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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 March 31, 2022

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.)

200 Ashford Center North, Suite 425

Atlanta, GA 30338

(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 May 9, 2022, there were 26,560,277 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

2

Item 1. Financial Statements

2

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)

2

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021 (unaudited)

3

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021 (unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2022 and 2021 (unaudited)

5

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021 (unaudited)

6

Notes to Condensed Consolidated Financial Statements (unaudited)

7

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

21

Item 3. Quantitative and Qualitative Disclosures about Market Risk

28

Item 4. Controls and Procedures

29

Part II—OTHER INFORMATION

Item 1. Legal Proceedings

30

Item 1A. Risk Factors

30

Item 6. Exhibits

30

SIGNATURES

31

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)

March 31, 2022

  

December 31, 2021

ASSETS

  

  

Current assets:

Cash and cash equivalents

$

4,260

$

2,482

Restricted cash

 

468

 

468

Accounts receivable, net of allowance of $392 and $427, respectively

 

33,574

 

35,204

Contract assets

 

12,838

 

12,683

Other current assets

 

11,076

 

11,049

Total current assets

 

62,216

 

61,886

Property, plant, and equipment, net

 

587

 

653

Goodwill

 

35,400

 

35,400

Intangible assets

 

12,500

 

12,500

Other long-term assets

 

6,998

 

5,712

Total assets

$

117,701

$

116,151

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

16,424

$

12,168

Accrued compensation and benefits

 

12,056

 

12,388

Contract liabilities

 

2,717

 

3,412

Short-term borrowings

676

Current portion of long-term debt

1,050

1,050

Other current liabilities

 

10,288

 

11,017

Current liabilities of discontinued operations

337

316

Total current liabilities

 

42,872

 

41,027

Long-term debt, net

 

30,228

 

30,328

Deferred tax liabilities

2,447

2,442

Other long-term liabilities

 

3,539

 

1,647

Long-term liabilities of discontinued operations

4,207

4,250

Total liabilities

 

83,293

 

79,694

Commitments and contingencies (Note 10)

Stockholders’ equity:

Common stock, $0.01 par value, 170,000,000 shares authorized and 26,700,683 and 26,408,789 shares issued, respectively, and 26,231,515 and 25,939,621 shares outstanding, respectively

 

261

 

261

Paid-in capital

 

92,080

 

92,227

Accumulated other comprehensive income (loss)

 

47

 

(95)

Accumulated deficit

 

(57,974)

 

(55,930)

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

 

(6)

 

(6)

Total stockholders’ equity

 

34,408

 

36,457

Total liabilities and stockholders’ equity

$

117,701

$

116,151

See accompanying notes to condensed consolidated financial statements.

2

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended March 31,

(in thousands, except per share data)

  

2022

  

2021

Revenue

$

69,559

$

60,851

Cost of revenue

63,850

54,753

 Gross profit

5,709

6,098

Selling and marketing expenses

330

211

General and administrative expenses

6,071

6,311

Depreciation and amortization expense

66

41

Total operating expenses

6,467

6,563

Operating loss

(758)

(465)

Interest expense, net

1,219

1,293

Other income, net

(179)

(360)

Total other expense, net

1,040

933

Loss from continuing operations before income tax

(1,798)

(1,398)

Income tax expense

229

185

Loss from continuing operations

(2,027)

(1,583)

Loss from discontinued operations before income tax

(79)

Income tax expense

17

19

Loss from discontinued operations

(17)

(98)

Net loss

$

(2,044)

$

(1,681)

Basic loss per common share

Loss from continuing operations

$

(0.08)

$

(0.06)

Loss from discontinued operations

(0.01)

Basic loss per common share

$

(0.08)

$

(0.07)

Diluted loss per common share

Loss from continuing operations

$

(0.08)

$

(0.06)

Loss from discontinued operations

(0.01)

Diluted loss per common share

$

(0.08)

$

(0.07)

See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

Three Months Ended March 31,

(in thousands)

2022

  

2021

Net loss

$

(2,044)

$

(1,681)

Foreign currency translation adjustment

 

142

 

4

Comprehensive loss

$

(1,902)

$

(1,677)

See accompanying notes to condensed consolidated financial statements.

4

Table of Contents

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, 2020

25,926,333

$

256

$

90,292

$

28

$

(58,673)

(589,891)

$

(8)

$

31,895

Issuance of restricted stock

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

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, 2021

26,408,789

$

261

$

92,227

$

(95)

$

(55,930)

(469,168)

$

(6)

$

36,457

Issuance of restricted stock units

291,894

Stock-based compensation

(147)

(147)

Foreign currency translation

142

142

Net loss

(2,044)

(2,044)

Balance, March 31, 2022

26,700,683

$

261

$

92,080

$

47

$

(57,974)

(469,168)

$

(6)

$

34,408

See accompanying notes to condensed consolidated financial statements.

5

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31,

(in thousands)

2022

  

2021

Operating activities:

Net loss

$

(2,044)

$

(1,681)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Net loss from discontinued operations

17

98

Deferred income tax provision (benefit)

5

(13)

Depreciation and amortization on plant, property, and equipment

66

41

Amortization of deferred financing costs

208

208

Amortization of debt discount

50

50

Bad debt expense

(35)

(18)

Stock-based compensation

(31)

715

Changes in operating assets and liabilities:

Accounts receivable

1,713

(1,634)

Contract assets

(153)

(4,410)

Other current assets

(27)

59

Other assets

(1,369)

(172)

Accounts payable

4,231

(859)

Accrued and other liabilities

619

5,112

Contract liabilities

(695)

(548)

Net cash provided by (used in) operating activities, continuing operations

2,555

(3,052)

Net cash used in operating activities, discontinued operations

(39)

(69)

Net cash provided by (used in) operating activities

2,516

(3,121)

Investing activities:

Purchase of property, plant, and equipment

(56)

Net cash used in investing activities

(56)

Financing activities:

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

(541)

Proceeds from short-term borrowings

66,618

57,971

Repayments of short-term borrowings

(67,294)

(57,172)

Repayments of long-term debt

(263)

(263)

Net cash used in financing activities

(939)

(5)

Effect of exchange rate change on cash

201

(90)

Net change in cash, cash equivalents and restricted cash

1,778

(3,272)

Cash, cash equivalents and restricted cash, beginning of period

2,950

9,184

Cash, cash equivalents and restricted cash, end of period

$

4,728

$

5,912

Supplemental Disclosures:

Cash paid for interest

$

867

$

875

Cash paid for income taxes, net of refunds

$

36

$

1,066

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 Inc., a Delaware corporation, and in 2001 changed its name to “Global Power Equipment Group Inc.,” and, as part of a reorganization, became the successor to GEEG Holdings, L.L.C., a Delaware limited liability company. 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 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, 2021, filed by the Company with the U.S. Securities and Exchange Commission (“SEC”) on March 16, 2022 (the “2021 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, 2021 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 2021 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” 5-4-4 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

  

2022

  

2021

Three Months Ended March 31

January 1, 2022 to April 3, 2022

January 1, 2021 to April 4, 2021

Three Months Ended June 30

April 4, 2022 to July 3, 2022

April 5, 2021 to July 4, 2021

Three Months Ended September 30

July 4, 2022 to October 2, 2022

July 5, 2021 to October 3, 2021

NOTE 2—RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

The Company did not implement any new accounting pronouncements during the first quarter of 2022. However, the Company is currently evaluating the impact of future disclosures that may arise under recent SEC proposals.

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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 Company completed its relocation in March 2022. The lease is presented as a right-of-use asset and lease liability and 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 Company subleased its former office space and collected $15,000 of sublease income as of March 31, 2022.

The components of lease expense were as follows:

Three Months Ended March 31,

Lease Cost/(Sublease Income) (in thousands)

2022

2021

Operating lease cost

$

546

$

555

Short-term lease cost

1,617

620

Sublease income

(15)

-

Total lease cost

$

2,148

$

1,175

Lease cost related to finance leases was not significant for the three months ended March 31, 2022 and 2021.

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

Lease Assets/Liabilities (in thousands)

Balance Sheet Classification

March 31, 2022

December 31, 2021

Lease Assets

Right-of-use assets

Other long-term assets

$

3,718

$

1,527

Lease Liabilities

Short-term lease liabilities

Other current liabilities

$

1,854

$

1,606

Long-term lease liabilities

Other long-term liabilities

2,348

511

Total lease liabilities

$

4,202

$

2,117

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

Three Months Ended March 31,

(dollars in thousands)

2022

2021

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

Operating cash used by operating leases

$

651

$

578

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

2,678

491

Weighted-average remaining lease term - operating leases

5.47 years

1.80 years

Weighted-average remaining lease term - finance leases

1.98 years

3.23 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

Three Months Ended March 31, 2022

(in thousands)

Remainder of 2022

$

1,735

$

4

2023

827

6

2024

479

-

2025

350

-

2026

348

-

Thereafter

1,589

-

Total lease payments

$

5,328

$

10

Less: interest

(1,136)

-

Present value of lease liabilities

$

4,192

$

10

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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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 $0.3 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 $0.3 million in 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 March 31, 2022 and December 31, 2021, 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)

  

March 31, 2022

December 31, 2021

Liabilities:

Other current liabilities

$

337

$

316

Current liabilities of discontinued operations

337

316

Liability for pension obligation

2,307

2,368

Liability for uncertain tax positions

1,900

1,882

Long-term liabilities of discontinued operations

4,207

4,250

Total liabilities of discontinued operations

$

4,544

$

4,566

The following table presents a reconciliation of the major classes of line items constituting the net 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 March 31,

(in thousands)

  

2022

  

2021

General and administrative expenses

$

$

28

Interest expense

51

Loss from discontinued operations before income tax

(79)

Income tax expense

17

19

Loss from discontinued operations

$

(17)

$

(98)

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NOTE 5—REVENUE

Disaggregation of Revenue

The Company’s contracts generally include a single performance obligation for which revenue is recognized over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. For cost-plus contracts, the Company recognizes revenue when services are performed and contractually billable based upon the hours incurred and agreed-upon hourly rates. Revenue on fixed-price contracts is recognized and invoiced over time using the cost-to-cost percentage-of-completion method. To the extent a contract is deemed to have multiple performance obligations, the Company allocates the transaction price of the contract to each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the contract. The Company does not adjust the price of the contract for the effects of a significant financing component. Change orders are generally not distinct from the existing contract due to the significant integration service provided in the context of the contract and are accounted for as a modification of the existing contract and performance obligation. The Company believes these methods of revenue recognition most accurately reflect the economics of the transactions with its customers.

The Company’s contracts may include several types of variable consideration, including change orders, rate true-up provisions, retainage, claims, incentives, penalties, and liquidated damages. The Company estimates the amount of revenue to be recognized on variable consideration using estimation methods that best predict the amount of consideration to which the Company expects to be entitled. The Company includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of its anticipated performance and all information (historical, current, and forecasted) that is reasonably available. The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. In circumstances where the Company cannot reasonably determine the outcome of a contract, it recognizes revenue over time as the work is performed, but only to the extent of recoverable costs incurred (i.e. zero margin). A loss provision is recorded for the amount of any estimated unrecoverable costs in excess of total estimated revenue on a contract as soon as the Company becomes aware. The Company generally provides a limited warranty for a term of two years or less following completion of services performed under its contracts. Historically, warranty claims have not resulted in material costs incurred.

Disaggregated revenue by type of contract was as follows:  

Three Months Ended March 31,

(in thousands)

2022

2021

Cost-plus reimbursement contracts

$

54,255

$

55,593

Fixed-price contracts

15,304

5,258

Total

$

69,559

$

60,851

Disaggregated revenue by the geographic area where the work was performed was as follows:

Three Months Ended March 31,

(in thousands)

2022

2021

United States

$

64,057

$

51,190

Canada

5,502

9,661

Total

$

69,559

$

60,851

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Contract Balances

The Company enters into contracts that allow for periodic billings over the contract term that are dependent upon specific advance billing terms, as services are provided, or as milestone billings based on completion of certain phases of work. Projects with performance obligations recognized over time that have costs and estimated earnings recognized to date in excess of cumulative billings are reported in the Company’s unaudited condensed consolidated balance sheets as contract assets. Projects with performance obligations recognized over time that have cumulative billings in excess of costs and estimated earnings recognized to date are reported in the Company’s unaudited condensed consolidated balance sheets as contract liabilities. At any point in time, each project in process could have either contract assets or contract liabilities.

The following table provides information about contract assets and contract liabilities from contracts with customers:

Three Months Ended March 31,

(in thousands)

2022

  

2021

Costs incurred on uncompleted contracts

$

63,850

$

54,753

Earnings recognized on uncompleted contracts

 

5,709

 

6,098

Total

69,559

 

60,851

Less—billings to date

(59,438)

 

(50,301)

Net

$

10,121

$

10,550

Contract assets

$

12,838

$

12,528

Contract liabilities

(2,717)

 

(1,978)

Net

$

10,121

$

10,550

For the three months ended March 31, 2022, the Company recognized revenue of approximately $1.4 million on approximately $3.4 million that was included in the corresponding contract liability balance on December 31, 2021.

Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2022:

(in thousands)

Remainder of 2022

2023

2024

Thereafter

Total

Remaining performance obligations

$

121,843

$

65,730

$

27,148

$

42,235

$

256,956

NOTE 6—EARNINGS (LOSS) PER SHARE

As of March 31, 2022, the Company’s 26,231,515 shares outstanding included 321,142 shares of contingently issued but unvested restricted stock. As of March 31, 2021, the Company’s 25,896,001 shares outstanding included 215,956 shares of contingently issued but unvested restricted stock. Restricted stock is excluded from the calculation of basic weighted average shares outstanding, but its impact, if dilutive, is included in the calculation of diluted weighted average shares outstanding.

Basic earnings per common share are calculated by dividing net income by the weighted average common shares outstanding during the period. Diluted earnings per common share are based on the weighted average common shares outstanding during the period, adjusted for the potential dilutive effect of common shares that would be issued upon the vesting and release of restricted stock awards and units and stock options, if any.

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Basic and diluted earnings per common share from continuing operations were calculated as follows:

Three Months Ended March 31,

(in thousands, except share data)

  

2022

2021

Loss from continuing operations

$

(2,027)

$

(1,583)

Basic loss per common share:

Weighted average common shares outstanding

25,838,562

24,933,894

Basic loss per common share

$

(0.08)

$

(0.06)

Diluted loss per common share:

Weighted average common shares outstanding

25,838,562

24,933,894

Diluted effect:

Unvested portion of restricted stock units and awards

Weighted average diluted common shares outstanding

25,838,562

24,933,894

Diluted loss per common share

$

(0.08)

$

(0.06)

The weighted average number of shares outstanding used in the computation of basic and diluted earnings per common share does not include the effect of the following potential outstanding common stock. The effects of the potentially outstanding service-based restricted stock and restricted stock unit awards were not included in the calculation of diluted earnings per common share because the effect would have been anti-dilutive. The effects of the potentially outstanding performance- and market-based restricted stock unit awards were not included in the calculation of diluted earnings per common share because the performance and/or market conditions had not been satisfied as of March 31, 2022 and 2021.

Three Months Ended March 31,

2022

2021

Unvested service-based restricted stock and restricted stock unit awards

281,243

1,476,645

Unvested performance- and market-based restricted stock unit awards

1,923,002

1,023,740

NOTE 7—INCOME TAXES

The effective income tax expense rate for continuing operations for the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended March 31,

    

2022

2021

Effective income tax rate for continuing operations

(12.7)%

(13.3)%

The effective income tax rate differs from the statutory federal income tax rate of 21% primarily because of the Canadian income tax provision and the partial valuation allowances recorded on the Company’s deferred tax assets.  

For the three months ended March 31, 2022, the Company recorded income tax expense from continuing operations of $0.2 million, or (12.7)% of pretax loss from continuing operations, compared with income tax expense from continuing operations of $0.2 million, or (13.3)% of pretax loss from continuing operations, in the corresponding period of 2021. The $44,000 increase in income tax provision from continuing operations for the three months ended March 31, 2022, compared with the corresponding period in 2021 was primarily the result of the Canadian pre-tax book income.

The Company’s net deferred balance was primarily composed of indefinite lived deferred tax liabilities attributable to goodwill and trade names, and indefinite lived deferred tax assets related to the post 2017 net operating losses and the Section 163(j) interest addback. A full valuation allowance was applied to most of the remaining deferred balances. The indefinite lived deferred tax assets enabled the release of the valuation allowance to the extent that it can offset the indefinite lived deferred tax liabilities. Because all indefinite lived deferred tax liabilities are part of continued operations, and the release of valuation allowance is attributable to the future taxable income related to these deferred tax liabilities, the entire valuation allowance released was recorded in continuing operations according to ASC 740-20-45-3. As of March 31, 2022, the Company had $2.4 million net deferred tax liabilities, mainly composed of $12.4 million indefinite lived deferred tax liabilities attributable to

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goodwill and trade names and $0.3 million of deferred tax liability related to its investment in Canada, partially offset by $6.9 million indefinite lived deferred tax assets attributable to post 2017 net operating losses, and $3.3 million indefinite lived deferred tax assets attributable to Section 163(j) interest addback.

As of March 31, 2022 and 2021, the Company would have needed to generate approximately $288.8 million and $273.8 million, respectively, of future taxable income in order to realize its deferred tax assets.

The Company’s foreign subsidiaries may generate earnings that are not subject to U.S. income taxes so long as they are permanently reinvested in its operations outside of the U.S. Pursuant to ASC 740-30, undistributed earnings of foreign subsidiaries that are no longer permanently reinvested would become subject to deferred income taxes.

As of March 31, 2022, the Company projects that its Canadian subsidiary will have generated approximately $6.2 million in undistributed earnings by the end of 2022. The Company’s management expects that all of the undistributed earnings will be repatriated back to the United States within the next 12 months. The Company formed the Canadian subsidiary in 2018 without significant capital investment, the majority of the undistributed earnings was expected to be repatriated as dividends to the United States at the United States-Canada treaty rate of 5%. As a result, the Company accrued a deferred tax liability of $0.3 million related to its investment in Canada for its outside basis difference as of March 31, 2022.

As of each of March 31, 2022 and 2021, the Company provided for a total liability of $3.0 million, of which $1.9 million for the period ended March 31, 2022, compared to $1.8 million for the corresponding period in 2021, related to discontinued operations, for unrecognized tax benefits related to various federal, foreign and state income tax matters, which were included in long-term liabilities of discontinued operations and other long-term liabilities. If recognized, the entire amount of the liability would affect the effective tax rate. As of March 31, 2022, the Company accrued approximately $1.4 million, of which $0.9 million related to discontinued operations, in both other long-term liabilities of discontinued operations and other long-term liabilities for potential payment of interest and penalties related to uncertain income tax positions.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted and signed into U.S. law to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 pandemic. The Company has incorporated the impact of the CARES Act to the tax provision. In addition, the Company deferred payments of federal employer payroll taxes of approximately $4.9 million, as permitted by the CARES Act. The first half of the deferred amounts were paid in December 2021, and the second half will be paid by December 2022.

NOTE 8—DEBT

The following table provides information about the Company’s debt, net of unamortized deferred financing costs:

(in thousands)

  

March 31, 2022

  

December 31, 2021

Short-term borrowings

$

-

$

676

Term loan, current portion of long-term debt

1,050

1,050

Current debt

$

1,050

$

1,726

Term loan, noncurrent portion of long-term debt

$

32,637

$

32,900

Debt discount

(741)

(791)

Unamortized deferred financing costs

(1,668)

(1,781)

Long-term debt, net

$

30,228

$

30,328

Total debt, net

$

31,278

$

32,054

Debt Refinancing

On December 16, 2020 (the “Closing Date”), the Company and certain of its subsidiaries refinanced and replaced its prior revolving credit facility and term loan facility and entered into (i) the Term Loan Agreement (as defined below), which provided for senior secured term loan facilities in an aggregate principal amount of up to $50.0 million (collectively, the “Term Loan”), consisting of a $35.0 million closing date term loan facility (the “Closing Date Term Loan”) and up to $15.0 million of borrowings under a delayed draw facility (the “Delayed Draw Term Loan Facility”) with EICF Agent LLC, as agent, and CION Investment Corporation,  as a lender and a co-lead arranger, and the other lenders party thereto; and (ii) a senior secured asset-based revolving line of credit of up to $30.0 million (the “Revolving Credit Facility”) with PNC Bank, National Association (“PNC”). In connection with the refinancing, the Company repaid the outstanding balance of the prior facilities and all interest

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in full.

As of March 31, 2022, the Company had no outstanding debt under the Revolving Credit Facility and $33.7 million outstanding (including both the noncurrent and current portion of the Term Loan) under the Term Loan. As of March 31, 2022, the Company was in compliance with all debt covenants.

The Revolving Credit Facility

On the Closing Date, the Company and certain of its subsidiaries (the “Revolving Loan Borrowers”) entered into the Revolving Credit and Security Agreement with PNC, as agent for the lenders, and the lenders party thereto (the “Revolving Credit Agreement”), which provides for the Revolving Credit Facility. As part of the Revolving Credit Facility, the Company may access a letter of credit sublimit in an amount up to $2.0 million, a swing loan sublimit in an aggregate principal amount of up to $3.0 million, and a Canadian dollar sublimit in an aggregate principal amount of up to $5.0 million. The Revolving Credit Agreement matures on December 16, 2025.

Borrowings under the Revolving Credit Facility bear interest, at the Company’s election, at either (1) the base commercial lending rate of PNC, as publicly announced, plus 1.25%, payable in cash on a monthly basis, (2) the 30, 60 or 90 day LIBOR rate, subject to a minimum LIBOR floor of 1.00%, plus 2.25%, payable in cash on the last day of each interest period, or (3) with respect to Canadian dollar loans, the Canadian Dollar Offered Rate (“CDOR”), subject to a minimum CDOR rate of 1.00%, payable in cash on a monthly basis. In addition, upon the occurrence of an event of default, and for so long as such event of default continues, default interest equal to 2.00% per year in excess of the rate otherwise applicable will be payable. The Revolving Credit Agreement also includes customary replacement provisions in the event of the discontinuation of LIBOR.

The Revolving Loan Borrowers’ Obligations (as defined in the Revolving Credit Agreement) are guaranteed by certain of the Company’s material, wholly-owned subsidiaries, subject to customary exceptions (the “Revolving Loan Guarantors” and, together with the Revolving Loan Borrowers, the “Revolving Loan Credit Parties”). The Revolving Loan Credit Parties’ obligations are secured by first-priority security interests on substantially all of the Revolving Loan Credit Parties’ accounts and a second-priority security interest in substantially all other assets of the Revolving Loan Credit Parties, subject to the terms of the Intercreditor Agreement between PNC and EICF Agent LLC, as the Revolving Loan Agent and the Term Loan Agent, respectively (as each such term is defined in the Intercreditor Agreement), as described below (the “Intercreditor Agreement”).  

The Revolving Loan Borrowers may from time to time voluntarily prepay outstanding amounts, plus any accrued but unpaid interest on the aggregate amount being prepaid, under the Revolving Credit Facility, in whole or in part. There is no required minimum prepayment amount. If at any time the amount outstanding under the Revolving Credit Agreement exceeds the borrowing base, or any sublimit, in effect at such time, the excess amount will be immediately due and payable. Subject to the Intercreditor Agreement, the Revolving Credit Agreement also requires mandatory prepayment of outstanding amounts in the event the Revolving Loan Borrowers receive proceeds from certain events and activities, including, among others, certain asset sales and casualty events, the issuance of indebtedness and equity interests, and the recovery of any proceeds from certain specified arbitration proceedings.

The Revolving Credit Agreement provides for (1) a closing fee of $0.2 million, which was paid on the Closing Date, (2) a customary unused line fee equal to 0.25% per year on the unused portion of the Revolving Credit Facility, which is payable on a quarterly basis, and (3) a collateral monitoring fee of $2,500, which is payable on a monthly basis. The Revolving Credit Agreement also provides for an early termination fee (the “Early Termination Fee”), payable to the revolving lenders thereunder upon (1) any acceleration of the Obligations and termination of the Revolving Credit Agreement and the obligation of the revolving lenders to make advances thereunder following the occurrence of an Event of Default (as defined in the Revolving Credit Agreement), or (2) any other termination of the Revolving Credit Agreement and the obligation of revolving lenders to make advances thereunder for any reason (the “Early Termination Date”). The Early Termination Fee is calculated as follows: if the Early Termination Date occurred on or prior to the first anniversary of the Closing Date, the Early Termination Fee would have been 2.00% of the Revolving Credit Facility; and if prepayment occurs after the first anniversary of the Closing Date and on or prior to the second anniversary of the Closing Date, the Early Termination Fee will be 1.00% of the Revolving Credit Facility. While any letter of credit is outstanding under the Revolving Credit Facility, the Revolving Loan Borrowers must pay a letter of credit fronting fee at a rate equal to 0.25% per year, payable quarterly, in addition to any other customary fees required by the issuer of the letter of credit.

The Revolving Credit Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants, in each case, with certain exceptions, limitations and qualifications. The Revolving Credit Agreement also requires the Revolving Loan Borrowers to regularly provide certain financial information to the lenders thereunder, maintain a

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springing minimum fixed charge coverage ratio, and comply with certain limitations on capital expenditures.

Events of default under the Revolving Credit Agreement include, but are not limited to, a breach of certain covenants or any representations or warranties, failure to timely pay any amounts due and owing, the commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters, impairment of security interests in collateral or invalidity of guarantees or security documents, or a default or event of default under the Term Loan Agreement or the Intercreditor Agreement, in each case, with customary exceptions, limitations, grace periods and qualifications. If an event of default occurs, the revolving lenders may, among other things, declare all Obligations outstanding under the Revolving Credit Facility to be immediately due and payable, together with accrued interest and fees, and exercise remedies under the collateral documents relating to the Revolving Credit Agreement.

EICF Agent LLC, as the Term Loan Agent, and PNC, as the Revolving Loan Agent, entered into an Intercreditor Agreement, dated as of the Closing Date, to which the Term Loan Credit Parties (as defined below) and Revolving Loan Credit Parties consented. The Intercreditor Agreement, among other things, specifies the relative lien priorities of the Term Loan Agent and Revolving Loan Agent in the relevant collateral, and contains customary provisions regarding, among other things, the rights of the Term Loan Agent and Revolving Loan Agent to take enforcement actions against the relevant collateral and certain limitations on amending the documentation governing each of the Term Loan and Revolving Credit Facility.

The Term Loan

On the Closing Date, the Company and certain of its subsidiaries (the “Term Loan Borrowers”) entered into the Term Loan, Guarantee and Security Agreement with EICF Agent LLC, as agent for the lenders, CION Investment Corporation, as a lender and co-lead arranger, and the other lenders party thereto (the “Term Loan Agreement”), which provides for the Term Loan. The Closing Date Term Loan was fully drawn on the Closing Date, while the Delayed Draw Term Loan Facility is available upon the satisfaction of certain conditions precedent for up to 18 months following the Closing Date. The Term Loan Agreement matures on December 16, 2025.

Borrowings under the Term Loan Agreement bear interest at LIBOR, plus a margin of 8.50% (if the Total Leverage Ratio (as defined in the Term Loan Agreement) is less than 2.50:1) or 9.00% per year (if the Total Leverage Ratio is greater than or equal to 2.50:1), subject to a minimum LIBOR floor of 1.00%, payable in cash on a quarterly basis. In addition, upon the occurrence of an event of default, and for so long as such event of default continues, default interest equal to 2.00% per year in excess of the rate otherwise applicable will be payable. The Term Loan Agreement also includes customary replacement provisions in the event of the discontinuation of LIBOR.

The Term Loan Borrowers’ Obligations (as defined in the Term Loan Agreement) are guaranteed by certain of the Company’s material, wholly-owned subsidiaries, subject to customary exceptions (the “Term Loan Guarantors” and, together with the Term Loan Borrowers, the “Term Loan Credit Parties”). The Term Loan Credit Parties’ obligations are secured by first-priority security interests on substantially all of the Term Loan Credit Parties’ assets, as well as a second-priority security interest on the Term Loan Credit Parties’ accounts receivable and inventory, subject to the Intercreditor Agreement.

Subject to certain conditions, the Term Loan Borrowers may voluntarily prepay the Term Loan on any Payment Date (as defined in the Term Loan Agreement), in whole or in part, in a minimum amount of $1.0 million of the outstanding principal amount, plus a prepayment fee (the “Prepayment Fee”), calculated as follows: if prepayment occurred prior to the first anniversary of the Closing Date, the Prepayment Fee would have been 3.00% of the principal amount being prepaid; if prepayment occurs on or after the first anniversary of the Closing Date and prior to the second anniversary of the Closing Date, the Prepayment Fee will be 2.00% of the principal amount being prepaid; and if prepayment occurs on or after the second anniversary of the Closing Date and prior to the third anniversary of the Closing Date, the Prepayment Fee will be 1.00% of the principal amount being prepaid.

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Subject to certain exceptions, within 120 days of the end of each calendar year, beginning with the year ended December 31, 2021, the Term Loan Borrowers must prepay the Obligations in an amount equal to (1) (i) if the Total Leverage Ratio is greater than 3:00:1:00, 50.0% of Excess Cash Flow (as defined in the Term Loan Agreement) or (ii) if the Total Leverage Ratio is equal to or less than 3:00:1:00 and greater than 2:00:1:00, 25.0% of Excess Cash Flow, less (2) all voluntary prepayments made on the Term Loan during such calendar year; provided that, so long as no default or event of default has occurred and is continuing or would result therefrom, no such prepayment will be required unless Excess Cash Flow for such calendar year equals or exceeds $0.5 million. The Company was not required to prepay any Obligations for the year ended December 31, 2021. The Term Loan Agreement also requires mandatory prepayment of certain amounts in the event the Term Loan Borrowers receive proceeds from certain events and activities, including, among others, certain asset sales and casualty events, the issuance of indebtedness and equity interests, and the receipt of extraordinary receipts (with certain exclusions), plus, in certain instances, the applicable Prepayment Fee, calculated as set forth above.

The Term Loan Agreement contains customary representations and warranties, as well as customary affirmative and negative covenants, in each case, with certain exceptions, limitations and qualifications. The Term Loan Agreement also requires the Term Loan Borrowers to regularly provide certain financial information to the lenders thereunder, maintain a maximum total leverage ratio and a minimum fixed charge coverage ratio, and comply with certain limitations on capital expenditures.

Events of default under the Term Loan Agreement include, but are not limited to, a breach of certain covenants or any representations or warranties, failure to timely pay any amounts due and owing, the commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, the occurrence of a change in control, certain events related to ERISA matters, impairment of security interests in collateral or invalidity of guarantees or security documents, or a default or event of default under the Revolving Credit Agreement or the Intercreditor Agreement, in each case, with customary exceptions, limitations, grace periods and qualifications. If an event of default occurs, the Term Loan lenders may, among other things, declare all Obligations to be immediately due and payable, together with accrued interest and fees, and exercise remedies under the collateral documents relating to the Term Loan Agreement.

Letters of Credit and Bonds

In line with industry practice, the Company is often required to provide letters of credit and payment and performance surety bonds to customers. These letters of credit and bonds provide credit support and security for the customer if the Company fails to perform its obligations under the applicable contract with such customer.

The Revolving Credit Facility provides for a letter of credit sublimit in an amount up to $2.0 million. As of March 31, 2022, the Company had $0.5 million letters of credit outstanding under this sublimit and $0.4 million cash collateralized standby letters of credit outstanding pursuant to its prior revolving credit facility with Wells Fargo Bank, National Association. There were no amounts drawn upon these letters of credit as of March 31, 2022.

In addition, as of March 31, 2022 and December 31, 2021, the Company had outstanding payment and performance surety bonds of $64.6 million and $67.6 million, respectively.

Deferred Financing Costs and Debt Discount:

Deferred financing costs and debt discount is amortized over the terms of the related debt facilities using the straight-line method. The following table summarizes the amortization of deferred financing costs and debt discount related to the Company's debt facilities and recognized in interest expense on the unaudited condensed consolidated statements of operations:

Three Months Ended March 31,

(in thousands)

2022

2021

Term loan

$

113

$

113

Debt discount on term loan

50

50

Revolving credit facility

95

95

Total

$

258

$

258

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The following table summarizes unamortized deferred financing costs and debt discount included on the Company's unaudited condensed consolidated balance sheets:

(in thousands)

    

Location

    

March 31, 2022

December 31, 2021

Term loan

Long-term debt, net

$

1,668

$

1,781

Debt discount on term loan

Long-term debt, net

741

791

Revolving credit facility

Other long-term assets

1,414

1,509

Total

$

3,823

$

4,081

NOTE 9FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

ASC 820–Fair Value Measurement defines fair value as the exit price, which is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-tier fair value hierarchy, which categorizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in the active markets for identical assets and liabilities and the lowest priority to unobservable inputs.

The Company’s financial instruments as of March 31, 2022 and December 31, 2021 consisted primarily of cash and cash equivalents, restricted cash, receivables, payables, and debt instruments. The carrying values of these financial instruments approximate their respective fair values, as they are either short-term in nature or carry interest rates that are periodically adjusted to market rates.

NOTE 10—COMMITMENTS AND CONTINGENCIES

Litigation and Claims

The Company is from time-to-time party to various lawsuits, including personal injury claims and other proceedings that arise in the ordinary course of its business. With respect to all such lawsuits, claims and proceedings, the Company records a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The Company does not believe that the resolution of any currently pending lawsuits, claims and proceedings, either individually or in the aggregate, will have a material adverse effect on its financial position, results of operations or liquidity. However, the outcomes of any currently pending lawsuits, claims and proceedings cannot be predicted, and therefore, there can be no assurance that this will be the case.

The Company completed a bankruptcy filing of its Koontz-Wagner subsidiary on July 11, 2018. This could require the Company to incur legal fees and other expenses related to liabilities from this bankruptcy filing. While the Company does not anticipate these liabilities will have a material adverse effect on its results of operations, cash flows and financial position, and although the statute of limitations has run on certain claims that the Chapter 7 Trustee for the Koontz-Wagner estate might assert, there can be no assurance of the outcome. 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. For additional information, please refer to “Note 4—Changes in Business” to the unaudited condensed consolidated financial statements.

The acquiror of certain assets from a former operating unit of the Company has been named as a defendant in an asbestos personal injury lawsuit and has submitted a claim for indemnification and tendered defense of the matter to the Company. The Company has assumed defense of the matter subject to a reservation of rights and objection to the claim for indemnification. Neither the Company nor its predecessors ever mined, manufactured, produced, or distributed asbestos fiber, the material that allegedly caused the injury underlying this action. The Company does not expect that this claim will have a material adverse effect on its financial position, results of operations or liquidity. Moreover, during 2012, the Company secured insurance coverage that will help to reimburse the defense costs and potential indemnity obligations of its former operating unit relating to these claims. The Company intends to vigorously defend all currently active actions, and it does not anticipate that this action will have a material adverse effect on its financial position, results of operations or liquidity. However, the outcomes of any legal action cannot be predicted and, therefore, there can be no assurance that this will be the case.

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Insurance

The Company maintains insurance coverage for most insurable aspects of its business and operations. The Company’s insurance programs, including, but not limited to, health, general liability, and workers’ compensation, have varying coverage limits depending upon the type of insurance. For the three months ended March 31, 2022, insurance expense, including insurance premiums related to the excess claim coverage and claims incurred for continuing operations, was $1.7 million.

The Company’s unaudited condensed consolidated balance sheets include amounts representing its probable estimated liability related to insurance-related claims that are known and have been asserted against the Company, and for insurance-related claims that are believed to have been incurred but had not yet been reported as of March 31, 2022. As of March 31, 2022, the Company provided $0.9 million in letters of credit and $1.5 million of non-depleting cash collateral as security for possible general liability and workers’ compensation claims.

Executive Severance

As of March 31, 2022, the Company had outstanding severance arrangements with senior executives. The Company’s maximum commitment under all such arrangements, which would apply if the employees covered by these arrangements were each terminated without cause, was $5.4 million on March 31, 2022. The Company did not accrue executive severance expenses as of March 31, 2022.

NOTE 11—STOCK-BASED COMPENSATION PLANS

During the first three months of 2022, the Company granted 291,894 service-based restricted stock awards under the 2015 Equity Incentive Plan (as amended and restated, the “2015 Plan”), at a grant date fair value of $1.85 per share, to its non-employee directors, which vest in full on February 3, 2023.

During the first three months of 2022, the Company granted 362,356 service-based restricted stock units to its employees under the 2022 long-term incentive (“LTI”) program and the 2015 Plan at a grant date fair value of $1.99 per share. These service-based restricted stock units can be paid in cash or shares at the election of the Compensation Committee of the Board of Directors and shall vest in equal annual installments over a period of three years.

During the first three months of 2022, the Company also granted 724,726 performance-based restricted stock units to its employees under the 2022 LTI program and the 2015 Plan at a grant date fair value of $1.99 per share. The 2022 performance-based restricted stock units have three annual performance periods (fiscal years 2022, 2023 and 2024), with operating income and free cash flow goals (equally weighted) for each year, and threshold performance resulting in awards earned at 50% of the target opportunity and maximum performance resulting in awards earned at 200% of the target. The annual achievement levels are averaged over the three-year performance period and the earned amounts, if any, will vest on March 31, 2025. The three-year average payout level for each performance objective replaces the actual payout level for any fiscal year where the actual payout is less than the three-year average. These performance-based restricted stock units can be paid in cash or shares at the election of the Compensation Committee of the Board of Directors.

During the first three months of 2021, the Company granted 307,616 service-based restricted stock units under the 2021 LTI program and the 2015 Plan at a grant date fair value of $3.48 per share. These service-based restricted stock units can be paid in cash or shares at the election of the Compensation Committee of the Board of Directors and shall vest in full on March 31, 2024.  

During the first three months of 2021, the Company also granted performance-based restricted stock units under the 2021 LTI program and the 2015 Plan with an aggregate cash value of approximately $2.2 million, which could be paid in cash or shares at the election of the Compensation Committee of the Board of Directors. The 2021 performance-based restricted stock units have three annual performance periods (fiscal years 2021, 2022 and 2023), with operating income and free cash flow goals (equally weighted) for each year, and threshold performance resulting in awards earned at 50% of the target opportunity and maximum performance resulting in awards earned at 200% of the target. The annual achievement levels are averaged over the three-year performance period and the earned amounts, if any, vest on March 31, 2024. These are cash-based awards that were included in other current liabilities on the consolidated balance sheet beginning in April 2021.

The Company previously granted (i) performance-based restricted stock units under the 2016 LTI program, which were scheduled to vest if the Company achieved a per share stock price of $5.50 for 30 consecutive trading days prior to August 5, 2021, (ii) performance-based restricted stock units under the 2017 LTI program, which were scheduled to vest if the Company

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achieved a per share stock price of $6.00 for 30 consecutive trading days prior to March 31, 2021 (pursuant to an extension from the initial vesting date of March 31, 2020, which extension was approved by the Compensation Committee in February 2020), and (iii) performance-based restricted stock units under the 2018 LTI program, which were scheduled to vest if the Company achieved a per share stock price of at least $5.00 for any period of 30 consecutive trading days prior to June 30, 2021 (collectively, the “LTI Performance Awards”). On March 5, 2021, the Compensation Committee of the Board of Directors extended the performance period for each of the LTI Performance Awards to December 31, 2022. In accordance with ASC Topic 718, “Compensation—Stock Compensation” (“ASC 718”),  the Company conducted a lattice valuation model in order to revalue the market price for the LTI Performance Awards at the March 5, 2021 modification date. The 2018 LTI program met the market objective by achieving a per share stock price of $5.00 for 30 consecutive days, and approximately 195,240 shares will vest for recipients remaining employed through December 31, 2022.

During the first three months of 2021, the Compensation Committee of the Board of Directors approved modifying the 2020 and 2019 performance-based restricted stock units granted in 2020 and 2019. The 2020 and 2019 performance-based restricted stock units did not achieve the 2021 performance objectives. The 2019 performance-based restricted stock units expired because their final performance period was 2021.

During the first three months of 2021, the Company’s management analyzed the probability of achieving the 2022 performance objectives for the 2021 and 2020 performance-based restricted stock units granted in 2021 and 2020 and determined that, after comparing the actual year-to-date results to the forecasted results, it is unlikely the Company will achieve the minimum performance metric for the 2022 performance period. This resulted in a $0.3 million adjustment for the 2021 performance-based restricted stock units and an entire reversal of $0.5 million for the 2020 performance-based restricted stock units within the first three months of 2022. The 2020 performance-based restricted stock units will expire after the 2022 performance period and the 2021 performance-based restricted stock units were adjusted to vest at 55% of their original cash value and will be expensed for a total of $0.9 million until the end of the service requisite period of March 31, 2024.

While the majority of  restricted stock units and awards were granted as equity, in accordance with ASC 718, the Company has one cash-based plan that is classified as a liability. The $0.8 million adjustment and reversal to the 2021 and 2020 performance-based restricted stock units resulted in the Company not having any stock-based compensation expense in the first three months of 2022 compared to $0.7 million for the same period in 2021. The March 31, 2022 and 2021 stock-based compensation expense was included in general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations.

NOTE 12—OTHER SUPPLEMENTARY INFORMATION

The following table summarizes other current assets included on the Company's unaudited condensed consolidated balance sheets:

(in thousands)

    

March 31, 2022

    

December 31, 2021

Sales tax receivable - Canada

$

5,382

4,866

Unamortized commercial insurance premiums

1,607

2,389

Prepaid expenses