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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 September 30, 2021

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 No. 001-16501

Graphic

Williams Industrial Services Group Inc.

(Exact name of registrant as specified in its charter)

Delaware

73-1541378

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

100 Crescent Centre Parkway, Suite 1240

Tucker, GA 30084

(Address of principal executive offices) (Zip code)

(770) 879-4400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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, par value $0.01 per share

WLMS

NYSE American

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      No  

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   No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 5, 2021, there were 25,915,502 shares of common stock of Williams Industrial Services Group Inc. outstanding.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

Table of Contents

Part I—FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (unaudited)

3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

4

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

5

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)

7

Notes to Condensed Consolidated Financial Statements (unaudited)

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3. Quantitative and Qualitative Disclosures about Market Risk

31

Item 4. Controls and Procedures

31

Part II—OTHER INFORMATION

Item 1. Legal Proceedings

31

Item 1A. Risk Factors

32

Item 5. Other Information

32

Item 6. Exhibits

33

SIGNATURES

34

1

Table of Contents

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)

September 30, 2021

  

December 31, 2020

ASSETS

  

  

Current assets:

Cash and cash equivalents

$

2,556

$

8,716

Restricted cash

 

468

 

468

Accounts receivable, net of allowance of $228 and $351, respectively

 

39,489

 

27,549

Contract assets

 

12,811

 

7,969

Other current assets

 

11,526

 

6,457

Total current assets

 

66,850

 

51,159

Property, plant and equipment, net

 

709

 

309

Goodwill

 

35,400

 

35,400

Intangible assets

 

12,500

 

12,500

Other long-term assets

 

5,687

 

5,712

Total assets

$

121,146

$

105,080

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

8,439

$

6,210

Accrued compensation and benefits

 

19,856

 

15,800

Contract liabilities

 

2,494

 

2,529

Short-term borrowings

4,672

352

Current portion of long-term debt

1,050

1,050

Other current liabilities

 

10,711

 

7,170

Current liabilities of discontinued operations

188

342

Total current liabilities

 

47,410

 

33,453

Long-term debt, net

 

30,428

 

30,728

Deferred tax liabilities

2,136

2,440

Other long-term liabilities

 

1,828

 

2,098

Long-term liabilities of discontinued operations

4,201

4,466

Total liabilities

 

86,003

 

73,185

Commitments and contingencies (Note 10)

Stockholders’ equity:

Common stock, $0.01 par value, 170,000,000 shares authorized and 26,384,670 and 25,926,333 shares issued, respectively, and 25,915,502 and 25,336,442 shares outstanding, respectively

 

260

 

256

Paid-in capital

 

91,670

 

90,292

Accumulated other comprehensive income (loss)

 

(36)

 

28

Accumulated deficit

 

(56,745)

 

(58,673)

Treasury stock, at par (469,168 and 589,891 common shares, respectively)

 

(6)

 

(8)

Total stockholders’ equity

 

35,143

 

31,895

Total liabilities and stockholders’ equity

$

121,146

$

105,080

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

  

2021

  

2020

2021

  

2020

Revenue

$

73,351

$

66,240

$

225,773

$

204,936

Cost of revenue

66,590

57,582

203,561

180,014

 Gross profit

6,761

8,658

22,212

24,922

Selling and marketing expenses

267

123

709

401

General and administrative expenses

4,248

5,827

16,931

17,413

Depreciation and amortization expense

50

46

137

144

Total operating expenses

4,565

5,996

17,777

17,958

Operating income

2,196

2,662

4,435

6,964

Interest expense, net

1,227

1,541

3,733

4,640

Other (income) expense, net

181

(316)

(1,411)

(937)

Total other expense, net

1,408

1,225

2,322

3,703

Income from continuing operations before income tax

788

1,437

2,113

3,261

Income tax (benefit) expense

(6)

321

256

565

Income from continuing operations

794

1,116

1,857

2,696

Income (loss) from discontinued operations before income tax

(34)

(66)

130

(222)

Income tax (benefit) expense

22

24

59

(56)

Income (loss) from discontinued operations

(56)

(90)

71

(166)

Net income

$

738

$

1,026

$

1,928

$

2,530

Basic earnings per common share

Income from continuing operations

$

0.03

$

0.04

$

0.07

$

0.12

Income (loss) from discontinued operations

0.00

0.00

0.00

(0.01)

Basic earnings per common share

$

0.03

$

0.04

$

0.07

$

0.11

Diluted earnings per common share

Income from continuing operations

$

0.03

$

0.04

$

0.07

$

0.11

Income (loss) from discontinued operations

0.00

0.00

0.00

0.00

Diluted earnings per common share

$

0.03

$

0.04

$

0.07

$

0.11

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2021

  

2020

2021

  

2020

Net income

$

738

$

1,026

$

1,928

$

2,530

Foreign currency translation adjustment

 

(98)

 

(34)

 

(64)

 

(288)

Comprehensive income

$

640

$

992

$

1,864

$

2,242

See accompanying notes to condensed consolidated financial statements.

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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

19,794,270

$

198

$

81,964

$

222

$

(60,211)

(737,075)

$

(9)

$

22,164

Issuance of common stock

5,384,615

54

6,478

6,532

Issuance of restricted stock units

423,341

80,207

1

1

Tax withholding on restricted stock units

(65)

(41,445)

(65)

Stock-based compensation

376

376

Foreign currency translation

(258)

(258)

Net loss

(1,001)

(1,001)

Balance, March 31, 2020

25,602,226

$

252

$

88,753

$

(36)

$

(61,212)

(698,313)

$

(8)

$

27,749

Issuance of common stock

4

(48)

(44)

Issuance of restricted stock units

407,315

138,221

1

1

Tax withholding on restricted stock units

(93,234)

(153)

(31,570)

(1)

(154)

Stock-based compensation

650

650

Foreign currency translation

4

4

Net income

2,505

2,505

Balance, June 30, 2020

25,916,307

$

256

$

89,202

$

(32)

$

(58,707)

(591,662)

$

(8)

$

30,711

Issuance of restricted stock units

10,026

4,788

Tax withholding on restricted stock units

(9)

(3,017)

(9)

Share-based compensation

389

389

Foreign currency translation

(34)

(34)

Net income

1,026

1,026

Balance, September 30, 2020

25,926,333

$

256

$

89,582

$

(66)

$

(57,681)

(589,891)

$

(8)

$

32,083

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

25,926,333

$

256

$

90,292

$

28

$

(58,673)

(589,891)

$

(8)

$

31,895

Issuance of restricted stock units

438,836

4

120,723

2

6

Tax withholding on restricted stock units

(545)

(545)

Stock-based compensation

625

625

Foreign currency translation

4

4

Net loss

(1,681)

(1,681)

Balance, March 31, 2021

26,365,169

$

260

$

90,372

$

32

$

(60,354)

(469,168)

$

(6)

$

30,304

Issuance of restricted stock units

19,501

Tax withholding on restricted stock units

40

40

Stock-based compensation

424

424

Foreign currency translation

30

30

Net income

2,871

2,871

Balance, June 30, 2021

26,384,670

$

260

$

90,836

$

62

$

(57,483)

(469,168)

$

(6)

$

33,669

Share-based compensation

834

834

Foreign currency translation

(98)

(98)

Net income

738

738

Balance, September 30, 2021

26,384,670

$

260

$

91,670

$

(36)

$

(56,745)

(469,168)

$

(6)

$

35,143

See accompanying notes to condensed consolidated financial statements.

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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Nine Months Ended September 30,

(in thousands)

2021

  

2020

Operating activities:

Net income

$

1,928

$

2,530

Adjustments to reconcile net income to net cash used in operating activities:

Net (income) loss from discontinued operations

(71)

166

Deferred income tax provision (benefit)

(304)

55

Depreciation and amortization on plant, property and equipment

137

144

Amortization of deferred financing costs

623

546

Amortization of debt discount

150

Gain on disposals of property, plant and equipment

(136)

Bad debt expense

(123)

19

Stock-based compensation

2,579

1,703

Changes in operating assets and liabilities, net of businesses sold:

Accounts receivable

(11,896)

(6,530)

Contract assets

(4,824)

(1,553)

Other current assets

(5,113)

(3,684)

Other assets

(214)

1,619

Accounts payable

2,121

(8,914)

Accrued and other liabilities

6,628

7,290

Contract liabilities

(39)

706

Net cash used in operating activities, continuing operations

(8,418)

(6,039)

Net cash used in operating activities, discontinued operations

(348)

(189)

Net cash used in operating activities

(8,766)

(6,228)

Investing activities:

Purchase of property, plant and equipment

(537)

(88)

Net cash used in investing activities

(537)

(88)

Financing activities:

Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation

(501)

(227)

Proceeds from issuance of common stock

6,488

Debt issuance costs

(325)

Proceeds from short-term borrowings

208,421

172,616

Repayments of short-term borrowings

(204,101)

(175,158)

Repayments of long-term debt

(788)

(350)

Net cash provided by financing activities

3,031

3,044

Effect of exchange rate change on cash

112

(80)

Net change in cash, cash equivalents and restricted cash

(6,160)

(3,352)

Cash, cash equivalents and restricted cash, beginning of period

9,184

7,818

Cash, cash equivalents and restricted cash, end of period

$

3,024

$

4,466

Supplemental Disclosures:

Cash paid for interest

$

2,781

$

2,900

Cash paid for income taxes, net of refunds

$

1,841

$

Noncash amendment fee related to revolving credit facility

$

$

150

See accompanying notes to condensed consolidated financial statements.

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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 formed in 1998 as GEEG Holdings, LLC, a Delaware limited liability company, and in 2001, changed its name to “Global Power Equipment Group Inc.,” a Delaware corporation and became the successor to GEEG Holdings, LLC. 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 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

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 one to ten years. Most leases contain renewal options for varying periods, which are at the Company’s sole discretion and included in the expected lease term if they are reasonably certain of being exercised. In accordance with ASU 2016-02, the Company accounts for lease components, such as fixed payments including rent, real estate taxes, and insurance costs, separately from the non-lease components, such as common area maintenance costs.

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.

On September 2, 2021, the Company made the decision to relocate its corporate headquarters to Atlanta, Georgia and entered into a ten-year lease agreement. The lease is not presented as a right-of-use asset and lease liability because the commencement date of the lease is not expected to occur until early 2022 after substantial completion of the leasehold improvements as defined in the lease agreement. The lease liability amounts to $3.5 million with a present value of $2.3 million over a ten-year term. If the Company defaults, the landlord has the right to use the security deposit for rent or other payments due to other damages, injury, expense or liability as defined in the lease agreement. Although the security deposit shall be deemed the property of the landlord, any remaining balance of the security deposit shall be returned by the landlord to the Company after termination of the lease as the Company’s obligations under the lease have been fulfilled.

The components of lease expense were as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Lease Cost (in thousands)

2021

2020

2021

2020

Operating lease cost

$

619

$

850

$

1,711

$

2,950

Short-term lease cost

1,051

505

2,484

1,972

Sublease income

(5)

(5)

Total lease cost

$

1,665

$

1,355

$

4,190

$

4,922

Lease cost related to finance leases was not significant for the three and nine months ended September 30, 2021 and 2020.

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Information related to the Company’s right-of-use assets and lease liabilities was as follows:

Lease Assets/Liabilities (in thousands)

Balance Sheet Classification

September 30, 2021

December 31, 2020

Lease Assets

Right-of-use assets

Other long-term assets

$

1,583

$

2,029

Lease Liabilities

Short-term lease liabilities

Other current liabilities

$

1,603

$

1,362

Long-term lease liabilities

Other long-term liabilities

673

1,011

Total lease liabilities

$

2,276

$

2,373

Supplemental information related to the Company’s leases was as follows:

Nine Months Ended September 30,

(dollars in thousands)

2021

2020

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash used by operating leases

$

1,810

$

3,388

Right-of-use assets obtained in exchange for new operating lease liabilities

1,549

2,226

Weighted-average remaining lease term - operating leases

1.47 years

1.71 years

Weighted-average remaining lease term - finance leases

2.48 years

3.48 years

Weighted-average discount rate - operating leases

9%

9%

Weighted-average discount rate - finance leases

9%

9%

Total remaining lease payments under the Company’s operating and finance leases were as follows:

Operating Leases

Finance Leases

Nine Months Ended September 30,

(in thousands)

Remainder of 2021

$

582

$

2

2022

1,372

6

2023

360

6

2024

103

1

2025

3

Total lease payments

$

2,420

$

15

Less: interest

(159)

Present value of lease liabilities

$

2,261

$

15

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.

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Table of Contents

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 $2.9 million related to Koontz-Wagner’s International Brotherhood of Electrical Workers Local Union 1392 (“IBEW”) multi-employer pension plan.

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 $0.2 million. The pension liability is expected to be satisfied by annual cash payments of $0.3 million each, paid in quarterly installments, through 2038. The Company recorded a gain on disposal of approximately $0.2 million in the nine months ended September 30, 2021 to reduce its previously recorded estimated withdrawal liability to the new amount.

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 September 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)

  

September 30, 2021

December 31, 2020

Liabilities:

Current liabilities of discontinued operations

$

188

$

342

Liability for pension obligation

2,347

2,670

Liability for uncertain tax positions

1,854

1,796

Long-term liabilities of discontinued operations

4,201

4,466

Total liabilities of discontinued operations

$

4,389

$