021.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (as defined herein), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
6
Reclassification
Certain amounts reported in prior years in the financial statements have been reclassified to conform to the current year’s presentation. This reclassification did not have any impact to our reported net income or cash flows for the three or six months ended June 30, 2020.
Fiscal Year
Prior to this fiscal year, the Company’s subsidiaries reported their results of operations based on 52 or 53-week periods ending on the Friday nearest but not subsequent to December 31, while Atlas reported on a calendar year end. For clarity of presentation, all periods were presented as if the year ended on December 31. During each quarter, our subsidiaries would close on the Friday closest to March 31, June 30, and September 30, and Atlas closed on the actual calendar day. The impact of the difference between these dates has been insignificant to date. The Company appropriately eliminated all transactions between itself and its subsidiaries when presenting its Consolidated Balance Sheet.
On January 4, 2021 the Company’s Board voted unanimously to change
the Company’s fiscal year end from December 31 to a 52 or 53 week fiscal year ending on the Friday closest to December 31, effective
as of the commencement of the Company’s fiscal year beginning January 1, 2021. Unlike prior years, the Company’s fiscal year
can now end subsequent to December 31 if that is the Friday closest to the end of the calendar year. Beginning with the first quarter
of 2021, Atlas and its operating companies closed their quarterly books on the Fridays closest to March 31, June 30, and September 30,
respectively, and will close its fiscal year on the Friday closest to December 31. Had the Company made the change in 2020, the effect
on the Company’s Consolidated Statement of Operations would have been immaterial, however, we would have reported additional debt
repayments, interest payments and preferred stock dividends in the amount of $
7
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounts Receivable and Accrued Billings
The Company records its trade accounts receivable and unbilled receivables at their face amounts less allowances. On a periodic basis, the Company monitors the trade accounts receivable and unbilled receivables from its customers for any collectability issues. The allowance for doubtful accounts is established based on reviews of individual customer accounts, recent loss experience, current economic conditions, and other pertinent factors. The Company writes off accounts after a determination has been made by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management’s determination that the costs of pursuing collection outweigh the likelihood of recovery. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
As of July 2, 2021 and December 31, 2020, the allowance
for trade accounts receivable was $
Property and Equipment
Purchases of new assets and costs of improvement to extend the useful life of existing assets are capitalized. Routine maintenance and repairs are charged to expenses as incurred. When an asset is sold or retired, the costs and related accumulated depreciation are eliminated from the accounts, and the resulting gains or losses on disposal are recognized in the accompanying Consolidated Statement of Operations. The Company depreciates its assets on a straight-line basis over the assets’ useful lives, which range from three to ten years.
Impairment of Long-Lived Assets
The Company assesses long-lived assets for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. The Company recognizes an impairment if the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. If an impairment is indicated based on a comparison of the assets’ carrying amounts and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amounts of the assets exceed the respective fair values of the assets. There were no impairment charges during the three or six months ended July 2, 2021 and June 30, 2020.
Goodwill
Goodwill represents the excess of the cost of net assets acquired over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other, we evaluate goodwill annually for impairment on October 1, or whenever events or changes in circumstances indicate the asset may be impaired, using the quantitative method. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If we determine that this threshold is met, then performing the two-step quantitative impairment test is unnecessary. We may elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting unit. The two-step impairment test requires a comparison of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit. We determine fair value through the discounted cash flow method. We make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of our reporting units. If the carrying value of our reporting unit exceeds the fair value of our reporting unit, we would calculate the implied fair value as compared to the carrying value to determine the appropriate impairment charge, if any. There were no impairment charges for the three or six months ended July 2, 2021 and June 30, 2020.
Revenue Recognition
We adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective approach to all contracts that were not completed as of the beginning of fiscal year 2019. We utilize the portfolio method practical expedient, which allows companies to account for multiple contracts as a portfolio, instead of accounting for them on a contract by contract basis (commonly known as the contract method). For our time and materials contracts, we apply the as-invoiced practical expedient, which permits us to recognize revenue as the right to invoice for services performed. The new standard did not materially affect our consolidated net income, financial position, or cash flows.
8
Below is a description of the basic types of contracts from which the Company may earn revenue:
Time and Materials Contracts
Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic time and materials, cost plus a margin or time and materials subject to a maximum contract value (the “ceiling”). Due to the potential limitation of the contract’s ceiling, the economic factors of the contracts subject to a ceiling differ from the economic factors of basic T&M and cost plus contracts.
The majority of the Company’s contracts are for projects where it bills the client monthly at hourly billing or unit rates. The billing rates are determined by contract terms. Under cost plus contracts, the Company charges its clients for contract related costs at cost, an agreed upon overhead rate plus a fixed fee or rate.
Under time and materials contracts with a ceiling, the Company charges the clients for time and materials based upon the work performed however there is a ceiling or a not to exceed value. There are often instances that a contract is modified to extend the contract value past the original or amended ceiling. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract price in accordance with the variable consideration guidelines and will only include consideration that it expects to receive from the customer. When the Company is reaching the ceiling, the contract will be renegotiated, or we cease work when the maximum contract value is reached. The Company will continue to work if it is probable that the contract will be extended. The Company is only entitled to consideration for the work it has performed, and the ceiling amount is not a guaranteed contract value.
The Company earned approximately
Fixed Price Contracts
Under fixed price contracts, the Company’s clients pay an agreed amount negotiated in advance for a specified scope of work. The Company is guaranteed to receive the consideration to the extent that the Company delivers under the contract. The Company assesses contracts quarterly and may recognize any expected future loss before actually incurring the loss. When the Company is expecting to reach the total consideration under the contract, the Company will begin to negotiate a change order.
Change Orders and Claims
Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions. Either the Company or its client may initiate change orders. They may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the customer’s written approval of such changes or separate documentation of change order costs that are identifiable. Change orders may take time to be formally documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the client. If the Company is having difficulties in renegotiating the change order, the Company will stop work if possible, record all costs incurred to date, and determine, on a project by project basis, the appropriate final revenue recognition.
Claims are amounts in excess of the agreed contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Costs related to change orders and claims are recognized when they are incurred. The Company evaluates claims on an individual basis and recognizes revenue it believes is probable to collect.
9
Performance Obligations
The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. However, in some instances, we may also promise to provide distinct goods or services within a contract, resulting in multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. Typically, we sell a customer a specific service and use the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
The Company’s performance obligations are satisfied as work progresses or at a point in time. Revenue on our cost-reimbursable contracts is recognized over time using direct costs incurred or direct costs incurred to date as compared to the estimated total direct costs for performance obligations because it best depicts the transfer of control to the customer. Contract costs include labor, subcontractors’ costs and other direct costs.
Gross revenue from services transferred to customers at a point in time is recognized when the customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the reports and/or analysis performed.
As of July 2, 2021 and December 31, 2020, we had
$
Contract Assets and Liabilities
The timing of revenue recognition, billings and
cash collections results in billed receivables, unbilled receivables (contract assets), and billings in excess of costs and estimated
earnings on uncompleted contracts (contract liabilities). Billed and unbilled receivables are reflected on the face of the Consolidated
Balance Sheet. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings
in excess of revenues recognized on these contracts as of the reporting date and is reported within “other current liabilities”
on the Consolidated Balance Sheet. This liability was $
U.S. Federal Acquisition Regulations
The Company has contracts with the U.S. federal, state and local governments that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations (“FAR”). These regulations are generally applicable to all of its contracts that are directly funded or partially funded by pass through funds from the U.S. federal government. These provisions limit the recovery of certain specified indirect costs on contracts subject to the FAR. Cost-plus contracts covered by the FAR provide for upward or downward adjustments if actual recoverable costs differ from the estimate billed under forward pricing arrangements. Most of the Company’s government contracts are subject to termination at the convenience of the government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.
10
Government contracts that are subject to the FAR
are subject to audits performed by the Defense Contract Audit Agency (“DCAA”) and many other state governmental agencies.
As such, the Company’s overhead rates, cost proposals, incurred government contract costs and internal control systems are subject
to review. During the course of its audits, the DCAA or a state agency may question incurred costs if it believes the Company has accounted
for such costs in a manner inconsistent with the requirements of the FAR or Cost Accounting Standards and recommend that the applicable
contracting officer disallow such costs. Historically, the Company has not incurred significant disallowed costs because of such audits.
However, the Company can provide no assurance that the rate audits will not result in material disallowances of incurred costs in the
future. The Company provides for a refund liability to the extent that it expects to refund some of the consideration received from a
customer. The liability at July 2, 2021 and December 31, 2020 was $
Disaggregation of Revenues
As described further in Note 2 – Summary
of Significant Accounting Policies, the Company has one operating segment, Engineering, Testing, Inspection and Other Consultative Services,
which reflects how the Company is being managed. The Company provides public and private sector clients with comprehensive support in
managing large-scale infrastructure improvement programs including engineering, design, program development/management, compliance services,
acquisition and project control services, as well as construction engineering and inspection and materials testing. Approximately
All services performed by the Company are rendered
in the United States and its territories via two contract types, time and materials or fixed price contracts. The Company derives
Cash Flows
The Company has presented its cash flows using the indirect method and considers all highly liquid investments with original maturities of three months or less at acquisition to be cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance limit.
Comprehensive Income
There are no other components of comprehensive income other than net income and the provision for non-controlling interest associated with Holdings Units.
Use of Estimates
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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable. These risks primarily relate to the concentration of customers who are large, governmental customers and regional governmental customers. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.
11
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurements (“ASC 820”), establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy under ASC 820 are described as follows:
Level 1 — Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access.
Level 2 — Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.
Level 3 — Inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company has various financial instruments, including cash and cash equivalents, accounts receivable and payable, accrued liabilities, and long-term debt. The carrying value of the Company’s cash and cash equivalents, accounts receivable, and payable and accrued liabilities approximate their fair value due to their short-term nature. The Company believes that the aggregate fair values of its long-term debt approximates their carrying amounts as the interest rates on the debt are either reset on a frequent basis or reflect current market rates.
The Company applies the provisions of ASC 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. The allocation of the purchase price to identifiable intangible assets is based on valuations performed to determine the fair values of such assets as of the acquisition dates. Depending on the size and complexity of the acquisition, the Company may engage a third-party independent valuation specialist to assist in management’s determination of fair values of tangible and intangible assets acquired and liabilities assumed. The fair values of earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. The Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability on the Consolidated Balance Sheet. Changes in the estimated fair value of contingent earnout payments are included in operating expenses in the accompanying Consolidated Statements of Operations.
Several factors are considered when determining contingent consideration liabilities as part of the purchase price, including whether (i) the valuation of the acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (ii) the former owners of the acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of other key employees. The contingent earn-out payments are not affected by employment termination.
12
The Company reviews and re-assesses the estimated fair value of contingent consideration liabilities on a quarterly basis, and the updated fair value could differ materially from the initial estimates. The Company measures contingent consideration recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The Company uses a probability-weighted discounted cash flow approach as a valuation technique to determine the fair value of the contingent consideration liabilities on the acquisition date and at each reporting period. The significant unobservable inputs used in the fair value measurements are projections over the earn-out period, and the probability outcome percentages that are assigned to each scenario. Significant increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent consideration liabilities. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and amount paid will be recorded in earnings. The Company records the current portion of contingent consideration liability within other current liabilities and the noncurrent portion of contingent consideration liability within other long-term liabilities within its Consolidated Balance Sheet.
The following table summarizes the changes in the fair value of estimated contingent consideration:
| Contingent consideration, as of December 31, 2020 | $ | |||
| Additions for acquisitions | ||||
| Adjustment to liability for changes in fair value | ( | ) | ||
| Reduction of liability for payment made | ( | ) | ||
| Total contingent consideration, as of July 2, 2021 | ||||
| Current portion of contingent consideration | ( | ) | ||
| Contingent consideration, less current portion | $ |
The Company may at its discretion settle the contingent consideration with cash, common shares or a combination of cash and common shares. During the three months ended July 2, 2021, we settled a portion of the $3.7 million payment with 192,090 shares of Class A common stock.
The Company incurred a non-cash charge of $
Equity Based Compensation
The Company recognizes the cost of services received in an equity based payment transaction with an employee as services are received and records either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria.
The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that the Company is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation cost for an award classified as an equity instrument is recognized ratably over the requisite service period, including an estimate of forfeitures. The requisite service period is the period during which an employee is required to provide service in exchange for an award.
Consistent with the change in control provisions within the applicable agreements, the Company fully expensed the remaining unamortized value of the stock awards that vested upon the completion of the Atlas Business Combination during the quarter ended March 31, 2020.
The Company granted restricted stock units (“RSUs”) during the second quarters of 2021 and 2020 as a means to reward and retain selected management personnel. Please refer to Note 10 – Equity Based Compensation for further information.
An additional grant of RSUs was made to a member of the Company’s leadership team on December 31, 2020.
During the second quarter of 2021, the Company granted certain members of its leadership team performance share units (“PSUs”) with both performance and market conditions that may affect the ultimate vesting of shares and also granted to its Board of Directors RSUs during the first quarter of 2021.
Equity compensation was $
13
Income Taxes
The Company accounts for income taxes in accordance with the FASB ASC Topic 740, Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, scheduled reversals of deferred tax amounts, availability of carrybacks, and potential tax planning strategies. Based on our assessment, we have concluded that a portion of the deferred tax assets will not be realized.
According to the authoritative guidance on accounting for uncertainty in income taxes, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. This guidance also addresses de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and disclosure requirements for uncertain tax positions.
Redeemable Preferred Stock
On February 14, 2020, in connection with the consummation of the Atlas Business Combination, Holdings and GSO COF III AIV-2 LP (“GSO AIV-2”) entered into a subscription agreement, dated February 14, 2020 (the “Subscription Agreement”) pursuant to which, GSO AIV-2 purchased 145,000 units of a new class of Series A Senior Preferred Units of Holdings (the “Preferred Units”) at a price per Preferred Unit of $978.21 for an aggregate cash purchase price of $141,840,450, which represented a 2.179% original issue discount on the Preferred Units (such purchase, the “GSO Placement”).
The GSO Placement was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder.
The Preferred Units ranked senior in priority to all other existing and future equity securities of Holdings with respect to liquidation preference and distribution rights.
The Preferred Units had a liquidation preference
of $
Subject to any limitations set forth in the Atlas
Credit Agreement (as defined in Note 7 – Long-Term Debt), the Preferred Units were paid a dividend of
If a cash dividend was not able to be made because
of a limitation under the Atlas Credit Agreement, then the Liquidation Preference with respect to any Preferred Unit would have increased
to
The Preferred Units did not possess voting rights and were not convertible into any other security of Holdings.
Holdings was permitted to redeem the Preferred
Units beginning on the second anniversary of the Closing Date at a price of
Subject to the terms of Holdings’ and its subsidiaries’ senior credit agreements, Holdings was required to redeem the Preferred Units at the Redemption Premium, plus accrued and unpaid dividends, in the event of (i) a change of control, (ii) sales or other dispositions of all or substantially all of Holdings’ assets and (iii) the insolvency or bankruptcy of Holdings or any of its material subsidiaries.
14
Finally, holders of the Preferred Units were permitted to require Holdings to redeem their Preferred Units at the Liquidation Preference, plus accrued and unpaid dividends, beginning on the eighth anniversary of the Closing Date, subject to certain customary limitations.
The Preferred Units were redeemed in full at par without a premium on February 25, 2021.
| Redeemable preferred stock, as of December 31, 2020 | $ | |||
| Accrued paid in-kind dividends | ||||
| Accretion of discount | ||||
| Redemption | ( | ) | ||
| Redeemable preferred stock, as of July 2, 2021 | $ |
Segment
The Company has one operating and reporting segment, Engineering, Testing, Inspection and Other Consultative Services. This financial information is reviewed regularly by our chief operating decision maker to assess performance and make decisions regarding the allocation of resources and is equivalent to our consolidated information. Our chief operating decision maker does not review below the consolidated level. Our chief operating decision maker is our Chief Executive Officer.
Recent Accounting Pronouncements
In February 2016, FASB issued ASU 2016-02, Leases. ASU 2016-02 requires lessees to recognize, in the balance sheet, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset over the lease term. The amendments in this accounting standard update are to be applied using a modified retrospective approach and are effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the requirements of ASU 2016-02 and its impact on the consolidated and combined financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) - Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for the Company commencing after December 15, 2022. The Company is in the process of assessing the impact of this ASU on our consolidated financial statements and disclosures.
15
NOTE 3 – ATLAS BUSINESS COMBINATION
On the Closing Date,
The shares of non-economic Class B common stock of the Company entitle each holder to one vote per share, and each Class B share, along with its corresponding Holdings Unit, is redeemable on a one-for-one basis for one share of Class A common stock at the option of the Unit Holders (formerly members) as their lock-up periods expire. Upon the redemption by any Class B common stock, along with the corresponding Holdings Units, for Class A common stock, a corresponding number of shares of Class B common stock will be cancelled.
In connection with the Company’s entry into
the Atlas Business Combination, the Company agreed to issue and sell in a private placement an aggregate of
Because the holders of our Class B common stock have effective control of the combined company after the Closing Date through their majority voting interests in both the Company and, accordingly, Atlas Intermediate, the Atlas Business Combination was accounted for as a reverse recapitalization. Although the Company was the legal acquirer, Atlas Intermediate was the accounting acquirer. As a result, the reports filed by the Company subsequent to the Atlas Business Combination are prepared “as if” Atlas Intermediate is the predecessor and legal successor to the Company. The historical operations of Atlas Intermediate are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Atlas Intermediate prior to the Atlas Business Combination; (ii) the combined results of the Company, which does not have any operating results and includes only certain costs such as the compensation for the Company’s Board, certain legal fees and taxes, and Atlas Intermediate following the Atlas Business Combination; (iii) the assets, liabilities and members’ capital of Atlas Intermediate at their historical cost; and (iv) the Company’s equity and earnings per share for the period from the Closing Date.
16
NOTE 4 – BUSINESS ACQUISITIONS
In February 2020, the Company acquired Long Engineering
LLC (“LONG”), a land surveying and engineering company headquartered in Atlanta, Georgia.
In September 2020,
In November 2020,
On April 14, 2021,
On July 1, 2021,
Acquisition costs of approximately $
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition:
| LONG | Alta Vista* | WesTest* | AEL* | O'Neill* | ||||||||||||||||
| Cash | $ | $ | $ | |||||||||||||||||
| Accounts receivable | ||||||||||||||||||||
| Unbilled receivable | ||||||||||||||||||||
| Property and equipment | ||||||||||||||||||||
| Other current and long-term assets | ||||||||||||||||||||
| Intangible assets | ||||||||||||||||||||
| Liabilities | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||
| Net assets acquired | $ | $ | $ | |||||||||||||||||
| Consideration paid (cash and equity consideration) | $ | $ | $ | $ | $ | |||||||||||||||
| Contingent earnout liability at fair value (cash) | ||||||||||||||||||||
| Total consideration | ||||||||||||||||||||
| Excess consideration over the amounts assigned to the net assets acquired (goodwill) | $ | $ | $ | $ | $ | |||||||||||||||
*
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NOTE 5 – PROPERTY AND EQUIPMENT, NET
The Company depreciates its assets on a straight-line
basis over the assets’ useful lives, which range from
| July 2, | December 31, | Average | ||||||||||
| 2021 | 2020 | life | ||||||||||
| Furniture and fixtures | $ | $ | ||||||||||
| Equipment and vehicles | ||||||||||||
| Computers | ||||||||||||
| Leasehold improvements | ||||||||||||
| Construction in progress | ||||||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||||||
| $ | $ | |||||||||||
Property and equipment under capital leases:
| July 2, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Computer equipment | $ | $ | ||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Capital leases for computer equipment have an average
lease term of
| 2021 (six months remaining) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| $ |
Depreciation expense was approximately $
18
NOTE 6 – GOODWILL AND INTANGIBLES
The carrying amount, including changes therein, of goodwill was as follows:
| Balance as of December 31, 2020 | $ | |||
| Acquisitions | ||||
| Disposals | ||||
| Measurement period adjustments | ( |
) | ||
| Balance as of July 2, 2021 | $ |
The Company did not recognize any impairments of goodwill in the three or six months ended July 2, 2021 or June 30, 2020. The Company completed its valuation analysis for the contingent consideration related to the LONG acquisition during the quarter ended April 2, 2021 resulting in an adjustment that is included in the measurement period adjustments noted above.
Intangible assets as of July 2, 2021 and December 31, 2020 consist of the following:
| July 2, 2021 | December 31, 2020 | Remaining | ||||||||||||||||||||||||||
| Gross | Accumulated | Net book | Gross | Accumulated | Net book | useful life | ||||||||||||||||||||||
| amount | amortization | value | amount | amortization | value | (in years) | ||||||||||||||||||||||
| Definite life intangible assets: | ||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
| Tradenames | ( | ) | ( | ) | ||||||||||||||||||||||||
| Non-competes | ( | ) | ( | ) | ||||||||||||||||||||||||
| Total intangibles | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||
Amortization expense was $
Amortization of intangible assets for the next five years and thereafter is expected to be as follows:
| 2021 (six months remaining) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| $ |
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NOTE 7 – LONG-TERM DEBT
In March 2019, subsequent to the merger with ATC
Group Partners (“ATC”), we repaid all outstanding balances on the combined entity’s loan agreements in full and terminated
our prior loan agreements. These loan agreements were replaced with a term loan of $
The Atlas Credit Facility was secured by assets of Atlas Intermediate. The Atlas Credit Facility required quarterly principal payments of $2.719 million through March 31, 2023, and then $3.625 million until the final maturity in March 2024, and bore interest at an annual rate of LIBOR plus a margin ranging from 275 to 425 basis points determined by the Company’s Consolidated Leverage Ratio, as defined in the Atlas Credit Facility. For the interest payment made in the quarter ended December 31, 2019, the applicable margin was 375 basis points and the total interest rate was 5.50%.
The Atlas Credit Facility was scheduled to mature
in March 2024. However, in connection with the consummation of the Atlas Business Combination, the Atlas Credit Facility was repaid and
a new credit arrangement (the “Atlas Credit Agreement”) was entered into with Macquarie Capital Funding LLC (the “Lender”
or “Lead Arranger”).
Under the terms of the Atlas Credit Agreement, the Term Loan and Revolver were set to mature on February 14, 2027 and February 14, 2025, respectively. Interest was payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rates under the Atlas Credit Agreement were equal to either (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 4.75%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 3.75%.
The Atlas Credit Agreement was guaranteed by Holdings and secured by (i) a first priority pledge of the equity interests of subsidiaries of Holdings and Atlas Intermediate and (ii) a first priority lien on substantially all other assets of Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries.
On March 31, 2020,
20
The Term Loan Agreement and ABL Revolver Agreement are collectively referred to as the “Atlas 2021 Credit Agreements” by the Company.
The initial Term Loan will mature on
Interest on any outstanding borrowings is payable
monthly under the ABL Revolver Agreement, quarterly under the Term Loan Agreement or, in each case, at the end of the applicable interest
period in arrears. The cash interest rates under the Term Loan Agreement will be equal to either
The Credit Agreements are guaranteed by Holdings and secured by (i) in the case of the ABL Revolver Agreement, a first priority security interest in the current assets, including accounts receivable, of Holdings, Intermediate and its subsidiaries and (ii) in the case of the Term Loan Agreement, a pledge of the equity interests of the subsidiaries of Holdings and Intermediate, and subject to the first lien security interest on current assets under the Revolver, a first priority lien on substantially all other assets of Holdings, Intermediate and all of their direct and indirect subsidiaries.
The Term Loan Agreement contains a financial covenant which requires Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Total Net Leverage Ratio (as defined in each Credit Agreement) tested on a quarterly basis that does not exceed (i) 8.25 to 1.00 with respect to the fiscal quarters ending on April 2, 2021 and July 2, 2021, (ii) 8.00 to 1.00 for the fiscal quarters ending October 1, 2021 and December 31, 2021, (iii) 7.50 to 1.00 for the fiscal quarters ending April 1, 2022 and July 1, 2022, (iv) 7.25 to 1.00 for the fiscal quarters ending September 30, 2022 and December 30, 2022, (v) 7.00 to 1.00 for the fiscal quarters ending March 31, 2023 and June 30, 2023, (vi) 6.75 to 1.00 for the fiscal quarters ending September 29, 2023 and December 29, 2023, and (vii) 6.50 to 1.00 for March 29, 2024 and each fiscal quarter ending thereafter.
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The ABL Revolver Agreement contains a “springing” financial covenant which requires Holdings, Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Fixed Charge Coverage Ratio (as defined in the ABL Revolver Agreement) of no less than 1.10 to 1.00 when the outstanding principal amount of loans under the Revolver exceeds $0 or the aggregate exposure for letters of credit under the Revolver exceeds $5 million.
The Company has been in compliance with the terms of the Atlas Credit Facility and Atlas Credit Agreement as of July 2, 2021 and December 31, 2020, respectively.
Long-term debt consisted of the following:
| July 2, 2021 | December 31, 2020 | |||||||
| Atlas 2021 credit agreement - term loan | $ | $ | ||||||
| Atlas credit agreement - term loan | ||||||||
| Atlas 2021 credit agreement – revolving | ||||||||
| Atlas credit agreement – revolving | ||||||||
| Atlas 2021 credit agreement – PIK | ||||||||
| Subtotal | ||||||||
| Less: Loan costs, net | ( | ) | ( | ) | ||||
| Less current maturities of long-term debt | ( | ) | ||||||
| Long-term debt | $ | $ | ||||||
The Company in conjunction with the refinancing
of the Atlas Credit Agreement on February 25, 2021 wrote off $
Aggregate long-term principal payments subsequent to July 2, 2021, are as follows (amounts in thousands):
| 2021 (six months remaining) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| $ |
The 2021 Atlas Credit agreement requires annual amortization of principal and interest paid in kind amounts of 1% or 2.5% depending on certain ratios. The Company is currently within the ratio that requires 1% annual amortization. Principal repayments commence during the Company’s second quarter 2022.
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NOTE 8- SHAREHOLDERS’ EQUITY
Shares Outstanding
Prior to the Atlas Business Combination, the Company was a special purpose acquisition company with no operations, formed as a vehicle to affect a business combination with one or more operating businesses. After the consummation of the Atlas Business Combination, the Company became a holding company whose sole material operating asset consists of its interest in Atlas Intermediate.
The following table summarizes the changes in the outstanding stock and warrants from the December 31, 2020 through July 2, 2021:
| Class A Common Stock | Class B Common Stock | Warrants | Private Placement Warrants | |||||||||||||
| Beginning Balance, as of December 31, 2020 | ||||||||||||||||
| Issuances | ||||||||||||||||
| Transfers to Class A from Class B | ( | ) | ||||||||||||||
| Shares Outstanding at July 2, 2021 | ||||||||||||||||
Class A Common Stock –At July
2, 2021 and December 31, 2020, there were
Class B Common Stock – At July 2, 2021 and December 31, 2020, there were
In October 2020,
23
Private Placement Warrants –
Upon closing of the Boxwood initial public offering, Boxwood Sponsor LLC (the “Sponsor”) purchased an aggregate of
In connection with the October 2020 offer to the warrant holders to exchange their warrants for the Company’s Class A common stock, the Sponsor opted to fully exchange its Private Placement Warrants for Class A common stock. As of December 31, 2020, there were no remaining Private Placement Warrants issued or outstanding.
Private Placement
In connection with the Company’s entry into
the Contribution Agreement, the Company agreed to issue and sell in a private placement an aggregate of
Non-controlling Interest
Due to the participation of the holders of our Class B common stock in the results of Atlas Intermediate and subsidiaries, a non-controlling interest was deemed to exist. Non-controlling ownership interests in Atlas Intermediate and its subsidiaries are presented in the Consolidated Balance Sheet within shareholders’ equity as a separate component. In addition, consolidated net income includes earnings attributable to both the shareholders and the non-controlling interests.
As holders of our Class B common stock transition to holders of Class A common stock, we adjust our additional paid in capital and non-controlling interest within our Consolidated Balance Sheet and the provision for non-controlling interest in our Consolidated Statement of Operations. Holders of Class B common stock may convert their shares to Class A common stock at their discretion as their contractual lock-ups expire after the Atlas Business Combination.
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NOTE 9 – LOSS PER SHARE
The Atlas Business Combination was structured as a reverse capitalization by which the Company issued stock for the net assets of Atlas Intermediate accompanied by a recapitalization. Earnings per share is calculated for the Company only for periods after the Atlas Business Combination due to the reverse recapitalization.
(Loss) per share was calculated as follows:
| Three Months Ended | Six Months Ended | Closing Date Through | ||||||||||||||
| July 2, 2020 | June 30, 2020 | July 2, 2021 | June 30, 2020 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) income post Atlas Business Combination | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Provision for non-controlling interest | ||||||||||||||||
| Redeemable preferred stock dividends | ( | ) | ( | ) | ( | ) | ||||||||||
| Net (loss) attributable to Class A common shares - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average shares outstanding - basic and diluted | ||||||||||||||||
| Net (loss) per Class A common share, basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The Company had the following shares that were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive for the periods presented but could potentially dilute basic earnings per share in future periods:
| Three Months Ended June 30, 2020 |
Closing Date Through June 30, 2020 |
|||||||
| Public warrants | ||||||||
| Private placement warrants | ||||||||
| Total | ||||||||
The Company retired the warrants, both public and private placement, via tender offer that concluded in November 2020 and as such is not presenting information for the three or six months ended July 2, 2021.
NOTE 10 – EQUITY BASED COMPENSATION
In December 2017, Atlas Intermediate’s Parent
granted service-based Class A units to certain members of Atlas’ management. As of December 31, 2017,
In April 2019, Atlas Intermediate’s Parent
granted service-based Class A units to certain members of Atlas’ management. As of January 1, 2019,
In connection with the Atlas Business Combination, the outstanding shares were vested under the change of control provisions within the agreements. The shares are currently reflected as Class B Common Shares and may be converted to Class A Common Shares as the lock-up agreements expire.
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During the second quarters of 2021 and 2020, the
Company awarded
On January 29, 2021, the Company granted to a member
of its executive team
On March 3, 2021,
During the second quarter of 2021, the Company
also awarded
The Company estimates forfeitures of its stock awards. Actual forfeitures
may differ from those estimates. The Company currently estimates its forfeitures as
Equity compensation was $
26
NOTE 11 – RELATED-PARTY TRANSACTIONS
During the six months ended July 2, 2021 and June
30, 2020, the Company leased office space from former owners of acquired companies that became shareholders and/or officers of the Company.
The Company recognized lease expenses under these leases within the Statement of Operations in the amount of $
During the three months ended July 2, 2021 and
June 30, 2020, the Company performed certain environmental consulting work for an affiliate of one of its principal shareholders or members
and collected fees related to these services in the amount of $
On February 3, 2020, the Company entered into a
subscription agreement with SCST, Inc., a California corporation, pursuant to which it agreed to acquire
On February 14, 2020, the Company entered into
a non-interest bearing short-term loan with the former owners of Atlas Intermediate to purchase insurance contracts in the amount of $
NOTE 12 — EMPLOYEE BENEFIT PLANS
The Company maintains employee savings plans which
allow for voluntary contributions into designated investment funds by eligible employees. The Company may, at the discretion of its Board,
make additional contributions to these plans. The Company has made total contributions of $
27
NOTE 13 – COMMITMENTS AND CONTINGENCIES
The Company is subject to certain claims and lawsuits typically filed against engineering companies, alleging primarily professional errors or omissions. The Company carries professional liability insurance, subject to certain deductibles and policy limits, against such claims. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on its financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.
The Company leases office space, laboratory facilities,
and automobiles under operating lease agreements and has options to renew most leases.
Future minimum payments under non-cancelable operating leases as of July 2, 2021 are as follows:
| 2021 (six months remaining) | $ | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| $ |
Rental expense associated with facility and equipment operating leases
for the three months ended July 2, 2021 and June 30, 2020 was $
NOTE 14 – COVID-19 PANDEMIC
In the first quarter of 2020, the COVID-19 outbreak spread quickly across the globe. Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various containment measures, which included stay-at-home orders and restrictions on the operations of businesses, while aiding in the prevention of further outbreak, have resulted in a severe drop in general economic activity, volatility in the financial markets and an economic downturn.
As a result, there have been three financial responses from the U.S. government, in addition to interest rate cuts by the U.S. Federal Reserve Board which were initially implemented to stabilize the U.S. stock markets. The federal government’s stimulus legislation related to COVID-19 include: the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020, the Families First Coronavirus Response Act, and the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 (the “CARES Act”).
In connection with the CARES Act, we have opted to defer the
deposit and payment of the employer’s share of Social Security taxes. Under the CARES Act, deferrals are currently allowed
from March 27, 2020 through December 31, 2020. The Company has not received any other assistance under the CARES Act, nor does
the Company expect to realize any other tax benefits from the program. As of July 2, 2021 and December 31, 2020, the Company has deferred
payment of $
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During the second quarter of 2020, we reduced our workforce through various actions. We routinely assess our staffing levels to make certain that we continue to appropriately service our clients and maintain shareholder value. As a safety focused organization, since the outbreak of COVID-19 and continuing throughout the remainder of 2020, we encouraged our employees to work from home wherever possible and to honor all shelter-in-place rules put forth by their state or local governments. As shelter-in-place rules have been lifted and vaccination efforts are rolled out to the general public, we have allowed our employees to return to our offices when it has been safe to do so and have begun to rehire additional staff.
We continue to monitor the credit quality and access to capital for our non-governmental clients as this can be an indication of their ability to go forth with future projects and continue to pay for contracted services. As an infrastructure company, the work we do is currently deemed essential by Federal, State and local governments but any change from that designation could have a negative result on our business as well as our peers.
We are in compliance with our debt covenants as of July 2, 2021 and we expect that we will continue to be for the foreseeable future.
NOTE 15 – INCOME TAXES
Following the consummation of the Atlas Business Combination, we are organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which our only direct assets consist of common units of Holdings. We are the sole manager of Holdings in accordance with the terms of the Holdings LLC Agreement entered into in connection with the consummation of the Atlas Business Combination.
Previously, Atlas Intermediate was treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the partners and members. As such, no recognition of federal or state income taxes have been provided for in the accompanying consolidated financial statements with the exception of income taxes relating to the C-Corp subsidiaries directly owned by Atlas Intermediate and the State of Texas Margin tax.
Subsequent to the Atlas Business Combination, income taxes relating to the C-Corps owned directly by Atlas Intermediate and the State of Texas Margin tax are considered within the provision of non-controlling interest as it is generated through the results of Atlas Intermediate and its subsidiaries.
Our effective tax rate from continuing operations
was (
The Company provides a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, a valuation allowance has been recorded to reduce net deferred tax assets to an amount that management believes is more than likely not to be realized.
The Company had no unrecognized tax benefits as of July 2, 2021 or December 31, 2020. Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. There are no accruals for interest and penalties as of July 2, 2021 or December 31, 2020.
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| ITEM 2 | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis should be read in conjunction with our unaudited financial statements and accompanying notes included herein. This discussion contains “forward-looking statements” reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, economic and competitive conditions, regulatory changes and other uncertainties, as well as those factors included in our Annual Report on Form 10-K for the year ended December 31, 2020, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. We assume no obligation to update any of these forward-looking statements.
For purposes of this section, “we,” “us,” “our,” the “Company” and “Atlas” refers to Atlas Technical Consultants, Inc. (formerly named Boxwood Merger Corp.) and its subsidiaries. The Atlas Business Combination (as defined below) was accounted for as a reverse recapitalization where the Company was the legal acquirer but treated as the accounting acquiree. All references to operations prior to the Atlas Business Combination reflect the results of Atlas Intermediate Holdings LLC, a Delaware limited liability company (“Atlas Intermediate”) and its subsidiaries. Since Atlas Intermediate was determined to be the accounting acquirer, the information included below will include the results of Atlas Intermediate and its subsidiaries through the Atlas Business Combination and will include the Company, including Atlas Intermediate, for transactions occurring after the Atlas Business Combination.
OVERVIEW
Atlas Technical Consultants, Inc. (the “Company”, “We”, or “Atlas” and formerly named Boxwood Merger Corp. (“Boxwood”)) was a blank check company, incorporated in Delaware on June 28, 2017. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization, or other similar business transaction, one or more operating businesses or assets.
On February 14, 2020 (the “Closing Date”), the Company consummated its acquisition of Atlas Intermediate pursuant to the Unit Purchase Agreement, dated as of August 12, 2019, as amended on January 22, 2020 (the “Purchase Agreement”), by and among the Company, Atlas TC Holdings LLC, a wholly-owned subsidiary of the Company and a Delaware limited liability company (“Holdings”), Atlas TC Buyer LLC, a wholly-owned subsidiary of Holdings and a Delaware limited liability company, Atlas Intermediate and Atlas Technical Consultants Holdings LP, a Delaware limited partnership (the “Seller”). The acquisition of Atlas Intermediate pursuant to the Purchase Agreement together with the other transactions contemplated by the Purchase Agreement is referred to herein as the “Atlas Business Combination.”
Following the consummation of the Atlas Business Combination, we are organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and continues to operate through the subsidiaries of Atlas Intermediate, and in which our only direct assets consist of common units of Holdings (the “Holdings Units”). We are the sole manager of Holdings in accordance with the terms of the Amended and Restated Limited Liability Company Agreement of Holdings entered into in connection with the consummation of the Atlas Business Combination.
Headquartered in Austin, Texas, we are a leading provider of professional testing, inspection, engineering, environmental, program management and consulting services, offering solutions to public and private sector clients in the transportation, commercial, water, government, education, industrial, healthcare and power markets. With approximately 145 offices located throughout the United States, we provide a broad range of mission-critical technical services, helping our clients test, inspect, certify, plan, design and manage a wide variety of projects across diverse end markets.
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We act as a trusted advisor to our clients, helping our clients design, engineer, inspect, manage and maintain civil and commercial infrastructure, servicing the existing structures as well as helping to build new structures. However, we do not perform any construction, and do not take any direct construction risk or engage in any product manufacturing.
We provide a broad range of mission-critical technical services, ranging from providing inspection services in small projects to managing significant aspects of large, multi-year projects. For the year ended December 31, 2020, we:
| ● | performed approximately 40,000 projects, with average revenue per project of less than $10,000; and |
| ● | delivered approximately 90% of our projects under “time & materials” and “cost-plus” contracts. |
We have long-term relationships with a diverse set of clients, providing a base of repeating clients, projects and revenues. Approximately 90% of our revenues are derived from clients who have used our services at least twice in the past three years and more than 95% of our revenues are generated from client relationships longer than 10 years, with greater than 25% of revenues generated from relationships longer than 30 years. Examples of such long-term customers include the Texas and Georgia Departments of Transportation, U.S. Postal Service, Gwinnett County Georgia, New York City Housing Authority, Stanford University, Port of Oakland, United Rentals, Inc., Speedway, Walmart, Inc., and Apple Inc.
Our broad base of customers spans a diverse set of end markets including the transportation, commercial, water, government, education, industrial, healthcare and power sectors. Our customers include government agencies, quasi-public entities, schools, hospitals, utilities and airports, as well as private sector clients across many industries.
Our services require a high degree of technical expertise, as our clients rely on us to provide testing, inspection and quality assurance services to ensure that structures are designed, engineered, built and maintained in accordance with building codes, regulations and the highest safety standards. As such, our services are delivered by a highly-skilled, technical employee base that includes scientists, engineers, inspectors and other field experts. As of July 2, 2021, our technical staff represented approximately 80% of our approximately 3,600 employees.
Our services are typically provided under contracts, some of which are long-term with long lead times between when contracts are signed and when our services are performed. As such, we have a significant amount of contracted backlog, providing for a high degree of visibility with respect to revenues expected to be generated from such backlog. As of July 2, 2021, our contracted backlog was estimated to be approximately $751 million. See “—Backlog” below for additional information relating to our backlog.
COVID-19 Pandemic
See Note 14 to the consolidated financial statements for a discussion of the COVID-19 Pandemic.
Recent Accounting Pronouncements
See Note 2. “Summary of Significant Accounting Policies,” to the Consolidated Financial Statements for a description of the recent accounting pronouncements.
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HOW WE EVALUATE OUR OPERATIONS
We use a variety of financial and other information in monitoring the financial condition and operating performance of our business. Some of this information is financial information that is prepared in accordance with generally accepted accounting principles (“GAAP”), while other information may be financial in nature and may not be prepared in accordance with GAAP. Historical information is periodically compared to budgets, as well as against industry-wide information. We use this information for planning and monitoring our business, as well as in determining management and employee compensation.
We evaluate our overall business performance based primarily on a combination of four financial metrics: revenue, backlog, adjusted EBITDA and liquidity measures. These are key measures used by our management team and Board to understand and evaluate our operational performance, to establish budgets and to develop short and long-term operational goals.
Revenue
Revenues for services are derived from billings under contracts (which are typically of short duration) that provide for specific time, material and equipment charges, or lump sum payments and are reported net of any taxes collected from customers. We recognize revenue as it is earned at estimated collectible amounts.
Revenue is recognized as services are performed and amounts are earned in accordance with the terms of a contract. We generally contract for services to customers based on either hourly rates or a fixed fee. In such contracts, our efforts, measured by time incurred, typically are provided in less than a year and represent the contractual milestones or output measure, which is the contractual earnings pattern. For contracts with fixed fees, we recognize revenues as amounts become billable in accordance with contract terms, provided the billable amounts are consistent with the services delivered and are earned. Expenses associated with performance of work may be reimbursed with a markup depending on contractual terms. Revenues include the markup, if any, earned on reimbursable expenses. Reimbursements include billings for travel and other out-of-pocket expenses and third-party costs, such as equipment rentals, materials, subcontractor costs and outside laboratories, which is included in cost of revenues in the accompanying combined statement of income.
Backlog
Effective for the quarter ended April 2, 2021, we define backlog to include the total estimated future revenue streams associated with fully executed contracts as well as an estimate of highly probable revenues from recurring, task order based contracts. As we integrate our acquisitions, we have standardized the backlog definition. Previously we defined backlog as fully awarded and contract work or revenue we expect to realize for work completed. Had we not refined our definition of backlog, our backlog as of April 2, 2021 would have been $640 million versus the $689 million we reported as of that date.
We use backlog to evaluate Company revenue growth as it typically follows growth in backlog. As backlog is not a defined accounting term, our computation of backlog may not be comparable with that of our peers.
Adjusted EBITDA
We view adjusted EBITDA, which is a non-GAAP financial measure, as an important indicator of performance. We define adjusted EBITDA as net income before interest expense, income taxes, depreciation and amortization and adjustments for certain one- time or non-recurring items adjustments. For more information on adjusted EBITDA, as well as a reconciliation to the most directly comparable GAAP measure, please see “—Non-GAAP Financial Measures” below.
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COMPONENTS AND FACTORS AFFECTING OUR OPERATING RESULTS
Revenue
We generate revenue primarily by providing infrastructure-based testing, inspection, certification, engineering, and compliance services to a wide range of public- and private-sector clients. Our revenue consists of both services provided by our employees and pass-through fees from subcontractors and other direct costs.
Cost of Revenue
Cost of revenue reflects the cost of personnel and specifically identifiable costs associated with revenue.
Operating Expense
Operating expense includes corporate expenses, including personnel, occupancy, and administrative expenses, including depreciation and amortization.
Interest Expense
Interest expense consists of contractual interest expense on outstanding debt obligations including amortization of deferred financing costs and other related financing expenses.
Income Tax Expense
Following the consummation of the Atlas Business Combination, we are organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which our only direct assets consist of common units of Holdings. We are the sole manager of Holdings in accordance with the terms of the Holdings LLC Agreement entered into in connection with the consummation of the Atlas Business Combination.
Previously, Atlas Intermediate was treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the partners and members. As such, no recognition of federal or state income taxes have been provided for in the accompanying consolidated financial statements with the exception of income taxes relating to the C-Corp subsidiaries directly owned by Atlas Intermediate and the State of Texas Margin tax.
Subsequent to the Atlas Business Combination, income taxes relating to the C-Corps owned directly by Atlas Intermediate and the State of Texas Margin tax are considered within the provision of non-controlling interest as it is generated through the results of Atlas Intermediate and its subsidiaries.
Net Income (loss)
Net income (loss) reflects our operating income after taking into account costs and expenses for a given period, while excluding any gain or loss from discontinued operations.
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Provision for Non-controlling Interest
Our ownership and voting structure is comprised of holders of our Class A common stock that participate 100% in the results of Atlas Technical Consultants, Inc. and 88.6% in Atlas Intermediate and its subsidiaries and holders of our Class B common stock that participate in the results of Atlas Intermediate and its subsidiaries until their Class B common stock is converted to Class A common stock. The holders of our Class B common stock participate in 11.4% of Atlas Intermediate and its subsidiaries. In connection with the Atlas Business Combination, it was determined that the results of Atlas Intermediate and its subsidiaries would be fully consolidated within the results of the Company.
Due to the participation of the holders of our Class B common stock in the results of Atlas Intermediate and subsidiaries, a non-controlling interest was deemed to exist. Consolidated net income includes earnings attributable to both the shareholders and the non-controlling interests.
The provision for non-controlling interest relates to pre-tax income subsequent to the Atlas Business Combination and includes a pro-rata share of taxes as federal and state income taxes relating to the C-Corps directly owned by Atlas Intermediate and the State of Texas Margin tax as it is generated through the results of Atlas Intermediate and its subsidiaries.
Upon the close of the Atlas Business Combination, the holders of our Class B common stock participated in 80.6% of the results of Atlas Intermediate and its subsidiaries. This percentage has declined over the course of the year due to the exchange of Atlas Intermediate units, together with Class B common shares, for Class A common shares and the exchange of our public and private placement warrants for Class A common shares during November and December 2020 as a result of our tender offer and warrant exchange.
Redeemable Preferred Stock Dividends
On February 14, 2020, in connection with the consummation of the Atlas Business Combination, Holdings and GSO COF III AIV-2 LP (“GSO AIV-2”) entered into a subscription agreement (the “Subscription Agreement”) pursuant to which GSO AIV-2 purchased 145,000 units of a new class of Series A Senior Preferred Units of Holdings (the “Preferred Units”) at a price per Preferred Unit of $978.21, for an aggregate cash purchase price of $141,840,450, which represented a 2.179% original issue discount on the Preferred Units (such purchase, the “GSO Placement”).
The GSO Placement was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder.
On February 25, 2021, the Company, in its capacity as the managing member of Holdings, entered into Amendment No. 1 to the Holdings LLC Agreement to allow Holdings, at the direction of the Board, to redeem all of the Preferred Units at any time using the proceeds from the refinancing of the Atlas Credit Agreement and entry into the Atlas 2021 Credit Agreements.
On February 25, 2021, following the execution of Amendment No. 1 to the Holdings LLC Agreement, Holdings elected to redeem all of the 145,000 Preferred Units then outstanding and held by GSO AIV-2 for $1,084.96 per Preferred Unit for a total redemption price of $157.4 million which included dividends accrued for as of December 31, 2020 (the “Redemption”). Following the Redemption, (i) the Preferred Units are no longer deemed outstanding, (ii) all dividends on the Preferred Units ceased to accrue, and (iii) all rights of the holders thereof as holders of Preferred Units ceased and terminated, except for the right to receive payment under the Redemption.
Net Income (loss) Attributable to Class A Common Stock (Previously Members)
Net income (loss) attribution to holders of our Class A common stock represents our results after the provision for non-controlling interest, the effect of all taxes under the Up-C structure for the period subsequent to the Atlas Business Combination, and dividends due on redeemable preferred stock.
Net income (loss) for the historical results of Atlas Intermediate prior to the Atlas Business Combination are also reported within this line item.
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RESULTS OF OPERATIONS
Overview of Financial Results
During the first six months of 2021, we continued to integrate our businesses into the Atlas name and execute on our growth strategy by targeting accretive and deleveraging acquisitions that complement our existing platform and strengthen our position in select areas of the country. We closed both the acquisitions of Atlantic Engineering Laboratories of NY, Inc. (“AEL”) and O’Neill Service Group (“O’Neill”) in the second quarter. These firms will strengthen our position in the Northeast and Pacific Northwest, respectively.
Our focus on providing environmental and other professional services without undertaking direct construction risk or having the carbon footprint of a manufacturing entity provides a growing platform for us to assist our clients in addressing their ongoing Environmental, Social and Governance (“ESG”) objectives. During the first six months of 2021, we were awarded several environmental remediation related contracts, a trend along with our infrastructure work that we expect to continue through 2021 and beyond.
We incurred a net loss for the three months ended July 2, 2021 as we incurred higher interest expense charges associated with the debt refinancing in February 2021. In the three months ended June 30, 2020, we had lower interest charges but incurred redeemable preferred stock dividends which were excluded from net income calculations.
Backlog has grown to $751 million with recent key wins this year including an $11 million contract with the US Bureau of Reclamation and a $24 million contract with Georgia Department of Transportation to provide quality inspection and engineering services, respectively.
Our stock was added as a member to the Russell 3000® Index which we believe reflects on the progress we have made in creating shareholder value by delivering on significant milestones, including organic growth, accretive acquisitions, and optimization of our capital structure.
Consolidated Results of Operations
The following table represents our selected results of operations for the periods indicated.
| Three Months Ended | Six Months Ended | |||||||||||||||
| July 2, 2021 | June 30, 2020 | July 2, 2021 | June 30, 2020 | |||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Revenues | $ | 131,562 | $ | 112,715 | $ | 254,831 | $ | 222,017 | ||||||||
| Cost of revenues | (68,349 | ) | (58,714 | ) | (132,977 | ) | (117,612 | ) | ||||||||
| Operating expenses | (57,551 | ) | (45,358 | ) | (107,896 | ) | (113,691 | ) | ||||||||
| Operating income (loss) | 5,662 | 8,643 | 13,958 | (9.286 | ) | |||||||||||
| Interest expense | (10,258 | ) | (6,398 | ) | (33,300 | ) | (12,038 | ) | ||||||||
| (Loss) income before income taxes | (4,596 | ) | 2,245 | (19,342 | ) | (21,324 | ) | |||||||||
| Income tax expense | (187 | ) | - | (232 | ) | - | ||||||||||
| Net (loss) income | (4,783 | ) | 2,245 | (19,574 | ) | (21,324 | ) | |||||||||
| Provision for non-controlling interest | 617 | 1,881 | 12,786 | 5,141 | ||||||||||||
| Redeemable preferred stock dividends | - | (4,533 | ) | (5,899 | ) | (6,777 | ) | |||||||||
| Net (loss) income attributable to Class A common stock shareholders/members | $ | (4,166 | ) | $ | (407 | ) | $ | (12,687 | ) | $ | (22,960 | ) | ||||
| (Loss) Per Class A Common Share | $ | (0.14 | ) | (0.07 | ) | $ | (0.57 | ) | (0.33 | ) | ||||||
| Weighted average of shares outstanding: | ||||||||||||||||
| Class A common shares (basic and diluted) | 30,633,366 | 5,767,342 | 22,400,179 | 5,767,342 | ||||||||||||
Comparison of the three months ended July 2, 2021 to the three months ended June 30, 2020:
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Revenue
Revenue for the three months ended July 2, 2021 increased $18.9 million, or 17%, to $131.6 million as compared to $112.7 million for the corresponding prior year period.
The increase in revenue for the three months ended July 2, 2021 was attributable, in part, to the acquisitions of Alta Vista, WesTest and AEL. Additionally, our operations previously impacted by shelter in place mandates, had a stronger quarter due to the re-opening of their regions with the distribution of the COVID-19 vaccines and the associated easing of shelter in place orders.
Cost of Revenue
Cost of revenue for the three months ended July 2, 2021 increased $9.6 million, or 16%, to $68.3 million as compared to $58.7 million for the corresponding prior year period. The increase in cost of revenues for the quarter ended July 2, 2021 was due to the increase in revenues when comparing the two periods. Cost of revenues as a percentage of revenues was 52.0% and 52.1% for the three months ended July 2, 2021 and June 30, 2020, respectively, and demonstrates our continued commitment to self-perform our services.
Operating Expense
Operating expense for the three months ended July 2, 2021 increased $12.2 million, or 27%, to $57.6 million as compared to $45.4 million for the corresponding prior year period. For the three months ended July 2, 2021, operating expense, as a percentage of revenue, increased to 43.7% from 40.2% for the three months ended June 30, 2020.
The increase was the result of the activities of our acquired companies and a $2.8 million non-cash charge we incurred relating to the fair market value change in contingent consideration relating to acquisitions. The acquisitions of Alta Vista, WesTest and AEL represented $4.6 million of the increase this quarter, and this combined with the valuation change was 61% of the increase for the three months ended July 2, 2021 in comparison to three months ended June 30, 2020. The remainder representing increased costs within our legacy operations.
In the quarter ended June 30, 2020, the Company was challenged with the onset of the COVID-19 pandemic and made the difficult decision to reduce overhead personnel costs through furloughs or other mechanisms. This response was swift and significantly reduced costs in our business to manage the uncertainty of that time. Once the Company believed the severity of the Pandemic’s effects on our operations were manageable and we could see a path forward with vaccines and responses from state governments, we brought many of our employees back and eased several of our other mandates that reduced personnel related costs.
The Company routinely reviews its performance and key drivers and during the latter part of the quarter ended July 2, 2021, the Company reduced redundant or under-utilized personnel but also made strategic investments to serve our clients and grow our operations responsibly.
We also continued to incur professional service-related fees associated with public company oversight and associated filings.
Interest Expense
Interest expense for the three months ended July 2, 2021 increased $3.9 million or 60%, to $10.3 million as compared to $6.4 million for the corresponding prior year period. The increase in interest expense is due to higher borrowings as we redeemed our Preferred Units by refinancing them into a term loan on February 25, 2021 and we are now recording associated costs as interest expense. The Company reduced its redeemable preferred stock dividends by $4.5 million when comparing the three months ended July 2, 2021 to the three months ended June 30, 2020.
Income Tax Expense
Income tax expense for the three months ended July 2, 2021 was $0.2 million compared to income tax expense of $0 for the three months ended June 30, 2020.
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Provision for Non-controlling Interest
The provision for non-controlling interest for the three months ended July 2, 2021 decreased by $1.3 million or 67% to $0.6 million from $1.9 million for the corresponding prior year period. This decrease is due to the lower participation of the Class B common share holders in the operations of the Company in the three months ended July 2, 2021 versus the comparable period last year as many Class B common shareholders converted their Class B common shares to Class A common shares. The Class B common shareholders participated 15.1% in our operations this quarter versus 80.6% in the three months ended June 30, 2020. This is an 81% reduction in their participation rate.
The provision for non-controlling interest was a result of the reverse recapitalization created by the Atlas Business Combination whereby the holders of our Class B common stock only share in the results of Atlas Intermediate and its subsidiaries based upon their ownership percentage in relation to total common stockholders. This treatment is effective from the Atlas Business Combination until the conversion of Class B common stock to Class A common stock.
Redeemable Preferred Stock Dividends
We redeemed the Preferred Units in February 2021 and therefore had no redeemable preferred stock dividends for the three months ended July 2, 2021. This compares to $4.5 million for the three months ended June 30, 2020. As noted above, this cost was replaced by higher interest expense this period in comparison to the prior period.
Comparison of the six months ended July 2, 2021 to the six months ended June 30, 2020:
Revenue
Revenue for the six months ended July 2, 2021 increased $32.8 million, or 15%, to $254.8 million as compared to $222.0 million for the corresponding prior year period. The acquisitions of AltaVista, WesTest and AEL contributed $21.3 million to the Company’s revenues for the six months ended July 2, 2021. The remainder is due to our legacy business which has seen a measured rebound to pre-COVID-19 performance levels.
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Cost of Revenue
Cost of revenue for the six months ended July 2, 2021 increased $15.4 million, or 13%, to $133.0 million as compared to $117.6 million for the corresponding prior year period. The increase in cost of revenues was due mainly to the increase in revenues. The cost of revenue, as a percentage of revenue, decreased to 52.2% from 53.0% for the six months ended June 30, 2021 when compared to the six months ended June 30, 2020 which is a reflection that we are able to self-perform more work as we integrate and strategically add to our nationwide platform.
Operating Expense
Operating expense for the six months ended July 2, 2021 decreased $5.8 million, or 5%, to $107.9 million as compared to $113.7 million for the corresponding prior year period. For the six months ended July 2, 2021, operating expense, as a percentage of revenue, was 42.3% versus 51.2% for the six months ended June 30, 2020.
The six months ended June 30, 2020 included the consummation of the Atlas Business Combination as the Company expensed $7.0 million of acquisition related costs and $12.0 million of costs incurred with change of control provisions contained within employment agreements and our former Management Incentive Plan. Without these transaction-related items our operating expenses as a percentage of revenues would have been 42.7% for the six months ended June 30, 2020 which is comparable with the 42.3% for the six months ended July 2, 2021.
We did not see a full $19.0 million decrease in operating costs in the six months ended July 2, 2021 as this period included $9.3 million of additional costs relating to the timing of the LONG, Alta Vista, WesTest and AEL acquisitions as well as a non-cash charge of $2.8 million relating to the change in the fair market value of contingent consideration associated with acquisitions.
Interest Expense
Interest expense for the six months ended July 2, 2021 increased $21.3 million or 177%, to $33.3 million as compared to $12.0 million for the corresponding prior year period. The primary reason for the increase was due to the write off of deferred loan acquisition costs previously paid in 2020 in connection with the Atlas Business Combination in the amount of $15.2 million in the six months ended July 2, 2021 in comparison to a $1.7 million write-off during the six months ended June 30, 2020. These write-offs were a result of the repayment of the underlying credit agreements during their respective periods.
Interest expense also increased for the six months ended July 2, 2021 due to higher interest rates and borrowing levels in part relating to the redemption of the Preferred Units. As the Preferred Units were redeemed, we will no longer record dividends for the remainder of the year but will experience an increase in interest expense with the balance of the new term loan increased with the new credit facilities entered into in February 2021.
Income Tax Expense
Income tax expense for the six months ended July 2, 201 was $0.2 million compared to income tax expense of $0 for the six months ended June 30, 2020.
Provision for Non-controlling Interest
The provision for non-controlling interest for the six months ended July 2, 2021 increased by $7.7 million or 149% to $12.8 million from $5.1 million for the corresponding period. The provision for non-controlling interest is due to the reverse recapitalization created by the Atlas Business Combination whereby the holders of our Class B common stock only share in the results of Atlas Intermediate and its subsidiaries based upon their ownership percentage in relation to total common stockholders. This treatment is effective from the Atlas Business Combination until the exchange of Class B common stock to Class A common stock.
Although the holders of Class B common stock participated at a higher rate during the period that spanned from the close of the Atlas Business Combination through June 30, 2020 than the six months ended July 2, 2021 at 80.6% versus 37.5%, respectively, the provision was not as high in the prior year period due to the timing of the costs incurred with the Atlas Business Combination. If those $19.0 million of costs incurred were included in the provision, the provision would have been $15.3 million greater last year than calculated. We expect the provision to continuously decline as the holders of Class B common stock only hold 11.4% of the Company as of July 2, 2021.
Redeemable Preferred Stock Dividends
Redeemable preferred stock dividends for the six months ended July 2, 2021 decreased by $0.9 million or 13% to $5.9 million from $6.8 million for the six months ended June 30, 2020. During the prior year, we held the Preferred Units for four and one half months versus approximately two months in the current year as they were repaid on February 25, 2021. We would expect a more significant decline due to timing, but we had to accrete the remaining discount at redemption and that was approximately $3.1 million of the dividends recorded in the six months ended July 2, 2021. As noted above, this cost was replaced by higher interest expense this period in comparison to the prior period.
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NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
We view adjusted EBITDA, which is a non-GAAP financial measure, as an important indicator of performance. We define adjusted EBITDA as net income before interest expense, provision for income taxes, depreciation and amortization, further adjusted to reflect non-cash equity compensation as well as certain one-time or non-recurring items.
We believe adjusted EBITDA is a useful performance measure because it allows for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at adjusted EBITDA because these amounts are either non-recurring or can vary substantially within the industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income determined in accordance with GAAP. Certain items excluded from adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in adjusted EBITDA. Our presentation of adjusted EBITDA should not be construed as an indication that results will be unaffected by the items excluded from adjusted EBITDA. Our computations of adjusted EBITDA may not be identical to other similarly titled measures of other companies.
The following table presents reconciliations of adjusted EBITDA to net income, our most directly comparable financial measure calculated and presented in accordance with GAAP.
| For the three months ended | For the six-months ended | |||||||||||||||
| July 2, 2021 | June 30, 2020 | July 2, 2021 | June 30, 2020 | |||||||||||||
| (in $ millions) | (in $ millions) | |||||||||||||||
| Net (loss) income | $ | (4.8 | ) | $ | 2.2 | $ | (19.6 | ) | $ | (21.3 | ) | |||||
| Interest | 10.2 | 6.4 | 33.3 | 12.0 | ||||||||||||
| Taxes | 0.2 | - | 0.2 | - | ||||||||||||
| Depreciation and amortization | 5.9 | 5.4 | 10.5 | 10.3 | ||||||||||||
| EBITDA | 11.5 | 14.0 | 24.4 | 1.0 | ||||||||||||
| EBITDA for acquired business prior to acquisition date(1) | $ | - | $ | - | $ | - | $ | 0.8 | ||||||||
| One time legal/transaction costs and other non-recurring charges(2) | 2.6 | 1.2 | 3.9 | 15.9 | ||||||||||||
| Non-cash change in fair market value of contingent consideration | 2.8 | - | 2.8 | - | ||||||||||||
| Non-cash equity compensation(3) | 1.3 | 0.2 | 1.7 | 10.6 | ||||||||||||
| Adjusted EBITDA | $ | 18.2 | $ | 15.4 | $ | 32.8 | $ | 28.3 | ||||||||
| (1) | Includes the EBITDA of LONG (which we acquired in February 2020) for the period January 1, 2020 through the date of acquisition. |
| (2) | Includes professional service-related service fees such as legal, accounting, tax, valuation and other consulting relating as well as change in control payments relating to the Atlas Business Combination. Additionally, it includes other acquisition related professional fees and other non-recurring expenses. |
| (3) | Includes the amortization of the unvested portion of our 2017 and 2019 Management Incentive Plan grants that vested immediately upon the change in control provisions contained within the agreements, compensation that was earned and accrued for in the three months ended March 31, 2020 that will be share settled subsequent to June 30, 2020, and the amortization of unvested restricted share units granted in 2020 and 2021 to key management personnel and our Board of Directors. |
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LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity and capital resources are our cash and cash equivalents balances, cash flow from operations, borrowings under the Atlas 2021 Credit Agreements (as defined below), and access to financial markets. Our principal uses of cash are operating expenses, working capital requirements, capital expenditures, repayment of debt and acquisition expenditures. We believe our sources of liquidity, including cash flow from operations, existing cash and cash equivalents and borrowing capacity under the Atlas 2021 Credit Agreements will be sufficient to meet projected cash requirements for at least the next twelve months.
We continue to assess our business operations and the impact that COVID-19 may have on our financial results and liquidity. Due to the effect of the COVID-19 pandemic and related project delays, during fiscal year 2020 we experienced a reduction in revenues and our cash flows in comparison to the previous comparable period. We will continue to monitor our capital requirements to ensure our needs are in line with available capital resources and we will continue to monitor the impact of COVID-19 on our liquidity. As of July 2, 2021, we had total liquidity of $34.2 million.
Other than the impact on cash flows from operations relating to the decrease in revenues relating to COVID-19, we have not experienced other liquidity decreases.
Cash Flows
The following table sets forth our cash flows for the periods indicated.
| For the six months ended | ||||||||
| July 2, 2021 | June 30, 2020 | |||||||
| ($ in thousands) | ||||||||
| Net cash (used in) provided by operating activities | $ | 8,456 | $ | (6,250 | ) | |||
| Net cash used in investing activities | (32,445 | ) | (12,881 | ) | ||||
| Net cash provided by financing activities | 21,733 | 15,827 | ||||||
| Net (decrease) increase in cash and cash equivalents | $ | (2,256 | ) | $ | (3,304 | ) | ||
Comparison of the six months ended July 2, 2021 to the six months ended June 30, 2020
Cash and Cash Equivalents.
At July 2, 2021 and June 30, 2020, we had $11.8 million and $16.9 million of cash and cash equivalents, respectively.
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Operating Activities
Cash flow from operating activities is primarily generated from operating income from our professional and technical testing, inspection engineering and consulting services.
Net cash provided by operating activities was $8.5 million for the six months ended July 2, 2021, compared to net cash used of ($6.1) million for the six months ended June 30, 2020. The increase of $14.6 million was due to the fact that we had significant payments of accounts payable and accrued expenses mainly relating to costs associated with the Atlas Business Combination and other public company costs in the prior year that did not recur this year.
Investing Activities
Net cash used in investing activities was ($32.4) million for the six months ended July 2, 2021, compared to ($12.9) million for the six months ended June 30, 2020. The $19.5 million increase in cash used was related to our acquisitions of AEL and O’Neill in the quarter ended July 2, 2021. The prior year period only included the LONG acquisition.
Financing Activities
Net cash provided by financing activities was $21.7 million for the six months ended July 2, 2021, compared $15.8 million for the six months ended June 30, 2020. The $5.9 million increase to net cash provided by financing activities was primarily due to the $35.0 million received from our term loan that was utilized for the acquisitions of AEL and O’Neill, netted by the ($12.2) million we paid towards our revolving letter of credit in comparison to the $20.7 million raised by the Company in the Atlas Business Combination in the form of issued stock and debt financing of the LONG acquisition in the amounts of $10.2 million and $10.5 million, respectively.
Working Capital
Working capital, or current assets less current liabilities, increased $9.4 million, or 10%, to $ $107.5 million at July 2, 2021 from $98.1 million at June 30, 2020. This increase in working capital is due to the acquisitions of AltaVista, WesTest, AEL and O’Neill.
Debt Arrangements
In March 2019, subsequent to the merger with ATC Group Partners (“ATC”), we repaid all outstanding balances on the combined entity’s loan agreements in full and terminated our prior loan agreements. These loan agreements were replaced with a term loan of $145.0 million and a revolving credit facility of $50.0 million, of which $31.8 million was funded at closing (the “Atlas Credit Facility”). Proceeds of the Atlas Credit Facility were used to repay existing debt of $123.9 million and fund a shareholder distribution of $52.8 million made in April 2019.
The Atlas Credit Facility was secured by assets of Atlas Intermediate. The Atlas Credit Facility required quarterly principal payments of $2.719 million through March 31, 2023, and then $3.625 million until the final maturity in March 2024, and bore interest at an annual rate of LIBOR plus a margin ranging from 275 to 425 basis points determined by the Company’s Consolidated Leverage Ratio, as defined in the Atlas Credit Facility. For the interest payment made in the quarter ended December 31, 2019, the applicable margin was 375 basis points and the total interest rate was 5.500%.
The Atlas Credit Facility was scheduled to mature in March 2024. However, in connection with the consummation of the Atlas Business Combination, the Atlas Credit Facility was repaid and we entered into a new credit arrangement (the “Atlas Credit Agreement”) with Macquarie Capital Funding LLC (the “Lender” or “Lead Arranger”). The Atlas Credit Agreement provided for a term loan (the “Term Loan”) in the amount of $281.0 million and revolving letter of credit (the “Revolver”) in the amount of $40.0 million, of which $24.0 million was drawn upon through December 31, 2020. The term loan proceeds were used to repay the existing Atlas Credit Facility in the amount of $171.0 million and partially fund the Atlas Business Combination and the acquisition of LONG.
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Under the terms of the Atlas Credit Agreement, the Term Loan and Revolver were set to expire on February 14, 2027 and February 14, 2025, respectively. However, the Atlas Credit Agreement was repaid on February 25, 2021 in connection with the entry into the Atlas 2021 Credit Agreements described below. Interest was payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rates under the Atlas Credit Agreement equaled either (i) Adjusted LIBOR (as defined in the Atlas Credit Agreement), plus 4.75%, or (ii) an Alternate Base Rate (as defined in the Atlas Credit Agreement), plus 3.75%.
The Atlas Credit Agreement was guaranteed by Holdings and secured by (i) a first priority pledge of the equity interests of subsidiaries of Holdings and Atlas Intermediate and (ii) a first priority lien on substantially all other assets of Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries.
On March 31, 2020, the terms of the Atlas Credit Agreement were modified to reduce the maturity of the Term Loan by one year to February 14, 2026 from February 14, 2027. The interest rate for the Term Loan was increased to (i) Adjusted LIBOR Rate as defined in the Atlas Credit Agreement, plus 6.25%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 5.25%. The interest rate for the Revolver was increased to (i) Adjusted LIBOR Rate as defined in the Atlas Credit Agreement, plus 5.0%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 4.0%. The modification also increased the rate of amortization applicable to the Term Loan to 5.0% per annum (commencing on June 30, 2020).
The modifications to the Atlas Credit Agreement resulted from the exercise of the market-flex rights by the Lead Arranger in connection with the syndication process, which, in addition, required the payment of an upfront fee in an amount equal to 2% of the currently outstanding Term Loans, which was subsequently paid in April 2020. The market-flex rights were included in the Atlas Credit Agreement and were exercised by the Lead Arranger upon completion of the time period allowed to complete a syndication process.
On February 25, 2021, Atlas Intermediate, as the borrower, entered into two new credit facilities consisting of (i) a $432.0 million senior secured term loan at closing and, subject to the satisfaction of certain terms and conditions, a committed delayed draw term loan facility in an aggregate principal amount of up to $75.0 million and an uncommitted incremental term loan facility that may be incurred after closing (the “2021 Term Loan”) pursuant to a Credit Agreement dated February 25, 2021, by and among Holdings, Atlas Intermediate, Wilmington Trust, National Association, as administrative agent and collateral agent, and certain lenders thereto, including certain Blackstone entities, which may include, Blackstone Alternative Credit Advisors LP, and its managed funds and accounts, and its affiliates, Blackstone Holdings Finance Co. L.L.C. and its affiliates, and/or certain other of their respective funds, accounts, clients managed, advised or sub-advised, or any of their respective affiliates (the “2021 Term Loan Agreement”) and (ii) a $40.0 million senior secured revolver which aggregate principal amount may be increased, subject to the satisfaction of certain terms and conditions, including obtaining commitments therefor, by up to $20,000,000 (the “2021 Revolver”) pursuant to the Credit Agreement dated February 25, 2021, by and among Holdings, Intermediate, JPMorgan Chase Bank, N.A., as administrative agent, swingline lender, issuing bank, lender, sole bookrunner and sole lead arranger (the “2021 ABL Revolver Agreement,” and together with the 2021 Term Loan Agreement, collectively the “Atlas 2021 Credit Agreements”).
The initial 2021 Term Loan will mature on February 25, 2028 and the 2021 Revolver will mature on February 25, 2026.
Interest on any outstanding borrowings is payable monthly under the 2021 ABL Revolver Agreement, quarterly under the 2021 Term Loan Agreement or, in each case, at the end of the applicable interest period in arrears. The cash interest rates under the 2021 Term Loan Agreement will be equal to either (i) the Adjusted LIBO Rate (as defined in the 2021 Term Loan Agreement), plus 5.50%, or (ii) an Alternate Base Rate (as defined in the 2021 Term Loan Agreement), plus 4.50%. In addition, the term loan requires an additional 2.0% interest that can be made at the option of the Company in cash or payment-in-kind (PIK). The interest rates under the 2021 ABL Revolver Agreement will be equal to either (i) the Adjusted LIBO Rate (as defined in the 2021 ABL Revolver Agreement), plus 2.50%, or (ii) the ABR (as defined in the 2021 ABL Revolver Agreement), plus 1.50%.
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The Atlas 2021 Credit Agreements are guaranteed by Holdings and secured by (i) in the case of the 2021 ABL Revolver Agreement, a first priority security interest in the current assets, including accounts receivable, of Holdings, Intermediate and its subsidiaries and (ii) in the case of the 2021 Term Loan Agreement, a pledge of the equity interests of the subsidiaries of Holdings and Intermediate, and subject to the first lien security interest on current assets under the 2021 Revolver, a first priority lien on substantially all other assets of Holdings, Intermediate and all of their direct and indirect subsidiaries.
The 2021 Term Loan Agreement contains a financial covenant which requires Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Total Net Leverage Ratio (as defined in each of the Atlas 2021 Credit Agreements) tested on a quarterly basis that does not exceed (i) 8.25 to 1.00 with respect to the fiscal quarters ending on April 2, 2021 and July 2, 2021, (ii) 8.00 to 1.00 for the fiscal quarters ending October 1, 2021 and December 31, 2021, (iii) 7.50 to 1.00 for the fiscal quarters ending April 1, 2022 and July 1, 2022, (iv) 7.25 to 1.00 for the fiscal quarters ending September 30, 2022 and December 30, 2022, (v) 7.00 to 1.00 for the fiscal quarters ending March 31, 2023 and June 30, 2023, (vi) 6.75 to 1.00 for the fiscal quarters ending September 29, 2023 and December 29, 2023, and (vii) 6.50 to 1.00 for March 29, 2024 and each fiscal quarter ending thereafter.
The 2021 ABL Revolver Agreement contains a “springing” financial covenant which requires Holdings, Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Fixed Charge Coverage Ratio (as defined in the 2021 ABL Revolver Agreement) of no less than 1.10 to 1.00 when the outstanding principal amount of loans under the 2021 Revolver exceeds $0 or the aggregate exposure for letters of credit under the 2021 Revolver exceeds $5 million.
The Company has been in compliance with the terms of the Atlas 2021 Credit Agreement and Atlas Credit Agreement as of July 2, 2021 and December 31, 2020, respectively.
Our debt balances are summarized as follows:
| July 2, 2021 | December 31, 2020 | |||||||
| (in thousands) | ||||||||
| Atlas 2021 credit agreement | $ | 487,748 | $ | - | ||||
| Atlas credit agreement | 294,463 | |||||||
| Subtotal | 487,748 | 294,463 | ||||||
| Less: Loan costs, net | (8,145 | ) | (15,443 | ) | ||||
| Less current maturities of long-term debt | - | (14,050 | ) | |||||
| Long-term debt | $ | 479,603 | $ | 264,970 | ||||
The Company in conjunction with the refinancing of the Atlas Credit Agreement on February 25, 2021 wrote off $15.2 million of deferred loan acquisition costs that were attributable to the agreement. The costs deferred as of July 2, 2021 relate to cost incurred with the Atlas 2021 Credit Agreement.
The following table presents, in millions, scheduled maturities of the Company’s debt as of July 2, 2021:
| 2021 (six months remaining) | $ | - | ||
| 2022 | 3.6 | |||
| 2023 | 4.8 | |||
| 2024 | 4.9 | |||
| 2025 | 4.9 | |||
| Thereafter | 469.5 | |||
| $ | 487.7 |
The 2021 Atlas Credit agreement requires annual amortization of principal and interest paid in kind amounts of 1% or 2.5% depending on certain ratios. The Company is currently within the ratio that requires 1% annual amortization. Principal repayments commence during the Company’s second quarter 2022.
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Effective Interest Rate
Our average effective interest rate on our total debt, exclusive of amortization of deferred debt issuance costs, during the six months ended July 2, 2021 and June 30, 2020 was 8.5% and 6.8%, respectively.
Interest expense, inclusive of amortization of deferred debt issuance costs, in the consolidated statements for the six months ended July 2, 2021 and June 30, 2020 was $33.3 million and $12.0 million, respectively.
Other Commitments and Contingencies
In connection with our acquisitions during the year ended December 31, 2020, we may be required to pay earnout bonuses upon the achievement of certain performance targets. This amount may be paid in installments over the first, second and third anniversaries of the acquisition. We have currently accrued $8.4 million and $9.6 million as the fair value of that liability within other current and other long-term liabilities, respectively, within our Consolidated Balance Sheet at July 2, 2021, which is temporary and subject to finalization.
In November 2020, we entered into a financing arrangement of our business-related insurance policies and the amount remaining is $2.4 million as of July 2, 2021.
The Company enters into operating leases relating to office space and equipment leases in the ordinary course of business. Remaining amounts due, in millions, as of July 2, 2021 are as follows:
| 2021 (six months remaining) | $ | 7.8 | ||
| 2022 | 12.7 | |||
| 2023 | 10.0 | |||
| 2024 | 5.8 | |||
| 2025 | 3.1 | |||
| Thereafter | 3.2 | |||
| $ | 42.6 |
During 2020, the Company entered into an agreement with its fleet management company pursuant to which it would receive rebates of $1.3 million to be repaid over three years at an interest rate of 2.85% per annum. The rebates were secured by title to selected vehicles within the Company’s owned fleet of vehicles in Georgia and California.
Remaining payments are as follows:
| 2021 (six months remaining) | $ | 0.2 | ||
| 2022 | 0.4 | |||
| 2023 | 0.2 | |||
| $ | 0.8 |
Off-Balance Sheet Arrangements
As of July 2, 2021, we had no material off-balance sheet arrangements.
Effects of Inflation
Based on the analysis of the periods presented, we believe that inflation has not had a material effect on our operating results through the six months ended July 2, 2021 However, the Company has begun to experience higher costs to replace comparable employees as certain labor markets have tightened and for employees opting to return to work post COVID-19.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The information called for by this item is not required as we are a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, an evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Quarterly Report. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that, as of July 2, 2021, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.
We review and evaluate the design and effectiveness of our disclosure controls and procedures on an ongoing basis, to improve our controls and procedures over time and to correct any deficiencies that we may discover in the future. Our goal is to ensure that our senior management has timely access to all material financial and non-financial information concerning our business. While we believe the present design of our disclosure controls and procedures is effective to achieve our goal, future events affecting our business may cause us to significantly modify our disclosure controls and procedures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over
financial reporting during the quarter ended July 2, 2021 that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting
despite the fact that many of our employees are working remotely due to COVID-19. We are continually monitoring and assessing the effects
of the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Currently, we are not a party to any material litigation in any court, and management is not aware of any contemplated proceeding by any governmental authority against us. From time to time, we are involved in various legal matters and proceedings concerning matters arising in the ordinary course of business. We currently believe that any ultimate liability arising out of these matters and proceedings will not have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
During the quarter ended July 2, 2021, there have been no material changes in any risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on March 23, 2021. We may disclose changes to risk factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS FROM REGISTERED SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS.
| * | Filed Herewith |
| † | Management contract and compensatory arrangement in which any director or named executive officer participates |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on this 16th day of August, 2021.
| ATLAS TECHNICAL CONSULTANTS, INC. | ||
| /s/ David D. Quinn, Sr. | ||
| Name: | David D. Quinn, Sr. | |
| Title: | Chief Financial Officer | |
| (Principal Financial Officer) | ||
| /s/ L. Joe Boyer | ||
| Name: | L. Joe Boyer | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) AND 15D-14(A)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, L. Joe Boyer, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended July 2, 2021 of Atlas Technical Consultants, Inc. (this “report”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: August 16, 2021 | /s/ L. Joe Boyer |
| L. Joe Boyer | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) AND 15D-14(A)
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, David D. Quinn Sr., certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q for the quarter ended July 2, 2021 of Atlas Technical Consultants, Inc. (this “report”); |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting. |
| Date: August 16, 2021 | /s/ David D. Quinn Sr. |
| David D. Quinn Sr. | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report on Form 10-Q of Atlas Technical Consultants, Inc. (the “Company”) for the quarter ended July 2, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, L. Joe Boyer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: August 16, 2021 | /s/ L. Joe Boyer |
| L. Joe Boyer | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report on Form 10-Q of Atlas Technical Consultants, Inc. (the “Company”) for the quarter ended July 2, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David D. Quinn Sr., Chief Financial Officer of the company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company. |
| Date: August 16, 2021 | /s/ David D. Quinn Sr. |
| David D. Quinn Sr. | |
| Chief Financial Officer | |
| (Principal Financial Officer) |
Unaudited Consolidated Balance Sheets (Parentheticals) - $ / shares |
Jul. 02, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Class A Common Stock | ||
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 |
| Common stock, authorized Shares | 400,000,000 | |
| Common stock, issued shares | 32,738,990 | |
| Common stock, outstanding shares | 32,738,990 | 12,841,584 |
| Class B Common Stock | ||
| Common stock, par value (in Dollars per share) | $ 0.0001 | |
| Common stock, authorized Shares | 4,234,323 | |
| Common stock, issued shares | 4,234,323 | |
| Common stock, outstanding shares | 4,234,323 | 22,438,828 |
Unaudited Statements of Operations - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 131,562 | $ 112,715 | $ 254,831 | $ 222,017 |
| Cost of revenues | (68,349) | (58,714) | (132,977) | (117,612) |
| Operating expenses | (57,551) | (45,358) | (107,896) | (113,691) |
| Operating income (loss) | 5,662 | 8,643 | 13,958 | (9,286) |
| Interest expense | (10,258) | (6,398) | (33,300) | (12,038) |
| (Loss) income before income taxes | (4,596) | 2,245 | (19,342) | (21,324) |
| Income tax expense | (187) | (232) | ||
| Net (loss) income | (4,783) | 2,245 | (19,574) | (21,324) |
| Provision for non-controlling interest | 617 | 1,881 | 12,786 | 5,141 |
| Redeemable preferred stock dividends | (4,533) | (5,899) | (6,777) | |
| Net (loss) attributable to Class A common stock shareholders/members | $ (4,166) | $ (407) | $ (12,687) | $ (22,960) |
| (Loss) Per Class A Common Share (in Dollars per share) | $ (0.14) | $ (0.07) | $ (0.57) | $ (0.33) |
| Weighted average of shares outstanding: | ||||
| Class A common shares (basic and diluted) (in Shares) | 30,633,366 | 5,767,342 | 22,400,179 | 5,767,342 |
Organization and Basis of Presentation |
6 Months Ended |
|---|---|
Jul. 02, 2021 | |
| Organization and Basis of Presentation [Abstract] | |
| ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION
Organization
Atlas Technical Consultants, Inc. (the “Company”, “We”, or “Atlas” and formerly named Boxwood Merger Corp. (“Boxwood”)) was a blank check company, incorporated in Delaware on June 28, 2017. The Company was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization, or other similar business transaction, one or more operating businesses or assets.
On February 14, 2020 (the “Closing Date”), the Company consummated its acquisition of Atlas Intermediate Holdings LLC, a Delaware limited liability company (“Atlas Intermediate”), pursuant to the Unit Purchase Agreement, dated as of August 12, 2019, as amended on January 22, 2020 (the “Purchase Agreement”), by and among the Company, Atlas TC Holdings LLC, a wholly-owned subsidiary of the Company and a Delaware limited liability company (“Holdings”), Atlas TC Buyer LLC, a wholly-owned subsidiary of Holdings and a Delaware limited liability company (the “Buyer”), Atlas Intermediate and Atlas Technical Consultants Holdings LP, a Delaware limited partnership (the “Seller”). The acquisition of Atlas Intermediate pursuant to the Purchase Agreement, together with the other transactions contemplated by the Purchase Agreement is referred to herein as the “Atlas Business Combination.”
Following the consummation of the Atlas Business Combination, the combined company is organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which the Company’s only direct assets will consist of common units of Holdings (“Holdings Units”). The Company is the sole manager of Holdings in accordance with the terms of the Amended and Restated Limited Liability Company Agreement of Holdings (the “Holdings LLC Agreement”) entered into in connection with the consummation of the Atlas Business Combination.
The Company has approximately 145 offices in 41 states, employs approximately 3,600 employees and is headquartered in Austin, Texas.
The Company provides public and private sector clients with comprehensive support in managing infrastructure improvement and environmental programs including testing, inspection & certification (TIC) services, complete array of environmental (ENV) services, program/construction/quality management (PCQM) services, as well as engineering & design (E&D) services.
Services are provided throughout the United States and its territories to a broad base of clients, with no single client representing 10% or more of our revenues for either the three or six months ended July 2, 2021 or June 30, 2020. Services are rendered primarily on a time and materials and cost-plus basis with approximately 90% of our contracts on that basis and the remainder represented by firm fixed price contracts.
Basis of Presentation
The acquisition of Atlas Intermediate has been accounted for as a reverse recapitalization. Under this method of accounting, Atlas is treated as the acquired company and Atlas Intermediate is treated as the acquirer for financial reporting purposes. Therefore, the consolidated financial results include information regarding Atlas Intermediate as the Company’s predecessor entity. Thus, the financial statements included in this report reflect (i) the historical operating results of Atlas Intermediate prior to the Atlas Business Combination; (ii) the combined results of the Company, which does not have any operating results and includes only certain costs such as the compensation for the Company’s board of directors (the “Board”), certain legal fees and taxes, and Atlas Intermediate following the Atlas Business Combination; (iii) the assets, liabilities and members’ capital of Atlas Intermediate at their historical costs; and (iv) the Company’s equity and earnings per share presented for the period from the Closing Date.
The accompanying interim statements of the Company have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
In the opinion of management, all adjustments, consisting only of normal recurring adjustments and disclosures necessary for a fair statement of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year or for any other period. These interim statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K that the Company filed with the SEC on March 23, 2021.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (as defined herein), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Reclassification
Certain amounts reported in prior years in the financial statements have been reclassified to conform to the current year’s presentation. This reclassification did not have any impact to our reported net income or cash flows for the three or six months ended June 30, 2020.
Fiscal Year
Prior to this fiscal year, the Company’s subsidiaries reported their results of operations based on 52 or 53-week periods ending on the Friday nearest but not subsequent to December 31, while Atlas reported on a calendar year end. For clarity of presentation, all periods were presented as if the year ended on December 31. During each quarter, our subsidiaries would close on the Friday closest to March 31, June 30, and September 30, and Atlas closed on the actual calendar day. The impact of the difference between these dates has been insignificant to date. The Company appropriately eliminated all transactions between itself and its subsidiaries when presenting its Consolidated Balance Sheet.
On January 4, 2021 the Company’s Board voted unanimously to change the Company’s fiscal year end from December 31 to a 52 or 53 week fiscal year ending on the Friday closest to December 31, effective as of the commencement of the Company’s fiscal year beginning January 1, 2021. Unlike prior years, the Company’s fiscal year can now end subsequent to December 31 if that is the Friday closest to the end of the calendar year. Beginning with the first quarter of 2021, Atlas and its operating companies closed their quarterly books on the Fridays closest to March 31, June 30, and September 30, respectively, and will close its fiscal year on the Friday closest to December 31. Had the Company made the change in 2020, the effect on the Company’s Consolidated Statement of Operations would have been immaterial, however, we would have reported additional debt repayments, interest payments and preferred stock dividends in the amount of $7.5 million in the six months ended July 2, 2021. These payments were made at the end of the calendar year ended December 31, 2020 and were appropriately reflected in the financial statements as of and for the year ended December 31, 2020. |
Summary of Significant Accounting Policies |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 02, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounts Receivable and Accrued Billings
The Company records its trade accounts receivable and unbilled receivables at their face amounts less allowances. On a periodic basis, the Company monitors the trade accounts receivable and unbilled receivables from its customers for any collectability issues. The allowance for doubtful accounts is established based on reviews of individual customer accounts, recent loss experience, current economic conditions, and other pertinent factors. The Company writes off accounts after a determination has been made by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management’s determination that the costs of pursuing collection outweigh the likelihood of recovery. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
As of July 2, 2021 and December 31, 2020, the allowance for trade accounts receivable was $2.5 million and $2.2 million, respectively, while the allowance for unbilled receivables was $0.5 million and $0.4 million, respectively. The allowances reflect the Company’s best estimate of collectability risks on outstanding receivables and unbilled services.
Property and Equipment
Purchases of new assets and costs of improvement to extend the useful life of existing assets are capitalized. Routine maintenance and repairs are charged to expenses as incurred. When an asset is sold or retired, the costs and related accumulated depreciation are eliminated from the accounts, and the resulting gains or losses on disposal are recognized in the accompanying Consolidated Statement of Operations. The Company depreciates its assets on a straight-line basis over the assets’ useful lives, which range from three to ten years.
Impairment of Long-Lived Assets
The Company assesses long-lived assets for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. The Company recognizes an impairment if the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. If an impairment is indicated based on a comparison of the assets’ carrying amounts and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amounts of the assets exceed the respective fair values of the assets. There were no impairment charges during the three or six months ended July 2, 2021 and June 30, 2020.
Goodwill
Goodwill represents the excess of the cost of net assets acquired over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other, we evaluate goodwill annually for impairment on October 1, or whenever events or changes in circumstances indicate the asset may be impaired, using the quantitative method. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If we determine that this threshold is met, then performing the two-step quantitative impairment test is unnecessary. We may elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting unit. The two-step impairment test requires a comparison of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit. We determine fair value through the discounted cash flow method. We make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of our reporting units. If the carrying value of our reporting unit exceeds the fair value of our reporting unit, we would calculate the implied fair value as compared to the carrying value to determine the appropriate impairment charge, if any. There were no impairment charges for the three or six months ended July 2, 2021 and June 30, 2020.
Revenue Recognition
We adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective approach to all contracts that were not completed as of the beginning of fiscal year 2019. We utilize the portfolio method practical expedient, which allows companies to account for multiple contracts as a portfolio, instead of accounting for them on a contract by contract basis (commonly known as the contract method). For our time and materials contracts, we apply the as-invoiced practical expedient, which permits us to recognize revenue as the right to invoice for services performed. The new standard did not materially affect our consolidated net income, financial position, or cash flows.
Below is a description of the basic types of contracts from which the Company may earn revenue:
Time and Materials Contracts
Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic time and materials, cost plus a margin or time and materials subject to a maximum contract value (the “ceiling”). Due to the potential limitation of the contract’s ceiling, the economic factors of the contracts subject to a ceiling differ from the economic factors of basic T&M and cost plus contracts.
The majority of the Company’s contracts are for projects where it bills the client monthly at hourly billing or unit rates. The billing rates are determined by contract terms. Under cost plus contracts, the Company charges its clients for contract related costs at cost, an agreed upon overhead rate plus a fixed fee or rate.
Under time and materials contracts with a ceiling, the Company charges the clients for time and materials based upon the work performed however there is a ceiling or a not to exceed value. There are often instances that a contract is modified to extend the contract value past the original or amended ceiling. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract price in accordance with the variable consideration guidelines and will only include consideration that it expects to receive from the customer. When the Company is reaching the ceiling, the contract will be renegotiated, or we cease work when the maximum contract value is reached. The Company will continue to work if it is probable that the contract will be extended. The Company is only entitled to consideration for the work it has performed, and the ceiling amount is not a guaranteed contract value.
The Company earned approximately 90% of its revenues under T&M contracts during the three and six months ended July 2, 2021 and June 30, 2020, respectively.
Fixed Price Contracts
Under fixed price contracts, the Company’s clients pay an agreed amount negotiated in advance for a specified scope of work. The Company is guaranteed to receive the consideration to the extent that the Company delivers under the contract. The Company assesses contracts quarterly and may recognize any expected future loss before actually incurring the loss. When the Company is expecting to reach the total consideration under the contract, the Company will begin to negotiate a change order.
Change Orders and Claims
Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions. Either the Company or its client may initiate change orders. They may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the customer’s written approval of such changes or separate documentation of change order costs that are identifiable. Change orders may take time to be formally documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the client. If the Company is having difficulties in renegotiating the change order, the Company will stop work if possible, record all costs incurred to date, and determine, on a project by project basis, the appropriate final revenue recognition.
Claims are amounts in excess of the agreed contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Costs related to change orders and claims are recognized when they are incurred. The Company evaluates claims on an individual basis and recognizes revenue it believes is probable to collect.
Performance Obligations
The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. However, in some instances, we may also promise to provide distinct goods or services within a contract, resulting in multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. Typically, we sell a customer a specific service and use the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
The Company’s performance obligations are satisfied as work progresses or at a point in time. Revenue on our cost-reimbursable contracts is recognized over time using direct costs incurred or direct costs incurred to date as compared to the estimated total direct costs for performance obligations because it best depicts the transfer of control to the customer. Contract costs include labor, subcontractors’ costs and other direct costs.
Gross revenue from services transferred to customers at a point in time is recognized when the customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the reports and/or analysis performed.
As of July 2, 2021 and December 31, 2020, we had $751 million and $628 million of remaining performance obligations, or backlog, respectively, of which $451 million and $377 million, respectively, or 60% is expected to be recognized over the next 12 months and the majority of the balance over the next 24 months. Project cancellations or scope adjustments may occur, from time to time, with respect to contracts reflected in backlog. Most of our government contracts are multi-year contracts for which funding is appropriated on an annual basis, therefore backlog includes only those amounts that have been funded and authorized and does not reflect the full amounts we may receive over the term of such contracts. In the case of non-government contracts, backlog includes future revenue at contract rates, excluding contract renewals or extensions that are at the discretion of the client. For contracts with a not-to-exceed maximum amount, we include revenue from such contracts in backlog to the extent of the remaining estimated amount. Our backlog for the period beyond 12 months may be subject to variation from year-to-year as existing contracts are completed, delayed, or renewed or new contracts are awarded, delayed, or cancelled. As a result, we believe that year-to-year comparisons of the portion of backlog expected to be performed more than one year in the future are difficult to assess and not necessarily indicative of future revenues or profitability.
Contract Assets and Liabilities
The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities). Billed and unbilled receivables are reflected on the face of the Consolidated Balance Sheet. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized on these contracts as of the reporting date and is reported within “other current liabilities” on the Consolidated Balance Sheet. This liability was $0 as of July 2, 2021 and December 31, 2020. Revenue recognized that was included in the contract liability balance at the beginning of the fiscal year was $0 and $32 thousand for the three months ended July 2, 2021 and June 30, 2020, respectively, and $0 and $64 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively.
U.S. Federal Acquisition Regulations
The Company has contracts with the U.S. federal, state and local governments that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations (“FAR”). These regulations are generally applicable to all of its contracts that are directly funded or partially funded by pass through funds from the U.S. federal government. These provisions limit the recovery of certain specified indirect costs on contracts subject to the FAR. Cost-plus contracts covered by the FAR provide for upward or downward adjustments if actual recoverable costs differ from the estimate billed under forward pricing arrangements. Most of the Company’s government contracts are subject to termination at the convenience of the government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.
Government contracts that are subject to the FAR are subject to audits performed by the Defense Contract Audit Agency (“DCAA”) and many other state governmental agencies. As such, the Company’s overhead rates, cost proposals, incurred government contract costs and internal control systems are subject to review. During the course of its audits, the DCAA or a state agency may question incurred costs if it believes the Company has accounted for such costs in a manner inconsistent with the requirements of the FAR or Cost Accounting Standards and recommend that the applicable contracting officer disallow such costs. Historically, the Company has not incurred significant disallowed costs because of such audits. However, the Company can provide no assurance that the rate audits will not result in material disallowances of incurred costs in the future. The Company provides for a refund liability to the extent that it expects to refund some of the consideration received from a customer. The liability at July 2, 2021 and December 31, 2020 was $0, respectively.
Disaggregation of Revenues
As described further in Note 2 – Summary of Significant Accounting Policies, the Company has one operating segment, Engineering, Testing, Inspection and Other Consultative Services, which reflects how the Company is being managed. The Company provides public and private sector clients with comprehensive support in managing large-scale infrastructure improvement programs including engineering, design, program development/management, compliance services, acquisition and project control services, as well as construction engineering and inspection and materials testing. Approximately 50% of the Company’s revenues in each reporting period presented are derived from federal, state and local government related projects.
All services performed by the Company are rendered in the United States and its territories via two contract types, time and materials or fixed price contracts. The Company derives 90% of its revenues from T&M contracts, the remainder are earned under fixed price contracts.
Cash Flows
The Company has presented its cash flows using the indirect method and considers all highly liquid investments with original maturities of three months or less at acquisition to be cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance limit.
Comprehensive Income
There are no other components of comprehensive income other than net income and the provision for non-controlling interest associated with Holdings Units.
Use of Estimates
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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable. These risks primarily relate to the concentration of customers who are large, governmental customers and regional governmental customers. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.
Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurements (“ASC 820”), establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy under ASC 820 are described as follows:
Level 1 — Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access.
Level 2 — Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.
Level 3 — Inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company has various financial instruments, including cash and cash equivalents, accounts receivable and payable, accrued liabilities, and long-term debt. The carrying value of the Company’s cash and cash equivalents, accounts receivable, and payable and accrued liabilities approximate their fair value due to their short-term nature. The Company believes that the aggregate fair values of its long-term debt approximates their carrying amounts as the interest rates on the debt are either reset on a frequent basis or reflect current market rates.
The Company applies the provisions of ASC 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. The allocation of the purchase price to identifiable intangible assets is based on valuations performed to determine the fair values of such assets as of the acquisition dates. Depending on the size and complexity of the acquisition, the Company may engage a third-party independent valuation specialist to assist in management’s determination of fair values of tangible and intangible assets acquired and liabilities assumed. The fair values of earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. The Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability on the Consolidated Balance Sheet. Changes in the estimated fair value of contingent earnout payments are included in operating expenses in the accompanying Consolidated Statements of Operations.
Several factors are considered when determining contingent consideration liabilities as part of the purchase price, including whether (i) the valuation of the acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (ii) the former owners of the acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of other key employees. The contingent earn-out payments are not affected by employment termination.
The Company reviews and re-assesses the estimated fair value of contingent consideration liabilities on a quarterly basis, and the updated fair value could differ materially from the initial estimates. The Company measures contingent consideration recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The Company uses a probability-weighted discounted cash flow approach as a valuation technique to determine the fair value of the contingent consideration liabilities on the acquisition date and at each reporting period. The significant unobservable inputs used in the fair value measurements are projections over the earn-out period, and the probability outcome percentages that are assigned to each scenario. Significant increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent consideration liabilities. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and amount paid will be recorded in earnings. The Company records the current portion of contingent consideration liability within other current liabilities and the noncurrent portion of contingent consideration liability within other long-term liabilities within its Consolidated Balance Sheet.
The following table summarizes the changes in the fair value of estimated contingent consideration:
The Company may at its discretion settle the contingent consideration with cash, common shares or a combination of cash and common shares. During the three months ended July 2, 2021, we settled a portion of the $3.7 million payment with 192,090 shares of Class A common stock.
The Company incurred a non-cash charge of $2.8 million during the three months ended July 2, 2021 to reflect the change in fair value of the contingent consideration liability relating to an acquisition that had finalized its purchase price allocation.
Equity Based Compensation
The Company recognizes the cost of services received in an equity based payment transaction with an employee as services are received and records either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria.
The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that the Company is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation cost for an award classified as an equity instrument is recognized ratably over the requisite service period, including an estimate of forfeitures. The requisite service period is the period during which an employee is required to provide service in exchange for an award.
Consistent with the change in control provisions within the applicable agreements, the Company fully expensed the remaining unamortized value of the stock awards that vested upon the completion of the Atlas Business Combination during the quarter ended March 31, 2020.
The Company granted restricted stock units (“RSUs”) during the second quarters of 2021 and 2020 as a means to reward and retain selected management personnel. Please refer to Note 10 – Equity Based Compensation for further information.
An additional grant of RSUs was made to a member of the Company’s leadership team on December 31, 2020.
During the second quarter of 2021, the Company granted certain members of its leadership team performance share units (“PSUs”) with both performance and market conditions that may affect the ultimate vesting of shares and also granted to its Board of Directors RSUs during the first quarter of 2021.
Equity compensation was $805 thousand and $190 thousand for the three months ended July 2, 2021 and June 30, 2020, respectively, and $1,251 thousand and $10,035 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively.
Income Taxes
The Company accounts for income taxes in accordance with the FASB ASC Topic 740, Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, scheduled reversals of deferred tax amounts, availability of carrybacks, and potential tax planning strategies. Based on our assessment, we have concluded that a portion of the deferred tax assets will not be realized.
According to the authoritative guidance on accounting for uncertainty in income taxes, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. This guidance also addresses de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and disclosure requirements for uncertain tax positions.
Redeemable Preferred Stock
On February 14, 2020, in connection with the consummation of the Atlas Business Combination, Holdings and GSO COF III AIV-2 LP (“GSO AIV-2”) entered into a subscription agreement, dated February 14, 2020 (the “Subscription Agreement”) pursuant to which, GSO AIV-2 purchased 145,000 units of a new class of Series A Senior Preferred Units of Holdings (the “Preferred Units”) at a price per Preferred Unit of $978.21 for an aggregate cash purchase price of $141,840,450, which represented a 2.179% original issue discount on the Preferred Units (such purchase, the “GSO Placement”).
The GSO Placement was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder.
The Preferred Units ranked senior in priority to all other existing and future equity securities of Holdings with respect to liquidation preference and distribution rights.
The Preferred Units had a liquidation preference of $1,000 per Preferred Unit (the “Liquidation Preference”).
Subject to any limitations set forth in the Atlas Credit Agreement (as defined in Note 7 – Long-Term Debt), the Preferred Units were paid a dividend of 5% per annum, plus either an additional 6.25% per annum in cash or 7.25% per annum in additional Preferred Units, at Holdings’ option, payable quarterly in arrears.
If a cash dividend was not able to be made because of a limitation under the Atlas Credit Agreement, then the Liquidation Preference with respect to any Preferred Unit would have increased to 3.5625% in any quarter until a cash dividend could be made.
The Preferred Units did not possess voting rights and were not convertible into any other security of Holdings.
Holdings was permitted to redeem the Preferred Units beginning on the second anniversary of the Closing Date at a price of 103% of the Liquidation Preference (the “Redemption Premium”), and on the third anniversary of their issuance at the Liquidation Preference, in each case plus accrued and unpaid dividends. The Preferred Units could only be redeemed by Holdings within the first two years of the Closing Date upon a change of control as described below, in which case such Preferred Units would have been redeemed at a customary make-whole amount as if the Preferred Units were redeemed on the second anniversary.
Subject to the terms of Holdings’ and its subsidiaries’ senior credit agreements, Holdings was required to redeem the Preferred Units at the Redemption Premium, plus accrued and unpaid dividends, in the event of (i) a change of control, (ii) sales or other dispositions of all or substantially all of Holdings’ assets and (iii) the insolvency or bankruptcy of Holdings or any of its material subsidiaries.
Finally, holders of the Preferred Units were permitted to require Holdings to redeem their Preferred Units at the Liquidation Preference, plus accrued and unpaid dividends, beginning on the eighth anniversary of the Closing Date, subject to certain customary limitations.
The Preferred Units were redeemed in full at par without a premium on February 25, 2021.
Segment
The Company has one operating and reporting segment, Engineering, Testing, Inspection and Other Consultative Services. This financial information is reviewed regularly by our chief operating decision maker to assess performance and make decisions regarding the allocation of resources and is equivalent to our consolidated information. Our chief operating decision maker does not review below the consolidated level. Our chief operating decision maker is our Chief Executive Officer.
Recent Accounting Pronouncements
In February 2016, FASB issued ASU 2016-02, Leases. ASU 2016-02 requires lessees to recognize, in the balance sheet, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset over the lease term. The amendments in this accounting standard update are to be applied using a modified retrospective approach and are effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the requirements of ASU 2016-02 and its impact on the consolidated and combined financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) - Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for the Company commencing after December 15, 2022. The Company is in the process of assessing the impact of this ASU on our consolidated financial statements and disclosures. |
Atlas Business Combination |
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| Business Combinations [Abstract] | |
| ATLAS BUSINESS COMBINATION | NOTE 3 – ATLAS BUSINESS COMBINATION
On the Closing Date, the Company completed the acquisition of Atlas Intermediate and its subsidiaries and in return the Atlas Intermediate members: (i) received 24.0 million shares of Class B common stock in the Company, (ii) repaid the $171.5 million of outstanding debt and interest accrued and due lender, (iii) paid $10.9 million of Seller incurred acquisition-related costs, (iv) settled $1.1 million of contingent consideration associated with the SCST, Inc. acquisition and (v) paid $2.2 million of change in control payments due certain executives. This was paid for with: (i) $20.7 million of cash raised from special purpose acquisition company (“SPAC”) shareholders and the private placement discussed herein, (ii) the issuance of redeemable preferred stock in the amount of $141.8 million and (iii) the issuance of new debt in the amount of $271.0 million as discussed in Note 7 – Long-Term Debt.
The shares of non-economic Class B common stock of the Company entitle each holder to one vote per share, and each Class B share, along with its corresponding Holdings Unit, is redeemable on a one-for-one basis for one share of Class A common stock at the option of the Unit Holders (formerly members) as their lock-up periods expire. Upon the redemption by any Class B common stock, along with the corresponding Holdings Units, for Class A common stock, a corresponding number of shares of Class B common stock will be cancelled.
In connection with the Company’s entry into the Atlas Business Combination, the Company agreed to issue and sell in a private placement an aggregate of 1,000,000 shares of Class A common stock for a purchase price of $10.23 per share, and aggregate consideration of $10.2 million (the “Private Placement”). The Private Placement was consummated concurrently with the Closing Date and the proceeds of the Private Placement were used to fund a portion of the consideration paid to the Atlas Intermediate members.
Because the holders of our Class B common stock have effective control of the combined company after the Closing Date through their majority voting interests in both the Company and, accordingly, Atlas Intermediate, the Atlas Business Combination was accounted for as a reverse recapitalization. Although the Company was the legal acquirer, Atlas Intermediate was the accounting acquirer. As a result, the reports filed by the Company subsequent to the Atlas Business Combination are prepared “as if” Atlas Intermediate is the predecessor and legal successor to the Company. The historical operations of Atlas Intermediate are deemed to be those of the Company. Thus, the financial statements included in this report reflect (i) the historical operating results of Atlas Intermediate prior to the Atlas Business Combination; (ii) the combined results of the Company, which does not have any operating results and includes only certain costs such as the compensation for the Company’s Board, certain legal fees and taxes, and Atlas Intermediate following the Atlas Business Combination; (iii) the assets, liabilities and members’ capital of Atlas Intermediate at their historical cost; and (iv) the Company’s equity and earnings per share for the period from the Closing Date. |
Business Acquisitions |
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| Business Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUSINESS ACQUISITIONS | NOTE 4 – BUSINESS ACQUISITIONS
In February 2020, the Company acquired Long Engineering LLC (“LONG”), a land surveying and engineering company headquartered in Atlanta, Georgia. The aggregate purchase price consideration paid in connection with this stock acquisition was $10.7 million in cash, subject to customary closing working capital adjustments plus an earnout of up to $12.0 million contingent upon the achievement of certain financial targets to be paid upon the first, second and third anniversaries of the closing.
In September 2020, the Company acquired AltaVista Solutions (“Alta Vista”), a provider of testing and inspection services primarily to infrastructure clients. Alta Vista is headquartered in Oakland, California and has offices in California and New York. The purchase agreement called for the Company to pay Alta Vista up to $15.1 million in the form of cash and stock consideration. The Company issued 776,197 shares of Class B common stock to the former owners of Alta Vista, which represented $7.0 million of the total consideration paid. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies.
In November 2020, the Company acquired WesTest LLC (“WesTest”), a testing and engineering services provider with operations in Colorado and Wyoming. WesTest, headquartered in Lakewood, Colorado, received consideration of $4.1 million in the form of cash and stock consideration. The Company issued 285,115 shares of Class A common stock to the former owner of WesTest, which represented $1.6 million of the total consideration paid. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies.
On April 14, 2021, the Company acquired Atlantic Engineering Laboratories, Inc. and Atlantic Engineering Laboratories of New York, Inc. (collectively, “AEL”) for cash and an amount of equity consideration totalling $24.5 million. The Company issued 738,566 shares of Class A common stock to the former owner of AEL, which represented $7.5 million of the total consideration paid. AEL is a materials testing and inspection firm based in Avenel, New Jersey, and provides steel, concrete, soil and other testing and inspection services to a diverse mix of public and private clients primarily in New York and New Jersey. AEL added approximately 290 professionals to the Company’s workforce and is expected to strengthen the Company’s materials testing and inspection services in the Northeast. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies.
On July 1, 2021, the Company acquired O’Neill Services Group (“O’Neill), a quality assurance and environmental services firm that services clients throughout the Pacific Northwest. O’Neill, headquartered in Redmond, Washington, employs 90 people and received $24.4 million in the form of cash and stock consideration. The Company issued 653,728 shares of Class A common stock which represented $6.5 million of the total consideration received. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies.
Acquisition costs of approximately $0.7 million and $0.3 million have been expensed in the three months ended July 2, 2021 and June 30, 2020, respectively, and $1.4 million and $0.6 million for the six months ended July 2, 2021 and June 30, 2020, respectively, in the Consolidated Statement of Operations within operating expenses.
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition:
*The above purchase price allocation is tentative and preliminary and subject to further updates as we complete the purchase price allocation. |
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Property and Equipment, Net |
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT, NET | NOTE 5 – PROPERTY AND EQUIPMENT, NET
The Company depreciates its assets on a straight-line basis over the assets’ useful lives, which range from 3 to 10 years. Property and equipment consist of the following:
Property and equipment under capital leases:
Capital leases for computer equipment have an average lease term of five years with minimum lease payments as follows:
Depreciation expense was approximately $1.5 and $1.5 million for the three months ended July 2, 2021 and June 30, 2020, respectively and $2.9 and $2.9 million for the six months ended July 2, 2021 and June 30, 2020, respectively. |
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GOODWILL AND INTANGIBLES | NOTE 6 – GOODWILL AND INTANGIBLES
The carrying amount, including changes therein, of goodwill was as follows:
The Company did not recognize any impairments of goodwill in the three or six months ended July 2, 2021 or June 30, 2020. The Company completed its valuation analysis for the contingent consideration related to the LONG acquisition during the quarter ended April 2, 2021 resulting in an adjustment that is included in the measurement period adjustments noted above.
Intangible assets as of July 2, 2021 and December 31, 2020 consist of the following:
Amortization expense was $3.6 million and $3.8 million for the three months ended July 2, 2021 and June 30, 2020 respectively, and $ 6.7 million and $7.5 million for the six months ended July 2, 2021 and June 30, 2020, respectively.
Amortization of intangible assets for the next five years and thereafter is expected to be as follows:
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Long-Term Debt |
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| LONG-TERM DEBT | NOTE 7 – LONG-TERM DEBT
In March 2019, subsequent to the merger with ATC Group Partners (“ATC”), we repaid all outstanding balances on the combined entity’s loan agreements in full and terminated our prior loan agreements. These loan agreements were replaced with a term loan of $145.0 million and a revolving credit facility of $50.0 million, of which $31.8 million was funded at closing (the “Atlas Credit Facility”). Proceeds of the Atlas Credit Facility were used to repay existing debt of $123.9 million and fund a shareholder distribution of $52.8 million made in April 2019.
The Atlas Credit Facility was secured by assets of Atlas Intermediate. The Atlas Credit Facility required quarterly principal payments of $2.719 million through March 31, 2023, and then $3.625 million until the final maturity in March 2024, and bore interest at an annual rate of LIBOR plus a margin ranging from 275 to 425 basis points determined by the Company’s Consolidated Leverage Ratio, as defined in the Atlas Credit Facility. For the interest payment made in the quarter ended December 31, 2019, the applicable margin was 375 basis points and the total interest rate was 5.50%.
The Atlas Credit Facility was scheduled to mature in March 2024. However, in connection with the consummation of the Atlas Business Combination, the Atlas Credit Facility was repaid and a new credit arrangement (the “Atlas Credit Agreement”) was entered into with Macquarie Capital Funding LLC (the “Lender” or “Lead Arranger”). The Atlas Credit Agreement called for a term loan (the “Term Loan”) in the amount of $281.0 million and revolving letter of credit (the “Revolver”) in the amount of $40.0 million of which $24.0 million was drawn upon through December 31, 2020. The term loan proceeds were used to repay the existing Atlas Credit Facility in the amount of $171.0 million and partially fund the Atlas Business Combination and the LONG acquisition.
Under the terms of the Atlas Credit Agreement, the Term Loan and Revolver were set to mature on February 14, 2027 and February 14, 2025, respectively. Interest was payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rates under the Atlas Credit Agreement were equal to either (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 4.75%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 3.75%.
The Atlas Credit Agreement was guaranteed by Holdings and secured by (i) a first priority pledge of the equity interests of subsidiaries of Holdings and Atlas Intermediate and (ii) a first priority lien on substantially all other assets of Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries.
On March 31, 2020, the terms of the Atlas Credit Agreement were modified to reduce the maturity of the Term Loan by one year to February 14, 2026 from February 14, 2027. The interest rate for the Term Loan was increased to (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 6.25%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 5.25%. The interest rate for the Revolver was increased to (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 5.0%, or (ii) an Alternate Base Rate as defined in the Credit Agreement, plus 4.0%. The modification also increased the rate of amortization applicable to the Term Loan to 5.0% per annum (commencing on June 30, 2020).
The modifications to the Atlas Credit Agreement resulted from the exercise of the market-flex rights by the lead arranger in connection with the syndication process, which, in addition, required the payment of an upfront fee in an amount equal to 2% of the currently outstanding Term Loans, which was paid during April 2020. The market-flex rights were included in the Atlas Credit Agreement and were exercised by the lead arranger upon completion of the time period allowed to complete a syndication process.
On February 25, 2021, Atlas Intermediate, as the borrower, entered into two new credit facilities consisting of (i) a $432.0 million senior secured term loan at closing and, subject to the satisfaction of certain terms and conditions, a committed delayed draw term loan facility to be used for future acquisitions in an aggregate principal amount of up to $75.0 million and an uncommitted incremental term loan facility that may be incurred after closing (the “Term Loan”) pursuant to a Credit Agreement dated February 25, 2021, by and among Holdings, Atlas Intermediate, Wilmington Trust, National Association, as administrative agent and collateral agent, and certain lenders thereto, including certain Blackstone entities, which may include, Blackstone Alternative Credit Advisors LP, and its managed funds and accounts, and its affiliates, Blackstone Holdings Finance Co. L.L.C. and its affiliates, and/or certain other of their respective funds, accounts, clients managed, advised or sub-advised, or any of their respective affiliates (the “Term Loan Agreement”) and (ii) a $40.0 million senior secured revolver which aggregate principal amount may be increased, subject to the satisfaction of certain terms and conditions, including obtaining commitments therefor, by up to $20,000,000 (the “Revolver”) pursuant to the Credit Agreement dated February 25, 2021, by and among Holdings, Intermediate, JPMorgan Chase Bank, N.A., as administrative agent, swingline lender, issuing bank, lender, sole bookrunner and sole lead arranger (the “ABL Revolver Agreement,” and together with the Term Loan Agreement, collectively the “Credit Agreements”). The Term Loan Agreement refinances the Atlas Credit Agreement dated as of February 14, 2020, with Macquarie Capital Funding LLC, as administrative agent and certain lenders, which repayment was effectuated partially in cash and partially by way of a cashless exchange of existing term loans and preferred equity for Term Loans.
The Term Loan Agreement and ABL Revolver Agreement are collectively referred to as the “Atlas 2021 Credit Agreements” by the Company.
The initial Term Loan will mature on February 25, 2028 and the Revolver will mature on February 25, 2026.
Interest on any outstanding borrowings is payable monthly under the ABL Revolver Agreement, quarterly under the Term Loan Agreement or, in each case, at the end of the applicable interest period in arrears. The cash interest rates under the Term Loan Agreement will be equal to either (i) the Adjusted LIBO Rate (as defined in the Term Loan Agreement), plus 5.50%, or (ii) an Alternate Base Rate (as defined in the Term Loan Agreement), plus 4.50%. In addition, the term loan requires an additional 2.0% interest that can be made at the option of the Company in cash or payment-in-kind (PIK). The interest rates under the ABL Revolver Agreement will be equal to either (i) the Adjusted LIBO Rate (as defined in the ABL Revolver Agreement), plus 2.50%, or (ii) the ABR (as defined in the ABL Revolver Agreement), plus 1.50%.
The Credit Agreements are guaranteed by Holdings and secured by (i) in the case of the ABL Revolver Agreement, a first priority security interest in the current assets, including accounts receivable, of Holdings, Intermediate and its subsidiaries and (ii) in the case of the Term Loan Agreement, a pledge of the equity interests of the subsidiaries of Holdings and Intermediate, and subject to the first lien security interest on current assets under the Revolver, a first priority lien on substantially all other assets of Holdings, Intermediate and all of their direct and indirect subsidiaries.
The Term Loan Agreement contains a financial covenant which requires Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Total Net Leverage Ratio (as defined in each Credit Agreement) tested on a quarterly basis that does not exceed (i) 8.25 to 1.00 with respect to the fiscal quarters ending on April 2, 2021 and July 2, 2021, (ii) 8.00 to 1.00 for the fiscal quarters ending October 1, 2021 and December 31, 2021, (iii) 7.50 to 1.00 for the fiscal quarters ending April 1, 2022 and July 1, 2022, (iv) 7.25 to 1.00 for the fiscal quarters ending September 30, 2022 and December 30, 2022, (v) 7.00 to 1.00 for the fiscal quarters ending March 31, 2023 and June 30, 2023, (vi) 6.75 to 1.00 for the fiscal quarters ending September 29, 2023 and December 29, 2023, and (vii) 6.50 to 1.00 for March 29, 2024 and each fiscal quarter ending thereafter.
The ABL Revolver Agreement contains a “springing” financial covenant which requires Holdings, Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Fixed Charge Coverage Ratio (as defined in the ABL Revolver Agreement) of no less than 1.10 to 1.00 when the outstanding principal amount of loans under the Revolver exceeds $0 or the aggregate exposure for letters of credit under the Revolver exceeds $5 million.
The Company has been in compliance with the terms of the Atlas Credit Facility and Atlas Credit Agreement as of July 2, 2021 and December 31, 2020, respectively.
Long-term debt consisted of the following:
The Company in conjunction with the refinancing of the Atlas Credit Agreement on February 25, 2021 wrote off $15.2 million of deferred loan acquisition costs that were attributable to the agreement. The costs deferred as of July 2, 2021 relate to cost incurred with the Atlas 2021 Credit Agreement.
Aggregate long-term principal payments subsequent to July 2, 2021, are as follows (amounts in thousands):
The 2021 Atlas Credit agreement requires annual amortization of principal and interest paid in kind amounts of 1% or 2.5% depending on certain ratios. The Company is currently within the ratio that requires 1% annual amortization. Principal repayments commence during the Company’s second quarter 2022. |
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Shareholders' Equity |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SHAREHOLDERS’ EQUITY | NOTE 8- SHAREHOLDERS’ EQUITY Shares Outstanding
Prior to the Atlas Business Combination, the Company was a special purpose acquisition company with no operations, formed as a vehicle to affect a business combination with one or more operating businesses. After the consummation of the Atlas Business Combination, the Company became a holding company whose sole material operating asset consists of its interest in Atlas Intermediate.
The following table summarizes the changes in the outstanding stock and warrants from the December 31, 2020 through July 2, 2021:
Class A Common Stock –At July 2, 2021 and December 31, 2020, there were 32,738,990 and 12,841,584 shares of Class A common stock issued and outstanding, respectively. Holders of the Company’s Class A common stock are entitled to one vote for each share. The Company is authorized to issue 400,000,000 shares of Class A common stock with a par value of $0.0001 per share.
Class B Common Stock – At July 2, 2021 and December 31, 2020, there were 4,234,323 and 22,438,828 shares of Class B common stock issued and outstanding, respectively. Class B common stock was issued to the holders of Holdings Units in Atlas Intermediate in connection with the Atlas Business Combination and are non-economic but entitle the holder to one vote per share. The Company is not authorized to issue any shares of Class B common stock with a par value of $0.0001 per share to the general public but can issue additional shares of Class B common stock to Atlas acquisition targets as part of the consideration paid with the approval of the Company’s Board.
Public Warrants – In November 2018, the Company consummated its initial public offering of units, each consisting of one share of Class A common stock and one warrant (each a “Public Warrant”). At the commencement of the Atlas Business Combination, there were 20,000,000 Public Warrants outstanding. Each Public Warrant entitled the holder to purchase one share of Class A common stock at a price of $11.50 per share. The Public Warrants were set to expire five years after the closing of the Atlas Business Combination or earlier upon redemption or liquidation. The Company had the ability to call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right could only be exercised if the last sale price of the Class A common stock equaled or exceeded $18.00 per share for any 20 trading days within a 30-day trading period ending three business days before we send the notice of redemption to the Public Warrant holders.
In October 2020, the Company offered each holder of its outstanding warrants, including the Public Warrants and the Private Placement Warrants, the opportunity to exchange their warrants for shares of the Company’s Class A common stock, par value $0.0001 per share. Each holder was set to receive 0.1665 or 0.185 shares of Class A common stock in exchange for each outstanding warrant tendered by the holder and exchanged pursuant to the terms of the offer. The redemption rate was dependent upon whether the warrant holder tendered their warrants prior to the offer deadline. Warrant holders who tendered their warrants for exchange prior to the expiration of the tender offer period received the 0.185 conversion rate, and any warrant holders who did not tender their warrants by the appropriate deadline received the 0.1665 conversion rate. The Company concluded the offer in November 2020 and all warrants were converted to Class A common stock by December 31, 2020.
Private Placement Warrants – Upon closing of the Boxwood initial public offering, Boxwood Sponsor LLC (the “Sponsor”) purchased an aggregate of 3,750,000 warrants at a price of $1.00 per warrant (the “Private Placement Warrants” and together with the Public Warrants, the “Warrants”). Each Private Placement Warrant was exercisable for one share of Class A common stock at a price of $11.50. The Private Placement Warrants were identical to the Public Warrants discussed above, except (i) they would not be redeemable by the Company so long as they were held by the Sponsor and (ii) they were exercisable by the holders on a cashless basis. Unlike the public warrants, the private placement warrants were determined to be a liability of the Company while outstanding. The impact of such liability was not material to the Company’s Consolidated Balance Sheet or Statement of Operations.
In connection with the October 2020 offer to the warrant holders to exchange their warrants for the Company’s Class A common stock, the Sponsor opted to fully exchange its Private Placement Warrants for Class A common stock. As of December 31, 2020, there were no remaining Private Placement Warrants issued or outstanding.
Private Placement
In connection with the Company’s entry into the Contribution Agreement, the Company agreed to issue and sell in a private placement an aggregate of 1,000,000 shares of Class A common stock for a purchase price of $10.23 per share, and aggregate consideration of $10.2 million (the “Private Placement”). The Private Placement was consummated concurrently with the Closing Date and the proceeds of the Private Placement were used to fund a portion of the cash consideration paid to the Unit Holders.
Non-controlling Interest
As of July 2, 2021 and December 31, 2020, the Company ownership and voting structure was comprised of holders of our Class A common stock that participate 100% in the results of Atlas Technical Consultants, Inc. and 88.6% and 36.4%, respectively, in Atlas Intermediate and its subsidiaries and holders of our Class B common stock that participate in the results of Atlas Intermediate and its subsidiaries until their Class B common stock is converted to Class A common stock. The holders of our Class B common stock participate in 11.4% and 63.6% as of July 2, 2021 and December 31, 2020, respectively, of Atlas Intermediate and its subsidiaries. In connection with the Atlas Business Combination, it was determined that the results of Atlas Intermediate and its subsidiaries would be fully consolidated within the results of the Company.
Due to the participation of the holders of our Class B common stock in the results of Atlas Intermediate and subsidiaries, a non-controlling interest was deemed to exist. Non-controlling ownership interests in Atlas Intermediate and its subsidiaries are presented in the Consolidated Balance Sheet within shareholders’ equity as a separate component. In addition, consolidated net income includes earnings attributable to both the shareholders and the non-controlling interests.
As holders of our Class B common stock transition to holders of Class A common stock, we adjust our additional paid in capital and non-controlling interest within our Consolidated Balance Sheet and the provision for non-controlling interest in our Consolidated Statement of Operations. Holders of Class B common stock may convert their shares to Class A common stock at their discretion as their contractual lock-ups expire after the Atlas Business Combination. |
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Loss Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE | NOTE 9 – LOSS PER SHARE
The Atlas Business Combination was structured as a reverse capitalization by which the Company issued stock for the net assets of Atlas Intermediate accompanied by a recapitalization. Earnings per share is calculated for the Company only for periods after the Atlas Business Combination due to the reverse recapitalization.
(Loss) per share was calculated as follows:
The Company had the following shares that were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive for the periods presented but could potentially dilute basic earnings per share in future periods:
The Company retired the warrants, both public and private placement, via tender offer that concluded in November 2020 and as such is not presenting information for the three or six months ended July 2, 2021. |
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Equity Based Compensation |
6 Months Ended |
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Jul. 02, 2021 | |
| Share-based Payment Arrangement [Abstract] | |
| EQUITY BASED COMPENSATION | NOTE 10 – EQUITY BASED COMPENSATION
In December 2017, Atlas Intermediate’s Parent granted service-based Class A units to certain members of Atlas’ management. As of December 31, 2017, 1,000 units were authorized and reserved for issuance with 504 granted in December 2017. The Class A units granted provide for service-based vesting annually over 4 years from the grant date.
In April 2019, Atlas Intermediate’s Parent granted service-based Class A units to certain members of Atlas’ management. As of January 1, 2019, 1,666 units were authorized and reserved for issuance with 973.65 units granted as of December 31, 2019. The Class A units granted provide for service-based vesting annually over 4 years from the grant date. The grant date fair value was determined using assumptions about the current waterfall expected payout.
In connection with the Atlas Business Combination, the outstanding shares were vested under the change of control provisions within the agreements. The shares are currently reflected as Class B Common Shares and may be converted to Class A Common Shares as the lock-up agreements expire.
During the second quarters of 2021 and 2020, the Company awarded 378,353 and 510,136 restricted share units (“RSUs”) to approximately ninety employees at a grant day fair market value of $11.42 and $8.95 per share, respectively. The Company estimates the fair value of the RSUs as the closing price of the Company’s Class A common stock on the grant date of the award, which is expensed over the applicable vesting period. The vesting period for these RSUs is equal annual tranches, pro-ratably over three years, and there is no performance requirement attached to the RSUs other than continued service to the Company. During the three months ended July 2, 2021, 158,977 of the shares granted in 2020 vested and 11,602 shares were forfeited.
On January 29, 2021, the Company granted to a member of its executive team 75,000 RSUs of the Company’s Class A common stock, par value $0.0001, retroactive to December 31, 2020. The value of these RSUs approximated $0.5 million and is set to cliff vest on December 31, 2022.
On March 3, 2021, the Company granted to its Board of Directors 60,921 RSUs with a one year vesting period and a grant date fair market value of $9.00 per share. There are no performance requirements to these RSUs other than continued service to the Company throughout the one-year vesting period.
During the second quarter of 2021, the Company also awarded 182,763 performance share units (“PSUs”) to its leadership team. The PSUs have both performance and market conditions that are required to be met in order for the shares to vest. The split between performance and market conditions is approximately 66.7% and 33.3%, respectively. If the conditions are met, the shares will cliff vest on the third anniversary of the award date. The Company has accounted for the portion of the award tied to the achievement of performance conditions based upon share price of $11.38 on the date of issuance and the probable number of shares anticipated to vest and accounted for the shares tied to market conditions based upon the fair market value as calculated in a Monte Carlo simulation. The Company will assess the probability of the performance conditions being achieved each quarter and adjust recorded stock compensation expense as appropriate.
The Company estimates forfeitures of its stock awards. Actual forfeitures may differ from those estimates. The Company currently estimates its forfeitures as 3% of the RSUs awards granted each year but will continue to reassess its estimate on a quarterly basis.
Equity compensation was $805 thousand and $190 thousand for the three months ended July 2, 2021 and June 30, 2020, respectively, and $1,251 thousand and $10,035 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively. |
Related-Party Transactions |
6 Months Ended |
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Jul. 02, 2021 | |
| Related Party Transactions [Abstract] | |
| RELATED-PARTY TRANSACTIONS | NOTE 11 – RELATED-PARTY TRANSACTIONS
During the six months ended July 2, 2021 and June 30, 2020, the Company leased office space from former owners of acquired companies that became shareholders and/or officers of the Company. The Company recognized lease expenses under these leases within the Statement of Operations in the amount of $244 thousand and $160 thousand for the three months ended July 2, 2021 and June 30, 2020, respectively, and $400 thousand and $322 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively.
During the three months ended July 2, 2021 and June 30, 2020, the Company performed certain environmental consulting work for an affiliate of one of its principal shareholders or members and collected fees related to these services in the amount of $14 thousand and $73 thousand, respectively Related party revenues were $55 thousand and $126 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively.
On February 3, 2020, the Company entered into a subscription agreement with SCST, Inc., a California corporation, pursuant to which it agreed to acquire 105,977 shares of Class A common stock (the “SCST Stock”), for an aggregate purchase price of $1.1 million, in a private placement not registered under the Securities Act, in reliance on the exemption from Registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The issuance of the SCST Stock was completed in connection with the Atlas Business Combination and served to settle the contingent consideration to them as of December 31, 2019.
On February 14, 2020, the Company entered into a non-interest bearing short-term loan with the former owners of Atlas Intermediate to purchase insurance contracts in the amount of $1.4 million. The loan has not been repaid as of the date of these financial statements and is accounted for in Accrued Liabilities within the Consolidated Balance Sheet. This was repaid during the quarter ended June 30, 2020. |
Employee Benefit Plans |
6 Months Ended |
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Jul. 02, 2021 | |
| Employee Benefit Plan [Abstract] | |
| EMPLOYEE BENEFIT PLANS | NOTE 12 — EMPLOYEE BENEFIT PLANS
The Company maintains employee savings plans which allow for voluntary contributions into designated investment funds by eligible employees. The Company may, at the discretion of its Board, make additional contributions to these plans. The Company has made total contributions of $1.6 and $1.8 million for the three months ended July 2, 2021 and June 30, 2020, respectively, and $3.4 million, and $3.1 million for the six months ended July 2, 2021 and June 30, 2020, respectively. |
Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES | NOTE 13 – COMMITMENTS AND CONTINGENCIES
The Company is subject to certain claims and lawsuits typically filed against engineering companies, alleging primarily professional errors or omissions. The Company carries professional liability insurance, subject to certain deductibles and policy limits, against such claims. While management does not believe that the resolution of these claims will have a material adverse effect, individually or in aggregate, on its financial position, results of operations or cash flows, management acknowledges the uncertainty surrounding the ultimate resolution of these matters.
The Company leases office space, laboratory facilities, and automobiles under operating lease agreements and has options to renew most leases. These leases expire at varying dates through 2025. The Company also rents equipment on a job-by-job basis.
Future minimum payments under non-cancelable operating leases as of July 2, 2021 are as follows:
Rental expense associated with facility and equipment operating leases for the three months ended July 2, 2021 and June 30, 2020 was $3.3 million and $3.2 million, respectively, and $6.3 million and $6.3 million for the six months ended July 2, 2021 and June 30, 2020, respectively. |
Covid-19 Pandemic |
6 Months Ended |
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Jul. 02, 2021 | |
| Covid Nineteen Pandemic Disclosure [Abstract] | |
| COVID-19 PANDEMIC | NOTE 14 – COVID-19 PANDEMIC
In the first quarter of 2020, the COVID-19 outbreak spread quickly across the globe. Federal, state and local governments mobilized to implement containment mechanisms and minimize impacts to their populations and economies. Various containment measures, which included stay-at-home orders and restrictions on the operations of businesses, while aiding in the prevention of further outbreak, have resulted in a severe drop in general economic activity, volatility in the financial markets and an economic downturn.
As a result, there have been three financial responses from the U.S. government, in addition to interest rate cuts by the U.S. Federal Reserve Board which were initially implemented to stabilize the U.S. stock markets. The federal government’s stimulus legislation related to COVID-19 include: the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020, the Families First Coronavirus Response Act, and the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 (the “CARES Act”).
In connection with the CARES Act, we have opted to defer the deposit and payment of the employer’s share of Social Security taxes. Under the CARES Act, deferrals are currently allowed from March 27, 2020 through December 31, 2020. The Company has not received any other assistance under the CARES Act, nor does the Company expect to realize any other tax benefits from the program. As of July 2, 2021 and December 31, 2020, the Company has deferred payment of $8.1 million relating to its share of Social Security taxes and $4.0 million of this liability is recorded within other long-term liabilities on its Consolidated Balance Sheet. The remainder is recorded in Accrued Liabilities within the Company’s Consolidated Balance Sheet. The Company has not deferred any additional tax payments subsequent to December 31, 2020.
During the second quarter of 2020, we reduced our workforce through various actions. We routinely assess our staffing levels to make certain that we continue to appropriately service our clients and maintain shareholder value. As a safety focused organization, since the outbreak of COVID-19 and continuing throughout the remainder of 2020, we encouraged our employees to work from home wherever possible and to honor all shelter-in-place rules put forth by their state or local governments. As shelter-in-place rules have been lifted and vaccination efforts are rolled out to the general public, we have allowed our employees to return to our offices when it has been safe to do so and have begun to rehire additional staff.
We continue to monitor the credit quality and access to capital for our non-governmental clients as this can be an indication of their ability to go forth with future projects and continue to pay for contracted services. As an infrastructure company, the work we do is currently deemed essential by Federal, State and local governments but any change from that designation could have a negative result on our business as well as our peers.
We are in compliance with our debt covenants as of July 2, 2021 and we expect that we will continue to be for the foreseeable future. |
Income Taxes |
6 Months Ended |
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Jul. 02, 2021 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | NOTE 15 – INCOME TAXES
Following the consummation of the Atlas Business Combination, we are organized in an “Up-C” structure in which the business of Atlas Intermediate and its subsidiaries is held by Holdings and will continue to operate through the subsidiaries of Atlas Intermediate, and in which our only direct assets consist of common units of Holdings. We are the sole manager of Holdings in accordance with the terms of the Holdings LLC Agreement entered into in connection with the consummation of the Atlas Business Combination.
Previously, Atlas Intermediate was treated as a partnership for federal and state income tax purposes with all income tax liabilities and/or benefits of the Company being passed through to the partners and members. As such, no recognition of federal or state income taxes have been provided for in the accompanying consolidated financial statements with the exception of income taxes relating to the C-Corp subsidiaries directly owned by Atlas Intermediate and the State of Texas Margin tax.
Subsequent to the Atlas Business Combination, income taxes relating to the C-Corps owned directly by Atlas Intermediate and the State of Texas Margin tax are considered within the provision of non-controlling interest as it is generated through the results of Atlas Intermediate and its subsidiaries.
Our effective tax rate from continuing operations was (3.8%) and 0.0% for the three months ending July 2, 2021 and June 30, 2020, respectively, and (1.2%) and 0.0% for the six months ended July 2, 2021 and June 30, 2020, respectively. Reconciliation between the amount determined by applying the U.S. federal income tax rate of 21% to pre-tax income from continuing operations and income tax expense is attributable to changes in our mix of pre-tax losses/earnings, the effect of non-controlling interest in income of consolidated subsidiaries, non-deductible transaction costs and changes in our valuation allowance.
The Company provides a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, a valuation allowance has been recorded to reduce net deferred tax assets to an amount that management believes is more than likely not to be realized.
The Company had no unrecognized tax benefits as of July 2, 2021 or December 31, 2020. Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. There are no accruals for interest and penalties as of July 2, 2021 or December 31, 2020. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
| Accounts Receivable and Accrued Billings | Accounts Receivable and Accrued Billings
The Company records its trade accounts receivable and unbilled receivables at their face amounts less allowances. On a periodic basis, the Company monitors the trade accounts receivable and unbilled receivables from its customers for any collectability issues. The allowance for doubtful accounts is established based on reviews of individual customer accounts, recent loss experience, current economic conditions, and other pertinent factors. The Company writes off accounts after a determination has been made by management that the amounts at issue are no longer likely to be collected, following the exercise of reasonable collection efforts, and upon management’s determination that the costs of pursuing collection outweigh the likelihood of recovery. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts.
As of July 2, 2021 and December 31, 2020, the allowance for trade accounts receivable was $2.5 million and $2.2 million, respectively, while the allowance for unbilled receivables was $0.5 million and $0.4 million, respectively. The allowances reflect the Company’s best estimate of collectability risks on outstanding receivables and unbilled services.
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| Property and Equipment | Property and Equipment
Purchases of new assets and costs of improvement to extend the useful life of existing assets are capitalized. Routine maintenance and repairs are charged to expenses as incurred. When an asset is sold or retired, the costs and related accumulated depreciation are eliminated from the accounts, and the resulting gains or losses on disposal are recognized in the accompanying Consolidated Statement of Operations. The Company depreciates its assets on a straight-line basis over the assets’ useful lives, which range from three to ten years.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
The Company assesses long-lived assets for impairment when events or circumstances indicate that the carrying value of an asset may not be recoverable. The Company recognizes an impairment if the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. If an impairment is indicated based on a comparison of the assets’ carrying amounts and the undiscounted cash flows, the impairment loss is measured as the amount by which the carrying amounts of the assets exceed the respective fair values of the assets. There were no impairment charges during the three or six months ended July 2, 2021 and June 30, 2020.
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| Goodwill | Goodwill
Goodwill represents the excess of the cost of net assets acquired over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination. In accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other, we evaluate goodwill annually for impairment on October 1, or whenever events or changes in circumstances indicate the asset may be impaired, using the quantitative method. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. These qualitative factors include: macroeconomic and industry conditions, cost factors, overall financial performance and other relevant entity-specific events. If we determine that this threshold is met, then performing the two-step quantitative impairment test is unnecessary. We may elect to bypass the qualitative assessment and proceed directly to the quantitative test for any reporting unit. The two-step impairment test requires a comparison of the carrying value of the assets and liabilities associated with a reporting unit, including goodwill, with the fair value of the reporting unit. We determine fair value through the discounted cash flow method. We make certain subjective and complex judgments in assessing whether an event of impairment of goodwill has occurred, including assumptions and estimates used to determine the fair value of our reporting units. If the carrying value of our reporting unit exceeds the fair value of our reporting unit, we would calculate the implied fair value as compared to the carrying value to determine the appropriate impairment charge, if any. There were no impairment charges for the three or six months ended July 2, 2021 and June 30, 2020.
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| Revenue Recognition | Revenue Recognition
We adopted ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”), using the modified retrospective approach to all contracts that were not completed as of the beginning of fiscal year 2019. We utilize the portfolio method practical expedient, which allows companies to account for multiple contracts as a portfolio, instead of accounting for them on a contract by contract basis (commonly known as the contract method). For our time and materials contracts, we apply the as-invoiced practical expedient, which permits us to recognize revenue as the right to invoice for services performed. The new standard did not materially affect our consolidated net income, financial position, or cash flows.
Below is a description of the basic types of contracts from which the Company may earn revenue:
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| Time and Materials Contracts | Time and Materials Contracts
Under the time and materials (“T&M”) arrangements, contract fees are based upon time and materials incurred. The contracts may be structured as basic time and materials, cost plus a margin or time and materials subject to a maximum contract value (the “ceiling”). Due to the potential limitation of the contract’s ceiling, the economic factors of the contracts subject to a ceiling differ from the economic factors of basic T&M and cost plus contracts.
The majority of the Company’s contracts are for projects where it bills the client monthly at hourly billing or unit rates. The billing rates are determined by contract terms. Under cost plus contracts, the Company charges its clients for contract related costs at cost, an agreed upon overhead rate plus a fixed fee or rate.
Under time and materials contracts with a ceiling, the Company charges the clients for time and materials based upon the work performed however there is a ceiling or a not to exceed value. There are often instances that a contract is modified to extend the contract value past the original or amended ceiling. As the consideration is variable depending on the outcome of the contract renegotiation, the Company will estimate the total contract price in accordance with the variable consideration guidelines and will only include consideration that it expects to receive from the customer. When the Company is reaching the ceiling, the contract will be renegotiated, or we cease work when the maximum contract value is reached. The Company will continue to work if it is probable that the contract will be extended. The Company is only entitled to consideration for the work it has performed, and the ceiling amount is not a guaranteed contract value.
The Company earned approximately 90% of its revenues under T&M contracts during the three and six months ended July 2, 2021 and June 30, 2020, respectively.
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| Fixed Price Contracts | Fixed Price Contracts
Under fixed price contracts, the Company’s clients pay an agreed amount negotiated in advance for a specified scope of work. The Company is guaranteed to receive the consideration to the extent that the Company delivers under the contract. The Company assesses contracts quarterly and may recognize any expected future loss before actually incurring the loss. When the Company is expecting to reach the total consideration under the contract, the Company will begin to negotiate a change order.
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| Change Orders and Claims | Change Orders and Claims
Change orders are modifications of an original contract that effectively change the provisions of the contract without adding new provisions. Either the Company or its client may initiate change orders. They may include changes in specifications or design, manner of performance, facilities, equipment, materials, sites and period of completion of the work. Management evaluates when a change order is probable based upon its experience in negotiating change orders, the customer’s written approval of such changes or separate documentation of change order costs that are identifiable. Change orders may take time to be formally documented and terms of such change orders are agreed with the client before the work is performed. Sometimes circumstances require that work progresses before an agreement is reached with the client. If the Company is having difficulties in renegotiating the change order, the Company will stop work if possible, record all costs incurred to date, and determine, on a project by project basis, the appropriate final revenue recognition.
Claims are amounts in excess of the agreed contract price that the Company seeks to collect from its clients or others for client-caused delays, errors in specifications and designs, contract terminations, change orders that are either in dispute or are unapproved as to both scope and price, or other causes of unanticipated additional contract costs. Costs related to change orders and claims are recognized when they are incurred. The Company evaluates claims on an individual basis and recognizes revenue it believes is probable to collect.
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| Performance Obligations | Performance Obligations
The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, is not distinct. However, in some instances, we may also promise to provide distinct goods or services within a contract, resulting in multiple performance obligations. For contracts with multiple performance obligations, we allocate the contract transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service in the contract. Typically, we sell a customer a specific service and use the expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.
The Company’s performance obligations are satisfied as work progresses or at a point in time. Revenue on our cost-reimbursable contracts is recognized over time using direct costs incurred or direct costs incurred to date as compared to the estimated total direct costs for performance obligations because it best depicts the transfer of control to the customer. Contract costs include labor, subcontractors’ costs and other direct costs.
Gross revenue from services transferred to customers at a point in time is recognized when the customer obtains control of the asset, which is generally upon delivery and acceptance by the customer of the reports and/or analysis performed.
As of July 2, 2021 and December 31, 2020, we had $751 million and $628 million of remaining performance obligations, or backlog, respectively, of which $451 million and $377 million, respectively, or 60% is expected to be recognized over the next 12 months and the majority of the balance over the next 24 months. Project cancellations or scope adjustments may occur, from time to time, with respect to contracts reflected in backlog. Most of our government contracts are multi-year contracts for which funding is appropriated on an annual basis, therefore backlog includes only those amounts that have been funded and authorized and does not reflect the full amounts we may receive over the term of such contracts. In the case of non-government contracts, backlog includes future revenue at contract rates, excluding contract renewals or extensions that are at the discretion of the client. For contracts with a not-to-exceed maximum amount, we include revenue from such contracts in backlog to the extent of the remaining estimated amount. Our backlog for the period beyond 12 months may be subject to variation from year-to-year as existing contracts are completed, delayed, or renewed or new contracts are awarded, delayed, or cancelled. As a result, we believe that year-to-year comparisons of the portion of backlog expected to be performed more than one year in the future are difficult to assess and not necessarily indicative of future revenues or profitability.
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| Contract Assets and Liabilities | Contract Assets and Liabilities
The timing of revenue recognition, billings and cash collections results in billed receivables, unbilled receivables (contract assets), and billings in excess of costs and estimated earnings on uncompleted contracts (contract liabilities). Billed and unbilled receivables are reflected on the face of the Consolidated Balance Sheet. The liability “Billings in excess of costs and estimated earnings on uncompleted contracts” represents billings in excess of revenues recognized on these contracts as of the reporting date and is reported within “other current liabilities” on the Consolidated Balance Sheet. This liability was $0 as of July 2, 2021 and December 31, 2020. Revenue recognized that was included in the contract liability balance at the beginning of the fiscal year was $0 and $32 thousand for the three months ended July 2, 2021 and June 30, 2020, respectively, and $0 and $64 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively.
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| U.S. Federal Acquisition Regulations | U.S. Federal Acquisition Regulations
The Company has contracts with the U.S. federal, state and local governments that contain provisions requiring compliance with the U.S. Federal Acquisition Regulations (“FAR”). These regulations are generally applicable to all of its contracts that are directly funded or partially funded by pass through funds from the U.S. federal government. These provisions limit the recovery of certain specified indirect costs on contracts subject to the FAR. Cost-plus contracts covered by the FAR provide for upward or downward adjustments if actual recoverable costs differ from the estimate billed under forward pricing arrangements. Most of the Company’s government contracts are subject to termination at the convenience of the government. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.
Government contracts that are subject to the FAR are subject to audits performed by the Defense Contract Audit Agency (“DCAA”) and many other state governmental agencies. As such, the Company’s overhead rates, cost proposals, incurred government contract costs and internal control systems are subject to review. During the course of its audits, the DCAA or a state agency may question incurred costs if it believes the Company has accounted for such costs in a manner inconsistent with the requirements of the FAR or Cost Accounting Standards and recommend that the applicable contracting officer disallow such costs. Historically, the Company has not incurred significant disallowed costs because of such audits. However, the Company can provide no assurance that the rate audits will not result in material disallowances of incurred costs in the future. The Company provides for a refund liability to the extent that it expects to refund some of the consideration received from a customer. The liability at July 2, 2021 and December 31, 2020 was $0, respectively.
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| Disaggregation of Revenues | Disaggregation of Revenues
As described further in Note 2 – Summary of Significant Accounting Policies, the Company has one operating segment, Engineering, Testing, Inspection and Other Consultative Services, which reflects how the Company is being managed. The Company provides public and private sector clients with comprehensive support in managing large-scale infrastructure improvement programs including engineering, design, program development/management, compliance services, acquisition and project control services, as well as construction engineering and inspection and materials testing. Approximately 50% of the Company’s revenues in each reporting period presented are derived from federal, state and local government related projects.
All services performed by the Company are rendered in the United States and its territories via two contract types, time and materials or fixed price contracts. The Company derives 90% of its revenues from T&M contracts, the remainder are earned under fixed price contracts.
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| Cash Flows | Cash Flows
The Company has presented its cash flows using the indirect method and considers all highly liquid investments with original maturities of three months or less at acquisition to be cash equivalents. At times, our cash and cash equivalents may be uninsured or in deposit accounts that exceed the Federal Deposit Insurance limit.
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| Comprehensive Income | Comprehensive Income
There are no other components of comprehensive income other than net income and the provision for non-controlling interest associated with Holdings Units.
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| Use of Estimates | Use of Estimates
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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
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| Concentration of Credit Risk | Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of trade accounts receivable. These risks primarily relate to the concentration of customers who are large, governmental customers and regional governmental customers. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurements (“ASC 820”), establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
The three levels of the fair value hierarchy under ASC 820 are described as follows:
Level 1 — Inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that management has the ability to access.
Level 2 — Inputs utilize data points that are observable such as quoted prices, interest rates and yield curves.
Level 3 — Inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The Company has various financial instruments, including cash and cash equivalents, accounts receivable and payable, accrued liabilities, and long-term debt. The carrying value of the Company’s cash and cash equivalents, accounts receivable, and payable and accrued liabilities approximate their fair value due to their short-term nature. The Company believes that the aggregate fair values of its long-term debt approximates their carrying amounts as the interest rates on the debt are either reset on a frequent basis or reflect current market rates.
The Company applies the provisions of ASC 805, Business Combinations, in the accounting for its acquisitions, which requires recognition of the assets acquired and the liabilities assumed at their acquisition date fair values, separately from goodwill. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of the tangible and identifiable intangible assets acquired and liabilities assumed. The allocation of the purchase price to identifiable intangible assets is based on valuations performed to determine the fair values of such assets as of the acquisition dates. Depending on the size and complexity of the acquisition, the Company may engage a third-party independent valuation specialist to assist in management’s determination of fair values of tangible and intangible assets acquired and liabilities assumed. The fair values of earn-out arrangements are included as part of the purchase price of the acquired companies on their respective acquisition dates. The Company estimates the fair value of contingent earn-out payments as part of the initial purchase price and records the estimated fair value of contingent consideration as a liability on the Consolidated Balance Sheet. Changes in the estimated fair value of contingent earnout payments are included in operating expenses in the accompanying Consolidated Statements of Operations.
Several factors are considered when determining contingent consideration liabilities as part of the purchase price, including whether (i) the valuation of the acquisitions is not supported solely by the initial consideration paid, and the contingent earn-out formula is a critical and material component of the valuation approach to determining the purchase price; and (ii) the former owners of the acquired companies that remain as key employees receive compensation other than contingent earn-out payments at a reasonable level compared with the compensation of other key employees. The contingent earn-out payments are not affected by employment termination.
The Company reviews and re-assesses the estimated fair value of contingent consideration liabilities on a quarterly basis, and the updated fair value could differ materially from the initial estimates. The Company measures contingent consideration recognized in connection with business combinations at fair value on a recurring basis using significant unobservable inputs classified as Level 3 inputs. The Company uses a probability-weighted discounted cash flow approach as a valuation technique to determine the fair value of the contingent consideration liabilities on the acquisition date and at each reporting period. The significant unobservable inputs used in the fair value measurements are projections over the earn-out period, and the probability outcome percentages that are assigned to each scenario. Significant increases or decreases to either of these inputs in isolation could result in a significantly higher or lower liability with a higher liability capped by the contractual maximum of the contingent consideration liabilities. Ultimately, the liability will be equivalent to the amount paid, and the difference between the fair value estimate on the acquisition date and amount paid will be recorded in earnings. The Company records the current portion of contingent consideration liability within other current liabilities and the noncurrent portion of contingent consideration liability within other long-term liabilities within its Consolidated Balance Sheet.
The following table summarizes the changes in the fair value of estimated contingent consideration:
The Company may at its discretion settle the contingent consideration with cash, common shares or a combination of cash and common shares. During the three months ended July 2, 2021, we settled a portion of the $3.7 million payment with 192,090 shares of Class A common stock.
The Company incurred a non-cash charge of $2.8 million during the three months ended July 2, 2021 to reflect the change in fair value of the contingent consideration liability relating to an acquisition that had finalized its purchase price allocation.
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| Equity Based Compensation | Equity Based Compensation
The Company recognizes the cost of services received in an equity based payment transaction with an employee as services are received and records either a corresponding increase in equity or a liability, depending on whether the instruments granted satisfy the equity or liability classification criteria.
The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that the Company is obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation cost for an award classified as an equity instrument is recognized ratably over the requisite service period, including an estimate of forfeitures. The requisite service period is the period during which an employee is required to provide service in exchange for an award.
Consistent with the change in control provisions within the applicable agreements, the Company fully expensed the remaining unamortized value of the stock awards that vested upon the completion of the Atlas Business Combination during the quarter ended March 31, 2020.
The Company granted restricted stock units (“RSUs”) during the second quarters of 2021 and 2020 as a means to reward and retain selected management personnel. Please refer to Note 10 – Equity Based Compensation for further information.
An additional grant of RSUs was made to a member of the Company’s leadership team on December 31, 2020.
During the second quarter of 2021, the Company granted certain members of its leadership team performance share units (“PSUs”) with both performance and market conditions that may affect the ultimate vesting of shares and also granted to its Board of Directors RSUs during the first quarter of 2021.
Equity compensation was $805 thousand and $190 thousand for the three months ended July 2, 2021 and June 30, 2020, respectively, and $1,251 thousand and $10,035 thousand for the six months ended July 2, 2021 and June 30, 2020, respectively.
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| Income Taxes | Income Taxes
The Company accounts for income taxes in accordance with the FASB ASC Topic 740, Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections, scheduled reversals of deferred tax amounts, availability of carrybacks, and potential tax planning strategies. Based on our assessment, we have concluded that a portion of the deferred tax assets will not be realized.
According to the authoritative guidance on accounting for uncertainty in income taxes, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. This guidance also addresses de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and disclosure requirements for uncertain tax positions.
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| Redeemable Preferred Stock | Redeemable Preferred Stock
On February 14, 2020, in connection with the consummation of the Atlas Business Combination, Holdings and GSO COF III AIV-2 LP (“GSO AIV-2”) entered into a subscription agreement, dated February 14, 2020 (the “Subscription Agreement”) pursuant to which, GSO AIV-2 purchased 145,000 units of a new class of Series A Senior Preferred Units of Holdings (the “Preferred Units”) at a price per Preferred Unit of $978.21 for an aggregate cash purchase price of $141,840,450, which represented a 2.179% original issue discount on the Preferred Units (such purchase, the “GSO Placement”).
The GSO Placement was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder.
The Preferred Units ranked senior in priority to all other existing and future equity securities of Holdings with respect to liquidation preference and distribution rights.
The Preferred Units had a liquidation preference of $1,000 per Preferred Unit (the “Liquidation Preference”).
Subject to any limitations set forth in the Atlas Credit Agreement (as defined in Note 7 – Long-Term Debt), the Preferred Units were paid a dividend of 5% per annum, plus either an additional 6.25% per annum in cash or 7.25% per annum in additional Preferred Units, at Holdings’ option, payable quarterly in arrears.
If a cash dividend was not able to be made because of a limitation under the Atlas Credit Agreement, then the Liquidation Preference with respect to any Preferred Unit would have increased to 3.5625% in any quarter until a cash dividend could be made.
The Preferred Units did not possess voting rights and were not convertible into any other security of Holdings.
Holdings was permitted to redeem the Preferred Units beginning on the second anniversary of the Closing Date at a price of 103% of the Liquidation Preference (the “Redemption Premium”), and on the third anniversary of their issuance at the Liquidation Preference, in each case plus accrued and unpaid dividends. The Preferred Units could only be redeemed by Holdings within the first two years of the Closing Date upon a change of control as described below, in which case such Preferred Units would have been redeemed at a customary make-whole amount as if the Preferred Units were redeemed on the second anniversary.
Subject to the terms of Holdings’ and its subsidiaries’ senior credit agreements, Holdings was required to redeem the Preferred Units at the Redemption Premium, plus accrued and unpaid dividends, in the event of (i) a change of control, (ii) sales or other dispositions of all or substantially all of Holdings’ assets and (iii) the insolvency or bankruptcy of Holdings or any of its material subsidiaries.
Finally, holders of the Preferred Units were permitted to require Holdings to redeem their Preferred Units at the Liquidation Preference, plus accrued and unpaid dividends, beginning on the eighth anniversary of the Closing Date, subject to certain customary limitations.
The Preferred Units were redeemed in full at par without a premium on February 25, 2021.
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| Segment | Segment
The Company has one operating and reporting segment, Engineering, Testing, Inspection and Other Consultative Services. This financial information is reviewed regularly by our chief operating decision maker to assess performance and make decisions regarding the allocation of resources and is equivalent to our consolidated information. Our chief operating decision maker does not review below the consolidated level. Our chief operating decision maker is our Chief Executive Officer.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In February 2016, FASB issued ASU 2016-02, Leases. ASU 2016-02 requires lessees to recognize, in the balance sheet, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset over the lease term. The amendments in this accounting standard update are to be applied using a modified retrospective approach and are effective for fiscal years beginning after December 15, 2021. The Company is currently evaluating the requirements of ASU 2016-02 and its impact on the consolidated and combined financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments (Topic 326) - Credit Losses: Measurement of Credit Losses on Financial Instruments, which provides guidance regarding the measurement of credit losses on financial instruments. The new guidance replaces the incurred loss impairment methodology in the current guidance with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This ASU will be effective for the Company commencing after December 15, 2022. The Company is in the process of assessing the impact of this ASU on our consolidated financial statements and disclosures. |
Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of changes in the fair value of estimated contingent consideration |
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| Schedule of redeem their preferred units at the liquidation |
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Business Acquisitions (Tables) |
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| Business Acquisitions [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair values of the assets acquired and liabilities |
*The above purchase price allocation is tentative and preliminary and subject to further updates as we complete the purchase price allocation. |
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Property and Equipment, Net (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 02, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
|
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| Schedule of property and equipment under capital leases |
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| Schedule of minimum lease payments |
|
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Goodwill and Intangibles (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 02, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of goodwill |
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| Schedule of intangible assets |
|
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| Schedule of amortization of intangible assets |
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Long-Term Debt (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of long term debt |
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| Schedule of long-term principal payments |
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Shareholders' Equity (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of outstanding stock and warrants |
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Loss Per Share (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 02, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of (loss) per share |
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| Schedule of anti-dilutive for the periods |
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Commitments and Contingencies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 02, 2021 | ||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
| Schedule of future minimum payments under non-cancelable operating leases |
|
Organization and Basis of Presentation (Details) $ in Millions |
6 Months Ended |
|---|---|
|
Jul. 02, 2021
USD ($)
| |
| Organization and Basis of Presentation [Line Items] | |
| Services provided, description | Services are provided throughout the United States and its territories to a broad base of clients, with no single client representing 10% or more of our revenues for either the three or six months ended July 2, 2021 or June 30, 2020. Services are rendered primarily on a time and materials and cost-plus basis with approximately 90% of our contracts on that basis and the remainder represented by firm fixed price contracts. |
| Interest payments and preferred stock dividends amount | $ 7.5 |
Summary of Significant Accounting Policies (Details) - Schedule of changes in the fair value of estimated contingent consideration $ in Thousands |
6 Months Ended |
|---|---|
|
Jul. 02, 2021
USD ($)
| |
| Schedule of changes in the fair value of estimated contingent consideration [Abstract] | |
| Contingent consideration, as of December 31, 2020 | $ 18,200 |
| Additions for acquisitions | 9,993 |
| Adjustment toliability for changes in fair value | (6,538) |
| Reduction of liability for payment made | (3,706) |
| Total contingent consideration, as of July 2, 2021 | 17,949 |
| Current portion of contingent consideration | (8,378) |
| Contingent consideration, less current portion | $ 9,571 |
Summary of Significant Accounting Policies (Details) - Schedule of redeem their preferred units at the liquidation $ in Thousands |
6 Months Ended |
|---|---|
|
Jul. 02, 2021
USD ($)
| |
| Schedule of redeem their preferred units at the liquidation [Abstract] | |
| Redeemable preferred stock, as of December 31, 2020 | $ 151,391 |
| Accrued paid in-kind dividends | 1,718 |
| Accretion of discount | 3,077 |
| Redemption | (156,186) |
| Redeemable preferred stock, as of July 2, 2021 |
Atlas Business Combination (Details) $ / shares in Units, $ in Millions |
6 Months Ended |
|---|---|
|
Jul. 02, 2021
USD ($)
$ / shares
shares
| |
| Acquisition of Atlas Intermediate Subsidiaries [Member] | |
| Atlas Business Combination (Details) [Line Items] | |
| Business combination, description | the Company completed the acquisition of Atlas Intermediate and its subsidiaries and in return the Atlas Intermediate members: (i) received 24.0 million shares of Class B common stock in the Company, (ii) repaid the $171.5 million of outstanding debt and interest accrued and due lender, (iii) paid $10.9 million of Seller incurred acquisition-related costs, (iv) settled $1.1 million of contingent consideration associated with the SCST, Inc. acquisition and (v) paid $2.2 million of change in control payments due certain executives. This was paid for with: (i) $20.7 million of cash raised from special purpose acquisition company (“SPAC”) shareholders and the private placement discussed herein, (ii) the issuance of redeemable preferred stock in the amount of $141.8 million and (iii) the issuance of new debt in the amount of $271.0 million as discussed in Note 7 – Long-Term Debt. |
| Class A Common Stock [Member] | Private Placement [Member] | |
| Atlas Business Combination (Details) [Line Items] | |
| Aggregate of shares | shares | 1,000,000 |
| Purchase price per share | $ / shares | $ 10.23 |
| Aggregate consideration | $ | $ 10.2 |
Business Acquisitions (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | 6 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|---|
Jul. 01, 2021 |
Apr. 14, 2021 |
Nov. 30, 2020 |
Sep. 30, 2020 |
Feb. 29, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Business Acquisitions (Details) [Line Items] | |||||||||
| Acquisition, description | The aggregate purchase price consideration paid in connection with this stock acquisition was $10.7 million in cash, subject to customary closing working capital adjustments plus an earnout of up to $12.0 million contingent upon the achievement of certain financial targets to be paid upon the first, second and third anniversaries of the closing. | ||||||||
| Acquisition costs | $ 1.4 | $ 0.6 | |||||||
| Business Acquisition [Member] | |||||||||
| Business Acquisitions (Details) [Line Items] | |||||||||
| Business acquisition description | the Company acquired AltaVista Solutions (“Alta Vista”), a provider of testing and inspection services primarily to infrastructure clients. Alta Vista is headquartered in Oakland, California and has offices in California and New York. The purchase agreement called for the Company to pay Alta Vista up to $15.1 million in the form of cash and stock consideration. The Company issued 776,197 shares of Class B common stock to the former owners of Alta Vista, which represented $7.0 million of the total consideration paid. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies. | ||||||||
| Acquisition costs | $ 0.7 | $ 0.3 | |||||||
| WesTest LLC [Member] | |||||||||
| Business Acquisitions (Details) [Line Items] | |||||||||
| Business acquisition description | the Company acquired Atlantic Engineering Laboratories, Inc. and Atlantic Engineering Laboratories of New York, Inc. (collectively, “AEL”) for cash and an amount of equity consideration totalling $24.5 million. The Company issued 738,566 shares of Class A common stock to the former owner of AEL, which represented $7.5 million of the total consideration paid. AEL is a materials testing and inspection firm based in Avenel, New Jersey, and provides steel, concrete, soil and other testing and inspection services to a diverse mix of public and private clients primarily in New York and New Jersey. AEL added approximately 290 professionals to the Company’s workforce and is expected to strengthen the Company’s materials testing and inspection services in the Northeast. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies. | the Company acquired WesTest LLC (“WesTest”), a testing and engineering services provider with operations in Colorado and Wyoming. WesTest, headquartered in Lakewood, Colorado, received consideration of $4.1 million in the form of cash and stock consideration. The Company issued 285,115 shares of Class A common stock to the former owner of WesTest, which represented $1.6 million of the total consideration paid. Total consideration may also be increased or decreased based on results in future years. Final value will be subject to the resolution of certain contingencies. | |||||||
| O’Neill Services Group [Member] | |||||||||
| Business Acquisitions (Details) [Line Items] | |||||||||
| Business acquisition description | the Company acquired O’Neill Services Group (“O’Neill), a quality assurance and environmental services firm that services clients throughout the Pacific Northwest. O’Neill, headquartered in Redmond, Washington, employs 90 people and received $24.4 million in the form of cash and stock consideration. The Company issued 653,728 shares of Class A common stock which represented $6.5 million of the total consideration received. Total consideration may also be increased or decreased based on results in future years. | ||||||||
Property and Equipment, Net (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Property and Equipment, Net (Details) [Line Items] | ||||
| Capital lease average lease term | 5 years | |||
| Depreciation expense | $ 1.5 | $ 1.5 | $ 2.9 | $ 2.9 |
| Minimum [Member] | ||||
| Property and Equipment, Net (Details) [Line Items] | ||||
| Useful lives range | 3 years | |||
| Maximum [Member] | ||||
| Property and Equipment, Net (Details) [Line Items] | ||||
| Useful lives range | 10 years | |||
Property and Equipment, Net (Details) - Schedule of property and equipment - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jul. 02, 2021 |
Dec. 31, 2020 |
|
| Property, Plant and Equipment [Line Items] | ||
| Accumulated depreciation and amortization | $ (54,986) | $ (47,482) |
| Property and equipment, net | 13,304 | 14,134 |
| Furniture and fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 3,869 | 3,492 |
| Equipment and vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 38,525 | 32,797 |
| Computers [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 20,050 | $ 19,649 |
| Average life | 3 years | |
| Leasehold improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | 5,696 | $ 5,548 |
| Construction in Progress [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment, gross | $ 150 | $ 130 |
| Minimum [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 3 years | |
| Minimum [Member] | Furniture and fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 3 years | |
| Minimum [Member] | Equipment and vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 3 years | |
| Minimum [Member] | Leasehold improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 3 years | |
| Maximum [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 10 years | |
| Maximum [Member] | Furniture and fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 5 years | |
| Maximum [Member] | Equipment and vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 10 years | |
| Maximum [Member] | Leasehold improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Average life | 5 years | |
Property and Equipment, Net (Details) - Schedule of property and equipment under capital leases - USD ($) |
Jul. 02, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of property and equipment under capital leases [Abstract] | ||
| Computer equipment | $ 1,583 | $ 1,578 |
| Less accumulated depreciation | (1,277) | (1,021) |
| Property and equipment under capital leases | $ 306 | $ 557 |
Property and Equipment, Net (Details) - Schedule of minimum lease payments |
Jul. 02, 2021
USD ($)
|
|---|---|
| Schedule of minimum lease payments [Abstract] | |
| 2021 (six months remaining) | $ 183 |
| 2022 | 365 |
| 2023 | 281 |
| 2024 | 99 |
| 2025 | 19 |
| Thereafter | |
| Total minimum lease payments | $ 947 |
Goodwill and Intangibles (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization expense | $ 3.6 | $ 3.8 | $ 6.7 | $ 7.5 |
Goodwill and Intangibles (Details) - Schedule of goodwill $ in Thousands |
6 Months Ended |
|---|---|
|
Jul. 02, 2021
USD ($)
| |
| Schedule of goodwill [Abstract] | |
| Balance as of December 31, 2020 | $ 109,001 |
| Acquisitions | 11,120 |
| Disposals | |
| Measurement period adjustments | (7,966) |
| Balance as of July 2, 2021 | $ 112,155 |
Goodwill and Intangibles (Details) - Schedule of intangible assets - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jul. 02, 2021 |
Dec. 31, 2020 |
|
| Definite life intangible assets: | ||
| Gross amount | $ 176,097 | $ 139,546 |
| Accumulated amortization | (60,274) | (53,538) |
| Net book value | 115,823 | 86,008 |
| Customer relationships [Member] | ||
| Definite life intangible assets: | ||
| Gross amount | 149,917 | 117,185 |
| Accumulated amortization | (40,062) | (34,214) |
| Net book value | $ 109,855 | 82,971 |
| Remaining useful life (in years) | 11 years | |
| Tradenames [Member] | ||
| Definite life intangible assets: | ||
| Gross amount | $ 25,580 | 21,761 |
| Accumulated amortization | (19,638) | (18,759) |
| Net book value | $ 5,942 | 3,002 |
| Remaining useful life (in years) | 2 years 6 months | |
| Non-competes [Member] | ||
| Definite life intangible assets: | ||
| Gross amount | $ 600 | 600 |
| Accumulated amortization | (574) | (565) |
| Net book value | $ 26 | $ 35 |
| Remaining useful life (in years) | 4 months 24 days |
Goodwill and Intangibles (Details) - Schedule of amortization of intangible assets - USD ($) $ in Thousands |
Jul. 02, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of amortization of intangible assets [Abstract] | ||
| 2021 (six months remaining) | $ 7,954 | |
| 2022 | 16,831 | |
| 2023 | 16,309 | |
| 2024 | 15,069 | |
| 2025 | 14,494 | |
| Thereafter | 45,166 | |
| Amortization of intangible assets | $ 115,823 | $ 86,008 |
Long-Term Debt (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|---|
Feb. 25, 2021 |
Apr. 30, 2019 |
Mar. 31, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
Mar. 31, 2019 |
|
| Long-Term Debt (Details) [Line Items] | ||||||
| Repayment of existing debt | $ 294,463 | $ 189,657 | ||||
| Credit agreement, description | On February 25, 2021, Atlas Intermediate, as the borrower, entered into two new credit facilities consisting of (i) a $432.0 million senior secured term loan at closing and, subject to the satisfaction of certain terms and conditions, a committed delayed draw term loan facility to be used for future acquisitions in an aggregate principal amount of up to $75.0 million and an uncommitted incremental term loan facility that may be incurred after closing (the “Term Loan”) pursuant to a Credit Agreement dated February 25, 2021, by and among Holdings, Atlas Intermediate, Wilmington Trust, National Association, as administrative agent and collateral agent, and certain lenders thereto, including certain Blackstone entities, which may include, Blackstone Alternative Credit Advisors LP, and its managed funds and accounts, and its affiliates, Blackstone Holdings Finance Co. | The Term Loan Agreement contains a financial covenant which requires Holdings, Atlas Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Total Net Leverage Ratio (as defined in each Credit Agreement) tested on a quarterly basis that does not exceed (i) 8.25 to 1.00 with respect to the fiscal quarters ending on April 2, 2021 and July 2, 2021, (ii) 8.00 to 1.00 for the fiscal quarters ending October 1, 2021 and December 31, 2021, (iii) 7.50 to 1.00 for the fiscal quarters ending April 1, 2022 and July 1, 2022, (iv) 7.25 to 1.00 for the fiscal quarters ending September 30, 2022 and December 30, 2022, (v) 7.00 to 1.00 for the fiscal quarters ending March 31, 2023 and June 30, 2023, (vi) 6.75 to 1.00 for the fiscal quarters ending September 29, 2023 and December 29, 2023, and (vii) 6.50 to 1.00 for March 29, 2024 and each fiscal quarter ending thereafter. | ||||
| Term loan agreement, description | (ii) a $40.0 million senior secured revolver which aggregate principal amount may be increased, subject to the satisfaction of certain terms and conditions, including obtaining commitments therefor, by up to $20,000,000 (the “Revolver”) pursuant to the Credit Agreement dated February 25, 2021, by and among Holdings, Intermediate, JPMorgan Chase Bank, N.A., as administrative agent, swingline lender, issuing bank, lender, sole bookrunner and sole lead arranger (the “ABL Revolver Agreement,” and together with the Term Loan Agreement, collectively the “Credit Agreements”). | (i) the Adjusted LIBO Rate (as defined in the Term Loan Agreement), plus 5.50%, or (ii) an Alternate Base Rate (as defined in the Term Loan Agreement), plus 4.50%. In addition, the term loan requires an additional 2.0% interest that can be made at the option of the Company in cash or payment-in-kind (PIK). The interest rates under the ABL Revolver Agreement will be equal to either (i) the Adjusted LIBO Rate (as defined in the ABL Revolver Agreement), plus 2.50%, or (ii) the ABR (as defined in the ABL Revolver Agreement), plus 1.50%. | ||||
| Revolver agreement, description | The ABL Revolver Agreement contains a “springing” financial covenant which requires Holdings, Intermediate and all of their direct and indirect subsidiaries on a consolidated basis to maintain a Fixed Charge Coverage Ratio (as defined in the ABL Revolver Agreement) of no less than 1.10 to 1.00 when the outstanding principal amount of loans under the Revolver exceeds $0 or the aggregate exposure for letters of credit under the Revolver exceeds $5 million. | |||||
| Deferred loan acquisition costs | $ 15,200 | |||||
| Atlas [Member] | ||||||
| Long-Term Debt (Details) [Line Items] | ||||||
| Business combination, description | The Atlas Credit Agreement called for a term loan (the “Term Loan”) in the amount of $281.0 million and revolving letter of credit (the “Revolver”) in the amount of $40.0 million of which $24.0 million was drawn upon through December 31, 2020. The term loan proceeds were used to repay the existing Atlas Credit Facility in the amount of $171.0 million and partially fund the Atlas Business Combination and the LONG acquisition. | |||||
| ATC [Member] | ||||||
| Long-Term Debt (Details) [Line Items] | ||||||
| Term loan | $ 145,000 | |||||
| Revolving credit facility | 50,000 | |||||
| Credit facility funded at closing | $ 31,800 | |||||
| Repayment of existing debt | $ 123,900 | |||||
| Shareholder distribution | $ 52,800 | |||||
| Credit facility interest terms, description | The Atlas Credit Facility was secured by assets of Atlas Intermediate. The Atlas Credit Facility required quarterly principal payments of $2.719 million through March 31, 2023, and then $3.625 million until the final maturity in March 2024, and bore interest at an annual rate of LIBOR plus a margin ranging from 275 to 425 basis points determined by the Company’s Consolidated Leverage Ratio, as defined in the Atlas Credit Facility. For the interest payment made in the quarter ended December 31, 2019, the applicable margin was 375 basis points and the total interest rate was 5.50%. | |||||
| Credit agreement, description | the terms of the Atlas Credit Agreement were modified to reduce the maturity of the Term Loan by one year to February 14, 2026 from February 14, 2027. The interest rate for the Term Loan was increased to (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 6.25%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 5.25%. The interest rate for the Revolver was increased to (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 5.0%, or (ii) an Alternate Base Rate as defined in the Credit Agreement, plus 4.0%. The modification also increased the rate of amortization applicable to the Term Loan to 5.0% per annum (commencing on June 30, 2020). | Under the terms of the Atlas Credit Agreement, the Term Loan and Revolver were set to mature on February 14, 2027 and February 14, 2025, respectively. Interest was payable monthly or at the end of the applicable interest period in arrears on any outstanding borrowings. The interest rates under the Atlas Credit Agreement were equal to either (i) Adjusted LIBOR as defined in the Atlas Credit Agreement, plus 4.75%, or (ii) an Alternate Base Rate as defined in the Atlas Credit Agreement, plus 3.75%. | ||||
| Long term debt, description | The 2021 Atlas Credit agreement requires annual amortization of principal and interest paid in kind amounts of 1% or 2.5% depending on certain ratios. The Company is currently within the ratio that requires 1% annual amortization. Principal repayments commence during the Company’s second quarter 2022. | |||||
| ETS [Member] | ||||||
| Long-Term Debt (Details) [Line Items] | ||||||
| Maturity date description | The modifications to the Atlas Credit Agreement resulted from the exercise of the market-flex rights by the lead arranger in connection with the syndication process, which, in addition, required the payment of an upfront fee in an amount equal to 2% of the currently outstanding Term Loans, which was paid during April 2020. | |||||
| Initial Term Loan [Member] | ||||||
| Long-Term Debt (Details) [Line Items] | ||||||
| Mature date | Feb. 25, 2028 | |||||
Long-Term Debt (Details) - Schedule of long term debt - USD ($) $ in Thousands |
Jul. 02, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Schedule of long term debt [Abstract] | ||
| Atlas 2021 credit agreement - term loan | $ 467,000 | |
| Atlas credit agreement - term loan | 270,463 | |
| Atlas 2021 credit agreement – revolving | 17,594 | |
| Atlas credit agreement – revolving | 24,000 | |
| Atlas 2021 credit agreement – PIK | 3,154 | |
| Subtotal | 487,748 | 294,463 |
| Less: Loan costs, net | (8,145) | (15,443) |
| Less current maturities of long-term debt | (14,050) | |
| Long-term debt | $ 479,603 | $ 264,970 |
Long-Term Debt (Details) - Schedule of long-term principal payments $ in Thousands |
Jul. 02, 2021
USD ($)
|
|---|---|
| Schedule of long-term principal payments [Abstract] | |
| 2021 (six months remaining) | |
| 2022 | 3,605 |
| 2023 | 4,849 |
| 2024 | 4,897 |
| 2025 | 4,946 |
| Thereafter | 469,451 |
| Total | $ 487,748 |
Shareholders' Equity (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | 6 Months Ended | 12 Months Ended |
|---|---|---|---|
Oct. 31, 2020 |
Jul. 02, 2021 |
Dec. 31, 2020 |
|
| Shareholders' Equity (Details) [Line Items] | |||
| Public warrants outstanding | 20,000,000 | ||
| Aggregate purchase of shares | 3,750,000 | ||
| Non-controlling interest, description | As of July 2, 2021 and December 31, 2020, the Company ownership and voting structure was comprised of holders of our Class A common stock that participate 100% in the results of Atlas Technical Consultants, Inc. and 88.6% and 36.4%, respectively, in Atlas Intermediate and its subsidiaries and holders of our Class B common stock that participate in the results of Atlas Intermediate and its subsidiaries until their Class B common stock is converted to Class A common stock. | ||
| Common stock participate non-controlling interest percentage | 11.40% | 63.60% | |
| Private Placement Warrants [Member] | |||
| Shareholders' Equity (Details) [Line Items] | |||
| Warrants outstanding per share (in Dollars per share) | $ 1.00 | ||
| Description of warrants for redemption | The Private Placement Warrants were identical to the Public Warrants discussed above, except (i) they would not be redeemable by the Company so long as they were held by the Sponsor and (ii) they were exercisable by the holders on a cashless basis. | ||
| Class A Common Stock [Member] | |||
| Shareholders' Equity (Details) [Line Items] | |||
| Common stock, issued | 32,738,990 | ||
| Common stock, outstanding | 32,738,990 | 12,841,584 | |
| Description of voting rights of common stock | Holders of the Company’s Class A common stock are entitled to one vote for each share. | ||
| Common stock, authorized | 400,000,000 | ||
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | |
| Warrants, description | the Company offered each holder of its outstanding warrants, including the Public Warrants and the Private Placement Warrants, the opportunity to exchange their warrants for shares of the Company’s Class A common stock, par value $0.0001 per share. Each holder was set to receive 0.1665 or 0.185 shares of Class A common stock in exchange for each outstanding warrant tendered by the holder and exchanged pursuant to the terms of the offer. The redemption rate was dependent upon whether the warrant holder tendered their warrants prior to the offer deadline. Warrant holders who tendered their warrants for exchange prior to the expiration of the tender offer period received the 0.185 conversion rate, and any warrant holders who did not tender their warrants by the appropriate deadline received the 0.1665 conversion rate. | ||
| Class A Common Stock [Member] | Public Warrants [Member] | |||
| Shareholders' Equity (Details) [Line Items] | |||
| Description of voting rights of common stock | Public Warrants – In November 2018, the Company consummated its initial public offering of units, each consisting of one share of Class A common stock and one warrant (each a “Public Warrant”). | ||
| Warrants outstanding per share (in Dollars per share) | $ 11.50 | ||
| Description of warrants for redemption | The Public Warrants were set to expire five years after the closing of the Atlas Business Combination or earlier upon redemption or liquidation. The Company had the ability to call the Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant with not less than 30 days’ notice provided to the Public Warrant holders. However, this redemption right could only be exercised if the last sale price of the Class A common stock equaled or exceeded $18.00 per share for any 20 trading days within a 30-day trading period ending three business days before we send the notice of redemption to the Public Warrant holders. | ||
| Class A Common Stock [Member] | Private Placement Warrants [Member] | |||
| Shareholders' Equity (Details) [Line Items] | |||
| Warrants outstanding per share (in Dollars per share) | $ 11.50 | ||
| Private placement shares | 1,000,000 | ||
| Private placement per shares (in Dollars per share) | $ 10.23 | ||
| Aggregate consideration private placement (in Dollars) | $ 10.2 | ||
| Class B Common Stock [Member] | |||
| Shareholders' Equity (Details) [Line Items] | |||
| Common stock, issued | 4,234,323 | ||
| Common stock, outstanding | 4,234,323 | 22,438,828 | |
| Description of voting rights of common stock | Class B common stock was issued to the holders of Holdings Units in Atlas Intermediate in connection with the Atlas Business Combination and are non-economic but entitle the holder to one vote per share. | ||
| Common stock, authorized | 4,234,323 | ||
| Common stock, par value (in Dollars per share) | $ 0.0001 |
Shareholders' Equity (Details) - Schedule of outstanding stock and warrants |
6 Months Ended |
|---|---|
|
Jul. 02, 2021
shares
| |
| Warrants [Member] | |
| Class of Warrant or Right [Line Items] | |
| Beginning Balance, as of December 31, 2020 | |
| Issuances | |
| Transfers to Class A from Class B | |
| Shares Outstanding at July 2, 2021 | |
| Private Placement Warrants [Member] | |
| Class of Warrant or Right [Line Items] | |
| Beginning Balance, as of December 31, 2020 | |
| Issuances | |
| Transfers to Class A from Class B | |
| Shares Outstanding at July 2, 2021 | |
| Class A Common Stock [Member] | |
| Class of Warrant or Right [Line Items] | |
| Beginning Balance, as of December 31, 2020 | 12,841,584 |
| Issuances | 1,692,901 |
| Transfers to Class A from Class B | 18,204,505 |
| Shares Outstanding at July 2, 2021 | 32,738,990 |
| Class B Common Stock [Member] | |
| Class of Warrant or Right [Line Items] | |
| Beginning Balance, as of December 31, 2020 | 22,438,828 |
| Issuances | |
| Transfers to Class A from Class B | (18,204,505) |
| Shares Outstanding at July 2, 2021 | 4,234,323 |
Loss Per Share (Details) - Schedule of (loss) per share - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Numerator: | ||||
| Net (loss) income post Atlas Business Combination | $ (4,783) | $ 2,245 | $ (19,574) | $ (277) |
| Provision for non-controlling interest | 617 | 1,881 | 12,786 | 5,141 |
| Redeemable preferred stock dividends | (4,533) | (5,899) | (6,777) | |
| Net (loss) attributable to Class A common shares - basic and diluted | $ (4,166) | $ (407) | $ (12,687) | $ (1,913) |
| Denominator: | ||||
| Weighted average shares outstanding - basic and diluted (in Shares) | 30,633,366 | 5,767,342 | 22,400,179 | 5,767,342 |
| Net (loss) per Class A common share, basic and diluted (in Dollars per share) | $ (0.14) | $ (0.07) | $ (0.57) | $ (0.33) |
Loss Per Share (Details) - Schedule of anti-dilutive for the periods - shares shares in Thousands |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2020 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 23,750,000 | 23,750,000 |
| Public warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 20,000,000 | 20,000,000 |
| Private placement warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total | 3,750,000 | 3,750,000 |
Equity Based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|---|
Mar. 03, 2021 |
Jan. 02, 2019 |
Jan. 29, 2021 |
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
Dec. 31, 2017 |
Dec. 31, 2020 |
|
| Equity Based Compensation (Details) [Line Items] | |||||||||
| Shares authorized | 1,666 | 1,000 | |||||||
| Shares reserved for issuance | 973.65 | 504 | |||||||
| Vesting term | 4 years | 4 years | |||||||
| Number of restricted stock units | 75,000 | ||||||||
| Grant day fair market value (in Dollars per share) | $ 8.95 | ||||||||
| Vesting terms | The vesting period for these RSUs is equal annual tranches, pro-ratably over three years, and there is no performance requirement attached to the RSUs other than continued service to the Company. | ||||||||
| Shares granted | 158,977 | 158,977 | |||||||
| Vested shares | 11,602 | ||||||||
| Share based compensation, description | the Company granted to its Board of Directors 60,921 RSUs with a one year vesting period and a grant date fair market value of $9.00 per share. There are no performance requirements to these RSUs other than continued service to the Company throughout the one-year vesting period. | ||||||||
| Performance share units | 182,763 | ||||||||
| Performance conditions based upon share price (in Dollars per share) | $ 11.38 | ||||||||
| Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeitures, Weighted Average Grant Date Fair Value (in Dollars per share) | $ 0.03 | ||||||||
| Equity compensation (in Dollars) | $ 805 | $ 190 | $ 1,251 | $ 10,035 | |||||
| Restricted Share Units (RSUs) [Member] | |||||||||
| Equity Based Compensation (Details) [Line Items] | |||||||||
| Number of restricted stock units | 378,353 | 510,136 | |||||||
| Grant day fair market value (in Dollars per share) | $ 11.42 | ||||||||
| Value of RSU (in Dollars) | $ 500 | ||||||||
| Maximum [Member] | |||||||||
| Equity Based Compensation (Details) [Line Items] | |||||||||
| Market conditions percentage | 66.70% | ||||||||
| Minimum [Member] | |||||||||
| Equity Based Compensation (Details) [Line Items] | |||||||||
| Market conditions percentage | 33.30% | ||||||||
| Class A Common Stock [Member] | |||||||||
| Equity Based Compensation (Details) [Line Items] | |||||||||
| Common stock, par value (in Dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||||
Related-Party Transactions (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|---|
Feb. 03, 2020 |
Feb. 14, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Related-Party Transactions (Details) [Line Items] | ||||||
| Lease expenses | $ 244 | $ 160 | $ 400 | $ 322 | ||
| Service fees | 14 | $ 73 | $ 55 | $ 126 | ||
| Aggregate purchase price | $ 16,007 | |||||
| Purchase insurance contracts | $ 1,400 | |||||
| Class A Common Stock [Member] | SCST Stock [Member] | ||||||
| Related-Party Transactions (Details) [Line Items] | ||||||
| Number of shares issued (in Shares) | 105,977 | |||||
| Aggregate purchase price | $ 1,100 | |||||
Employee Benefit Plans (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Employee Benefit Plan [Abstract] | ||||
| Total contributions | $ 1.6 | $ 1.8 | $ 3.4 | $ 3.1 |
Commitments and Contingencies (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Commitments and Contingencies Disclosure [Abstract] | ||||
| Description of leases expire | These leases expire at varying dates through 2025. | |||
| Rental expense | $ 3.3 | $ 3.2 | $ 6.3 | $ 6.3 |
Commitments and Contingencies (Details) - Schedule of future minimum payments under non-cancelable operating leases $ in Thousands |
Jul. 02, 2021
USD ($)
|
|---|---|
| Schedule of future minimum payments under non-cancelable operating leases [Abstract] | |
| 2021 (six months remaining) | $ 7,813 |
| 2022 | 12,685 |
| 2023 | 9,975 |
| 2024 | 5,805 |
| 2025 | 3,143 |
| Thereafter | 3,162 |
| Total | $ 42,583 |
Covid-19 Pandemic (Details) - USD ($) $ in Millions |
Jul. 02, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Covid Nineteen Pandemic Disclosure [Abstract] | ||
| Deferred payments | $ 8.1 | |
| Other long-term liability | $ 4.0 |
Income Taxes (Details) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jul. 02, 2021 |
Jun. 30, 2020 |
Jul. 02, 2021 |
Jun. 30, 2020 |
|
| Income Tax Disclosure [Abstract] | ||||
| Effective tax rate from continuing operations | 3.80% | 0.00% | 1.20% | 0.00% |
| U.S. federal income tax rate | 21.00% | |||