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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
Table of Contents
1
Part I—FINANCIAL INFORMATION
Item 1. Financial Statements.
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data) | June 30, 2021 |
| December 31, 2020 | |||
ASSETS |
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Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
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Accounts receivable, net of allowance of $ |
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Contract assets |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Goodwill |
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Intangible assets |
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Other long-term assets |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued compensation and benefits |
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Contract liabilities |
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Short-term borrowings | | | ||||
Current portion of long-term debt | | | ||||
Other current liabilities |
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Current liabilities of discontinued operations | | | ||||
Total current liabilities |
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Long-term debt, net |
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Deferred tax liabilities | | | ||||
Other long-term liabilities |
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Long-term liabilities of discontinued operations | | | ||||
Total liabilities |
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Commitments and contingencies (Note 10) | ||||||
Stockholders’ equity: | ||||||
Common stock, $ |
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Paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
| ( |
| ( | ||
Treasury stock, at par ( |
| ( |
| ( | ||
Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
3
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(in thousands, except per share data) |
| 2021 |
| 2020 | 2021 |
| 2020 | |||||
Revenue | $ | | $ | | $ | | $ | | ||||
Cost of revenue | | | | | ||||||||
Gross profit | | | | | ||||||||
Selling and marketing expenses | | | | | ||||||||
General and administrative expenses | | | | | ||||||||
Depreciation and amortization expense | | | | | ||||||||
Total operating expenses | | | | | ||||||||
Operating income | | | | | ||||||||
Interest expense, net | | | | | ||||||||
Other income, net | ( | ( | ( | ( | ||||||||
Total other (income) expense, net | ( | | | | ||||||||
Income from continuing operations before income tax | | | | | ||||||||
Income tax expense | | | | | ||||||||
Income from continuing operations | | | | | ||||||||
Income (loss) from discontinued operations before income tax | | ( | | ( | ||||||||
Income tax (benefit) expense | | ( | | ( | ||||||||
Income (loss) from discontinued operations | | ( | | ( | ||||||||
Net income | $ | | $ | | $ | | $ | | ||||
Basic earnings per common share | ||||||||||||
Income from continuing operations | $ | | $ | | $ | | $ | | ||||
Income (loss) from discontinued operations | | | | | ||||||||
Basic earnings per common share | $ | | $ | | $ | | $ | | ||||
Diluted earnings per common share | ||||||||||||
Income from continuing operations | $ | | $ | | $ | | $ | | ||||
Income (loss) from discontinued operations | | | | | ||||||||
Diluted earnings per common share | $ | | $ | | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
4
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) | 2021 |
| 2020 | 2021 |
| 2020 | ||||||
Net income | $ | | $ | | $ | | $ | | ||||
Foreign currency translation adjustment |
| |
| |
| |
| ( | ||||
Comprehensive income | $ | | $ | | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
5
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Accumulated | ||||||||||||||||||||||
Common Shares | Other | |||||||||||||||||||||
$0.01 Per Share | Paid-in | Comprehensive | Accumulated | Treasury Shares | ||||||||||||||||||
(in thousands, except share data) |
| Shares |
| Amount |
| Capital |
| Income (Loss) | Deficit | Shares | Amount |
| Total | |||||||||
Balance, December 31, 2019 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of common stock | | | | — | — | — | — | | ||||||||||||||
Issuance of restricted stock units | | — | — | — | — | | | | ||||||||||||||
Tax withholding on restricted stock units | — | — | ( | — | — | ( | — | ( | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | ( | — | — | — | ( | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, March 31, 2020 | | $ | | $ | | $ | ( | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of common stock | — | | ( | — | — | — | — | ( | ||||||||||||||
Issuance of restricted stock units | | — | — | — | — | | | | ||||||||||||||
Tax withholding on restricted stock units | ( | — | ( | — | — | ( | ( | ( | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net income | — | — | — | — | | — | — | | ||||||||||||||
Balance, June 30, 2020 | | $ | | $ | | $ | ( | $ | ( | ( | $ | ( | $ | |
Accumulated | ||||||||||||||||||||||
Common Shares | Other | |||||||||||||||||||||
$0.01 Per Share | Paid-in | Comprehensive | Accumulated | Treasury Shares | ||||||||||||||||||
(in thousands, except share data) |
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance, December 31, 2020 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of restricted stock units | | | — | — | — | | | | ||||||||||||||
Tax withholding on restricted stock units | — | — | ( | — | — | — | — | ( | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, March 31, 2021 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of restricted stock units | | — | — | — | — | — | — | — | ||||||||||||||
Tax withholding on restricted stock units | — | — | | — | — | — | — | | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net income | — | — | — | — | | — | — | | ||||||||||||||
Balance, June 30, 2021 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | |
See accompanying notes to condensed consolidated financial statements.
6
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, | ||||||
(in thousands) | 2021 |
| 2020 | |||
Operating activities: | ||||||
Net income | $ | | $ | | ||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||
Net (income) loss from discontinued operations | ( | | ||||
Deferred income tax provision (benefit) | ( | | ||||
Depreciation and amortization on plant, property and equipment | | | ||||
Amortization of deferred financing costs | | | ||||
Amortization of debt discount | | — | ||||
Bad debt expense | ( | | ||||
Stock-based compensation | | | ||||
Changes in operating assets and liabilities, net of businesses sold: | ||||||
Accounts receivable | ( | ( | ||||
Contract assets | ( | ( | ||||
Other current assets | ( | ( | ||||
Other assets | ( | ( | ||||
Accounts payable | | ( | ||||
Accrued and other liabilities | | | ||||
Contract liabilities | ( | | ||||
Net cash used in operating activities, continuing operations | ( | ( | ||||
Net cash used in operating activities, discontinued operations | ( | ( | ||||
Net cash used in operating activities | ( | ( | ||||
Investing activities: | ||||||
Purchase of property, plant and equipment | ( | ( | ||||
Net cash used in investing activities | ( | ( | ||||
Financing activities: | ||||||
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation | ( | ( | ||||
Proceeds from issuance of common stock | — | | ||||
Debt issuance costs | — | ( | ||||
Proceeds from short-term borrowings | | | ||||
Repayments of short-term borrowings | ( | ( | ||||
Repayments of long-term debt | ( | ( | ||||
Net cash provided by financing activities | | | ||||
Effect of exchange rate change on cash | | ( | ||||
Net change in cash, cash equivalents and restricted cash | ( | ( | ||||
Cash, cash equivalents and restricted cash, beginning of period | | | ||||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental Disclosures: | ||||||
Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes, net of refunds | $ | | $ | — | ||
Noncash amendment fee related to revolving credit facility | $ | — | $ | |
See accompanying notes to condensed consolidated financial statements.
7
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1—BUSINESS AND BASIS OF PRESENTATION
Business
Williams Industrial Services Group Inc. (together with its wholly owned subsidiaries, “Williams,” the “Company,” “we,” “us” or “our,” unless the context indicates otherwise) was initially incorporated in 1998, and in 2001, changed its name to “Global Power Equipment Group Inc.” under the laws of the State of Delaware and became the successor to GEEG Holdings, LLC, which was formed as a Delaware limited liability company in 1998. Effective June 29, 2018, the Company changed its name to Williams Industrial Services Group Inc. to better align its name with the Williams business, and the Company’s stock now trades on the NYSE American LLC (the “NYSE American”) under the ticker symbol “WLMS.” Williams has been safely helping plant owners and operators enhance asset value for more than 50 years. It provides a broad range of construction, maintenance, and support services to infrastructure customers in energy, power, and industrial end markets. The Company’s mission is to be the preferred provider of construction, maintenance, and specialty services through commitment to superior safety performance, focus on innovation, and dedication to delivering unsurpassed value to its customers.
Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) on a basis consistent with that used in the Annual Report on Form 10-K for the year ended December 31, 2020, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2021 (the “2020 Report”). In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, including all normal recurring adjustments, necessary to present fairly the unaudited condensed consolidated balance sheets and statements of operations, comprehensive income, stockholders’ equity and cash flows for the periods indicated. All significant intercompany transactions have been eliminated. The December 31, 2020 unaudited condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated interim financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the 2020 Report. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for any interim period are not necessarily indicative of operations to be expected for the full year.
The Company reports on a fiscal quarter basis utilizing a “modified” 4-4-5 calendar (modified in that the fiscal year always begins on January 1 and ends on December 31). However, the Company has continued to label its quarterly information using a calendar convention. The effects of this practice are modest and only exist when comparing interim period results. The reporting periods and corresponding fiscal interim periods are as follows:
Reporting Interim Period | Fiscal Interim Period | |||
| 2021 |
| 2020 | |
Three Months Ended March 31 | January 1, 2021 to April 4, 2021 | January 1, 2020 to March 29, 2020 | ||
Three Months Ended June 30 | April 5, 2021 to July 4, 2021 | March 30, 2020 to June 28, 2020 | ||
Three Months Ended September 30 | July 5, 2021 to October 3, 2021 | June 29, 2020 to September 27, 2020 |
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NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS
Recently Adopted Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2019-12, “Income Taxes”, which simplifies the accounting for income taxes by removing certain exceptions for investments, intraperiod allocations and interim calculations, and adding guidance to reduce complexity in accounting for income taxes. The update is effective for annual periods beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company historically did not rely on the exceptions in computing the tax provision. The Company adopted the guidance as of January 1, 2021. The adoption of ASU 2019-12 did not have a material impact on the Company's financial statements.
NOTE 3—LEASES
On January 1, 2019, the Company adopted ASU 2016-02 using the modified retrospective method, and accordingly, the new guidance was applied to leases that existed as of January 1, 2019.
The Company primarily leases office space and related equipment, as well as equipment, modular units and vehicles directly used in providing services to its customers. The Company’s leases have remaining lease terms of
In accordance with ASU 2016-02, for leases with terms greater than twelve months, the Company records the related right-of-use assets and lease liabilities at the present value of the fixed lease payments over the lease term at the lease commencement date. The Company uses its incremental borrowing rate to determine the present value of the lease as the rate implicit in the lease is typically not readily determinable.
Short-term leases (leases with an initial term of twelve months or less or leases that are cancelable by the lessee and lessor without significant penalties) are expensed on a straight-line basis over the lease term. The majority of the Company’s short-term leases relate to equipment used in delivering services to its customers. These leases are entered into at agreed upon hourly, daily, weekly, or monthly rental rates for an unspecified duration and typically have a termination for convenience provision. Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than twelve months.
The components of lease expense were as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
Lease Cost (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||
Operating lease cost | $ | | $ | | $ | | $ | | ||||
Short-term lease cost | | | | | ||||||||
Total lease cost | $ | | $ | | $ | | $ | |
Lease cost related to finance leases was not significant for the three and six months ended June 30, 2021 and 2020.
9
Information related to the Company’s right-of-use assets and lease liabilities was as follows:
Lease Assets/Liabilities (in thousands) | Balance Sheet Classification | June 30, 2021 | December 31, 2020 | |||||
Lease Assets | ||||||||
Right-of-use assets | $ | | $ | | ||||
Lease Liabilities | ||||||||
Short-term lease liabilities | $ | | $ | | ||||
Long-term lease liabilities | | | ||||||
Total lease liabilities | $ | | $ | |
Supplemental information related to the Company’s leases was as follows:
Six Months Ended June 30, | ||||||
(dollars in thousands) | 2021 | 2020 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||
Operating cash used by operating leases | $ | | $ | | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | | | ||||
Weighted-average remaining lease term - operating leases | ||||||
Weighted-average remaining lease term - finance leases | ||||||
Weighted-average discount rate - operating leases | ||||||
Weighted-average discount rate - finance leases |
Total remaining lease payments under the Company’s operating and finance leases were as follows:
Operating Leases | Finance Leases | |||||
Six Months Ended June 30, 2021 | (in thousands) | |||||
Remainder of 2021 | $ | | $ | | ||
2022 | | | ||||
2023 | | | ||||
2024 | | | ||||
2025 | | - | ||||
Total lease payments | $ | | $ | | ||
Less: interest | ( | — | ||||
Present value of lease liabilities | $ | | $ | |
NOTE 4—CHANGES IN BUSINESS
Discontinued Operations
Electrical Solutions
During the fourth quarter of 2017, the Company made the decision to exit and sell its Electrical Solutions segment (which was comprised solely of Koontz-Wagner Custom Controls Holdings LLC (“Koontz-Wagner”), a wholly owned subsidiary of the Company) in an effort to reduce the Company’s outstanding term debt. The Company determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.
10
On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded a pension withdrawal liability of $
After an arbitration process, on May 12, 2021, an arbitrator concluded that the IBEW used an incorrect per hour contribution rate in calculating the Company’s pension withdrawal liability, which resulted in the Company overpaying. The arbitrator directed IBEW to refund all overpayments, with interest, to the Company and to redetermine the Company’s payments going forward using the proper contribution rate. Accordingly, the Company’s overall pension withdrawal liability decreased by approximately $
Mechanical Solutions
During the third quarter of 2017, the Company made the decision to exit and sell substantially all of the operating assets and liabilities of its Mechanical Solutions segment and determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.
As of June 30, 2021 and December 31, 2020, the Company did not have any assets related to its Electrical Solutions’ and Mechanical Solutions’ discontinued operations. The following table presents a reconciliation of the carrying amounts of major classes of liabilities of Electrical Solutions’ and Mechanical Solutions’ discontinued operations:
(in thousands) |
| June 30, 2021 | December 31, 2020 | |||
Liabilities: | ||||||
Current liabilities of discontinued operations | $ | | $ | | ||
Liability for pension obligation | | | ||||
Liability for uncertain tax positions | | | ||||
Long-term liabilities of discontinued operations | | | ||||
Total liabilities of discontinued operations | $ | | $ | |
The following table presents a reconciliation of the major classes of line items constituting the net income (loss) from discontinued operations. In accordance with GAAP, the amounts in the table below do not include an allocation of corporate overhead.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) |
| 2021 |
| 2020 | 2021 |
| 2020 | |||||
General and administrative expenses | $ | | $ | | $ | | $ | | ||||
Loss (gain) on disposal - Electrical Solutions | ( | | ( | | ||||||||
Interest expense (income) | ( | | | | ||||||||
Income (loss) from discontinued operations before income tax | | ( | | ( | ||||||||
Income tax expense (benefit) | | ( | | ( | ||||||||
Income (loss) from discontinued operations | $ | | $ | ( | $ | | $ | ( |
NOTE 5—REVENUE
Disaggregation of Revenue
Disaggregated revenue by type of contract was as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||
Cost-plus reimbursement contracts | $ | | $ | | $ | | $ | | ||||
Fixed-price contracts | | | | | ||||||||
Total | $ | | $ | | $ | | $ | |
11