Note 4 - Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable

6 Months Ended

Jul. 04, 2015

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

4.	Accounts Receivable, Transit Accounts Receivable and Transit Accounts Payable

The Company’s accounts receivable are comprised as follows:

	July 4, 2015			January 3, 2015
Billed	$	48,083		$	47,318
Accrued and unbilled		5,363			4,853
Work-in-progress		8,644			8,027
Allowance for doubtful accounts		(1,236	)		(1,011	)

Accounts receivable, net	$	60,854		$	59,187

Unbilled receivables primarily represent revenues earned whereby those services are ready to be billed as of the balance sheet ending date. Work-in-process primarily represents revenues earned under contracts which the Company contractually invoices at future dates.

From time to time, the Company’s Engineering segment enters into agreements to provide, among other things, construction management and engineering services. Pursuant to these agreements, the Company a) may engage subcontractors to provide construction or other services; b) typically earns a fixed percentage of the total project value; and c) assumes no ownership or risks of inventory. Under the terms of the agreements, the Company is typically not required to pay the subcontractor until after the corresponding payment from the Company’s end-client is received. Upon invoicing the end-client on behalf of the subcontractor or staffing agency the Company records this amount simultaneously as both a “transit account receivable” and “transit account payable” as the amount when paid to the Company is due to and generally paid to the subcontractor within a few days. The Company typically does not pay a given transit account payable until the related transit account receivable is collected. The Company’s transit accounts payable generally exceeds the Company’s transit accounts receivable but absolute amounts and spreads fluctuate significantly from quarter to quarter in the normal course of business. The transit accounts receivable was $4.2 million and related transit accounts payable was $5.3 million, for a net liability of $1.1 million, as of July 4, 2015. The transit accounts receivable was $3.8 million and related transit accounts payable was $6.7 million, for a net liability of $2.9 million, as of January 3, 2015.

The Company has a subcontract agreement with Black & McDonald Limited (“B&M”) to provide engineering and procurement services under B&M’s master services agreement with Ontario Power Generation (“OPG”). The Company understands that in October 2014, OPG provided to B&M notice of default and termination of a large purchase order from OPG to B&M with respect to which B&M had engaged several subcontractors, including the Company. B&M notified the Company that it is disputing OPG’s default claim on this purchase order. Subsequently, OPG has disputed the services provided on several other smaller purchase orders. As of July 4, 2015 the Company had outstanding accounts receivable to B&M under disputed purchase orders by OPG of $6.2 million and, including such disputed amounts, a total of $10.0 million of outstanding accounts receivable from B&M. OPG has indicated to the Company that it will not make any further payments to B&M on the projects in dispute. The Company has received notice from B&M that while B&M disputes OPG’s assertion it is in default on any contested purchase order, B&M believes that in the event that it is in default under its agreement with OPG, then the Company may also be in default under its agreement with B&M. The Company does not agree with this assertion.

The Company does not believe that any of its account receivables from B&M have been materially impaired and believes that its accounts receivable from B&M remain collectible, subject to existing reserves. However, it is possible that a protracted dispute between OPG and B&M may impact the Company’s ability to collect its outstanding accounts receivable in a timely manner.