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WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
Table of Contents
1
Part I—FINANCIAL INFORMATION
Item 1. Financial Statements.
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data) | March 31, 2022 |
| December 31, 2021 | |||
ASSETS |
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Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
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Accounts receivable, net of allowance of $ |
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Contract assets |
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Other current assets |
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Total current assets |
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Property, plant, and equipment, net |
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Goodwill |
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Intangible assets |
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Other long-term assets |
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Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued compensation and benefits |
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Contract liabilities |
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Short-term borrowings | — | | ||||
Current portion of long-term debt | | | ||||
Other current liabilities |
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Current liabilities of discontinued operations | | | ||||
Total current liabilities |
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Long-term debt, net |
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Deferred tax liabilities | | | ||||
Other long-term liabilities |
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Long-term liabilities of discontinued operations | | | ||||
Total liabilities |
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Commitments and contingencies (Note 10) | ||||||
Stockholders’ equity: | ||||||
Common stock, $ |
| |
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Paid-in capital |
| |
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Accumulated other comprehensive income (loss) |
| |
| ( | ||
Accumulated deficit |
| ( |
| ( | ||
Treasury stock, at par ( |
| ( |
| ( | ||
Total stockholders’ equity |
| |
| | ||
Total liabilities and stockholders’ equity | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
2
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 | $ | | $ | | ||
Cost of revenue | | | ||||
Gross profit | | | ||||
Selling and marketing expenses | | | ||||
General and administrative expenses | | | ||||
Depreciation and amortization expense | | | ||||
Total operating expenses | | | ||||
Operating loss | ( | ( | ||||
Interest expense, net | | | ||||
Other income, net | ( | ( | ||||
Total other expense, net | | | ||||
Loss from continuing operations before income tax | ( | ( | ||||
Income tax expense | | | ||||
Loss from continuing operations | ( | ( | ||||
Loss from discontinued operations before income tax | — | ( | ||||
Income tax expense | | | ||||
Loss from discontinued operations | ( | ( | ||||
Net loss | $ | ( | $ | ( | ||
Basic loss per common share | ||||||
Loss from continuing operations | $ | ( | $ | ( | ||
Loss from discontinued operations | — | ( | ||||
Basic loss per common share | $ | ( | $ | ( | ||
Diluted loss per common share | ||||||
Loss from continuing operations | $ | ( | $ | ( | ||
Loss from discontinued operations | — | ( | ||||
Diluted loss per common share | $ | ( | $ | ( |
See accompanying notes to condensed consolidated financial statements.
3
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 | $ | ( | $ | ( | |||
Foreign currency translation adjustment |
| |
| | |||
Comprehensive loss | $ | ( | $ | ( |
See accompanying notes to condensed consolidated financial statements.
4
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
Accumulated | ||||||||||||||||||||||
Common Shares | Other | |||||||||||||||||||||
$ | Paid-in | Comprehensive | Accumulated | Treasury Shares | ||||||||||||||||||
(in thousands, except share data) |
| Shares |
| Amount |
| Capital |
| Income (Loss) | Deficit | Shares | Amount |
| Total | |||||||||
Balance, December 31, 2020 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of restricted stock | | | — | — | — | | | | ||||||||||||||
Tax withholding on restricted stock units | — | — | ( | — | — | — | — | ( | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, March 31, 2021 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | |
Accumulated | ||||||||||||||||||||||
Common Shares | Other | |||||||||||||||||||||
$ | Paid-in | Comprehensive | Accumulated | Treasury Shares | ||||||||||||||||||
(in thousands, except share data) |
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Deficit |
| Shares |
| Amount |
| Total | ||||||
Balance, December 31, 2021 | | $ | | $ | | $ | ( | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of restricted stock units | | — | — | — | — | — | — | — | ||||||||||||||
Stock-based compensation | — | — | ( | — | — | — | — | ( | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, March 31, 2022 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | |
See accompanying notes to condensed consolidated financial statements.
5
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 | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||
Net loss from discontinued operations | | | ||||
Deferred income tax provision (benefit) | | ( | ||||
Depreciation and amortization on plant, property, and equipment | | | ||||
Amortization of deferred financing costs | | | ||||
Amortization of debt discount | | | ||||
Bad debt expense | ( | ( | ||||
Stock-based compensation | ( | | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | | ( | ||||
Contract assets | ( | ( | ||||
Other current assets | ( | | ||||
Other assets | ( | ( | ||||
Accounts payable | | ( | ||||
Accrued and other liabilities | | | ||||
Contract liabilities | ( | ( | ||||
Net cash provided by (used in) operating activities, continuing operations | | ( | ||||
Net cash used in operating activities, discontinued operations | ( | ( | ||||
Net cash provided by (used in) operating activities | | ( | ||||
Investing activities: | ||||||
Purchase of property, plant, and equipment | — | ( | ||||
Net cash used in investing activities | — | ( | ||||
Financing activities: | ||||||
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation | — | ( | ||||
Proceeds from short-term borrowings | | | ||||
Repayments of short-term borrowings | ( | ( | ||||
Repayments of long-term debt | ( | ( | ||||
Net cash used in financing activities | ( | ( | ||||
Effect of exchange rate change on cash | | ( | ||||
Net change in cash, cash equivalents and restricted cash | | ( | ||||
Cash, cash equivalents and restricted cash, beginning of period | | | ||||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental Disclosures: | ||||||
Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes, net of refunds | $ | | $ | |
See accompanying notes to condensed consolidated financial statements.
6
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.
7
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
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
The components of lease expense were as follows:
Three Months Ended March 31, | ||||||
Lease Cost/(Sublease Income) (in thousands) | 2022 | 2021 | ||||
Operating lease cost | $ | | $ | | ||
Short-term lease cost | | | ||||
Sublease income | ( | - | ||||
Total lease cost | $ | | $ | |
Lease cost related to finance leases was not significant for the three months ended March 31, 2022 and 2021.
8
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 | $ | | $ | | ||||
Lease Liabilities | ||||||||
Short-term lease liabilities | $ | | $ | | ||||
Long-term lease liabilities | | | ||||||
Total lease liabilities | $ | | $ | |
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 | $ | | $ | | ||
Right-of-use assets obtained in exchange for new operating lease liabilities | | | ||||
Weighted-average remaining lease term - operating leases | ||||||
Weighted-average remaining lease term - finance leases | ||||||
Weighted-average discount rate - operating leases | ||||||
Weighted-average discount rate - finance leases |
Total remaining lease payments under the Company’s operating and finance leases were as follows:
Operating Leases | Finance Leases | |||||
Three Months Ended March 31, 2022 | (in thousands) | |||||
Remainder of 2022 | $ | | $ | | ||
2023 | | | ||||
2024 | | - | ||||
2025 | | - | ||||
2026 | | - | ||||
Thereafter | | - | ||||
Total lease payments | $ | | $ | | ||
Less: interest | ( | - | ||||
Present value of lease liabilities | $ | | $ | |
NOTE 4—CHANGES IN BUSINESS
Discontinued Operations
Electrical Solutions
During the fourth quarter of 2017, the Company made the decision to exit and sell its Electrical Solutions segment (which was comprised solely of Koontz-Wagner Custom Controls Holdings LLC (“Koontz-Wagner”), a wholly owned subsidiary of the Company) in an effort to reduce the Company’s outstanding term debt. The Company determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.
9
On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded a pension withdrawal liability of $
After an arbitration process, on May 12, 2021, an arbitrator concluded that the IBEW used an incorrect per hour contribution rate in calculating the Company’s pension withdrawal liability, which resulted in the Company overpaying. The arbitrator directed IBEW to refund all overpayments, with interest, to the Company and to redetermine the Company’s payments going forward using the proper contribution rate. Accordingly, the Company’s overall pension withdrawal liability decreased by approximately $
Mechanical Solutions
During the third quarter of 2017, the Company made the decision to exit and sell substantially all of the operating assets and liabilities of its Mechanical Solutions segment and determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.
As of March 31, 2022 and December 31, 2021, the Company did
(in thousands) |
| March 31, 2022 | December 31, 2021 | |||
Liabilities: | ||||||
Other current liabilities | $ | | $ | | ||
Current liabilities of discontinued operations | | | ||||
Liability for pension obligation | | | ||||
Liability for uncertain tax positions | | | ||||
Long-term liabilities of discontinued operations | | | ||||
Total liabilities of discontinued operations | $ | | $ | |
The following table presents a reconciliation of the major classes of line items constituting the net 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 | $ | — | $ | | ||
Interest expense | — | | ||||
Loss from discontinued operations before income tax | — | ( | ||||
Income tax expense | | | ||||
Loss from discontinued operations | $ | ( | $ | ( |
10
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
Disaggregated revenue by type of contract was as follows:
Three Months Ended March 31, | ||||||
(in thousands) | 2022 | 2021 | ||||
Cost-plus reimbursement contracts | $ | | $ | | ||
Fixed-price contracts | | | ||||
Total | $ | | $ | |
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 | $ | | $ | | ||
Canada | | | ||||
Total | $ | | $ | |
11
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 | $ | | $ | | ||
Earnings recognized on uncompleted contracts |
| |
| | ||
Total | |
| | |||
Less—billings to date | ( |
| ( | |||
Net | $ | | $ | | ||
Contract assets | $ | | $ | | ||
Contract liabilities | ( |
| ( | |||
Net | $ | | $ | |
For the three months ended March 31, 2022, the Company recognized revenue of approximately $
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) | Total | ||||||||||||||
Remaining performance obligations | $ | | $ | | $ | | $ | | $ | |
NOTE 6—EARNINGS (LOSS) PER SHARE
As of March 31, 2022, the Company’s
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.
12
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 | $ | ( | $ | ( | ||
Basic loss per common share: | ||||||
Weighted average common shares outstanding | | | ||||
Basic loss per common share | $ | ( | $ | ( | ||
Diluted loss per common share: | ||||||
Weighted average common shares outstanding | | | ||||
Diluted effect: | ||||||
Unvested portion of restricted stock units and awards | — | — | ||||
Weighted average diluted common shares outstanding | | | ||||
Diluted loss per common share | $ | ( | $ | ( |
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 | | | |
Unvested performance- and market-based restricted stock unit awards | | |
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 | ( | ( |
The effective income tax rate differs from the statutory federal income tax rate of
For the three months ended March 31, 2022, the Company recorded income tax expense from continuing operations of $
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 $
13
goodwill and trade names and $
As of March 31, 2022 and 2021, the Company would have needed to generate approximately $
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 $
As of each of March 31, 2022 and 2021, the Company provided for a total liability of $
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 $
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 | $ | - | $ | | ||
Term loan, current portion of long-term debt | | | ||||
Current debt | $ | | $ | | ||
Term loan, noncurrent portion of long-term debt | $ | | $ | | ||
Debt discount | ( | ( | ||||
Unamortized deferred financing costs | ( | ( | ||||
Long-term debt, net | $ | | $ | | ||
Total debt, net | $ | | $ | |
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 $
14
in full.
As of March 31, 2022, the Company had
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 $
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
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
The Revolving Credit Agreement provides for (1) a closing fee of $
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
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 $
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Subject to certain exceptions, within
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 $
In addition, as of March 31, 2022 and December 31, 2021, the Company had outstanding payment and performance surety bonds of $
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 | $ | | $ | | ||
Debt discount on term loan | | | ||||
Revolving credit facility | | | ||||
Total | $ | $ | |
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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 | $ | | $ | | |||
Debt discount on term loan | Long-term debt, net | | | |||||
Revolving credit facility | Other long-term assets | | | |||||
Total | $ | | $ | |
NOTE 9—FINANCIAL 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 $
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 $
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 $
NOTE 11—STOCK-BASED COMPENSATION PLANS
During the first three months of 2022, the Company granted
During the first three months of 2022, the Company granted
During the first three months of 2022, the Company also granted
During the first three months of 2021, the Company granted
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 $
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 $
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achieved a per share stock price of $
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 $
While the majority of restricted stock units and awards were granted as equity, in accordance with ASC 718, the Company has
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 | $ | | | |||
Unamortized commercial insurance premiums | | | ||||
Prepaid expenses |