Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In
millions, except share and per share data, or unless otherwise noted)
Revolution Lighting Technologies, Inc., together with its wholly-owned subsidiaries
(Revolution, we, us or our), is a leader in the de
s
igning, manufacturing, marketing, and selling of light-emitting diode (LED) lighting solutions focusing on the industrial,
commercial and government markets in the United States, Canada, and internationally. Through advanced LED technologies, we have created an innovative lighting company that offers a comprehensive advanced product platform of high-quality interior and
exterior LED lamps and fixtures, including signage and control systems. We are uniquely positioned to act as an expert partner, offering full-service lighting solutions through our operating divisions, including Energy Source, Value Lighting,
Tri-State LED, E-Lighting, All-Around Lighting and TNT Energy, to transform lighting into a source of superior energy savings, quality light and well-being.
We generate revenue by selling lighting products for use in the commercial, industrial and government markets, which include vertical markets such as
military, municipal, commercial office, industrial, warehouse, education, hospitality, retail, healthcare, multi-family and signage-media-accent markets. We market and distribute our products globally through networks of distributors, independent
sales agencies and representatives, electrical supply companies, as well as internal marketing and sales forces.
Our operations consist of one reportable
segment for financial reporting purposes: Lighting Products and Solutions (principally LED fixtures and lamps).
Basis of presentation
The accompanying condensed consolidated financial statements are unaudited, and have been prepared pursuant to the rules and regulations of the United States
Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America (U.S. GAAP)
for complete financial statements, and should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016. The Condensed
Consolidated Balance Sheet as of December 31, 2016 was derived from our audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.
In the opinion of management, these accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal
recurring adjustments) necessary to fairly state our financial position, results of operations, and cash flows as of and for the dates and periods presented. The unaudited condensed consolidated financial statements include the accounts of
Revolution Lighting Technologies, Inc. and its wholly owned subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the 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. The most significant estimates relate to valuation of
receivables and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, income taxes and contingencies. Actual results could differ from those estimates.
The results of operations for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the
full year ending on December 31, 2017, or for any other future period. Our business exhibits some seasonality, with net sales being affected by the impact of weather and seasonal demand on construction and installation programs, particularly
during the winter months. Because of these seasonal factors, we have historically experienced increasing revenue as the year progresses.
Sales Tax
Revenue
We record sales tax revenue on a gross basis (included in both Revenue and Cost of sales in the unaudited
Condensed Consolidated Statements of Operations). Revenues from sales taxes were $1.2 million and $1.3 million for the three months ended June 30, 2017 and 2016, respectively, and $1.9 million and $2.2 million for the six months ended
June 30, 2017 and 2016, respectively.
Liquidity and Capital Resources
On January 26, 2017, we amended the Revolving Credit Facility which enabled us to borrow up to $50.0 million on a revolving basis, based upon
specified percentages of eligible receivables and inventory, which matures on January 26, 2020. See Note 7.
8
Our liquidity as of June 30, 2017 and December 31, 2016 was $4.5 million and $1.9 million,
respectively, which consisted of cash and cash equivalents of $0.5 million and $0.9 million, respectively, and additional borrowing capacity under the Revolving Credit Facility of $4.0 million and $1.0 million, respectively.
Historically, our significant shareholder, RVL 1 LLC (RVL), and its affiliates have been a significant source of financing, and they continue to
support our operations.
At June 30, 2017 and December 31, 2016, we had working capital of $57.7 million and $51.3 million,
respectively. We believe we have adequate resources to meet our cash requirements for the foreseeable future.
Recent accounting pronouncements
In July 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-11,
Simplifying the Measurement of Inventory
, which require an entity to measure inventory at the lower of cost and net realizable value. The standard was effective for fiscal years beginning after December 15, 2016. The adoption
of this standard did not have a material effect on our financial statements.
In February 2016, the FASB issued ASU 2016-02,
Leases
,
which requires lessees to recognize a right-of-use asset and a lease liability for virtually all of their leases. The standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. The
adoption of this standard is not expected to have a material effect on our results of operations.
In May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers
, with amendments issued during 2016. This standard is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The
provisions of this ASU are effective with either a full retrospective approach or a modified retrospective approach for periods beginning after December 15, 2017. For revenue recognized from our product sales upon shipment or delivery to
customers, we do not believe that the adoption of this standard will have an impact on our unaudited condensed consolidated financial statements. For revenue recognized using the percentage-of-completion method of accounting, we believe that the
adoption of this standard will have an impact on our consolidated financial statements; however we believe the impact will not be material. We are currently updating our processes and controls necessary for implementing this standard, including the
increased disclosure requirements, and expect to adopt the new guidance beginning in 2018 using the modified retrospective approach.
In March 2016, the
FASB issued ASU 2016-09,
Compensation Stock Compensation
, which is intended to simplify the accounting for share-based payment awards, including accounting for the income tax consequences, the classification of awards as
either equity or liabilities and the classification on the statement of cash flows. The standard was effective for fiscal years beginning after December 15, 2016. The adoption of this standard did not have a material effect on our financial
statements.
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash
Payments,
which provides guidance on eight specific cash flow issues. The provisions of this standard are effective for periods beginning after December 15, 2017. The adoption of this standard is not expected to have a material effect
on our financial statements.
In January 2017, the FASB issued ASU 2017-01,
Business Combinations: Clarifying the Definition of a
Business
, which assists entities with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The provisions of this standard are effective for periods beginning after December 15, 2017. The
adoption of this standard is not expected to have a material impact on our financial statements.
In January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment
, which simplifies the subsequent measure of goodwill by eliminating the second step from the goodwill impairment test. The provisions of this standard are effective for periods
beginning after December 15, 2019. The adoption of this standard is not expected to have a material impact on our financial statements.
In May 2017,
the FASB issued ASU 2017-09,
CompensationStock Compensation: Scope of Modification Accounting
which provides guidance about which changes to the terms or conditions of a share-based payment award would require an entity to
apply modification accounting. The provisions of this standard are effective for periods beginning after December 15, 2017. The adoption of this standard is not expected to have a material impact on our financial statements.
9
2.
|
Accounts Receivable, Net of Allowance for Doubtful Accounts
|
Accounts receivable, net of allowance for
doubtful accounts, consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Trade receivables
|
|
$
|
51.2
|
|
|
$
|
54.7
|
|
Allowance for doubtful accounts
|
|
|
(0.5
|
)
|
|
|
(1.4
|
)
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
$
|
50.7
|
|
|
$
|
53.3
|
|
|
|
|
|
|
|
|
|
|
Write-offs and other adjustments, which are recorded in Other selling, general and administrative in the unaudited
Condensed Consolidated Statements of Operations, were $0.4 million and $0.3 million for the three months ended June 30, 2017 and 2016, respectively, and $0.4 million and $0.5 million for the six months ended June 30, 2017 and
2016, respectively.
Inventories, which are primarily purchased from third parties, consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Raw materials
|
|
$
|
2.6
|
|
|
$
|
2.4
|
|
Finished goods, net
|
|
|
30.3
|
|
|
|
26.1
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
32.9
|
|
|
|
28.5
|
|
Less: Provision for obsolescence
|
|
|
(1.7
|
)
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
31.2
|
|
|
$
|
26.7
|
|
|
|
|
|
|
|
|
|
|
4.
|
Property and Equipment
|
Property and equipment, net of accumulated depreciation, consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Total property and equipment
|
|
$
|
3.6
|
|
|
$
|
3.2
|
|
Less accumulated depreciation
|
|
|
(2.0
|
)
|
|
|
(1.7
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
1.6
|
|
|
$
|
1.5
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense related to property and equipment, which was recorded in Amortization and depreciation in the
unaudited Condensed Consolidated Statements of Operations, was $0.2 million and $0.1 million for the three months ended June 30, 2017 and 2016, respectively, and $0.3 million and $0.2 million for the six months ended June 30, 2017 and
2016, respectively.
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
|
|
Gross
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
|
Gross
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
Customer relationships and product supply agreements
|
|
$
|
35.2
|
|
|
$
|
(9.8
|
)
|
|
$
|
25.4
|
|
|
$
|
35.0
|
|
|
$
|
(7.9
|
)
|
|
$
|
27.1
|
|
Trademarks/Trade Names
|
|
|
17.6
|
|
|
|
(4.0
|
)
|
|
|
13.6
|
|
|
|
17.6
|
|
|
|
(3.4
|
)
|
|
|
14.2
|
|
Technology
|
|
|
2.0
|
|
|
|
(0.6
|
)
|
|
|
1.4
|
|
|
|
2.0
|
|
|
|
(0.6
|
)
|
|
|
1.4
|
|
Non-compete agreement
|
|
|
1.4
|
|
|
|
(0.9
|
)
|
|
|
0.5
|
|
|
|
1.4
|
|
|
|
(0.7
|
)
|
|
|
0.7
|
|
Customer contracts and backlog
|
|
|
3.3
|
|
|
|
(3.2
|
)
|
|
|
0.1
|
|
|
|
3.3
|
|
|
|
(3.1
|
)
|
|
|
0.2
|
|
Other
|
|
|
0.6
|
|
|
|
(0.4
|
)
|
|
|
0.2
|
|
|
|
0.6
|
|
|
|
(0.4
|
)
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets, net
|
|
$
|
60.1
|
|
|
$
|
(18.9
|
)
|
|
$
|
41.2
|
|
|
$
|
59.9
|
|
|
$
|
(16.1
|
)
|
|
$
|
43.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
Amortization expense related to intangible assets, which was recorded in Amortization and
depreciation on the unaudited Condensed Consolidated Statements of Operations, was $1.4 million and $1.3 million for the three months ended June 30, 2017 and 2016, respectively, and $2.8 million and $2.4 million for the six months
ended June 30, 2017 and 2016, respectively.
6.
|
Accrued and Other Current Liabilities
|
Accrued and other current liabilities consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Compensation, benefits and commissions
|
|
$
|
4.5
|
|
|
$
|
4.4
|
|
Accruals and other liabilities
|
|
|
7.1
|
|
|
|
6.1
|
|
|
|
|
|
|
|
|
|
|
Accrued and other current liabilities
|
|
$
|
11.6
|
|
|
$
|
10.5
|
|
|
|
|
|
|
|
|
|
|
Revolving Credit Facility
On January 26, 2017, we amended the loan and security agreement with Bank of America to borrow up to $50.0 million on a revolving basis, based upon
specified percentages of eligible receivables and inventory, which matures on January 26, 2020 (the Revolving Credit Facility). Under the Revolving Credit Facility, the maximum applicable margin for LIBOR rate loans is 2.75%, and
the maximum applicable margin for base rate loans is 1.75%. As of June 30, 2017, our Chairman, Chief Executive Officer and President had guaranteed $10.0 million of the borrowings under the Revolving Credit Facility (see Note 13). At
June 30, 2017 and December 31, 2016, the balance outstanding on the Revolving Credit Facility was $38.7 million and $26.0 million, respectively. We recorded interest expense of $0.5 million and $0.2 million for the
three months ended June 30, 2017 and 2016, respectively, and $0.9 million and $0.4 million for the six months ended June 30, 2017 and 2016, respectively.
In connection with obtaining the revolving credit facility, we incurred debt issuance costs, which are being amortized through the maturity date. At
June 30, 2017 and December 31, 2016, we had $0.7 million and $0.2 million, respectively, of deferred debt issuance costs, which are recorded in Other assets, net in the Consolidated Balance Sheets. Amortization expense of
deferred debt issuance costs was $0.1 million and less than $0.1 million for the three months ended June 30, 2017 and 2016, respectively, and $0.2 million and $0.1 million for the six months ended June 30, 2017 and 2016, respectively.
Notes Payable
Notes payable consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
|
December 31,
2016
|
|
Value Lighting acquisition note
|
|
$
|
2.3
|
|
|
$
|
2.4
|
|
TNT acquisition notes
|
|
|
2.0
|
|
|
|
2.0
|
|
Energy Source acquisition notes
|
|
|
|
|
|
|
10.0
|
|
|
|
|
|
|
|
|
|
|
Total notes payable
|
|
$
|
4.3
|
|
|
$
|
14.4
|
|
Less: Notes payablecurrent
|
|
|
(2.4
|
)
|
|
|
(2.4
|
)
|
|
|
|
|
|
|
|
|
|
Notes payablenoncurrent
|
|
$
|
1.9
|
|
|
$
|
12.0
|
|
|
|
|
|
|
|
|
|
|
Value Lighting Acquisition Note
In conjunction with the acquisition of Value Lighting, we refinanced $3.7 million of Value Lightings trade accounts payable by issuing a note
payable to the creditor. The note is payable in monthly installments through October 2019 and a lump sum payment of $1.4 million due on November 22, 2018, which may be settled, at our option, in either cash or an equivalent amount of
common shares based upon their then-current market value.
TNT Acquisition Notes
In connection with the acquisition of TNT in May 2016, we issued $2.0 million in promissory notes bearing interest at 5% per annum, of which
$1.0 million was due on April 21, 2017 and $1.0 million was due on November 6, 2017. In February 2017, the maturity date was extended to November 6, 2017 for all of the TNT promissory notes. Our Chairman, Chief Executive
Officer, and President has provided irrevocable letters of credit to support the TNT acquisition notes (see Note 13). We recorded accrued interest of $0.1 million and less than $0.1 million at June 30, 2017 and December 31, 2016,
respectively. We recorded interest expense of less than $0.1 million for both the three and six months ended June 30, 2017.
11
Energy Source Acquisition Notes
In connection with the acquisition of Energy Source in August 2015, we issued $10.0 million in promissory notes bearing interest at 5% per annum due
July 20, 2016, which were supported by an irrevocable letter of credit from RVL. In July 2016, the maturity date was extended to January 20, 2017, with an interest rate of 7%. On January 26, 2017, we repaid the Energy Source
acquisition notes, including interest of $0.4 million, using proceeds from the amended Revolving Credit Facility, and the related guarantee provided by RVL was terminated. We recorded interest expense of less than $0.1 million and $0.2
million for the three months ended June 30, 2017 and 2016, respectively, and less than $0.1 million and $0.3 million for the six months ended June 30, 2017 and 2016, respectively.
Debt Maturities
At June 30, 2017, the
scheduled maturities of our borrowings were as follows:
|
|
|
|
|
|
|
Total
Notes Payable
|
|
2017
|
|
$
|
2.2
|
|
2018
|
|
|
1.8
|
|
2019
|
|
|
39.0
|
|
|
|
|
|
|
Total borrowings
|
|
$
|
43.0
|
|
|
|
|
|
|
8.
|
Purchase Price Obligations
|
Changes in the fair value of purchase price obligations were as follows:
|
|
|
|
|
Fair value, January 1, 2017 (1)
|
|
$
|
3.0
|
|
Fair value of acquisition liabilities paid (2)
|
|
|
(0.8
|
)
|
Change in fair value (3)
|
|
|
(1.6
|
)
|
|
|
|
|
|
Fair value, June 30, 2017 (4)
|
|
$
|
0.6
|
|
|
|
|
|
|
(1)
|
Includes $0.9 million to be paid in cash, $0.6 million to be settled in common stock and $1.5 million that may be settled, at our option, in either cash or an equivalent amount of common stock based upon
their then-current market value, if certain performance criteria had been met.
|
(2)
|
Such acquisition liabilities were settled in common stock.
|
(3)
|
Change in fair value includes a reduction due to a change in assumptions utilized in the calculation of purchase price obligations and not meeting applicable thresholds.
|
(4)
|
Includes $0.1 million to be paid in cash, $0.3 million to be settled in common stock and $0.2 million that may be settled, at our option, in either cash or an equivalent amount of common stock based upon their
then-current market value, if certain performance criteria had been met.
|
The following table presents quantitative information about
Level 3 fair value measurements as of June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
Valuation Technique
|
|
Unobservable Inputs
|
Earnout liabilities
|
|
$
|
0.3
|
|
|
Income approach
|
|
Discount rate 19.5%
|
Stock distribution price floor
|
|
|
0.3
|
|
|
Monte Carlo simulation
|
|
Volatility 60%
|
|
|
|
|
|
|
|
|
Risk free rate 1.2%
Dividend yield 0%
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
$
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Common Stock
The changes in issued and outstanding common stock during the six months ended June 30, 2017 were as follows:
|
|
|
|
|
|
|
Shares
|
|
Balance at January 1, 2017
|
|
|
20,893,262
|
|
Shares issued for stock-based compensation
|
|
|
53,039
|
|
Shares issued for contingent consideration
|
|
|
101,556
|
|
|
|
|
|
|
Balance at June 30, 2017
|
|
|
21,047,857
|
|
|
|
|
|
|
At June 30, 2017, 8,670,386 shares, or 41% of our outstanding shares, were owned by RVL and its affiliates.
Preferred Stock
We are authorized to issue up to
5,000,000 shares of preferred stock. There were no shares of preferred stock outstanding at June 30, 2017.
We file income tax returns in the United States federal jurisdiction, as well as in
various state jurisdictions. We did not record any current or deferred U.S. federal income tax provision or benefit during the six months ended June 30, 2017 and 2016 because we have experienced operating losses since inception. We have
recognized a full valuation allowance related to our net deferred tax assets, including substantial net operating loss carryforwards. As of June 30, 2017, we had approximately $61.0 million of net operating loss carryforwards and amortizable
expenses related to acquisitions that can be used to offset our income for federal and state tax purposes.
The computation of basic and diluted net loss per share for the periods indicated is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(0.7
|
)
|
|
$
|
(1.1
|
)
|
|
$
|
(5.7
|
)
|
|
$
|
(3.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares (in thousands) basic and diluted
|
|
|
20,761
|
|
|
|
18,850
|
|
|
|
20,680
|
|
|
|
17,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share, basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.27
|
)
|
|
$
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in the computation of basic net loss per share for the three and six months ended June 30, 2017 and 2016 were
26,669 and 80,001 potentially dilutive shares, respectively.
Additionally, at June 30, 2017 and 2016, we were contingently obligated to pay
$0.2 million and $4.3 million, which may be settled, at our option, in either cash or an equivalent amount of common shares based upon their then-current market value, if certain performance criteria had been met. The equivalent amount of
common shares have been excluded from the computation of diluted net loss per share for the three and six months ended June 30, 2017 and 2016, as they were antidilutive.
At June 30, 2017 and 2016, 24,928 and 27,828 outstanding options, respectively, with an average exercise price of $44.45 and $43.34, respectively, were
not recognized in the diluted earnings per share calculation as they were antidilutive.
13
12.
|
Stock-Based Compensation
|
The 2003 Plan
The following table presents a summary of activity for the six months ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Contractual Life
|
|
Outstanding, January 1, 2017
|
|
|
27,828
|
|
|
$
|
44.76
|
|
|
|
3.01
|
|
Expired
|
|
|
(2,900
|
)
|
|
|
47.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and expected to vest, June 30, 2017
|
|
|
24,928
|
|
|
$
|
44.45
|
|
|
|
2.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, June 30, 2017
|
|
|
24,928
|
|
|
$
|
44.45
|
|
|
|
2.82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2017, no options were issued. We issue new shares upon the exercise of options.
Options outstanding at June 30, 2017 had no intrinsic value. At June 30, 2017, unrecognized compensation expense related to options was less than $0.1 million, which is expected to be recognized over a weighted-average period of one
year.
The 2013 Plan
On May 2, 2017, our
stockholders voted on a fourth amendment to the 2013 Plan (the 2013 Plan) to increase the number of shares that may be issued to officers, employees, non-employee directors and consultants of Revolution and its affiliates under the 2013
Plan to 1,600,000.
Restricted Shares
The
following table presents a summary of activity for the six months ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Outstanding, January 1, 2017
|
|
|
360,305
|
|
|
$
|
7.32
|
|
Vested
|
|
|
(131,038
|
)
|
|
|
8.35
|
|
Forfeited
|
|
|
(767
|
)
|
|
|
17.68
|
|
|
|
|
|
|
|
|
|
|
Outstanding and expected to vest, June 30, 2017
|
|
|
228,500
|
|
|
$
|
6.69
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017, there was $1.5 million of unrecognized compensation expense related to nonvested restricted
shares, which is expected to be recognized over a weighted-average period of 2.8 years. The total fair value of restricted shares that vested during the six months ended June 30, 2016 was $1.1 million.
Restricted Share Units
During the six months
ended June 30, 2017, we granted restricted share units to employees which vest ratably over a three-year period. These awards are classified as equity awards, and are accounted for using the fair value established at the grant date.
The following table presents a summary of activity for the six years ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
Number of
Units
|
|
|
Weighted Average
Grant Date
Fair Value
|
|
Outstanding, January 1, 2017
|
|
|
132,517
|
|
|
$
|
6.84
|
|
Granted
|
|
|
79,223
|
|
|
|
7.47
|
|
Vested
|
|
|
(53,806
|
)
|
|
|
7.83
|
|
|
|
|
|
|
|
|
|
|
Outstanding and expected to vest, June 30, 2017
|
|
|
157,934
|
|
|
$
|
6.82
|
|
|
|
|
|
|
|
|
|
|
At June 30, 2017, there was $1.1 million of unrecognized compensation expense related to nonvested restricted share
units, which is expected to be recognized over a weighted-average period of 1.8 years. The total fair value of restricted shares that vested during the six months ended June 30, 2017 was $0.4 million.
14
13.
|
Related Party Transactions
|
Chairman, Chief Executive Officer and President
As of June 30, 2017, our Chairman, Chief Executive Officer, and President has guaranteed $10.0 million of borrowings under our Revolving Credit
Facility. In addition, our Chairman, Chief Executive Officer, and President has provided irrevocable letters of credit to support $2.0 million of the TNT acquisition notes. See Note 7.
Aston Capital
On April 1, 2016, we entered
into a $2.6 million amended and restated promissory note with Aston, which bears interest at 9% annually and matures on April 1, 2019, which can be prepaid at our option. In May 2017, we amended the promissory note with Aston to include an
additional $7.0 million of borrowings. At June 30, 2017 and December 31, 2016, we had accrued interest of $0.5 million and $0.2 million, respectively. We recorded interest expense related to financing agreements with Aston of $0.2
million and less than $0.1 million for the three months ended June 30, 2017 and 2016, respectively, and $0.2 million and $0.1 million for the six months ended June 30, 2017 and 2016, respectively.
On January 5, 2017, we ratified a management services agreement with Aston (the Management Agreement) to memorialize certain management
services that Aston has been providing to us since RVL acquired majority control of our voting securities in September 2012. Pursuant to the Management Agreement, Aston provides consulting services in connection with financing matters, budgeting,
strategic planning and business development, including, without limitation, assisting us in (i) analyzing the operations and historical performance of target companies; (ii) analyzing and evaluating the transactions with such target
companies; (iii) conducting financial, business and operational due diligence, and (iv) evaluating related structuring and other matters. In addition, two of the Aston members hold executive positions in Revolution, and receive no
compensation. On May 12, 2016, we granted 250,000 shares of restricted stock to Aston, which vest in three annual installments on May 12, 2017, 2018, and 2019. The Audit Committee of the Board will consider from time to time (at a minimum
at such times when the Compensation Committee of the Board evaluates director compensation) whether additional compensation to Aston is appropriate given the nature of the services provided.
In March 2017, Aston provided a $1.5 million advance that bears interest annually at 9%, which is included in Related party notes payable on the
unaudited Condensed Consolidated Balance Sheets at June 30, 2017. On November 30, 2016, Aston provided a $1.5 million advance that bore interest annually at 9%, which is included in Related party notes payable on the
unaudited Condensed Consolidated Balance Sheets at December 31, 2016, and was repaid on January 26, 2017 using proceeds from the amended Revolving Credit Facility.
Our corporate headquarters utilizes space in Stamford, Connecticut, which is also occupied by affiliates of our Chairman and Chief Executive Officer. Our
proportionate share of the space under the underlying lease, which we paid to Aston, was $0.1 million and $0.1 million during the three months ended June 30, 2017 and 2016, respectively, and $0.2 million and $0.2 million during the six months
ended June 30, 2017 and 2016, respectively.
14.
|
Acquisitions of Businesses
|
TNT Energy, LLC
On May 6, 2016, we completed the acquisition of TNT, a turnkey provider of LED lighting-based energy savings projects within the commercial, industrial,
hospitality, retail, education and municipal sectors. TNTs headquarters is located in Raynham, Massachusetts. The acquisition of TNT is expected to expand our footprint within key lighting retrofit markets in the United States. We believe this
is a direct complementary fit with our division, Energy Source, based in Providence, RI. In addition to its broad existing customer base, TNT is a contract vendor for the Small C&I Business Programs of northeast utility companies, with a defined
territory of approximately 120 municipalities throughout Massachusetts. We acquired TNT for its management team, its client base and operational and business development synergies.
15
We accounted for the acquisition of TNT under ASC 805,
Business Combinations
(ASC 805), which
requires recording assets and liabilities at fair value. Under the acquisition method of accounting, each tangible and separately identifiable intangible asset acquired and liabilities assumed were recorded based on their estimated fair values on
the date of the acquisition.
|
|
|
|
|
Consideration:
|
|
|
|
|
Cash paid
|
|
$
|
8.6
|
|
Promissory note
|
|
|
2.0
|
|
Contingent consideration
|
|
|
4.1
|
|
|
|
|
|
|
Net Assets
|
|
$
|
14.7
|
|
|
|
|
|
|
Fair Value of Assets Acquired and Liabilities Assumed:
|
|
|
|
|
Working capital, net
|
|
$
|
0.9
|
|
Goodwill (1)
|
|
|
7.9
|
|
Intangible assets
|
|
|
5.9
|
|
|
|
|
|
|
Net Assets
|
|
$
|
14.7
|
|
|
|
|
|
|
(1)
|
Since our initial valuation on the date of the acquisition, we recorded a $1.7 million increase to goodwill related to adjustments in working capital, including $0.1 million in the second quarter of 2017. Goodwill
is expected to be deductible for income tax purposes.
|
16