UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer |
(Address of principal executive offices) (Zip code)
(
(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 |
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.
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).
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 | ◻ | ☒ | ||
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
As of August 8, 2022, there were
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
Table of Contents
1
Part I—FINANCIAL INFORMATION
Item 1. Financial Statements.
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share data) | June 30, 2022 |
| December 31, 2021 | |||
ASSETS |
|
| ||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
| | ||
Accounts receivable, net of allowance of $ |
| |
| | ||
Contract assets |
| |
| | ||
Other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Property, plant, and equipment, net |
| |
| | ||
Goodwill |
| |
| | ||
Intangible assets |
| |
| | ||
Other long-term assets |
| |
| | ||
Total assets | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued compensation and benefits |
| |
| | ||
Contract liabilities |
| |
| | ||
Short-term borrowings | | | ||||
Current portion of long-term debt | | | ||||
Other current liabilities |
| |
| | ||
Current liabilities of discontinued operations | | | ||||
Total current liabilities |
| |
| | ||
Long-term debt, net (Note 8) |
| |
| | ||
Deferred tax liabilities | | | ||||
Other long-term liabilities |
| |
| | ||
Long-term liabilities of discontinued operations | | | ||||
Total liabilities |
| |
| | ||
Commitments and contingencies (Note 10) | ||||||
Stockholders’ equity: | ||||||
Common stock, $ |
| |
| | ||
Paid-in capital |
| |
| | ||
Accumulated other comprehensive 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 June 30, | Six Months Ended June 30, | |||||||||||
(in thousands, except per share data) |
| 2022 |
| 2021 | 2022 |
| 2021 | |||||
Revenue | $ | | $ | | $ | | $ | | ||||
Cost of revenue | | | | | ||||||||
Gross profit | | | | | ||||||||
Selling and marketing expenses | | | | | ||||||||
General and administrative expenses | | | | | ||||||||
Depreciation and amortization expense | | | | | ||||||||
Total operating expenses | | | | | ||||||||
Operating income (loss) | ( | | ( | | ||||||||
Interest expense, net | | | | | ||||||||
Other income, net | ( | ( | ( | ( | ||||||||
Total other (income) expense, net | | ( | | | ||||||||
Income (loss) from continuing operations before income tax | ( | | ( | | ||||||||
Income tax expense (benefit) | ( | | | | ||||||||
Income (loss) from continuing operations | ( | | ( | | ||||||||
Income (loss) from discontinued operations before income tax | ( | | ( | | ||||||||
Income tax expense (benefit) | ( | | ( | | ||||||||
Income (loss) from discontinued operations | | | | | ||||||||
Net income (loss) | $ | ( | $ | | $ | ( | $ | | ||||
Basic loss per common share | ||||||||||||
Income (loss) from continuing operations | $ | ( | $ | | $ | ( | $ | | ||||
Income from discontinued operations | | | | | ||||||||
Basic income (loss) per common share | $ | ( | $ | | $ | ( | $ | | ||||
Diluted income (loss) per common share | ||||||||||||
Income (loss) from continuing operations | $ | ( | $ | | $ | ( | $ | | ||||
Income from discontinued operations | | | | | ||||||||
Diluted income (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 June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) | 2022 |
| 2021 | 2022 |
| 2021 | ||||||
Net income (loss) | $ | ( | $ | | $ | ( | $ | | ||||
Foreign currency translation adjustment |
| ( |
| |
| ( |
| | ||||
Comprehensive income (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 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Restricted stock awards granted | | — | — | — | — | — | — | |||||||||||||||
Restricted stock units vested | | | — | — | — | | | | ||||||||||||||
Tax withholding on restricted stock units | — | — | ( | — | — | — | — | ( | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, March 31, 2021 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of common stock | — | — | — | — | — | — | — | — | ||||||||||||||
Restricted stock units vested | | — | — | — | — | — | — | — | ||||||||||||||
Tax withholding on restricted stock units | — | — | | — | — | — | — | | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net income | — | — | — | — | | — | — | | ||||||||||||||
Balance, June 30, 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 | | $ | | $ | | $ | ( | $ | ( | ( | $ | ( | $ | | ||||||||
Restricted stock awards granted | | — | — | — | — | — | — | — | ||||||||||||||
Stock-based compensation | — | — | ( | — | — | — | — | ( | ||||||||||||||
Foreign currency translation | — | — | — | | — | — | — | | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, March 31, 2022 | | $ | | $ | | $ | | $ | ( | ( | $ | ( | $ | | ||||||||
Issuance of common stock | — | — | — | — | — | — | — | — | ||||||||||||||
Restricted stock units vested | | — | — | — | — | | — | — | ||||||||||||||
Tax withholding on restricted stock units | — | | ( | — | — | — | — | ( | ||||||||||||||
Stock-based compensation | — | — | | — | — | — | — | | ||||||||||||||
Foreign currency translation | — | — | — | ( | — | — | — | ( | ||||||||||||||
Net loss | — | — | — | — | ( | — | — | ( | ||||||||||||||
Balance, June 30, 2022 | | $ | | $ | | $ | ( | $ | ( | ( | $ | ( | $ | |
See accompanying notes to condensed consolidated financial statements.
5
WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, | ||||||
(in thousands) | 2022 |
| 2021 | |||
Operating activities: | ||||||
Net income (loss) | $ | ( | $ | | ||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||
Net income 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 used in operating activities, continuing operations | ( | ( | ||||
Net cash used in operating activities, discontinued operations | ( | ( | ||||
Net cash used in operating activities | ( | ( | ||||
Investing activities: | ||||||
Purchase of property, plant, and equipment | ( | ( | ||||
Net cash used in investing activities | ( | ( | ||||
Financing activities: | ||||||
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation | ( | ( | ||||
Proceeds from short-term borrowings | | | ||||
Repayments of short-term borrowings | ( | ( | ||||
Repayments of long-term debt | ( | ( | ||||
Net cash provided by financing activities | | | ||||
Effect of exchange rate change on cash | | | ||||
Net change in cash, cash equivalents and restricted cash | ( | ( | ||||
Cash, cash equivalents and restricted cash, beginning of period | | | ||||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
Supplemental Disclosures: | ||||||
Cash paid for interest | $ | | $ | | ||
Cash paid for income taxes, net of refunds | $ | — | $ | |
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 power 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 six months 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 June 30, | Six Months Ended June 30, | |||||||||||
Lease Cost/(Sublease Income) (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
Operating lease cost | $ | | $ | | $ | | $ | | ||||
Short-term lease cost | | | | | ||||||||
Sublease income | ( | - | ( | - | ||||||||
Total lease cost | $ | | $ | | $ | | $ | |
8
Lease cost related to finance leases was not significant for the three and six months ended June 30, 2022 and 2021.
Information related to the Company’s right-of-use assets and lease liabilities were as follows:
Lease Assets/Liabilities (in thousands) | Balance Sheet Classification | June 30, 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:
Six Months Ended June 30, | ||||||
(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 |
9
Total remaining lease payments under the Company’s operating and finance leases were as follows:
Operating Leases | Finance Leases | |||||
Six Months Ended June 30, | (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.
On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of Texas. The filing was for Koontz-Wagner only, not for the Company as a whole, and was completely separate and distinct from the Williams business and operations. As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded a pension withdrawal liability of $
After an arbitration process, on May 12, 2021, an arbitrator concluded that the IBEW used an incorrect per hour contribution rate in calculating the Company’s pension withdrawal liability, which resulted in the Company overpaying. The arbitrator directed IBEW to refund all overpayments, with interest, to the Company and to redetermine the Company’s payments going forward using the proper contribution rate. Accordingly, the Company’s overall pension withdrawal liability decreased by approximately $
Mechanical Solutions
During the third quarter of 2017, the Company made the decision to exit and sell substantially all of the operating assets and liabilities of its Mechanical Solutions segment and determined that the decision to exit this segment met the definition of a discontinued operation. As a result, this segment has been presented as a discontinued operation for all periods presented.
As of June 30, 2022 and December 31, 2021, the Company did
10
(in thousands) |
| June 30, 2022 | December 31, 2021 | |||
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 June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) |
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
General and administrative expenses | $ | — | $ | | $ | — | $ | | ||||
Loss (gain) on disposal - Electrical Solutions | | ( | | ( | ||||||||
Interest expense (income) | | ( | | | ||||||||
Income (loss) from discontinued operations before income tax | ( | | ( | | ||||||||
Income tax expense (benefit) | ( | | ( | | ||||||||
Income (loss) from discontinued operations | $ | | $ | | $ | | $ | |
NOTE 5—REVENUE
Disaggregation of Revenue
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
11
Disaggregated revenue by type of contract was as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) | 2022 | 2021 | 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 June 30, | Six Months Ended June 30, | |||||||||||
(in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||
United States | $ | | $ | | $ | | $ | | ||||
Canada | - | | | | ||||||||
Total | $ | | $ | | $ | |