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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________
FORM 10-Q
_______________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to
Commission File Number 001-35849
_______________________________________________________
NV5 Global, Inc.
(Exact name of registrant as specified in its charter)
_______________________________________________________
Delaware
 
45-3458017
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
200 South Park Road,
Suite 350

33021
Hollywood,
Florida
 
(Zip Code)
(Address of principal executive offices)
 
 
 
(954495-2112
(Registrant’s telephone number, including area code)
_______________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
NVEE
The NASDAQ Stock Market
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.    Yes x     No o
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).    Yes x    No o
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 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
x
 
 
 
 
Non-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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No x
As of August 6, 2019, there were 12,769,832 shares outstanding of the registrant’s common stock, $0.01 par value.
 


Table of Contents

NV5 GLOBAL, INC.
INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I – FINANCIAL INFORMATION
ITEM 1.    FINANCIAL STATEMENTS.
NV5 Global, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except share data)
 
June 29, 2019
 
December 29, 2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
44,436

 
$
40,739

Billed receivables, net
97,593

 
98,324

Unbilled receivables, net
49,808

 
43,411

Prepaid expenses and other current assets
12,215

 
2,582

Total current assets
204,052

 
185,056

Property and equipment, net
12,129

 
11,677

Right-of-use lease asset, net
35,566

 

Intangible assets, net
98,941

 
99,756

Goodwill
151,788

 
140,930

Other assets
1,971

 
2,002

Total Assets
$
504,447

 
$
439,421

 
 
 
 
Liabilities and Stockholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
19,612

 
$
22,588

Accrued liabilities
35,565

 
20,853

Income taxes payable
360

 
2,697

Billings in excess of costs and estimated earnings on uncompleted contracts
2,243

 
7,625

Client deposits
256

 
208

Current portion of contingent consideration
1,895

 
1,845

Current portion of notes payable and other obligations
16,687

 
17,139

Total current liabilities
76,618

 
72,955

Contingent consideration, less current portion
2,195

 
2,853

Long-term lease liability
27,736

 

Notes payable and other obligations, less current portion
40,189

 
29,847

Deferred income tax liabilities, net
18,708

 
16,224

Total liabilities
165,446

 
121,879

 
 
 
 
Commitments and contingencies

 

 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value; 5,000,000 shares authorized, no shares issued and outstanding

 

Common stock, $0.01 par value; 45,000,000 shares authorized, 12,657,841 and 12,550,711 shares issued and outstanding as of June 29, 2019 and December 29, 2018, respectively
127

 
126

Additional paid-in capital
243,646

 
236,525

Retained earnings
95,228

 
80,891

Total stockholders’ equity
339,001

 
317,542

Total liabilities and stockholders’ equity
$
504,447

 
$
439,421

See accompanying notes to consolidated financial statements (unaudited).

1

Table of Contents

NV5 Global, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(in thousands, except share data)
 
Three Months Ended
 
Six Months Ended
 
June 29,
2019

June 30,
2018
 
June 29,
2019

June 30,
2018
Gross revenues
$
127,974

 
$
104,018

 
$
245,309

 
$
198,552

 
 
 
 
 
 
 
 
Direct costs (excluding depreciation and amortization):
 
 
 
 
 
 
 
Salaries and wages
38,080

 
33,546

 
73,337

 
64,067

Sub-consultant services
20,044

 
14,900

 
36,996

 
28,360

Other direct costs
8,410

 
4,870

 
18,106

 
8,792

Total direct costs
66,534

 
53,316

 
128,439

 
101,219

 
 
 
 
 
 
 
 
Gross Profit
61,440

 
50,702

 
116,870

 
97,333

 
 
 
 
 
 
 
 
Operating Expenses:
 
 
 
 
 
 
 
Salaries and wages, payroll taxes and benefits
30,765

 
25,767

 
60,004

 
51,225

General and administrative
10,896

 
8,258

 
19,758

 
15,792

Facilities and facilities related
3,937

 
3,520

 
7,743

 
7,062

Depreciation and amortization
6,245

 
3,807

 
12,357

 
7,603

Total operating expenses
51,843

 
41,352

 
99,862

 
81,682

 
 
 
 
 
 
 
 
Income from operations
9,597

 
9,350

 
17,008

 
15,651

 
 
 
 
 
 
 
 
Interest expense
(457
)
 
(650
)
 
(808
)
 
(1,261
)
 
 
 
 
 
 
 
 
Income before income tax expense
9,140

 
8,700

 
16,200

 
14,390

Income tax expense
(346
)
 
(1,080
)
 
(1,863
)
 
(2,478
)
Net Income and Comprehensive Income
$
8,794

 
$
7,620

 
$
14,337

 
$
11,912

 
 
 
 
 
 
 
 
Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.73

 
$
0.73

 
$
1.19

 
$
1.15

Diluted
$
0.70

 
$
0.69

 
$
1.15

 
$
1.09

 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
12,106,066

 
10,496,524

 
12,033,906

 
10,395,874

Diluted
12,521,463

 
11,004,212

 
12,447,248

 
10,953,259

See accompanying notes to consolidated financial statements (unaudited).

2

Table of Contents

NV5 Global, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(in thousands, except share data)

 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
 
 
Shares
 
Amount
 
 
 
Total
Balance, March 31, 2018
10,991,107

 
$
110

 
$
128,585

 
$
58,327

 
$
187,022

Stock compensation

 

 
1,503

 

 
1,503

Restricted stock issuance, net
110,732

 

 

 

 

Stock issuance for acquisitions
27,243

 
1

 
1,658

 

 
1,659

Net income

 

 

 
7,620

 
7,620

Balance, June 30, 2018
11,129,082

 
$
111

 
$
131,746

 
$
65,947

 
$
197,804

 
 
 
 
 
 
 
 
 
 
Balance, March 30, 2019
12,565,115

 
$
126

 
$
239,611

 
$
86,434

 
$
326,171

Stock compensation

 

 
2,369

 

 
2,369

Restricted stock issuance, net
66,874

 
1

 
(1
)
 

 

Stock issuance for acquisitions
25,852

 

 
1,667

 

 
1,667

Payment of contingent consideration with common stock

 

 

 

 

Net income

 

 

 
8,794

 
8,794

Balance, June 29, 2019
12,657,841

 
$
127

 
$
243,646

 
$
95,228

 
$
339,001


 
Common Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
 
 
Shares
 
Amount
 
 
 
Total
Balance, December 30, 2017
10,834,770

 
$
108

 
$
125,954

 
$
54,035

 
$
180,097

Stock compensation

 

 
2,639

 

 
2,639

Restricted stock issuance, net
118,446

 
1

 
(1
)
 

 

Stock issuance for acquisitions
35,866

 
1

 
2,063

 

 
2,064

Proceeds from exercise of warrants, net of costs
140,000

 
1

 
1,091

 

 
1,092

Net income

 

 

 
11,912

 
11,912

Balance, June 30, 2018
11,129,082

 
$
111

 
$
131,746

 
$
65,947

 
$
197,804

 
 
 
 
 
 
 
 
 
 
Balance, December 29, 2018
12,550,711

 
$
126

 
$
236,525

 
$
80,891

 
$
317,542

Stock compensation

 

 
4,167

 


 
4,167

Restricted stock issuance, net
60,124

 
1

 
(1
)
 


 

Stock issuance for acquisitions
35,821

 

 
2,230

 


 
2,230

Payment of contingent consideration with common stock
11,185

 

 
725

 


 
725

Net income

 

 

 
14,337

 
14,337

Balance, June 29, 2019
12,657,841

 
$
127

 
$
243,646

 
$
95,228

 
$
339,001

See accompanying notes to consolidated financial statements (unaudited).

3

Table of Contents

NV5 Global, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
Six Months Ended
 
June 29, 2019
 
June 30, 2018
Cash Flows From Operating Activities:
 
 
 
Net income
$
14,337

 
$
11,912

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
12,357

 
7,603

Non-cash lease expense
4,251

 

Provision for doubtful accounts
1,456

 
831

Stock based compensation
4,167

 
2,639

Change in fair value of contingent consideration
49

 
107

Gain on disposals of property and equipment
(48
)
 

Deferred income taxes
477

 
521

Changes in operating assets and liabilities, net of impact of acquisitions:
 
 
 
Billed receivables
5,511

 
(7,834
)
Unbilled receivables
(5,188
)
 
(1,796
)
Prepaid expenses and other assets
(9,413
)
 
253

Accounts payable
(3,816
)
 
1,157

Accrued liabilities
968

 
2,700

Income taxes payable
(2,338
)
 
(7,869
)
Billings in excess of costs and estimated earnings on uncompleted contracts
(5,383
)
 
602

Deposits
47

 
11

Net cash provided by operating activities
17,434

 
10,837

 
 
 
 
Cash Flows From Investing Activities:
 
 
 
Cash paid for acquisitions (net of cash received from acquisitions)
(14,160
)
 
(3,473
)
Purchase of property and equipment
(1,626
)
 
(1,462
)
Net cash used in investing activities
(15,786
)
 
(4,935
)
 
 
 
 
Cash Flows From Financing Activities:
 
 
 
Borrowings from Senior Credit Facility
10,000

 

Payments on notes payable
(6,738
)
 
(6,482
)
Payments of contingent consideration
(1,213
)
 
(728
)
Proceeds from exercise of unit warrant

 
1,092

Payments of borrowings from Senior Credit Facility

 
(2,500
)
Net cash provided by (used in) financing activities
2,049

 
(8,618
)
 
 
 
 
 
 
 
 
Net increase (decrease) in Cash and Cash Equivalents
3,697

 
(2,716
)
Cash and cash equivalents – beginning of period
40,739

 
18,751

Cash and cash equivalents – end of period
$
44,436

 
$
16,035

See accompanying notes to consolidated financial statements (unaudited).


4

Table of Contents

NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)
Note 1 - Organization and Nature of Business Operations
Business
NV5 Global, Inc. and its subsidiaries (collectively, the “Company,” “NV5 Global,” “our,” “we”) is a provider of professional and technical engineering and consulting solutions to public and private sector clients in the infrastructure, energy, construction, real estate and environmental markets, operating nationwide and abroad. The Company’s clients include the U.S. federal, state and local governments, and the private sector. NV5 Global provides a wide range of services, including, but not limited to:
Infrastructure, engineering and support
Management oversight
Construction quality assurance, testing and inspection
Permitting
Program management
Inspection and field supervision
Energy
Testing inspection and certification
Environmental
Forensic engineering
Planning
Litigation support
Design
Condition assessment
Consulting
Compliance certification

Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited interim consolidated financial statements of the Company contain all adjustments necessary to present fairly the financial position and results of operations of the Company as of the dates and for the periods presented. Accordingly, these statements should be read in conjunction with the consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K for the year ended December 29, 2018 (the “2018 Form 10-K”). The results of operations and cash flows for the interim periods presented are not necessarily indicative of the results to be expected for any future interim period or for the full 2019 fiscal year.
There have been no significant changes, other than those related to the adopted new accounting standards below, in the Company’s accounting policies from those disclosed in our 2018 Form 10-K.
Adoption of New Accounting Standards
Leases
We adopted ASU No. 2016-2, Leases (Topic 842), as of the first day of the fiscal year 2019 using the modified retrospective approach and elected not to adjust comparative periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which permits us not to reassess under the new standard our prior conclusions about lease identification, lease classification and the initial direct costs. We elected the practical expedient to keep leases with an initial term of 12 months or less off the balance sheet and the practical expedient to account for non-lease components in a contract as part of a single lease component. Lease payments are recognized in the Consolidated Statements of Operations on a straight-line basis over the lease term. Adoption of the new standard resulted in the recording of additional right-of-use lease assets and lease liabilities of $34,186 and $34,965, respectively, as of the first day of the fiscal year 2019. The standard did not materially impact our consolidated net earnings and had no impact on cash flows. Additionally, there was no cumulative effect of adoption on retained earnings in the Statement of Changes in Stockholders' Equity.

5

Table of Contents
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

Revenue Recognition
On the first day of fiscal year 2018, 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 2018. 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.
Performance Obligations
Some 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 June 29, 2019, we had $563,797 of remaining performance obligations, or backlog, of which $450,889 or 80% is expected to be recognized over the next 12 months and the majority of the balance over the next 24 months. Contracts for which work authorizations have been received are included in backlog. 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) on 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. This liability is generally classified as current. Revenue recognized that was included in the contract liability balance at the beginning of the fiscal year was $2,013 and $6,435 for the three and six months ended June 29, 2019, respectively and $19 and $212 for the three and six months ended June 30, 2018, respectively.
Note 3 – Recent Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. This ASU eliminates Step 2 of the goodwill impairment test and simplifies how the amount of an impairment loss is determined. The update is effective for public companies in the beginning of fiscal year 2020 and will be applied on a prospective basis. We will adopt this ASU at the beginning of fiscal year 2020. We do not expect the impact of this ASU to be material to our consolidated financial statements.

6

Table of Contents
NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)


Note 4 – Earnings per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. The effect of potentially dilutive securities is not considered during periods of loss or if the effect is anti-dilutive.
The weighted average number of shares outstanding in calculating basic earnings per share for the six months ended June 29, 2019 and June 30, 2018 exclude 480,694 and 573,378 non-vested restricted shares, respectively. There were no potentially anti-dilutive securities during the three and six months ended June 29, 2019 and June 30, 2018.
The following table represents a reconciliation of the net income and weighted average shares outstanding for the calculation of basic and diluted earnings per share:
 
Three Months Ended
 
Six Months Ended
 
June 29,
2019
 
June 30,
2018
 
June 29,
2019
 
June 30,
2018
Numerator:
 
 
 
 
 
 
 
Net income – basic and diluted
$
8,794

 
$
7,620

 
$
14,337

 
$
11,912

 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Basic weighted average shares outstanding
12,106,066

 
10,496,524

 
12,033,906

 
10,395,874

Effect of dilutive non-vested restricted shares and units
351,110

 
421,760

 
334,029

 
404,240

Effect of issuable shares related to acquisitions
64,287

 
85,928

 
79,313

 
101,340

Effect of warrants

 

 

 
51,805

Diluted weighted average shares outstanding
12,521,463

 
11,004,212

 
12,447,248

 
10,953,259


Warrant exercise
In conjunction with our initial public offering on March 26, 2013, the underwriter received a warrant to acquire up to 140,000 units (“Unit Warrant”). On March 23, 2016, the underwriter paid us $1,008 to exercise the Unit Warrant. Each of the units delivered upon exercise consisted of one share of our common stock and one warrant to purchase one share of our common stock at an exercise price of $7.80 per share (“Warrant”), which warrant expired on March 27, 2018. On March 19, 2018, the underwriter paid us $1,092 to exercise the Warrant. On March 21, 2018, we delivered 140,000 shares of common stock to the underwriter.
Note 5 Business Acquisitions
2019 Acquisitions 
On June 3, 2019, the Company acquired Alta Environmental, L.P. (“Alta”), a consulting firm specializing in air quality, environmental building sciences, water resources, site assessment and remediation as well as environmental health and safety compliance services. The aggregate purchase price is up to $6,500, including $4,000 of cash and $2,000 in promissory note (bearing interest at 4%), payable in four equal installments of $500 due on the first, second, third and fourth anniversaries of June 3, 2019. Further, the purchase price includes a $500 earn-out of cash, which was recorded at an estimated fair value of $485. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Alta, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values. The Company expects to finalize the purchase price allocation with respect to this transaction by the end of the fourth quarter 2019.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

On June 3, 2019, the Company acquired Page One Consultants (“Page One”), a program management and construction quality assurance firm based in Orlando, Florida. The aggregate purchase price is up to $3,900, including $2,000 of cash, $1,000 in promissory note (bearing interest at 3%), payable in three equal installments of $333 due on the first, second and third anniversaries of June 3, 2019 and $200 of the Company’s common stock (2,647 shares) issued at the closing date. The purchase price also includes $200 of the Company’s common stock payable on the first anniversary of June 3, 2019. Further, the purchase price includes a $500 earn-out of cash and stock, which was recorded at an estimated fair value of $448. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Page One, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values. The Company expects to finalize the purchase price allocation with respect to this transaction by the end of the fourth quarter 2019.
On March 22, 2019, the Company acquired The Sextant Group, Inc. (“The Sextant Group”), a national leading provider of audiovisual, information and communications technology, acoustics consulting, and design services headquartered in Pittsburgh, PA. The Sextant Group provides services throughout the U.S. and is well-known for creating integrated technology solutions for a wide range of public and private sector clients. The aggregate purchase price is up to $11,000, including $7,000 of cash and $4,000 in promissory note (bearing interest at 4%), payable in four equal installments of $1,000 due on the first, second, third and fourth anniversaries of March 22, 2019. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for The Sextant Group, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values. The Company expects to finalize the purchase price allocation with respect to this transaction by the end of the fourth quarter 2019.
On December 31, 2018, the Company acquired certain assets of Celtic Energy, Inc. (“Celtic”), a nationally recognized energy consulting firm that specializes in energy project management and oversight. The aggregate purchase price is up to $1,900, including $1,000 in cash, $300 in promissory note (bearing interest at 3%), payable in three equal installments of $100 on the first, second and third anniversaries of December 31, 2018 and $200 of the Company’s common stock (3,227 shares) issued at the closing date. The purchase price also includes $200 of the Company’s common stock payable on the first anniversary of December 31, 2018. Further, the purchase price includes a $200 earn-out of cash, which was recorded at an estimated fair value of $181. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Celtic, the Company performed a purchase price allocation.
2018 Acquisitions
On November 2, 2018 the Company acquired CHI Engineering, Inc. (“CHI”), an infrastructure engineering firm based in Portsmouth, New Hampshire. CHI is a leading provider of engineering, procurement, and construction management services to the liquefied natural gas (“LNG”), petroleum gas (“LPG”) and Natural Gas industries. CHI’s client base includes the majority of LNG facility owner/operators in the U.S. The aggregate purchase price of this acquisition is up to $53,000, including $30,000 in cash, $15,000 in promissory notes (bearing interest at 3%), payable in four equal installments of $3,750 on the first, second, third and fourth anniversaries of November 2, 2018 and $3,000 of the Company’s common stock (36,729 shares) issued at the closing date. The purchase price also includes $3,000 of the Company’s common stock payable in three installments of $1,000, due on the first, second and third anniversaries of November 2, 2018. The purchase price also includes a $2,000 earn-out of cash (at a 3% interest rate which begins to accrue on January 1, 2020), which was recorded at its estimated fair value of $1,547, based on a probability-weighted approach valuation technique used to determine the fair value of the contingent consideration on the acquisition date. The note and the earn-out are due to related party individuals who became employees of the Company upon the acquisition. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for CHI, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values. The Company expects to finalize the purchase price allocation with respect to this transaction by the end of the third quarter of 2019.
On August 24, 2018, the Company acquired all of the outstanding equity interests in CALYX Engineers and Consultants, Inc. (“CALYX”), an infrastructure and transportation firm based in Cary, North Carolina. CALYX provides roadway and structure design, transportation planning, water resources, construction services, utility services, building structure design, land development, traffic services, cultural resources, surveying, and environmental services. CALYX serves both public and private clients, including state departments of transportation, municipalities, developers, higher education, and healthcare systems. The acquisition of CALYX will expand our infrastructure engineering service in the southeast United States. The purchase price of this acquisition is $34,000, subject to customary closing working capital adjustments, including $25,000 in cash, $4,000 in promissory notes (bearing interest at 3.75%), payable in four installments of $1,000, due on the first, second, third and fourth anniversaries of August 24, 2018 (see Note 10), $3,000 of the Company’s common stock (36,379 shares) as of the closing date of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

the acquisition, and $2,000 in cash payable within 120 days of the closing date. The note is due to related party individuals who became employees of the Company. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for CALYX, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values.
On February 2, 2018, the Company acquired CSA (M&E) Ltd. (“CSA”), a leading provider of Mechanical, Electrical, and Plumbing (MEP) engineering and sustainability consulting services. CSA provides MEP and sustainability services for the retail, education, healthcare, industrial, corporate, hospitality and infrastructure market sectors with offices in Hong Kong, Macau and the UAE. CSA serves private and public sector clients throughout Asia and the Middle East. The purchase price of this acquisition was up to $4,200, including $2,000 in cash; $600 in promissory notes (bearing interest at 3%), payable in four installments of $150, due on the first, second, third and fourth anniversaries of February 2, 2018, the effective date of the acquisition; and $150 of the Company’s common stock (2,993 shares) issued as of the closing date. The purchase price also includes $250 of the Company’s common stock payable in two installments of $125, due on the first and second anniversaries of the acquisition. The purchase price also included a non-interest bearing earn-out of up to $1,200 payable in cash and stock, subject to the achievement of certain agreed upon financial metrics for fiscal year 2018. The earn-out of $1,200 is non-interest bearing and was recorded at its estimated fair value of $899, based on a probability-weighted approach valuation technique used to determine the fair value of the contingent consideration on the acquisition date. The note and the earn-out are due to a related party individual who became an employee of the Company upon the acquisition. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for CSA, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values.
On January 12, 2018, the Company acquired all of the outstanding equity interest in Butsko Utility Design, Inc. (“Butsko”). Butsko is leading provider of utility planning and design services serving both public and private sector clients through its offices in Southern California and Washington. The purchase price of this acquisition was up to $4,250, including $1,500 in cash; $1,000 in promissory notes (bearing interest at 3%), payable in four installments of $250, due on the first, second, third and fourth anniversaries of January 12, 2018, the effective date of the acquisition; and $300 of the Company’s common stock (5,630 shares) issued as of the closing date. The purchase price also includes $600 of the Company’s common stock payable in two installments of $300, due on the first and second anniversaries of the acquisition. The purchase price also included a non-interest bearing earn-out of up to $850 payable in cash and stock, subject to the achievement of certain agreed upon financial metrics for fiscal year 2018. The earn-out of $850 is non-interest bearing and was recorded at its estimated fair value of $666, based on a probability-weighted approach valuation technique used to determine the fair value of the contingent consideration on the acquisition date. The note and the earn-out are due to a related party individual who became an employee of the Company upon the acquisition. In order to determine the fair values of tangible and intangible assets acquired and liabilities assumed for Butsko, the Company engaged a third-party independent valuation specialist to assist in the determination of fair values.
The following table summarizes the fair values of the assets acquired and liabilities assumed as of the acquisition date for the acquisitions closed during 2019 and 2018:

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NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

 
2019
 
2018
Cash
$
140

 
$
345

Billed and unbilled receivables, net
7,445

 
20,999

Property and equipment
743

 
3,122

Prepaid expenses
152

 
589

Other assets
12

 
83

Intangible assets:

 

Customer relationships
7,401

 
32,267

Trade name
506

 
2,479

Customer backlog
446

 
8,007

Non-compete
916

 
4,306

Total Assets
17,761

 
72,197

Liabilities
(2,689
)
 
(11,589
)
Deferred tax liabilities
(2,007
)
 
(8,903
)
Net assets acquired
$
13,065

 
$
51,705

 
 
 
 
Consideration paid (Cash, Notes and/or stock)
$
22,643

 
$
90,516

Contingent earn-out liability (Cash and stock)
1,114

 
3,112

Total Consideration
$
23,757

 
$
93,628

Excess consideration over the amounts assigned to the net assets acquired (Goodwill)
$
10,692

 
$
41,923


Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be achieved from these acquisitions. See Note 8 for further information on goodwill and identified intangibles.
The consolidated financial statements of the Company for the three and six months ended June 29, 2019 and June 30, 2018 include the results of operations from any business acquired from their respective dates of acquisition during each of the respective period as follows:
 
Three Months Ended
 
Six Months Ended
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Gross Revenues
$
4,926

 
$
2,841

 
$
5,692

 
$
4,517

Income before income taxes
$
891

 
$
497

 
$
939

 
$
652


The following table presents the unaudited, pro forma consolidated results of operations (in thousands, except per share amounts) for the three and six months ended June 29, 2019 and June 30, 2018 as if the acquisitions of CHI, CALYX, The Sextant Group, Page One and Alta had occurred as of January 1, 2018. The pro forma information provided below is compiled from the pre-acquisition financial information of CHI, CALYX, The Sextant Group, Page One and Alta, which includes pro forma adjustments for amortization expense, adjustments to certain expenses, and the income tax impact of these adjustments. The pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had the operations of these acquisitions actually been acquired on January 1, 2018 or (ii) future results of operations:

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NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

 
Three Months Ended
 
Six Months Ended
 
June 29, 2019
 
June 30, 2018
 
June 29, 2019
 
June 30, 2018
Gross revenues
$
130,500

 
$
136,264

 
$
255,063

 
$
254,226

Net income
$
8,847

 
$
10,257

 
$
14,615

 
$
15,639

Basic earnings per share
$
0.73

 
$
0.97

 
$
1.21

 
$
1.49

Diluted earnings per share
$
0.71

 
$
0.93

 
$
1.17

 
$
1.42


The Company has determined the supplemental disclosures pursuant to ASC 805-10-50-2h, for the Celtic, CSA and Butsko acquisitions were not material to the Company’s consolidated financial statements both individually and in the aggregate.
Note 6 Billed and Unbilled Receivables
Billed and Unbilled Receivables consists of the following:
 
June 29, 2019
 
December 29, 2018
Billed receivables
$
101,957

 
$
101,482

Less: allowance for doubtful accounts
(4,364
)
 
(3,158
)
Billed receivables, net
$
97,593

 
$
98,324

 
 
 
 
Unbilled receivables
$
51,196

 
$
44,799

Less: allowance for doubtful accounts
(1,388
)
 
(1,388
)
Unbilled receivables, net
$
49,808

 
$
43,411


Note 7 Property and Equipment, net
Property and equipment, net, consists of the following:
 
June 29, 2019
 
December 29, 2018

Office furniture and equipment
$
2,753

 
$
2,328

Computer equipment
12,560

 
11,640

Survey and field equipment
5,856

 
5,526

Leasehold improvements
3,779

 
2,541

 
24,948

 
22,035

Accumulated depreciation
(12,819
)
 
(10,358
)
 
$
12,129

 
$
11,677


Depreciation expense was $1,161 and $2,274 for the three and six months ended June 29, 2019, respectively and $1,016 and $2,034 for the three and six months ended June 30, 2018, respectively.
Note 8 Goodwill and Intangible Assets
Goodwill
The changes in the carrying value by reportable segment for the six months ended June 29, 2019 were as follows:

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NV5 Global, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

 
Six Months Ended
 
December 29, 2018
 
Acquisitions
 
Disposed/Adjustments
 
June 29, 2019
INF
$
69,255

 
$
4,803

 
$
166

 
$
74,224

BTS
71,675

 
5,889

 

 
77,564

Total
$
140,930

 
$
10,692

 
$
166

 
$
151,788


Goodwill of approximately $5,712 and $1,723 from acquisitions during the six months ended June 29, 2019 and June 30, 2018, respectively, is expected to be deductible for income tax purposes.  
Intangible Assets
Intangible assets, net, as of June 29, 2019 and December 29, 2018 consist of the following:
 
June 29, 2019
 
December 29, 2018
 
Gross
Carrying
Amount
 
Accumulated Amortization
 
Net
Amount
 
Gross
Carrying
Amount
 
Accumulated Amortization
 
Net
Amount
Customer relationships (1)
$
108,355

 
$
(23,697
)
 
$
84,658

 
$
100,956

 
$
(18,724
)
 
$
82,232

Trade name (2)
9,394

 
(7,609
)
 
1,785

 
8,888

 
(6,469
)
 
2,419

Customer backlog (1)
16,446

 
(9,630
)
 
6,816

 
16,000

 
(6,730
)
 
9,270

Favorable lease (3)
553

 
(221
)
 
332

 
552

 
(197
)
 
355

Non-compete (4)
9,470

 
(4,120
)
 
5,350

 
8,554

 
(3,074
)
 
5,480

Total
$
144,218

 
$
(45,277
)
 
$
98,941

 
$
134,950

 
$
(35,194
)
 
$
99,756

(1)
Amortized on a straight-line basis over estimated lives (1 to 10 years)
(2)
Amortized on a straight-line basis over their estimated lives (1 to 3 years)
(3)
Amortized on a straight-line basis over the remaining lease term of 9 years
(4)
Amortized on a straight-line basis over their contractual lives (4 to 5 years)
Amortization expense was $5,083 and $10,083 for the three and six months ended June 29, 2019, respectively and $2,791 and $5,569 for the three and six months ended June 30, 2018, respectively.
Note 9 Accrued Liabilities
Accrued liabilities consist of the following:
 
June 29, 2019
 
December 29, 2018
Accrued lease liability
$
8,899

 
$

Accrued vacation
10,134

 
7,994

Payroll and related taxes
10,142

 
8,136

Benefits
2,670

 
1,598

Unrecognized tax benefits
878

 
548

Professional liability reserve
171

 
157

Deferred rent

 
779

Other
2,671

 
1,641

Total
$
35,565

 
$
20,853


Note 10 Notes Payable and Other Obligations
Notes payable and other obligations consists of the following:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share data)

 
June 29, 2019
 
December 29, 2018
Other Obligations
$
3,460

 
$
4,893

Uncollateralized promissory notes
40,975

 
40,001

Senior credit facility
10,000
 

Capital leases
2,441

 
2,092

Total Notes Payable and Other Obligations
56,876

 
46,986

Current portion of notes payable and other obligations
(16,687
)
 
(17,139
)
Notes payable and other obligations, less current portion
$
40,189

 
$
29,847


As of June 29, 2019 and December 29, 2018, the carrying amount of debt obligations approximates their fair values based on Level 2 inputs as the terms are comparable to terms currently offered by local lending institutions for arrangements with similar terms to industry peers with comparable credit characteristics.
Senior Credit Facility
On December 20, 2018, we entered into an amendment to a Credit Agreement (the “Credit Agreement”) dated December 7, 2016 with Bank of America, N.A. (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPFS”). Pursuant to the amended Credit Agreement, Bank of America agreed to be the sole administrative agent for a five-year $125,000 Senior Secured Revolving Credit Facility (“Senior Credit Facility”) to the Company and, together with PNC Bank, National Association and Regions Bank as the other lenders under the Senior Credit Facility, has committed to lend to the Company all of the Senior Credit Facility, subject to certain terms and conditions. The Senior Credit Facility is secured by a first priority lien on substantially all of the assets of the Company. MLPFS has undertaken to act as sole lead arranger and sole book manager for the Senior Credit Facility. In addition, the Senior Credit Facility includes an accordion feature permitting the Company to request an increase in the Senior Credit Facility by an additional amount of up to $100,000. The Senior Credit Facility includes a $20,000 sublimit for the issuance of standby letters of credit and a $15,000 sublimit for swingline loans. The proceeds of the Senior Credit Facility are intended to be used (i) to finance permitted acquisitions, (ii) for capital expenditures, and (iii) for general corporate purposes.
Borrowings under the Credit Agreement are at variable rates which are, at our option, tied to a Eurocurrency rate equal to LIBOR (London Interbank Offered Rate) plus an applicable rate or a base rate denominated in U.S. dollars. Interest rates are subject to change based on our Consolidated Senior Leverage Ratio (as defined in the Credit Agreement).
The Senior Credit Facility contains certain financial covenants, including a maximum leverage ratio of 4.0:1 and a minimum fixed charge coverage ratio of 1.20:1. Furthermore, the Senior Credit Facility also contains financial reporting covenant provisions and other covenants, representations, warranties, indemnities, and events of default that are customary for facilities of this type. As of June 29, 2019 and December 29, 2018, the Company is in compliance with the financial covenants. As of June 29, 2019 there was $10,000 outstanding on the Senior Credit Facility. As of December 29, 2018, we had no outstanding balance on the Senior Credit Facility.
Other Obligations
On June 3, 2019, the Company acquired Page One. The purchase price allowed for the payment of $200 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable on the first anniversary of June 3, 2019. At June 29, 2019, the outstanding balance of this obligation was $181.
On December 31, 2018, the Company acquired certain assets of Celtic. The purchase price allowed for the payment of $200 in shares of the Company’s stock or a combination of cash and shares of the Company’s stock, at our discretion, payable on the first anniversary of December 31, 2018. At June 29, 2019, the outstanding balance of this obligation was $181.
On November 2, 2018, the Company acquired CHI. The purchase price allowed for the payment of $