UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2018~~2019

☐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

Williams Industrial Services Group Inc.

(Exact name of registrant as specified in its charter)


Delaware		73-1541378
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 Crescent Centre Parkway, Suite 1240

Tucker, GA 30084

(Address of principal executive offices) (Zip code)

(770) 879-4400

(Registrant’s telephone number, including area code)

~~Global Power Equipment Group Inc.~~

~~400 E. Las Colinas Blvd., Suite 400~~

~~Irving, TX 75039~~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
None	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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



Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

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

As of November ~~9, 2018,~~8, 2019, there were ~~18,514,945~~19,057,195 shares of common stock of Williams Industrial Services Group Inc. outstanding.

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

Table of Contents


Part I—FINANCIAL INFORMATION	3

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets as of September 30, ~~2018~~2019 and December 31, ~~2017~~2018 (unaudited)	3

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018 (unaudited)	4

Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss) for the Three and Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018 (unaudited)	5

Condensed Consolidated ~~Statement~~Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (unaudited)	6

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2018~~2019 and ~~2017~~2018 (unaudited)	7

Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423

Item 3. Quantitative and Qualitative Disclosures about Market Risk	3130

Item 4. Controls and Procedures	3130

Part II—OTHER INFORMATION

Item 1. Legal Proceedings	31

Item 1A. Risk Factors	31

Item ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~5. Other Items	32

~~Item 3. Defaults Upon Senior Securities~~	32

~~Item 4. Mine Safety Disclosures~~	32

~~Item 5. Other Information~~	3231

Item 6. Exhibits	32

SIGNATURES	3433

Table of Contents

Part I—FINANCIAL INFORMATION

Item 1. Financial Statements.

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(in thousands, except share data)	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	4,393	$	4,594	$	2,004	$	4,475
Restricted cash		5,916		11,562		468		467
Accounts receivable, net of allowance of $493 and $1,568, respectively		29,010		26,060
Accounts receivable, net of allowance of $193 and $140, respectively						30,514		22,724
Contract assets		9,151		11,487		12,377		8,218
Other current assets		1,553		4,006		3,653		1,735
Current assets of discontinued operations		229		27,922
Total current assets		50,252		85,631		49,016		37,619

Property, plant and equipment, net		972		1,712		285		335
Goodwill		35,400		35,400		35,400		35,400
Intangible assets		12,500		12,500		12,500		12,500
Other long-term assets		1,398		573		8,752		1,650
Total assets	$	100,522	$	135,816	$	105,953	$	87,504

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	7,101	$	5,080	$	10,969	$	2,953
Accrued compensation and benefits		13,136		7,481		9,233		10,859
Contract liabilities		2,788		7,049		5,317		3,278
Long-term debt, current		438		—
Short-term borrowings						3,898		3,274
Current portion of long-term debt						700		525
Other current liabilities		5,963		5,552		9,807		5,518
Current liabilities of discontinued operations		2,515		28,802		342		640
Total current liabilities		31,941		53,964		40,266		27,047
Long-term debt, net		33,058		24,304		32,738		32,978
Deferred tax liabilities		10,529		9,921		2,614		2,682
Other long-term liabilities		1,491		2,390		4,736		1,396
Long-term liabilities of discontinued operations		5,192		3,110		4,466		5,188
Total liabilities		82,211		93,689		84,820		69,291
Commitments and contingencies (Notes 8 and 10)
Commitments and contingencies (Note 9 and 11)
Stockholders’ equity:
Common stock, $0.01 par value, 170,000,000 shares authorized and 19,715,605 and 19,360,026 shares issued, respectively, and 18,514,945 and 17,946,386 shares outstanding, respectively		197		193
Common stock, $0.01 par value, 170,000,000 shares authorized and 19,794,270 and 19,767,605 shares issued, respectively, and 19,057,195 and 18,660,218 shares outstanding, respectively						198		197
Paid-in capital		80,046		78,910		81,380		80,424
Retained earnings (deficit)		(61,920)		(36,962)
Treasury stock, at par (1,200,660 and 1,413,640 common shares, respectively)		(12)		(14)
Accumulated other comprehensive loss						(27)		—
Accumulated deficit						(60,409)		(62,397)
Treasury stock, at par (737,075 and 1,107,387 common shares, respectively)						(9)		(11)
Total stockholders’ equity		18,311		42,127		21,133		18,213
Total liabilities and stockholders’ equity	$	100,522	$	135,816	$	105,953	$	87,504

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands, except per share data)


2018


2017

2018

2017
Revenue

$
53,467

$
39,040

$
144,563

$
142,653
Cost of revenue

43,255

34,280

121,154

132,694

Gross profit

10,212

4,760

23,409

9,959

Selling and marketing expenses

397

470

1,299

1,754
General and administrative expenses

7,529

9,650

21,645

27,788
Restructuring charges

1,436

—

3,661

—
Depreciation and amortization expense

192

484

633

1,148
Total operating expenses

9,554

10,604

27,238

30,690

Operating income (loss)

658

(5,844)

(3,829)

(20,731)

Interest expense, net

3,622

3,640

7,397

7,584
Gain on sale of business and net assets held for sale

—

—

—

(239)
Other (income) expense, net

(339)

(9)

(844)

(9)
Total other (income) expenses, net

3,283

3,631

6,553

7,336

Loss from continuing operations before income tax expense (benefit)

(2,625)

(9,475)

(10,382)

(28,067)
Income tax expense (benefit)

215

312

720

(1,226)
Loss from continuing operations

(2,840)

(9,787)

(11,102)

(26,841)

Loss from discontinued operations before income tax expense (benefit)

(10,619)

(8,052)

(14,522)

(16,819)
Income tax expense (benefit)

17

(687)

(666)

533
Loss from discontinued operations

(10,636)

(7,365)

(13,856)

(17,352)

Net loss

$
(13,476)

$
(17,152)

$
(24,958)

$
(44,193)

Basic loss per common share

Loss from continuing operations

$
(0.16)

$
(0.55)

$
(0.61)

$
(1.53)
Loss from discontinued operations

(0.58)

(0.42)

(0.76)

(0.99)
Basic loss per common share

$
(0.74)

$
(0.97)

$
(1.37)

$
(2.52)

Diluted loss per common share

Loss from continuing operations

$
(0.16)

$
(0.55)

$
(0.61)

$
(1.53)
Loss from discontinued operations

(0.58)

(0.42)

(0.76)

(0.99)
Diluted loss per common share

$
(0.74)

$
(0.97)

$
(1.37)

$
(2.52)


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except share and per share data)	2019		2018		2019		2018
Revenue	$	56,862	$	53,467	$	178,980	$	144,563
Cost of revenue		50,906		43,255		157,150		121,154

Gross profit		5,956		10,212		21,830		23,409

Selling and marketing expenses		63		397		468		1,299
General and administrative expenses		5,091		7,529		16,327		21,645
Restructuring charges		—		1,436		—		3,661
Depreciation and amortization expense		77		192		225		633
Total operating expenses		5,231		9,554		17,020		27,238

Operating income (loss)		725		658		4,810		(3,829)

Interest expense, net		1,511		3,622		4,504		7,397
Other (income) expense, net		(485)		(339)		(1,153)		(844)
Total other (income) expense, net		1,026		3,283		3,351		6,553

Income (loss) from continuing operations before income tax		(301)		(2,625)		1,459		(10,382)
Income tax (benefit) expense		62		215		141		720
Income (loss) from continuing operations		(363)		(2,840)		1,318		(11,102)

Loss from discontinued operations before income tax		(54)		(10,619)		(175)		(14,522)
Income tax (benefit) expense		(97)		17		(845)		(666)
Income (loss) from discontinued operations		43		(10,636)		670		(13,856)

Net income (loss)	$	(320)	$	(13,476)	$	1,988	$	(24,958)

Basic earnings (loss) per common share
Income (loss) from continuing operations	$	(0.02)	$	(0.16)	$	0.07	$	(0.61)
Income (loss) from discontinued operations		—		(0.58)		0.04		(0.76)
Basic earnings (loss) per common share	$	(0.02)	$	(0.74)	$	0.11	$	(1.37)

Diluted earnings (loss) per common share
Income (loss) from continuing operations	$	(0.02)	$	(0.16)	$	0.07	$	(0.61)
Income (loss) from discontinued operations		—		(0.58)		0.03		(0.76)
Diluted earnings (loss) per common share	$	(0.02)	$	(0.74)	$	0.10	$	(1.37)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS) (UNAUDITED)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)		2018		2017		2018		2017	2019		2018		2019		2018
Net loss	$	(13,476)	$	(17,152)	$	(24,958)	$	(44,193)
Net income (loss)									$	(320)	$	(13,476)	$	1,988	$	(24,958)
Foreign currency translation adjustment		—		791		—		2,887		17		—		(27)		—
Comprehensive loss	$	(13,476)	$	(16,361)	$	(24,958)	$	(41,306)
Comprehensive income (loss)									$	(303)	$	(13,476)	$	1,961	$	(24,958)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)



	Common Shares						Retained						Common Shares
	$0.01 Per Share				Paid-in		Earnings	Treasury Shares					$0.01 Per Share				Paid-in		Accumulated	Treasury Shares
(in thousands, except share data)	Shares		Amount		Capital		(Deficit)	Shares		Amount		Total	Shares		Amount		Capital		Deficit	Shares		Amount		Total
Balance, December 31, 2017	19,360,026	$	193	$	78,910	$	(36,962)	(1,413,640)	$	(14)	$	42,127	19,360,026	$	193	$	78,910	$	(36,962)	(1,413,640)	$	(14)	$	42,127
Issuance of restricted stock units	355,579		4				—	347,131		4		8	167,841		2		(2)		—	—		—		—
Tax withholding on restricted stock units	—		—		(357)		—	(134,151)		(2)		(359)	—		—		(186)		—	(23,161)		—		(186)
Stock-based compensation	—		—		1,493		—	—		—		1,493	—		—		753		—	—		—		753
Net loss	—		—		—		(24,958)	—		—		(24,958)	—		—		—		(3,988)	—		—		(3,988)
March 31, 2018													19,527,867	$	195	$	79,475	$	(40,950)	(1,436,801)	$	(14)	$	38,706
Issuance of restricted stock units													187,738		2		(2)		—	308,523		4		4
Tax withholding on restricted stock units													—		—		(140)		—	(100,569)		(2)		(142)
Stock-based compensation													—		—		490		—	—		—		490
Net loss													—		—		—		(7,494)	—		—		(7,494)
June 30, 2018													19,715,605	$	197	$	79,823	$	(48,444)	(1,228,847)	$	(12)	$	31,564
Issuance of restricted stock units													—		—		4		—	38,608		—		4
Tax withholding on restricted stock units													—		—		(31)		—	(10,421)		—		(31)
Stock-based compensation													—		—		250		—	—		—		250
Net loss													—		—		—		(13,476)	—		—		(13,476)
Balance, September 30, 2018	19,715,605	$	197	$	80,046	$	(61,920)	(1,200,660)	$	(12)	$	18,311	19,715,605	$	197	$	80,046	$	(61,920)	(1,200,660)	$	(12)	$	18,311


							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, 2018	19,767,605	$	197	$	80,424	$	—	$	(62,397)	(1,107,387)	$	(11)	$	18,213
Issuance of restricted stock units	—		—		—		—		—	390,901		4		4
Tax withholding on restricted stock units	—		—		(123)		—		—	(50,738)		(2)		(125)
Stock-based compensation	—		—		408		—		—	—		—		408
Foreign currency translation	—		—		—		18		—	—		—		18
Net income	—		—		—		—		303	—		—		303
March 31, 2019	19,767,605	$	197	$	80,709	$	18	$	(62,094)	(767,224)	$	(9)	$	18,821
Issuance of restricted stock units	—		—		—		—		—	19,027		—		—
Tax withholding on restricted stock units	—		—		—		—		—	—		—		—
Stock-based compensation	—		—		482		—		—	—		—		482
Foreign currency translation	—		—		—		(62)		—	—		—		(62)
Net income	—		—		—		—		2,005	—		—		2,005
June 30, 2019	19,767,605	$	197	$	81,191	$	(44)	$	(60,089)	(748,197)	$	(9)	$	21,246
Issuance of restricted stock units	26,665		1		—		—		—	27,391		—		1
Tax withholding on restricted stock units	—		—		(34)		—		—	(16,269)		—		(34)
Stock-based compensation	—		—		223		—		—	—		—		223
Foreign currency translation	—		—		—		17		—	—		—		17
Net income	—		—		—		—		(320)	—		—		(320)
Balance, September 30, 2019	19,794,270	$	198	$	81,380	$	(27)	$	(60,409)	(737,075)	$	(9)	$	21,133

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Nine Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2019		2018
Operating activities:
Net loss	$	(24,958)	$	(44,193)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net loss from discontinued operations		13,856		17,352
Deferred income tax expense (benefit)		608		(400)
Depreciation and amortization on plant, property and equipment and intangible assets		633		1,147
Net income (loss)					$	1,988	$	(24,958)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Net (income) loss from discontinued operations						(670)		13,856
Deferred income tax provision (benefit)						(68)		608
Depreciation and amortization on plant, property and equipment						225		633
Amortization of deferred financing costs		1,475		526		462		1,475
Loss on disposals of property, plant and equipment		210		30		—		210
Gain on sale of business and net assets held for sale		—		(239)
Bad debt expense		(90)		190		53		(90)
Stock-based compensation		697		1,855		1,114		697
Payable-in-kind interest		1,964		2,004
Paid-in-kind interest						—		1,964
Restructuring charges		3,661		—		—		3,661
Changes in operating assets and liabilities, net of business sold:
Changes in operating assets and liabilities, net of businesses sold:
Accounts receivable		(2,860)		(11,089)		(7,843)		(2,860)
Contract assets		2,336		11,454		(4,159)		2,336
Other current assets		2,453		3,370		(1,918)		2,453
Other assets		(1,400)		3,521		1,404		(1,400)
Accounts payable		2,021		470		8,016		2,021
Accrued and other liabilities		3,643		(11,223)		(2,705)		3,643
Contract liabilities		(4,261)		2,820		2,039		(4,261)
Net cash provided by (used in) operating activities, continuing operations		(12)		(22,405)		(2,062)		(12)
Net cash provided by (used in) operating activities, discontinued operations		(6,685)		3,438		(350)		(6,685)
Net cash provided by (used in) operating activities		(6,697)		(18,967)		(2,412)		(6,697)
Investing activities:
Proceeds from sale of business, net of restricted cash and transaction costs		—		20,206
Purchase of property, plant and equipment		(123)		(11)		(178)		(123)
Other investing activities		—		3,286
Net cash provided by (used in) investing activities, continuing operations		(123)		23,481		(178)		(123)
Net cash provided by (used in) investing activities, discontinued operations		319		(264)		—		319
Net cash provided by (used in) investing activities		196		23,217		(178)		196
Financing activities:
Repurchase of stock-based awards for payment of statutory taxes due on stock-based compensation		(351)		(463)		(154)		(351)
Debt issuance costs		(1,520)		(1,872)		—		(1,520)
Dividends paid		—		(9)
Proceeds from short-term borrowings						163,040		—
Repayments of short-term borrowings						(162,416)		—
Proceeds from long-term debt		33,679		171,599		—		33,679
Payments of long-term debt		(31,154)		(165,515)
Repayments of long-term debt						(350)		(31,154)
Net cash provided by (used in) financing activities, continuing operations		654		3,740		120		654
Net cash provided by (used in) financing activities, discontinued operations		—		—		—		—
Net cash provided by (used in) financing activities		654		3,740		120		654
Effect of exchange rate change on cash, continuing operations		—		19
Effect of exchange rate change on cash, discontinued operations		—		694
Effect of exchange rate change on cash		—		713
Net change in cash, cash equivalents and restricted cash		(5,847)		8,703		(2,470)		(5,847)
Cash, cash equivalents and restricted cash, beginning of period		16,156		11,570		4,942		16,156
Cash, cash equivalents and restricted cash, end of period	$	10,309	$	20,273	$	2,472	$	10,309

Supplemental Disclosures:
Cash paid for interest	$	3,555	$	4,736	$	3,527	$	3,555
Cash paid for income taxes, net of refunds	$	16	$	1,259	$	—	$	16
Noncash amendment fee related to term loan	$	4,000	$	—	$	—	$	4,000
Noncash repayment of revolving credit facility	$	—	$	(36,224)
Noncash upfront fee related to senior secured term loan facility	$	—	$	4,550

See accompanying notes to condensed consolidated financial statements.

Table of Contents

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—BUSINESS AND BASIS OF PRESENTATION

Business

Effective June 29, 2018, Global Power Equipment Group Inc. changed its name to Williams Industrial Services Group Inc. ~~(“Williams,~~(together with its wholly owned subsidiaries, “Williams,” the “Company,” “we,” “us” or ~~“our”)~~“our,” unless the context indicates otherwise) to better align its name with the Williams ~~business, and~~business. Since March 19, 2019, the Company’s stock ~~now trades~~has traded on the ~~OTC Pink® Marketplace~~OTCQX® Best Market under the ticker symbol “WLMS.” Williams has been safely helping plant owners and operators enhance asset value for more than 50 years. The Company provides a broad range of ~~general and specialty~~ construction, maintenance and ~~modification, and plant management~~ support services to ~~the nuclear, hydro~~customers in energy, power and ~~fossil power generation, pulp and paper, refining, petrochemical and other process and manufacturing industries.~~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, ~~2017,~~2018, filed by the Company with the ~~United States (the “U.S.”)~~U.S. Securities and Exchange Commission (“SEC”) on April ~~16, 2018~~1, 2019 (the ~~“2017~~“2018 Report”)~~, and include~~. 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 ~~loss,~~income (loss), stockholders’ equity and cash flows for the periods indicated. All significant intercompany transactions have been eliminated. The December 31, 2018 unaudited condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. These unaudited condensed consolidated interim financial statements and accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the ~~2017~~2018 Report. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for ~~the three and nine month periods~~any interim period are not necessarily indicative of ~~the results~~operations to be expected for the full year.

The Company reports on a fiscal quarter basis utilizing a “modified” 4-4-5 calendar (modified in that the fiscal year always begins on January 1 and ends on December 31). However, the Company has continued to label its quarterly information using a calendar convention. The effects of this practice are modest and only exist when comparing interim period results. The reporting periods and corresponding fiscal interim periods are as follows:



Reporting Interim Period	Fiscal Interim Period		Fiscal Interim Period
	2018	2017	2019	2018
Three Months Ended March 31	January 1, 2018 to April 1, 2018	January 1, 2017 to April 2, 2017	January 1, 2019 to March 31, 2019	January 1, 2018 to April 1, 2018
Three Months Ended June 30	April 2, 2018 to July 1, 2018	April 3, 2017 to July 2, 2017	April 1, 2019 to June 30, 2019	April 2, 2018 to July 1, 2018
Three Months Ended September 30	July 2, 2018 to September 30, 2018	July 3, 2017 to October 1, 2017	July 1, 2019 to September 29, 2019	July 2, 2018 to September 30, 2018

NOTE 2—LIQUIDITY

The Company’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which assumes ~~that~~ it will be able to meet its obligations and continue its operations during the twelve-month period following the issuance of this Quarterly Report on Form 10-Q for the three and nine months ended September 30, ~~2018~~2019 (this “Form 10-Q”). These financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

~~In the 2017 Report and the Form 10-Q reports~~The MidCap Facility generally provides adequate liquidity for the ~~first~~Company’s working capital needs. However, due to certain borrowing base eligibility limitations and ~~second quarters of 2018, management assessed~~exclusions within the ~~Company’s financial condition~~MidCap Facility, there are instances where the Company would not have sufficient availability under the MidCap Facility to meet its growth working capital requirements. The borrowing base eligibility limitations and ~~concluded~~exclusions that have the ~~following primary factors, taken in~~most impact on availability under the ~~aggregate, raised substantial doubt regarding the Company’s ability to continue as a going concern for the twelve-month periods following the issuance of those reports:~~

~~For the past several years, the Company has incurred both net losses and negative cash flows from operations.~~

Since December 31, 2017, Koontz-Wagner Custom Controls Holdings LLC (“Koontz-Wagner”), a wholly owned subsidiary of the Company and the sole component of the Electrical Solutions segment, was presented as a discontinued operation. However, Koontz-Wagner continued to incur operating losses, which resulted in its bankruptcy filing in July 2018. Please refer to “Note 4–Changes in Business” for additional discussion on the bankruptcy filing.

MidCap Facility are customer

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The Company’s liquidity had been very constrained. The Company’s lack of access to readily available capital resources and unexpected delays in collecting projected cash receipts could create significant liquidity problems.

The Fourth Amendment to the Centre Lane Facility (as defined below) required prepayment of all outstanding amounts due and payable on the earlier of (i) May 31, 2019, (ii) the date Williams Industrial Services Group, LLC and its subsidiaries are sold or (iii) the date of acceleration of the loans pursuant to an additional event of default.

~~Management believes~~concentration limits, exclusion of receivables from the ~~following actions,~~Company’s joint ventures, and exclusion of receivables related to projects on which ~~were completed after the August 14, 2018 filing~~there is an underlying surety bond.

As of the ~~Company’s~~date of this Form 10-Q, ~~for the second quarter of 2018, have alleviated the factors~~management has concluded that ~~previously caused the substantial doubt about the Company’s ability to continue as a going concern:~~

~~On October 18, 2018, restricted cash of $5.4 million that was held as collateral on letters of credit was released to the Company, net of $0.9 million in fees owed to the collateral agent.~~

On October 11, 2018, the Company entered into a three-year, $15.0 million Credit Agreement (as defined below). The Credit Agreement is a secured asset-based revolving credit facility that provides borrowing availability against 85% of eligible accounts receivable and 80% of eligible costs and estimated earnings in excess of billings, after certain customary exclusions and reserves, and allows for up to $6.0 million of non-cash collateralized letters of credit. On the date the Company entered into the Credit Agreement, its eligible borrowing base supported $13.4 million of available borrowings under the Credit Agreement. The Company can, if necessary, make daily borrowings under the Credit Agreement with same day funding. Please refer to “Note 12–Subsequent Event” for additional discussion of the Credit Agreement.

~~As of September 30, 2018, the Company had formally closed its Irving, Texas corporate headquarters and implemented employee reductions in accordance with its plans.~~

On September 18, 2018, the Company refinanced and replaced its existing Centre Lane Facility with a four-year, $35.0 million senior secured credit agreement with an affiliate of Centre Lane as Administrative Agent and Collateral Agent, and the other lenders from time to time party thereto (the “New Centre Lane Facility”). After payment of the amounts outstanding under the prior Centre Lane Facility and fees associated with the New Centre Lane Facility, net cash proceeds were $1.0 million. Additionally, under the New Centre Lane Facility, there is no longer any payable-in-kind (“PIK”) interest charge. Please refer to “Note 8–Debt” for additional discussion of the New Centre Lane Facility.

~~While management believes the implementation of~~ its ~~mitigation plans have~~plan has alleviated the substantial doubt regarding the Company’s ability to continue as a going ~~concern during~~concern. While management believes that the ~~ensuing twelve-month period,~~Company has sufficient resources to satisfy its 2019 working capital requirements, the Company is currently engaged in a process to refinance its existing credit facilities with Centre Lane and MidCap. In addition, the Company intends to file a registration statement on Form S-1 with the SEC for a rights offering to existing holders of the Company’s common stock. However, the Company’s liquidity will be periodically, and for certain intervals, significantly constrained due to the working capital requirements that will be needed to execute its plans to grow the business. In the event the Company is unable to close on the new credit facility through its refinancing process, and are unable to address potential liquidity shortfalls in the future, the Company will need to seek additional funding, which may not be available on reasonable terms, if at all, and may result in management concluding that our liquidity position raises substantial doubt about our ability to continue as a going concern. The risk factors described in ~~our 2017~~the 2018 Report under the heading “Item 1A. Risk Factors,” are still relevant to ~~our~~the Company’s operations.

NOTE 3—RECENT ACCOUNTING PRONOUNCEMENTS

Recently Adopted Accounting Pronouncements

In ~~the first quarter of~~June 2018, the ~~Company adopted~~ Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-18, “Restricted Cash (a consensus of the FASB Emerging Issues Task Force).” ASU 2016-18 requires an entity to include in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. The Company adopted ASU 2016-18 on a retrospective basis, and net transfers of restricted cash of $5.6 million and $3.3 million have been presented in net change in cash and cash equivalents in the condensed consolidated statements of cash flows for the nine months ended September 30, 2018 and 2017, respectively.

In the first quarter of 2018, the Company adopted ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.” ASU 2016-15 requires an entity to classify distributions received from equity method investees in the statement of cash flows using either the cumulative earnings approach or the nature of distribution approach. The Company adopted ASU 2016-15 on a retrospective basis and elected to classify distributions received from its equity method investees using the cumulative earnings approach. The adoption of ASC 2016-15 did not have an impact on the condensed consolidated statements of cash flows for the nine months ended September 30, 2018 and 2017, respectively.

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In the first quarter of 2018, the Company adopted ASU 2014-09 (ASC Topic 606), “Revenue from Contracts with Customers,” and the related ASUs, which provided new guidance for revenue recognized from contracts with customers and replaced the previously existing revenue recognition guidance. ASU 2014-09 requires that revenue be recognized at an amount the Company is entitled to upon transferring control of goods or services to customers, as opposed to when risks and rewards transfer to a customer. The Company adopted ASC Topic 606 using the modified retrospective method, and accordingly, the new guidance was applied retrospectively to contracts that were not completed as of December 31, 2017. Results for operating periods beginning after January 1, 2018 are presented under ASC Topic 606, while comparative information for prior periods has not been restated and continues to be reported in accordance with the accounting standards in effect for those periods. The adoption of ASC Topic 606 did not result in changes to the method or timing of revenue recognized and did not have a material impact on the Company’s financial position, results of operations and cash flows as of and for the three and nine months ended September 30, 2018.

There was no material difference in the Company’s results for the three and nine months ended September 30, 2018 with application of ASC Topic 606 on its contracts and what results would have been if such contracts had been reported using accounting standards previously in effect for such contracts. The Company elected to utilize the modified retrospective transition practical expedient that allows the Company to evaluate the impact of contract modifications as of January 1, 2018 rather than evaluating the impact of the modifications at the time they occurred. There was no material impact associated with the election of this practical expedient.

The Company also elected to utilize the practical expedient to recognize revenue in the amount to which it has a right to invoice for services performed when it has a right to consideration from a customer in an amount that corresponds directly with the value of its performance completed to date.

~~Please refer to “Note 5–Revenue” for additional discussion of the Company’s revenue recognition accounting policies and expanded disclosures required by ASC Topic 606.~~

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

~~In June 2018, the FASB issued ASU~~ 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope of ~~ASC~~Accounting Standards Codification (“ASC”) Topic 718, “Compensation–Stock Compensation” and applies to all share-based payment transactions to nonemployees in which a grantor acquires goods and services to be used or consumed in a grantor’s own operations by issuing share-based awards. Upon adoption of ASU 2018-07, an entity should only re-measure liability-classified awards that have not been settled by the date of adoption and equity-classified awards for which a measurement date has not been established through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. In the first quarter of 2019, the Company adopted ASU 2018-07, ~~is effective for interim and annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company does~~which did not ~~expect the adoption of ASU 2018-07 to~~ have a material impact on its financial position, results of operations and cash flows.

In February 2018, the FASB issued ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which gives entities the option to reclassify the tax effects stranded in accumulated other comprehensive income as a result of the enactment of comprehensive tax legislation in December 2017, commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), to retained earnings. The Company adopted ASU 2018-02 is effective ~~for interim~~January 1, 2019 and ~~annual reporting periods beginning after December 15, 2018, with early adoption permitted. The Company does~~elected not ~~expect~~to reclassify the ~~adoption of ASU 2018-02~~income tax effects stranded in accumulated other comprehensive income to ~~have~~retained earnings and, as a ~~material~~result, there was no impact on ~~its~~the Company’s financial position, results of operations ~~and~~or cash flows.

In February 2016, the FASB issued ASU 2016-02, ~~“Leases.”~~“Leases” (ASC Topic 842), which, together with its related clarifying ASUs (collectively, “ASU 2016-02”), amended the previous guidance for lease accounting and related disclosure requirements. The ~~primary difference between the current requirement under GAAP and ASU 2016-02 is~~new guidance requires the recognition of ~~lease~~right-of-use assets and lease liabilities ~~by lessees~~on the balance sheet for ~~those~~ leases ~~classified~~with terms greater than twelve months or leases that contain a purchase option that is reasonably certain to be exercised. Lessees are required to classify leases as either finance or operating leases. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. For leases with a term of twelve months or less, a lessee can make an accounting policy election by class of underlying asset to not recognize an asset and corresponding liability. Lessees will also be required to provide additional qualitative and quantitative disclosures regarding the amount, timing and uncertainty of cash flows arising from leases. These disclosures are intended to supplement the amounts recorded in the financial statements and provide additional information about the nature of an organization’s leasing activities. On January 1, 2019, the Company adopted ASU 2016-02 using the modified retrospective method, meaning it has been applied to leases that existed or have been entered into on or after January 1, 2019 without adjusting comparative periods in the financial statements. Please refer to “Note 4–Leases” for further discussion of the adoption and the impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued ASU 2018-15, “Intangibles—Goodwill and Other Internal-Use Software (Subtopic 350-40).” This update aligns the requirements for capitalizing costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software, including hosting arrangements that are service contracts, over the term of the hosting arrangement. Further, this update requires ~~that a lessee recognize~~the presentation of the expense in the statement of income, the presentation of the costs on the statement of financial position ~~a liability~~and the

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classification of payments in the statement of cash flows related to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leasescapitalized implementation costs to be ~~classified~~treated the same as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases), while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. ASU 2016-02the fees of the associated hosting arrangement. The update is effective for annual ~~and interim~~ periods beginning after December 15, ~~2018,~~2019, and ~~early~~interim periods thereafter. Early adoption is permitted. The Company is currently evaluating the effect this ASU will have on its results of operations, financial position and cash flows.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820).” This amendment update modifies disclosure requirements related to fair value measurement and will be effective for fiscal years beginning after December 15, 2019 and interim periods thereafter. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. Early adoption is permitted, and the standard allows for early adoption of any removed or modified disclosures upon issuance of the update, while delaying adoption of the additional disclosures until their effective date. The Company is currently evaluating this guidance to determine the impact it may have on its disclosures.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments". This update replaces the incurred loss methodology to record credit losses with a methodology which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. The Company will be required to adopt ASU 2016-13 for its annual periods beginning after December 15, 2022, and interim periods within the fiscal years. Early adoption is permitted for periods beginning on or after January 1, 2019. The Company is currently evaluating the effect the adoption may have on its results of operations, financial condition and cash flows.

NOTE 4—LEASES

On January 1, 2019, the Company adopted ASU 2016-02, ~~must~~which amended the previous guidance for lease accounting and related disclosure requirements. The new guidance requires the recognition of right-of-use assets and lease liabilities on the balance sheet for leases with terms greater than twelve months or leases that contain a purchase option that is reasonably certain to be ~~adopted using~~exercised. Lessees are required to classify leases as either finance or operating leases. This classification will determine whether lease expense is recognized based on an effective interest method or on a ~~modified retrospective transition, and provides for certain practical expedients.~~ straight-line basis over the term of the lease.

The Company ~~has not determined~~elected to utilize the ~~potential impact~~package of ~~the~~practical expedients in ASC 842-10-65-1(f) that, upon adoption of ASU 2016-02, allowed entities to (1) not reassess whether any expired or existing contracts are or contain leases, (2) retain the classification of leases (e.g., operating or finance lease) existing as of the date of adoption and (3) not reassess initial direct costs for any existing leases.

The Company adopted ASU 2016-02 using the modified retrospective method, and accordingly, the new guidance was applied to leases that existed as of January 1, 2019. This resulted in the recognition of lease liabilities of $8.7 million and right-of-use-assets of $8.5 million on ~~its financial position,~~January 1, 2019, which included the impact of eliminating prior year deferred rent. The adoption of ASU 2016-02 did not have a material impact on the Company’s results of operations ~~and~~or cash flows.

The Company primarily leases office space and related equipment, as well as equipment, modular units and vehicles directly used in providing services to our 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. For leases beginning in 2019 and thereafter, 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.

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 term at the 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.

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Short-term leases (leases with an initial term of twelve months or less or leases that are cancelable by the lessee and lessor without significant penalties) are expensed on a straight-line basis over the lease term. The majority of the Company’s short-term leases relate to equipment used in delivering services to its customers. These leases are entered into at agreed upon hourly, daily, weekly or monthly rental rates for an unspecified duration and typically have a termination for convenience provision. Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than twelve months.

The components of lease expense for the three and nine months ended September 30, 2019 were as follows:


Lease Cost/(Sublease Income) (in thousands)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Operating lease cost	$	1,223	$	3,669
Short-term lease cost		463		1,480
Sublease income		(38)		(86)
Total lease cost	$	1,648	$	5,063

Lease cost related to finance leases was not significant for the three and nine months ended September 30, 2019.

Information related to the Company’s right-of-use assets and lease liabilities as of September 30, 2019 was as follows:


Lease Assets/Liabilities (in thousands)	Balance Sheet Classification	September 30, 2019
Lease Assets
Right-of-use assets	Other long-term assets	$	6,349

Lease Liabilities
Short-term lease liabilities	Other current liabilities	$	3,046
Long-term lease liabilities	Other long-term liabilities		3,495
Total lease liabilities		$	6,541

Supplemental information related to the Company’s leases for the nine months ended September 30, 2019 was as follows:


(in thousands)	Nine Months Ended September 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used by operating leases	$	3,696
Right-of-use assets obtained in exchange for new operating lease liabilities		9,701
Right-of-use assets obtained in exchange for new finance lease liabilities		27
Weighted-average remaining lease term - operating leases		2.25 years
Weighted-average remaining lease term - finance leases		4.48 years
Weighted-average discount rate - operating leases		9%
Weighted-average discount rate - finance leases		9%

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


	Operating Leases		Finance Leases
Year Ended December 31,	(in thousands)
Remainder of 2019	$	1,136	$	1
2020		3,060		6
2021		2,208		6
2022		646		6
2023		144		6
Thereafter		1		1
Total lease payments	$	7,195	$	26
Less: interest		(678)		(1)
Present value of lease liabilities	$	6,517	$	25

NOTE 4—5—CHANGES IN BUSINESS

Restructuring Charges

In 2018, the Company made the decision to relocate its corporate headquarters to Tucker, Georgia and vacated its existing leased office space in Irving, Texas on September 30, 2018. Presently, the Company is seeking to sublease the office space; however, it may attempt to pay a termination fee and terminate the lease. The Company expects to complete its exit activities related to this office space by November 2019, when the lease expires. The Company recorded exit costs related to the leased office space and the termination of certain ~~personnel, which were~~personnel. The balance of the restructuring accrual is included in ~~restructuring charges in~~other current liabilities on the Company’s unaudited condensed consolidated ~~statements~~balance sheets.

The following table shows the restructuring activities for the nine months ended September 30, 2019:


	September 30, 2019
(in thousands)		Lease		Severance		Total
Balance, December 31, 2018	$	367	$	2,889	$	3,256
Payments for restructuring		(196)		(2,502)		(2,698)
Balance, September 30, 2019	$	171	$	387	$	558

In March 2019, the Company entered into a short-term sublease of ~~operations~~its former headquarters facility in which the rental period is co-terminus with the primary lease, which ends in November 2019. Under the sublease arrangement, the sublessee is obligated to pay the Company sublease payments and the Company recognizes those payments as a reduction of the fixed lease costs. The sublease income was immaterial for each of the three and nine months ended September 30, ~~2018.~~2019.

~~The following table shows exit costs included in other current liabilities on the Company’s condensed consolidated balance sheet:~~

September 30, 2018
(in thousands)

Lease

Severance

Total
Balance, December 31, 2017

$
—

$
—

$
—
Restructuring charges

418

3,243

3,661
Payments for restructuring

—

(660)

(660)
Balance, September 30, 2018

$
418

$
2,583

$
3,001

~~The following table presents the major classes of items constituting restructuring expenses on the Company’s condensed consolidated statement of operations:~~

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands)

2018

2017

2018

2017
Lease

418

—

418

—
Severance

1,018

—

3,243

—
Total

$
1,436

$
—

$
3,661

$
—

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. In connection with the Company’s decision to sell the Electrical Solutions segment, the Company performed an impairment analysis on this segment’s finite- and indefinite-lived intangible assets (customer relationships and trade names, respectively) and determined that their carrying value exceeded their fair value. As a result, in the fourth quarter of 2017, the Company recorded an impairment charge of $9.7 million related to these intangible assets. After the impairment charge, the fair value of this segment’s intangible assets was zero at December 31, 2017. Determining fair value is judgmental in nature and requires the use of significant estimates and assumptions, considered to be Level 3 inputs. There were no ~~other~~ non-recurring fair value re-measurements related to the Electrical Solutions segment during the year ended December 31, ~~2017~~2018 or the three and nine months ended September 30, ~~2018.~~2019.

In spite of the Company’s efforts, which included retaining financial advisors to sell all or part of Koontz-Wagner’s operations, inside or outside of a federal bankruptcy or state court proceeding (including Chapter 11 of Title 11 of the U.S. Bankruptcy ~~Code (the “Code”))~~Code), the proposed disposition did not progress as planned due, primarily, to the absence of viable bids in the sale process, the inability of Koontz-Wagner to fund its ongoing operations or obtain financing to do so, and Koontz-Wagner’s deteriorating

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financial performance. As a result, on July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the U.S. 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.

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As a result of the July 11, 2018 bankruptcy of Koontz-Wagner, the Company recorded $11.4 million of exit costs, which were included in loss from discontinued operations in the Company’s ~~condensed~~ consolidated statements of operations for the ~~three and nine months~~year ended ~~September 30,~~December 31, 2018. These charges consisted of a $4.0 million fee related to a fifth amendment of the Initial Centre Lane Facility, ~~Fifth Amendment fee,~~ a pension withdrawal liability of $2.9 million related to Koontz-Wagner’s International Brotherhood of Electrical Workers Local Union 1392 multi-employer pension plan, a $1.8 million negotiated settlement of the Company’s guarantee of Koontz-Wagner’s Houston, Texas facility lease agreement and a $2.7 million liability as a result of the Company providing affected Koontz-Wagner employees with 60 days of salary continuation, as well as the difference between each employee’s cost of health care at the time of their employment termination and the cost of continued benefits under the Consolidated Omnibus Budget Reconciliation Act ~~(COBRA)~~(“COBRA”). The Company ~~expects to satisfy~~satisfied the liability related to the lease guarantee settlement and substantially all of the salary and benefit continuation liability through cash payments by the end of 2018. The pension liability is expected to be satisfied by annual cash payments of $0.3 million each, paid in quarterly installments, over the next twenty years.

As a result of the bankruptcy of Koontz-Wagner, the Company wrote off the related assets and liabilities on the Company’s consolidated balance sheet and recorded a loss of $9.3 million, which was reflected in loss from discontinued operations in the condensed consolidated statements of operations for the three and nine months ended September 30, 2018.

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 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. The Mechanical Solutions and the Electrical Solutions segments were the only components of the business that qualified for discontinued operations for all periods presented.

On October 11, 2017, the Company sold substantially all of the operating assets and liabilities of its Mechanical Solutions segment for $43.0 million and used a portion of the proceeds to pay down $34.0 million of the Company’s outstanding debt and related fees, including full repayment of the First-Out Loan (as defined below). Additionally, on October 31, 2017, the Company completed the sale of its manufacturing facility in Mexico and auctioned the remaining production equipment and other assets for net proceeds of $3.6 million, of which $1.9 million was used to reduce the principal amount of the Initial Centre Lane Facility. The remainder was used to fund working capital requirements. In the fourth quarter of 2017, the Company recorded a total gain of $6.3 million related to these sales.

The Company excluded an asset and liability from the sale of the Mechanical Solutions segment, which were comprised of the Company’s office building located in Heerlen, Netherlands and its liability for uncertain tax positions. The liability was included in long-term liabilities of discontinued operations in the September 30, 2018 and December 31, 2017 condensed consolidated balance sheets. The asset was included in current assets of discontinued operations in the December 31, 2017 condensed consolidated balance sheet. At the time the Heerlen office building met the “asset held for sale” criteria, its carrying value was $0.5 million; however, the Company subsequently determined that the building’s carrying value exceeded its fair value and, consequently, it recorded an impairment charge of $0.2 million during the fourth quarter of 2017. The impairment charge was included in loss from discontinued operations before income tax expense (benefit) in the consolidated statement of operations for the year ended December 31, 2017. After the impairment charge, the fair value of the Heerlen building was $0.3 million at December 31, 2017. Determining fair value is judgmental in nature and requires the use of significant estimates and assumptions, considered to be Level 3 inputs. There were no other non-recurring fair value re-measurements related to the Mechanical Solutions segment during the year ended December 31, 2017.

On March 21, 2018, the Company closed on the sale of its office building in Heerlen, Netherlands for $0.3 million, resulting in an immaterial gain on sale, which was reflected in loss from discontinued operations before income tax expense (benefit) in the Company’s unaudited condensed consolidated statement of operations for the nine months ended September 30, 2018.

In connection with the sale of its Mechanical Solutions segment during 2017, the Company entered into a transition services agreement with the purchaser to provide certain accounting and administrative services for an initial period of nine months. During the three and nine months ended September 30, 2019, the Company did not provide services for the purchaser. For ~~each of~~ the three and nine months ended September 30, 2018, the Company provided less than $0.1 million and $0.3 million, respectively, in services for the purchaser, which was included in general and administrative expenses from continuing operations in the unaudited condensed consolidated statement of operations.

In April 2019, the purchaser of our former Mechanical Solutions segment went into receivership and in connection with this event, the Company recognized a write down to the estimated fair value of its amounts due of $0.2 million in the three months ended March 31, 2019. This charge was included in general and administrative expenses from continuing operations in the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2019. The Company has remaining balances of $0.2 million and $0.8 million included in other current assets and other current liabilities, respectively, on the September 30, 2019 unaudited condensed consolidated balance sheet. Management continues to monitor the status of the bankruptcy proceedings and believes the amounts recorded in its financial statements as of September 30, 2019 materially reflect the fair value of the related asset and liability.

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As of September 30, 2019 and December 31, 2018, the Company did not have any assets related to its Electrical and Mechanical Solutions’ discontinued operations. The following table presents a reconciliation of the carrying amounts of major classes of ~~assets and~~ liabilities of Electrical and Mechanical Solutions’ discontinued operations:

(in thousands)

September 30, 2018

December 31, 2017
Assets:

Accounts receivable

$
—

$
12,296
Inventories, net

—

178
Contract assets

26

11,325
Other current assets

203

493
Property, plant and equipment, net

—

3,630
Current assets of discontinued operations*

$
229

$
27,922

Liabilities:

Accounts payable

$
9

$
7,004
Accrued compensation and benefits

—

1,191
Contract liabilities

—

948
Accrued warranties

—

1,166
Other current liabilities

2,506

18,493
Current liabilities of discontinued operations

2,515

28,802
Liability for uncertain tax positions

2,393

3,110
Liability for pension obligation

2,799

—
Long-term liabilities of discontinued operations

5,192

3,110
Total liabilities of discontinued operations

$
7,707

$
31,912



(in thousands)	September 30, 2019		December 31, 2018
Liabilities:
Accrued compensation and benefits	$	—	$	259
Other current liabilities		342		381
Current liabilities of discontinued operations		342		640
Liability for pension obligation		2,726		2,781
Liability for uncertain tax positions		1,740		2,407
Long-term liabilities of discontinued operations		4,466		5,188
Total liabilities of discontinued operations	$	4,808	$	5,828

* The total assets of discontinued operations were classified as current on the September 30, 2018 and December 31, 2017 condensed consolidated balance sheets because it was probable that a sale would occur and proceeds would be collected within one year.

The following table presents a reconciliation of the major classes of line items constituting the net income (loss) from discontinued operations. In accordance with GAAP, the amounts in the table below do not include an allocation of corporate overhead.

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands)

2018

2017

2018

2017
Revenue

Electrical Solutions

$
3,218

$
11,590

$
22,259

$
35,669
Mechanical Solutions

—

16,262

—

50,841
Total revenue

3,218

27,852

22,259

86,510
Cost of revenue

Electrical Solutions

4,290

17,475

24,613

45,205
Mechanical Solutions

—

13,087

—

41,580
Total cost of revenue

4,290

30,562

24,613

86,785

Selling and marketing expenses

34

1,215

207

3,625
General and administrative expenses

268

3,729

2,634

12,192
Other (income) expense

(29)

398

(38)

727
Loss from discontinued operations before income taxes

(1,345)

(8,052)

(5,157)

(16,819)
Loss on disposal - Electrical Solutions

9,274

—

9,274

—
Loss on disposal - Mechanical Solutions

—

—

91

—
Total loss from discontinued operations before income taxes

(10,619)

(8,052)

(14,522)

(16,819)
Income tax expense (benefit)

17

(687)

(666)

533
Loss from discontinued operations

$
(10,636)

$
(7,365)

$
(13,856)

$
(17,352)

~~Disposition of Hetsco~~

In June 2016, the Company engaged a financial advisor to assist with the sale of its wholly owned subsidiary, Hetsco, Inc. (“Hetsco”), in order to pay down debt. Hetsco was previously included in the Services segment. In connection with the

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~~Company’s decision to sell Hetsco, the net assets were adjusted to estimated fair value less estimated selling expenses, which resulted in a write-down of $8.3 million in 2016.~~

On January 13, 2017, the Company sold the stock of Hetsco for $23.2 million in cash, inclusive of working capital adjustments. After transaction costs and an escrow withholding of $1.5 million, the net proceeds of $20.2 million were used to reduce debt. In connection with the Company’s decision to sell Hetsco, the net assets were adjusted to estimated fair value less estimated selling expenses, which resulted in a write-down of $8.3 million in 2016. In the first quarter of 2017, the Company recorded a $0.2 million adjustment, which reduced the $8.3 million loss recorded in 2016.

~~A summary of Hetsco’s income before income taxes for the three and nine months ended September 30, 2018 and 2017 was as follows:~~


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Income before income taxes	$	—	$	—	$	—	$	489
Revenue
Electrical Solutions									$	—	$	3,218	$	—	$	22,259
Total revenue										—		3,218		—		22,259
Cost of revenue
Electrical Solutions										—		4,290		—		24,613
Total cost of revenue										—		4,290		—		24,613

Selling and marketing expenses										—		34		—		207
General and administrative expenses										1		268		15		2,634
Loss on disposal - Electrical Solutions										—		9,274		—		9,274
Loss on disposal - Mechanical Solutions										—		—		—		91
Other										53		(29)		160		(38)
Loss from discontinued operations before income tax										(54)		(10,619)		(175)		(14,522)
Income tax expense (benefit)										(97)		17		(845)		(666)
Income (loss) from discontinued operations									$	43	$	(10,636)	$	670	$	(13,856)

NOTE 5—6—REVENUE

The Company provides a comprehensive range of maintenance, modification and construction support services for nuclear power plants and a wide range of utility and industrial customers in the fossil fuel, industrial gas, natural gas and petrochemical industries, as well as other industrial operations. The Company provides these services in the U.S. both on a constant presence basis and for discrete projects. The services the Company provides are designed to improve or sustain operating efficiencies and extend the useful lives of process equipment.

The Company’s contracts are awarded on a competitively bid and negotiated basis and the timing of revenue recognition is impacted by the terms of such contracts. The Company enters into a variety of contract structures, including cost plus reimbursement contracts and fixed-price contracts. The determination of contract structure is based on the scope of work, complexity and project length, and customer preference of contract terms. Cost plus contracts represent the majority of the Company’s contracts. There were no direct and incremental costs to the acquisition of a new contract that required a deferral of costs.

~~Performance Obligations~~

A performance obligation is a contractual promise to transfer a distinct good or service to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. 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. In addition, certain contracts may be combined and deemed to be a single performance obligation.

The majority of the Company’s contracts are in the form of master service agreements, basic ordering agreements and other similar agreements, and related subsequent purchase orders, contract work authorizations and other similar agreements. The Company’s purchase orders, contract work authorizations and other similar agreements are generally deemed to be single performance obligations, and its contracts with multiple performance obligations were not material during the three and nine months ended September 30, 2018. The Company’s performance obligations are satisfied over time because the services provided create or enhance a customer-controlled asset. Therefore, the Company recognizes revenue in the same period the services are performed. For cost-plus reimbursement contracts, revenue is recognized when services are performed and contractually billable based on an agreed-upon price for the completed services or based on the agreed-upon 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. 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.

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~~Variable Consideration~~

The Company’s contracts may include several types of variable consideration, including unapproved change orders and 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 or expects to incur. 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 largely 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.

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.

Disaggregation of Revenue

Disaggregated revenue by type of contract was as ~~follows.~~follows:


					Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018		2019		2018		2019		2018
Cost-plus reimbursement contracts	$	45,506	$	118,614	$	47,128	$	45,506	$	155,427	$	118,614
Fixed-price contracts		7,961		25,949		9,734		7,961		23,553		25,949
Total	$	53,467	$	144,563	$	56,862	$	53,467	$	178,980	$	144,563

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


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
United States	$	51,858	$	53,467	$	167,960	$	144,563
Canada		5,004		—		11,020		—
Total	$	56,862	$	53,467	$	178,980	$	144,563

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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 ~~sheet~~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 ~~sheet~~sheets as contract liabilities. At any point in time, each project in process could have either ~~costs and estimated earnings in excess of billings~~contract assets or ~~billings in excess of costs and estimated earnings.~~contract liabilities.

The following table provides information about contract assets and contract liabilities from contracts with ~~customers. The table also includes changes in the contract assets and the contract liabilities balances during the period.~~customers:

September 30, 2018

December 31, 2017 (1)
(in thousands)

Asset

Liability

Asset

Liability
Costs and estimated earnings on contracts in progress

$
51,590

$
(360)

$
22,274

$
(422)
Billings on contracts in progress

(42,439)

(2,428)

(10,787)

(6,627)
Contracts in progress, net

$
9,151

$
(2,788)

$
11,487

$
(7,049)


(in thousands)	September 30, 2019		December 31, 2018
Costs incurred on uncompleted contracts	$	157,211	$	160,368
Earnings recognized on uncompleted contracts		21,750		28,581
Total		178,961		188,949
Less—billings to date		(171,901)		(184,009)
Net	$	7,060	$	4,940
Contract assets	$	12,377	$	8,218
Contract liabilities		(5,317)		(3,278)
Net	$	7,060	$	4,940

~~(1)~~

~~Prior period amounts have not been adjusted for the adoption of ASC Topic 606 under the modified retrospective method.~~

For the three and nine months ended September 30, ~~2018,~~2019, the Company recognized revenue of ~~approximately $3.4~~less than $0.1 million and ~~$6.6~~approximately $1.0 million, respectively, that was included in the corresponding ~~contracts in progress~~contract liability balance at December 31, ~~2017.~~2018.

~~Transaction Price Allocated to the~~ Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) ~~at the end~~as of ~~the reporting period.~~September 30, 2019:


(in thousands)	2019		2020		Thereafter		Total			Remainder of 2019		2020		2021		Thereafter		Total
Fixed-price contracts	$	6,500	$	6,500	$	12,644		$	25,644
Remaining performance obligations										$	52,346	$	130,566	$	99,548	$	108,173	$	390,633

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NOTE 6—7—EARNINGS (LOSS) PER SHARE

As of September 30, ~~2018,~~2019, the Company’s ~~18,514,945~~19,057,195 shares outstanding included ~~193,589~~307,164 shares of contingently issued but unvested restricted stock. As of September 30, ~~2017,~~2018, the Company’s ~~17,801,095~~18,514,945 shares outstanding included ~~15,279~~193,589 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 (loss) per common share are calculated by dividing net income (loss) by the weighted average common shares outstanding during the period. Diluted earnings (loss) 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.~~units and stock options, if any.

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Basic and diluted ~~loss~~earnings (loss) per common share from continuing operations were calculated as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands, except per share data)	2018		2017		2018		2017		2019		2018		2019		2018
Loss from continuing operations	$	(2,840)	$	(9,787)	$	(11,102)	$	(26,841)
Income (loss) from continuing operations									$	(363)	$	(2,840)	$	1,318	$	(11,102)

Basic loss per common share:
Basic earnings (loss) per common share:
Weighted average common shares outstanding		18,315,180		17,707,459		18,164,141		17,577,358		18,732,402		18,315,180		18,653,301		18,164,141

Basic loss per common share	$	(0.16)	$	(0.55)	$	(0.61)	$	(1.53)
Basic earnings (loss) per common share									$	(0.02)	$	(0.16)	$	0.07	$	(0.61)

Diluted loss per common share:
Diluted earnings (loss) per common share:
Weighted average common shares outstanding		18,315,180		17,707,459		18,164,141		17,577,358		18,732,402		18,315,180		18,653,301		18,164,141

Diluted effect:
Unvested portion of restricted stock units and awards		—		—		—		—		—		—		323,318		—
Weighted average diluted common shares outstanding		18,315,180		17,707,459		18,164,141		17,577,358		18,732,402		18,315,180		18,976,619		18,164,141

Diluted loss per common share	$	(0.16)	$	(0.55)	$	(0.61)	$	(1.53)
Diluted earnings (loss) per common share									$	(0.02)	$	(0.16)	$	0.07	$	(0.61)

The weighted average number of shares outstanding used in the computation of basic and diluted loss per common share does not include the effect of the following ~~potential~~potentially outstanding common stock. The effects of these potentially outstanding shares were not included in the calculation of diluted loss per common share because the effect would have been anti-dilutive.

Three Months Ended September 30,

Nine Months Ended September 30,

2018

2017

2018

2017
Unvested service-based restricted stock units and awards

425,036

41,381

1,515

41,381
Unvested performance- and market-based restricted stock units

688,812

512,515

688,812

512,515
Stock options

122,000

122,000

122,000

122,000


	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Unvested service-based restricted stock and restricted stock unit awards	196,910	425,036	211,243	1,515
Unvested performance- and market-based restricted stock unit awards	618,482	688,812	618,482	688,812
Stock options	122,000	122,000	122,000	122,000

NOTE 7—8—INCOME TAXES

The effective income tax rate for continuing operations for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,


2018

2017

2018

2017
Effective income tax rate for continuing operations

(8.2)%

(3.3)%

(6.9)%

4.4%


	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
Effective income tax rate for continuing operations	(20.6)%	(8.2)%	9.7%	(6.9)%

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

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For the three ~~and~~months ended September 30, 2019, the Company recorded income tax expense from continuing operations of less than $0.1 million compared with income tax expense from continuing operations of $0.2 million in the corresponding period in 2018. For the nine months ended September 30, ~~2018,~~2019, the Company recorded income tax expense from continuing operations of $0.2 million ~~or (8.2)% of pretax loss from continuing operations, and $0.7 million, or (6.9)% of pretax loss from continuing operations, respectively,~~ compared with income tax expense from continuing operations of ~~$0.3~~$0.7 million ~~or (3.3)% of pretax loss~~in the corresponding period in 2018. The decrease in income tax provision from continuing operations and income tax benefit from continuing operations of $1.2 million, or 4.4% of pretax loss from continuing operations, respectively, in the corresponding periods of 2017. The difference between the Company’s effective tax rate and the federal statutory tax rate for the three and nine months ended September 30, 2019 compared with the corresponding periods in 2018 ~~and 2017~~ was primarily related to ~~the full valuation allowance recorded on its~~a $0.6 million increase in indefinite-lived deferred tax ~~assets.~~assets related to an interest expense addback under Section 163(j) of the Internal Revenue Code and the post-2017 U.S. net operating loss that can be used to offset indefinitely-lived intangible deferred tax liabilities.

As of September 30, ~~2018~~2019 and ~~2017,~~2018, the Company would have needed to generate approximately ~~$273.3~~$276.0 million and ~~$256.8~~$273.3 million, respectively, of future financial taxable income 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 Topic No. 740-30, undistributed earnings of

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foreign subsidiaries that are no longer permanently reinvested would become subject to deferred income taxes. As of September 30, 2019 and 2018, the Company did not have any undistributed earnings in its foreign subsidiaries because all of their earnings were either taxed as deemed dividends or included with the provisional estimate of one-time transition tax as of December 31, 2017.

As of September 30, 2019 and December 31, ~~2017,~~2018, the Company provided for a total liability of ~~$3.1~~$2.8 million and ~~$3.3~~$3.4 million, respectively, of which ~~$1.2~~$1.7 million and ~~$1.4~~$2.5 million, respectively, was related to ~~its~~ discontinued operations, for unrecognized tax benefits related to various federal, foreign and state income tax matters, which was included in other long-term assets and deferred tax ~~assets and other long-term~~ liabilities. If recognized, the entire amount of the liability would affect the effective tax rate. As of September 30, ~~2018,~~2019, the Company accrued approximately ~~$2.1~~$1.2 million, of which ~~$1.8~~$0.7 million was related to its discontinued operations, in other long-term liabilities for potential payment of interest and penalties related to uncertain income tax positions.

NOTE 9—DEBT

As of September 30, 2019 and December 31, 2018, the Company had the following debt, net of unamortized deferred financing costs:


(in thousands)	September 30, 2019		December 31, 2018
MidCap Facility	$	3,898	$	3,274
Current portion of New Centre Lane Facility		700		525
Current debt	$	4,598	$	3,799

New Centre Lane Facility		33,862		34,387
Unamortized deferred financing costs		(1,124)		(1,409)
Long-term debt, net	$	32,738	$	32,978

Total debt, net	$	37,336	$	36,777

MidCap Facility

On ~~December 22, 2017,~~October 11, 2018, the ~~SEC staff issued Staff Accounting Bulletin 118~~Company entered into a three-year, $15.0 million Credit and Security Agreement with MidCap Financial Trust (“~~SAB 118”~~MidCap”), ~~“Income Tax Accounting Implications~~as agent and as a lender, and other lenders that may be added as a party thereto (the “MidCap Facility”). The MidCap Facility is a secured asset-based revolving credit facility that provides borrowing availability against 85% of eligible accounts receivable and the lesser of 80% of eligible contract assets and $1.0 million, after certain customary exclusions and reserves, and allows for up to $6.0 million of non-cash collateralized letters of credit. The borrowing base eligibility limitations and exclusions that have the most impact on availability under the MidCap Facility are customer concentration limits, exclusion of receivables from the Company’s joint ventures, and exclusion of receivables related to projects on which there is an underlying surety bond. The Company can, if necessary, make daily borrowings under the MidCap Facility with same day funding. The outstanding loan balance under the MidCap Facility is reduced through the daily automated sweeping of the ~~Tax Cuts~~Company’s depository accounts to the lender’s account under the terms of deposit account control agreements. As of September 30, 2019 and ~~Jobs Act,”~~December 31, 2018, the Company had $3.9 million and $3.3 million, respectively, outstanding under the MidCap Facility, which ~~provides guidance~~was included in short-term borrowings on ~~accounting for~~ the ~~impact~~unaudited condensed consolidated balance sheets. As of September 30, 2019, the Company had $6.4 million in available borrowings under the MidCap facility.

Borrowings under the MidCap Facility bear interest at the London Interbank Offered Rate (“LIBOR”) plus 6.0% per year, subject to a minimum LIBOR rate of 1.0%, and are payable in cash on a monthly basis.

The Company must pay a customary unused line fee equal to 0.5% per annum of the Tax Act. SAB 118 was issued to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effectsaverage unused portion of the ~~Tax Act. Pursuant~~commitments under the MidCap Facility, certain other customary administration fees and a minimum balance fee. In addition, while any letters of credit are outstanding under the MidCap Facility, the Company must pay a letter of credit fee equal to 6.0% per annum, in addition to any other customary fees required by the issuer of the letter of credit.

The Company’s obligations under the MidCap Facility are secured by first priority liens on substantially all of its assets, other than the Excluded Collateral (as defined in the MidCap Facility), subject to the ~~disclosure~~terms of an intercreditor agreement, dated as of October 11, 2018 (the “Intercreditor Agreement”), entered into by an affiliate of Centre Lane, as a lender under the New Centre Lane Facility (as defined below), and MidCap, as agent, and to which the Company consented. The Intercreditor Agreement was entered into as required by the MidCap Facility and the New Centre Lane Facility. The first priority liens previously granted by the Company and certain of its wholly owned subsidiaries in favor of the Centre Lane affiliate in connection with

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the New Centre Lane Facility are also subject to the Intercreditor Agreement, which, among other things, specifies the relative lien priorities of the secured parties under each of the MidCap Facility and the New Centre Lane Facility in the relevant collateral. It contains customary provisions regarding, among other things, the rights of ~~SAB 118,~~the respective secured parties to take enforcement actions against the collateral and certain limitations on amending the documentation governing each of the MidCap Facility and the New Centre Lane Facility. Additionally, it provides secured parties under each of the MidCap Facility and the New Centre Lane Facility the option, in certain instances, to purchase all outstanding obligations of the Company under the other respective loan.

The Company may from time to time voluntarily prepay outstanding amounts under the MidCap Facility, in whole or in part, in a minimum amount of $0.1 million. If at any time the amount outstanding under the MidCap Facility exceeds the borrowing base in effect at such time, the Company must repay the excess amount in cash, cash collateralize liabilities under letters of credit, or cause the cancellation of outstanding letters of credit (or any combination of the foregoing), in an aggregate amount equal to such excess. The Company is also required to repay certain amounts outstanding under the MidCap Facility upon the occurrence of certain events involving the assets upon which the borrowing base is calculated, including receipt of payments or proceeds from the Company’s accounts receivable, certain casualty proceeds in excess of $25,000, and receipt of proceeds following certain asset dispositions. The Company also has certain reimbursement obligations in the event of payments by the agent or a lender against draws under outstanding letters of credit.

In the event the MidCap Facility is terminated (by reason of an event of default or otherwise) 90 days or more prior to the maturity date, the Company will be required to pay a prepayment fee in an amount equal to the aggregate commitment under the MidCap Facility at the time of termination, multiplied by 2.0% in the first year following October 11, 2018, 1.5% in the second year, and 1.0% in the first nine months of the third year.

The MidCap Facility requires the Company to regularly provide financial information to the lenders, and, beginning on December 31, 2018, to maintain certain total leverage and fixed charge coverage ratios and meet minimum consolidated adjusted EBITDA and minimum liquidity requirements (each of which as defined in the MidCap Facility). The Company determined that it was not in compliance with these covenants as of the last day of its third quarter, and accordingly, on November 14, 2019, the Company entered into an amendment to the MidCap Facility that changed the required levels of both financial covenants so that the Company is now in compliance with the MidCap Facility as amended as of September ~~30, 2018,~~29, 2019. The Company’s expense related to this amendment was $0.1 million and will be reflected in the ~~Company has completed its accounting~~consolidated statement of operations for the ~~tax effects of the Tax Act. The Company recorded a reasonable estimate of the impact from the Tax Act as of~~year ended December 31, ~~2017, but is still analyzing the Tax Act~~2019.

The MidCap Facility also contains customary representations and ~~refining its calculations. Additionally, future guidance from the Internal Revenue Service, the SEC or the FASB could result in changes to~~warranties, as well as customary affirmative and negative covenants. The MidCap Facility contains covenants that may, among other things, limit the Company’s ability to incur additional debt, incur liens, make investments, engage in mergers, dispositions or sale-leasebacks, engage in new lines of business or certain transactions with affiliates and change accounting ~~for~~policies or fiscal year.

Events of default under the ~~tax effects~~MidCap Facility include, but are not limited to, failure to timely pay any amounts due and owing, a breach of certain covenants or any representations or warranties, the ~~Tax Act.~~

~~NOTE 8—DEBT~~

commencement of any bankruptcy or other insolvency proceeding, judgments in excess of certain acceptable amounts, certain events related to ERISA matters, impairment of security interests in collateral or invalidity of guarantees or security documents, and a default or event of default under the New Centre Lane Facility or the Intercreditor Agreement.

Upon default, MidCap would have the right to declare all borrowings under the MidCap Facility to be immediately due and payable, together with accrued interest and fees, and exercise remedies under the other Financing Documents (as defined in the MidCap Facility).

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Centre Lane Facilities

In June 2017, the Company refinanced and replaced its then-existing debt with a 4.5-year senior secured term loan facility with an affiliate of Centre Lane Partners, LLC (“Centre Lane”) as Administrative Agent and Collateral Agent, and the other lenders from time to time party thereto (as amended, the “Initial Centre Lane Facility”). The Initial Centre Lane Facility did not provide for working capital borrowings or access to additional letters of credit. These restrictions were addressed when the Company refinanced and replaced the Initial Centre Lane Facility with a new Centre Lane Facility and when it entered into the MidCap Facility discussed above.

On September 18, 2018, the Company refinanced and replaced ~~its prior~~the Initial Centre Lane Facility with ~~the New Centre Lane Facility,~~ a four-year, $35.0 million senior secured credit agreement with an affiliate of Centre Lane as Administrative Agent and Collateral Agent, and the other lenders from time to time party thereto. The Company recorded a loss on extinguishment of debt of $1.1 million, which is included in interest expense on the condensed consolidated statement of operations for the three and nine months ended September 30, 2018. After payment of the amounts outstanding under the priorthereto (the “New Centre Lane ~~Facility and fees associated with the New Centre Lane Facility, net cash proceeds were $1.0 million.~~

Facility”). The New Centre Lane Facility requires payment of an annual administration fee of $25,000. Borrowings under the New Centre Lane Facility bear interest at ~~the London Interbank Offered Rate (“LIBOR”)~~LIBOR (with a minimum rate of 2.5%) plus ~~10%~~10.0% per year, payable monthly in cash. The Company must repay an amount equal to 0.25% of the original aggregate principal amount of the New Centre Lane Facility in consecutive quarterly installments, beginning on December 31, 2018 through June 30, 2019. The Company must repay an amount equal to ~~0.50%~~0.5% of the original aggregate principal amount of the New Centre Lane Facility in consecutive quarterly installments, beginning on September 30, 2019.

The Company’s obligations under the New Centre Lane Facility are guaranteed by all of its wholly owned domestic subsidiaries, subject to customary exceptions. The Company’s obligations are secured by first priority security interests on substantially all of its assets and those of its wholly owned domestic subsidiaries. This includes 100% of the voting equity interests of the Company’s domestic subsidiaries and 65% of the voting equity interests of other directly owned foreign subsidiaries, subject to customary exceptions.

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Beginning on September 19, 2019, the Company may voluntarily prepay the New Centre Lane Facility at any time or from time to time, in whole or in part, in a minimum amount of $1.0 million of the outstanding principal amount, plus ~~a prepayment premium, plus~~ any accrued but unpaid interest on the aggregate principal amount being prepaid, plus a prepayment premium, to be calculated as follows (the “Prepayment Premium”):


~~Period~~	Prepayment Premium as a
	Percentage of Aggregate
Period	Outstanding Principal Prepaid
September 19, 2019 to September 18, 2021		1%
After September 18, 2021		0%

Subject to certain exceptions, the Company must prepay an aggregate principal amount equal to 75% of its Excess Cash Flow (as defined in the New Centre Lane Facility), minus the sum of all voluntary prepayments, within five business days after the date that is 90 days following the end of each fiscal year. The New Centre Lane Facility also requires mandatory prepayment of certain amounts in the event the Company or its subsidiaries receive proceeds from certain events and activities, including, among others, asset sales, casualty events, the issuance of indebtedness and equity interests not otherwise permitted under the New Centre Lane Facility and the receipt of tax refunds or extraordinary receipts in excess of $500,000, plus, in certain instances, the applicable Prepayment Premium, calculated as set forth above.

The New Centre Lane Facility contains customary representations and warranties, as well as customary affirmative and negative covenants. The New Centre Lane Facility contains covenants that may, among other things, limit the Company’s ability to incur additional debt, incur liens, make investments or capital expenditures, declare or pay dividends, engage in mergers, acquisitions and dispositions, engage in new lines of business or certain transactions with affiliates and change accounting policies or fiscal year.

Events of default under the New Centre Lane Facility include, but are not limited to, a breach of any of the financial 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 and impairment of security interests in collateral or invalidity of guarantees or security documents.

Upon a default under the New Centre Lane Facility, the Company’s senior secured lenders would have the right to accelerate the then-outstanding amounts under such facility and to exercise their rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of the Company’s assets and those of its subsidiaries. However,

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in October 2018, the Company entered into ~~a three-year, $15.0 million Credit Agreement (as defined below) that~~the MidCap Facility, which provides for a secured asset-based revolving credit facility that provides borrowing availability against 85% of eligible accounts receivable and 80% of eligible contract assets; as such, the lenders under the ~~Credit Agreement~~MidCap Facility hold a first priority lien on the Company’s accounts receivable and contract assets. ~~Please refer to “Note 12–Subsequent Event” for additional discussion of the Credit Agreement.~~

~~Prior Centre Lane Facility~~

In June 2017, funds affiliated with Centre Lane purchased and assumed the outstanding debt from the Company’s then-existing lenders under its revolving credit facility (as amended or supplemented from time to time, the “Revolving Credit Facility”). The Company replaced the Revolving Credit Facility with a 4.5-year senior secured term loan facility (the “Initial Centre Lane Facility”) with an affiliate of Centre Lane Partners, LLC (“Centre Lane”) as Administrative Agent and Collateral Agent, and the other lenders from time to time party thereto (collectively, the “Lenders”). The Initial Centre Lane Facility is governed by the terms of the Senior Secured Credit Agreement, dated June 16, 2017, as amended by the First Amendment, dated August 17, 2017 (the “First Centre Lane Amendment”), the Limited Waiver and Second Amendment, dated October 11, 2017, the Second Limited Waiver and Third Amendment, dated January 9, 2018, the Third Limited Waiver, dated March 30, 2018, the Fourth Amendment, dated April 13, 2018 (the “Fourth Amendment”), and the Consent and Fifth Amendment, dated July 11, 2018 (the “Fifth Amendment”) (collectively, the “Centre Lane Facility”). While not a party to the Centre Lane Facility, entities associated with Wynnefield Capital, Inc., the Company’s largest equity investor, funded $6.0 million of the Centre Lane Facility. After payment of the Revolving Credit Facility and fees associated with both the Initial Centre Lane Facility and the First Centre Lane Amendment, net cash proceeds were $15.3 million.

The Initial Centre Lane Facility provided for an initial loan in an aggregate principal amount of $45.0 million, and the First Centre Lane Amendment provided for a first-out loan for an additional aggregate principal amount of $10.0 million (the “First-Out Loan”). The Initial Centre Lane Facility had a maturity date of December 16, 2021. The Fourth Amendment imposed a

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mandatory prepayment of all obligations then outstanding under the Centre Lane Facility on May 31, 2019. However, the Fifth Amendment extended the required prepayment of all outstanding amounts due and payable to April 1, 2020. Had the First-Out Loan not been paid in full as a result of the sale of Mechanical Solutions in October 2017, described below, it would have matured on September 30, 2018.

The Initial Centre Lane Facility required payment of an annual administration fee of $25,000 and an upfront fee equal to 7% of the aggregate commitments provided under the Centre Lane Facility. The upfront fee bore interest at a rate of the LIBOR plus 19% annual PIK interest. The upfront fee was payable upon the earlier of maturity or the occurrence of certain events, including significant debt prepayments or asset sales that may occur prior to maturity. In addition to those fees, the First Centre Lane Amendment also required the Company to pay an upfront fee equal to 7% of the First-Out Loan commitments, which bore interest at the same rate as the initial upfront fee, and an exit fee equal to 7% of the aggregate outstanding principal amount of the First-Out Loan commitments, which was payable upon the maturity date of the First-Out Loan.

Borrowings under the Centre Lane Facility bore interest at LIBOR plus the sum of 9% per year, payable in cash, plus 10% PIK interest. Cash interest was payable monthly, and the PIK interest accrued to and increased the principal balance on a monthly basis.

On October 11, 2017, the Company sold substantially all of the operating assets and liabilities of its Mechanical Solutions segment and used a portion of the proceeds to pay down $34.0 million of the Company’s outstanding debt, including full repayment of the First-Out Loan and its related fees as well as the upfront fee on the Initial Centre Lane Facility. This payment satisfied the $25.0 million prepayment criteria necessary to avoid a PIK rate increase to 15% on January 1, 2018. Additionally, on October 31, 2017, the Company completed the sale of its manufacturing facility in Mexico and auctioned the remaining production equipment and other assets for net proceeds of $3.6 million, of which $1.9 million was used to reduce the principal amount of the Initial Centre Lane Facility. The remainder was used to fund working capital requirements.

The Company’s ~~obligations~~borrowing rate under the New Centre Lane Facility were guaranteed by all of its wholly owned domestic subsidiaries, subject to customary exceptions. The Company’s obligations were secured by first priority security interests on substantially all of its assets and those of its wholly owned domestic subsidiaries. This included 100% of the voting equity interests of the Company’s domestic subsidiaries and certain specified foreign subsidiaries and 65% of the voting equity interests of other directly owned foreign subsidiaries, subject to customary exceptions.

The Company was permitted to voluntarily prepay the Centre Lane Facility at any time or from time to time, in whole or in part, in a minimum amount of $1.0 million of the outstanding principal amount, plus any accrued but unpaid interest on the aggregate amount of the term loans being prepaid, plus a prepayment premium, which was to be calculated as follows (the “Prior Prepayment Premium”):


	~~Prior Prepayment Premium as a~~
	~~Percentage of Aggregate~~
~~Period~~	~~Outstanding Principal Prepaid~~
~~June 16, 2017 to June 16, 2018~~		3%
~~June 17, 2018 to June 16, 2019~~		2%
~~June 17, 2019 to June 16, 2020~~		1%
~~After June 16, 2020~~		0%

Subject to certain exceptions, the Company was required to prepay an aggregate principal amount equal to 100% of its Excess Cash Flow (as defined in the Centre Lane Facility), minus the sum of all voluntary prepayments, within five business days after the date that is 90 days following the end of each fiscal year. The Centre Lane Facility also required mandatory prepayment of certain amounts in the event the Company or its subsidiaries received proceeds from certain events and activities, including, among others, asset sales, casualty events, the issuance of indebtedness and equity interests not otherwise permitted under the Centre Lane Facility and the receipt of tax refunds or extraordinary receipts in excess of $500,000, plus, in certain instances, the applicable Prior Prepayment Premium, calculated as set forth above.

The Centre Lane Facility contained customary representations and warranties, as well as customary affirmative and negative covenants. The Centre Lane Facility contained covenants that may have, among other things, limited the Company’s ability to incur additional debt, incur liens, make investments or capital expenditures, declare or pay dividends, engage in mergers, acquisitions and dispositions, engage in new lines of business or certain transactions with affiliates and change accounting policies or fiscal year.

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Events of default under the Centre Lane Facility included, but were not limited to, a breach of any of the financial 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 and impairment of security interests in collateral or invalidity of guarantees or security documents.

Upon a default under the Centre Lane Facility, the Company’s senior secured lenders would have had the right to accelerate the then-outstanding amounts under such facility and to exercise their rights and remedies to collect such amounts, which would include foreclosing on collateral constituting substantially all of the Company’s assets and those of its subsidiaries. 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 in an effort to reduce the Company’s outstanding term debt. As an initial step in this plan, the Company filed a certificate of dissolution and dissolved its wholly owned inactive subsidiary, Braden Construction Services, Inc., on September 5, 2017. As a result of this dissolution, the Company was in violation of one of its covenants under the Center Lane Facility as of ~~December 31, 2017. On January 9, 2018, the Company entered into a second limited waiver and third amendment to the~~September 30, 2019 was 12.5%.

The New Centre Lane Facility ~~which waived the event of default caused by the dissolution and extended the first required date for~~requires the Company to ~~satisfy~~regularly provide financial information to the lenders, and, beginning on December 31, 2018, to maintain certain total leverage and fixed charge coverage ratios ~~to March 31, 2019.~~

~~On March 30, 2018,~~and meet minimum consolidated adjusted EBITDA and minimum liquidity requirements (each of which as defined in the New Centre Lane Facility). The Company determined that it was not in compliance with these covenants as of the last day of its third quarter, and accordingly, on November 14, 2019, the Company entered into ~~a Third Limited Waiver~~an amendment to the Centre Lane Facility, which extended the delivery date of the 2017 Report and the time period for the required payment of the $0.3 million net cash proceeds from the sale of the office building in Heerlen, Netherlands, which was sold in March 2018, until May 31, 2018.

~~On April 13, 2018, the Company entered into the Fourth Amendment to the Centre Lane Facility, which:~~

~~Extended the first required date for the Company to satisfy the total leverage and fixed charge coverage ratios to September 30, 2019.~~

Waived the requirement under the Centre Lane Facility to prepay $3.7 million of certain future cash receipts and any event of default that would otherwise result from failure to pay such amounts (including the $0.3 million net cash proceeds from the sale of the Heerlen office building and $2.1 million cash proceeds from the sale of pre-petition receivables due from Westinghouse Electric Company LLC, which filed for bankruptcy in March 2017).

~~Provided a $3.0 million Incremental Loan Commitment, which could have been drawn upon in minimum increments of $1.0 million, which, if utilized, bore interest at the greater of LIBOR plus 19% or 50%.~~

~~Assessed a 1% unused line fee on the Incremental Loan Commitment.~~

~~Required a payment of a $0.5 million exit fee, due and payable on May 31, 2019.~~

Required a mandatory prepayment of all the obligations due and payable under the Centre Lane Facility on the earlier of (i) May 31, 2019, (ii) the date Williams Industrial Services Group, LLC and its subsidiaries are sold or (iii) the date of acceleration of the loans pursuant to an additional event of default.

~~On July 11, 2018, the Company entered into the Fifth Amendment to the~~ ~~Centre Lane Facility, which:~~

Waived the event of default and other bankruptcy events of default (as defined in the Centre Lane Facility) that would otherwise have resulted from Koontz-Wagner filing for bankruptcy protection under Chapter 7 of the Code.

~~Extended the required prepayment of all outstanding amounts due and payable to the earlier of April 1, 2020 or the date of acceleration of loans pursuant to an additional event of default.~~

~~Extended the first required date for the Company to satisfy the total leverage and fixed charge coverage ratios to June 30, 2020.~~

~~Assessed a $4.0 million amendment fee, which was capitalized and added to the outstanding principal balance of the term loan and was to be due and payable on April 1, 2020.~~

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~~The following table summarizes the Company’s long-term debt under~~ the New Centre Lane ~~Facility:~~

(in thousands)

As of September 30, 2018
Current portion of term loan

$
438

Term loan, due 2021

34,562
Unamortized deferred financing costs

(1,504)
Long-term debt, net

$
33,058

Total term loan, net

$
33,496

~~The Company’s effective rate on its outstanding debt was 14.6% and 20.3%~~Facility that changed the required levels of both financial covenants so that the Company is now in compliance with the New Centre Lane Facility as amended as of September ~~30, 2018~~29, 2019. The Company’s expense related to this amendment was $0.3 million and will be reflected in the consolidated statement of operations for the year ended December 31, ~~2017, respectively.~~2019.

Letters of Credit and Bonds

In line with industry practice, the Company is often required to provide letters of credit and surety and performance 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 ~~interest rate on letters of credit issued under the Revolving Credit~~MidCap Facility letter of credit sublimit was 8.5% per annum at the time the Company refinanced its debt in mid-June 2017. To the extent that a letter of credit had an expiration date beyond the original Revolving Credit Facility maturity date of February 21, 2017, cash collateral of an amount equal to 105% of the face amount of such letter of credit was provided as security for all reimbursement and other letter of credit obligations.

As of September 30, 2018, the Company had $5.1 million outstanding standby letters of credit that were originally issued under the Revolving Credit Facility and there were no amounts drawn upon these letters of credit. As of September 30, 2018, the Company provided cash collateral of $5.4 million for letters of credit with expiry dates beyond the Revolving Credit Facility’s original maturity date. In addition, as of September 30, 2018, the Company had outstanding surety bonds on projects of $49.6 million. The New Centre Lane Facility does not provide for letters of credit; therefore, as of September 30, 2018, the Company was unable to obtain new letters of credit.

~~On October 11, 2018, the Company entered into a three-year, $15.0 million Credit Agreement that~~ allows for up to $6.0 million of non-cash collateralized letters of ~~credit. Please refer to “Note 12–Subsequent Event” for additional discussion~~credit at 6.0% interest, of which the ~~Credit Agreement.~~Company had $2.9 million outstanding as of September 30, 2019. There were no amounts drawn upon these letters of credit.

In addition, as of September 30, 2019 and December 31, 2018, the Company had outstanding payment and performance surety bonds of $52.8 million and $51.1 million, respectively.

Deferred Financing Costs

Deferred financing costs are amortized over the terms of the related debt facilities using the effective yield method. ~~Total interest expense associated with~~The following table summarizes the amortization of deferred financing costs related to the Company's debt facilities and recognized in interest expense on the ~~prior Centre Lane Facility was $1.3 million and $1.5 million for the three and nine months ended September 30, 2018, respectively. Total interest expense associated with the amortization~~unaudited condensed consolidated statements of operations:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2019		2018		2019		2018
Initial Centre Lane Facility	$	—	$	1,256	$	—	$	1,475
New Centre Lane Facility		95		—		285		—
MidCap Facility		59		—		177		—
Total	$	154	$	1,256	$	462	$	1,475

The following table summarizes unamortized deferred financing costs on the prior Centre Lane Facility was $0.4 million and $0.5 million for the three and nine months ended September 30, 2017. The Company did not incur any interest expense associated with the amortization of deferred financing costs on the Revolving Credit Facility for the three months ended September 30, 2017 and incurred less than $0.1 million for the nine months ended September 30, 2017.

As of September 30, 2018, the Company had total unamortized deferred financing costs of $1.5 million related to the New Centre Lane Facility, which were included in long-term debt, net on the accompanyingCompany's unaudited condensed consolidated balance sheet. As of and December 31, 2017, the Company had total unamortized deferred financing costs of $0.9 million related to the Centre Lane Facility, which were included in long-term debt, net on the accompanying condensed consolidated balance sheet. As of September 30, 2018, the Company did not have any unamortized deferred financing costs related to the exit fee under the Fourth Amendment of the Center Lane Facility.sheets:


(in thousands)	Location	September 30, 2019		December 31, 2018
New Centre Lane Facility	Long-term debt, net	$	1,124	$	1,409
MidCap Facility	Other long-term assets		477		654
Total		$	1,601	$	2,063

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NOTE 910—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.

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The Company’s financial instruments as of September 30, ~~2018~~2019 and ~~2017~~December 31, 2018 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. ~~The foreign currency forward exchange contracts previously disclosed in the Company’s Quarterly Report on Form 10-Q for the second quarter of 2017 were held by its discontinued operations.~~

NOTE ~~10—~~11—COMMITMENTS AND CONTINGENCIES

Litigation and Claims

The Company is from time to time party to various lawsuits, 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.

AThe Company prevailed in a putative shareholder class action, which was captioned Budde v. Global Power Equipment Group Inc., ~~was~~ and filed in the U.S. District Court for the Northern District of Texas naming the Company and certain former officers as defendants. This action and another action were filed on May 13, 2015 and June 23, 2015, respectively and, on July 29, 2015, the court consolidated the two actions and appointed a lead ~~plaintiff. On May 1, 2017,~~plaintiffFollowing the lead plaintiff filed a second consolidated amended complaint that names the Company and three of its former officers as defendants. It alleges violations of the federal securities laws arising out of matters related to the Company’s restatement of certain financial periods and claims that the defendants made material misrepresentations and omissions of material fact in certain public disclosures during the putative class period in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5, as promulgated thereunder. The plaintiffs seek class certification on behalf of persons who acquired the Company’s stock between September 7, 2011 and May 6, 2015, monetary damages of “more than $200 million” on behalf of the putative class and an award of costs and expenses, including attorneys’ fees and experts’ fees. The Company intends to defend against this action. On June 26, 2017, the Company and the individual defendants filed a motion to dismiss the complaint. After full briefing, on December 27, 2017, the court issued a memorandum opinion and order granting the motion to dismiss, allowing the plaintiffs until January 15, 2018 to file an amended complaint. The court found that,District Court’s dismissal with respect to each of the defendants, plaintiffs failed to plead facts supporting a strong inference of scienter, or the required intent to deceive, manipulate or defraud, or act with severe recklessness. On January 15, 2018, the plaintiffs filed their third amended complaint, and in response the Company filed a renewed motion to dismiss. After full briefing and oral argument,prejudice on September 11, 2018, Plaintiffs appealed the ~~court dismissed with prejudice~~decision to the ~~third amended complaint. The court found that, even with Plaintiffs’ amended allegations, plaintiff failed to plead facts supporting a strong inference~~United States Court of ~~scienter. Also on September 11, 2018, plaintiff filed a notice of appeal to~~Appeals for the Fifth Circuit. ~~Litigation is subject~~The Fifth Circuit held oral arguments on August 5, 2019. Just 18 days later, on August 23, 2019, the Fifth Circuit issued a per curiam decision affirming the District Court’s dismissal. Plaintiffs have until November 21, 2019, to ~~many uncertainties, and~~petition for certiorari review by the ~~outcome~~Supreme Court of ~~this action is not predictable with assurance. At this time,~~the United States.

In previous periods, the Company ~~is unable to predict the possible loss or range of loss, if any, associated with the resolution of this litigation, or any potential effect such may have on the Company or its business or operations.~~

Areported that a former operating unit of the Company ~~has~~had been named as a defendant in a limited number of asbestos personal injury lawsuits. Neither the Company nor its predecessors ever mined, manufactured, produced or distributed asbestos fiber, the material that allegedly caused the injury underlying these actions. ~~The bankruptcy court’s discharge order issued upon the Company’s emergence from bankruptcy in January 2008 extinguished the claims made by~~As of April 2019, all ~~plaintiffs who had filed asbestos claims~~pending asbestos-related litigation against it before that time. The Company believes the bankruptcy court’s discharge order should serve as a bar against any later claim filed against it, including any of its subsidiaries, based on alleged injury from asbestos at any time before emergence from bankruptcy. In any event, in all of the asbestos cases finalized post-bankruptcy, the Company has been successful in having such ~~cases dismissed without liability. Moreover, during 2012, the Company secured insurance coverage that will help~~

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~~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, all without liability,~~had been dismissed, and ~~it does~~there are no longer any such claims outstanding against the unit. Such litigation did not ~~anticipate that any of these actions will~~ have a material adverse effect on ~~its~~the Company’s 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.~~

NOTE ~~11—~~12—STOCK-BASED COMPENSATION PLANS

During the ~~third quarter~~first nine months of ~~2018,~~2019, the Company granted ~~42,500~~21,500 service-based restricted stock units and ~~42,500 performance-based~~21,500 market-based restricted stock units, both out of treasury stock, at a grant date fair value of ~~$2.74~~$2.60 per share and ~~$0.98,~~$0.75 per share, respectively. ~~These service-based and performance-based restricted stock units have the same terms as those described below.~~

~~During the second quarter of 2018, the Company granted 381,021~~The service-based restricted stock units ~~to employees, out~~will vest ratably over a period of ~~treasury~~three years; the market-based restricted stock units will vest, in whole or in part, if the stock price goal is met on or before June 30, 2021. The fair value of the market-based restricted stock units is estimated using the Monte Carlo simulation model.

In addition, during the first nine months of 2019, the Company granted 358,613 service-based restricted stock units under the 2015 Equity Incentive Plan at a grant date fair value of ~~$2.94~~$2.35 per share. ~~Restricted~~These service-based restricted stock units ~~granted to employees in 2018~~ vest ratably over a three-year period beginning on March 31, ~~2019.~~2020. The fair value of service-based restricted stock units represents the closing price of the Company’s ~~common~~commons stock on the date of grant.

During the ~~second quarter~~first nine months of ~~2018,~~2019, the Company ~~awarded 381,008~~also granted cash-based performance awards under the 2015 Equity Incentive Plan valued at $1.7 million. At the Company’s discretion, these performance-based restricted stock ~~units~~awards can be settled in cash or shares. The performance objectives associated with these awards are established by the Compensation Committee of the Board of Directors (the “Compensation Committee”) on an annual basis. For the 2019 performance period, the performance objective is based on the Company’s backlog performance target as of December 31, 2019. Performance objectives for the two succeeding years will be established by the Compensation Committee in the respective performance period. Award payouts range from a threshold of 50% to ~~employees, out~~a maximum of ~~treasury stock, at a grant date~~200% for each respective annual performance period. Because the Company intends to settle the cash-based performance awards that are scheduled vest on March 31, 2020 with shares, the fair value of ~~$1.27 per share. The 2018 units contain a~~the cash-based performance ~~condition based on a stock~~awards with an established 2019 performance objective represents the closing price ~~goal. The stock price goal will be met if~~of the Company’s common stock price per share equals or exceeds $5.00 for any period of 30 consecutive trading days during a three-year period ending on March 31, 2021. These restricted stock units will vest ratably over a period of three years if the stock price goal is met on or before March 31, 2019. However, if the stock price goal is achieved after March 31, 2019 and on or prior to March 31, 2020, the restricted stock units will vest in three installments, with one-third vesting on the date the stock price goal is met, one-third vesting on March 31, 2020 and one-third vesting on March 31, 2021. Further, if the stock price goal is achieved after March 31, 2020 and on or prior to March 31, 2021, the restricted stock units will vest in two installments, with two-thirds vesting on the date the stock price goal is met and one-third vesting on March 31, 2021. If the stock price goal is met after March 31, 2021 and during the three-year performance period, the restricted stock units will vest in full on the date that the stock price goal is met.of grant. The fair value of the ~~performance-based restricted stock units~~cash-based performance awards that are scheduled to vest on March 31, 2021 and 2022 will be measured in the year that the respective performance objective is ~~estimated using~~established and approved by the ~~Monte Carlo simulation model.~~Compensation Committee. The Company recognizes stock-based compensation expense related to its cash-based performance awards based on its determination of the likelihood of achieving the performance

~~On April 16, 2018,~~

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objective. The Company reassesses the likelihood of meeting the specified performance objective at the end of each reporting period and adjusts compensation expense, as necessary, based on the likelihood of achieving the performance objective. As of September 30, 2019, the Company does not expect any of the unvested cash-based performance awards that are tied to the Company’s December 31, 2019 backlog performance target to ultimately vest. Consequently, the Company reversed $0.3 million of stock-based compensation expense for each of the three and nine months ended September 30, 2019.

During the first nine months of 2019, the Company granted ~~129,410~~ service-based restricted stock awards out of treasury stock totaling 149,639 shares to its ~~four~~five non-employee directors, ~~at a grant date fair value~~which vest in four equal annual installments on January 22 of ~~$2.33 per share with a vesting period~~each of four years. Because the Company had not granted restricted stock awards to its directors since 2015, a portion of the total awards vested on the grant date. In addition, due to the resignation of six non-employee members of the Company’s Board of Directors, on April 11, 2018, a total of 4,545 shares of previously granted restricted stock awards vested.

On May 16, 2018, the Company granted 109,192 service-based restricted stock awards out of treasury stock to its four non-employee directors, at a grant date fair value of $2.20 per share with a vesting period of four years.2020, 2021, 2022 and 2023.

Stock-based compensation expense for the three months ended September 30, 2019 and 2018 ~~and 2017~~ was ~~$0.2~~$0.1 million and ~~$0.4~~$0.2 million, respectively, and ~~$0.7 million~~$1.0 and ~~$1.9~~$0.7 million for the nine months ended September 30, ~~2018~~2019 and ~~2017,~~2018, respectively, and was included in general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations.

~~NOTE 12—SUBSEQUENT EVENT~~

On October 11, 2018, the Company entered into a three-year, $15.0 million Credit and Security Agreement with Midcap Financial Trust as Agent and as a lender, and other lenders from time to time party thereto (the “Credit Agreement”). The Credit Agreement provides for a secured asset-based revolving credit facility that provides borrowing availability against 85% of eligible accounts receivable and 80% of eligible contract assets, after certain customary exclusions and reserves, and allows for up to $6.0 million of non-cash collateralized letters of credit. The Company can, if necessary, make daily borrowings under the Credit Agreement with same day funding. The outstanding loan balance under the Credit Agreement is reduced via the daily automated sweeping of the Company’s depository accounts to the lender’s account under the terms of deposit account control agreements. As of November 9, 2018, the Company had no loan amount outstanding under the Credit Agreement.

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

Cautionary Statement Regarding Forward-Looking Statements

This Form 10-Q and its exhibits contain or incorporate by reference various forward-looking statements that express a belief, expectation or intention or are otherwise not statements of historical fact. Forward-looking statements generally use forward-looking words, such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast” and other words that convey the uncertainty of future events or outcomes. These forward-looking statements are not guarantees of our future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, our actual outcomes and results may differ materially from those expressed in these forward-looking statements. Investors should not place undue reliance on any of these forward-looking statements. Except as required by law, we undertake no obligation to further update any such statements, or the risk factors described in our ~~2017~~2018 Report under the heading “Item 1A. Risk Factors,” to reflect new information, the occurrence of future events or circumstances or otherwise. The forward-looking statements in this Form 10-Q do not constitute guarantees or promises of future performance. Forward-looking statements may include information concerning the following, among other items:

our ~~high~~ level of ~~indebtedness;~~indebtedness and our ability to successfully refinance our existing credit facilities;

our ability to make interest and principal payments on our debt and satisfy the financial and other covenants contained in the New Centre Lane Facility and the ~~Credit Agreement;~~MidCap Facility;

our ability to engage in certain transactions and activities due to limitations and covenants contained in the New Centre Lane Facility and the MidCap Facility;

our ability to enter into new lending facilities, if needed, and to ~~access~~obtain adequate surety bonding and letters of credit;

our ability to generate sufficient cash resources to continue funding ~~operations;~~operations, including investments in working capital required to support growth-related commitments that we make to our customers, and the possibility that we will continue to incur further losses from operations in the future;

the possibility that our ~~pending putative securities class action;~~independent registered public accounting firm may include an explanatory paragraph in its audit opinion that accompanies our financial statements for the year ended December 31, 2019, indicating that our debt covenants and liquidity position raise substantial doubt about our ability to continue as a going concern or that such firm fails to stand for reappointment;

exposure to market risks from changes in interest rates, including changes to LIBOR;

the possibility we may be required to write down additional amounts of goodwill and other indefinite-lived assets;

our material weaknesses in internal control over financial reporting and our ability to implement and maintain effective controls over financial reporting in the future;

changes in our senior management and financial reporting and accounting ~~teams;~~

teams, the ability of such persons to successfully perform their roles, and our ability to ~~timely prepare~~attract and ~~file our periodic reports;~~retain qualified personnel, skilled workers and key officers;

a failure to successfully implement or realize our business strategies, plans and objectives of management, and liquidity, operating and growth initiatives and opportunities, including our ~~potential inability~~ability to successfully ~~divest additional assets to reduce debt;~~expand our business outside of the U.S., such as our expansion into Canada;

~~a failure to realize liquidity, operating and growth initiatives and opportunities;~~the loss of one or more of our significant customers;

our competitive position;

market outlook and trends in our ~~industry;~~industry, including the possibility of reduced investment in, or increased regulation of, nuclear power plants;

costs exceeding estimates we use to set fixed-price contracts;

harm to our reputation or profitability due to, among other things, internal operational issues, poor subcontractor performances or subcontractor insolvency;

potential insolvency or financial distress of third parties, including our customers and suppliers;

our contract backlog and related amounts to be recognized as revenue;

our ~~expected financial condition;~~ability to maintain our safety record;

changes in our ~~future cash flows;~~credit profile and market conditions affecting our relationships with suppliers, vendors and subcontractors;

compliance with environmental, health, safety and other related laws and regulations;

expiration of the Price-Anderson Act’s indemnification authority;

our expected financial condition, future cash flows, results of ~~operations;~~

operations and future capital and other expenditures;

~~future liabilities~~the impact of general economic conditions;

information technology vulnerabilities and cyberattacks on our networks;

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our failure to comply with applicable laws and regulations, including, but not limited to, those relating to privacy and anti-bribery;

our participation in multiemployer pension plans;

the impact of any disruptions resulting from the ~~Koontz-Wagner bankruptcy filing;~~expiration of collective bargaining agreements;

availability of raw materials ~~supplies~~ and ~~craft labor;~~inventories;

~~plans~~the impact of natural disasters and ~~objectives of management;~~other severe catastrophic events;

future income tax payments and utilization of net operating loss and foreign tax credit carryforwards, including any impact relating to the Tax ~~Act;~~Act or other tax changes;

future compliance with orders of and agreements with regulatory agencies;

volatility of the market price for our common stock and our stockholders’ ability to resell their shares of common stock;

our ability to pay cash dividends in the future;

the impact of activist shareholder actions;

the impact of future offerings or sales of our common stock on the market price of such stock;

expected outcomes of legal or regulatory proceedings and their expected effects on our results of operations, including future liabilities, fees and expenses resulting from the Koontz-Wagner bankruptcy ~~filing by Koontz-Wagner;~~filing; and

any other statements regarding future growth, future cash needs, future operations, business plans and future financial results.

These forward-looking statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, including unpredictable or unanticipated factors that we have not discussed in this Form 10-Q. Many of those factors are outside of our control and could cause actual results to differ materially from the results expressed or implied by the forward-looking statements.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. Investors should consider the areas of risk and uncertainty described above, as well as those discussed in the ~~2017~~2018 Report under the heading “Item 1A. Risk Factors.” Except as may be required by applicable law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, and we caution investors not to rely upon them unduly.

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The following discussion provides an analysis of the results of continuing operations, an overview of our liquidity and capital resources and other items related to our business. In the third quarter of 2017, we made the decision to exit and sell substantially all of the operating assets and liabilities of our Mechanical Solutions segment. In October 2017, we sold substantially all of the operating assets and liabilities of our Mechanical Solutions segment, including our manufacturing facility in Mexico. During the fourth quarter of 2017, we made the decision to exit and sell our Koontz-Wagner business. On July 11, 2018, Koontz-Wagner filed a voluntary petition for relief under Chapter 7 of Title 11 of the Bankruptcy Code with the United States Bankruptcy Court for the Southern District of Texas. We determined that the decision to exit each of those segments met the definition of a discontinued operation. As a result, those segments have been presented as discontinued operations for all periods presented. Unless otherwise specified, the financial information and discussion in this Form 10-Q are as of and for the three and nine months ended September 30, ~~2018~~2019 and are based on our continuing operations; they exclude any results of our discontinued operations. Please refer to “Note 4—5—Changes in Business” to the unaudited condensed consolidated financial statements included in this Form 10-Q for additional information on our discontinued operations.

This discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this Form 10-Q and our audited consolidated financial statements and notes thereto included in the ~~2017~~2018 Report.

Backlog

~~Our backlog consists of firm orders or blanket authorizations from our customers. Backlog may vary significantly from reporting period to reporting period due to the timing of customer commitments.~~

The services we provide are typically carried out under construction contracts, long-term maintenance contracts and master service agreements. ~~Backlog related to fixed-price contracts~~Total backlog represents the ~~total~~dollar amount of revenue ~~we expect~~expected to ~~record~~be recorded in the future for work performed under awarded contracts. Previously, we reported backlog as ~~a result of performing work under~~orders from fixed-price contracts ~~that have been awarded to us. With respect to multi-year maintenance contracts, we include in backlog~~plus the amount of revenue we ~~expect~~expected to receive ~~for only one succeeding year,~~in the next twelve-month period from cost-plus contracts, regardless of the remaining life of the cost-plus contract. However, we believe that reporting the total revenue expected under awarded contracts is more representative of our expected future revenue.

Revenue estimates included in our backlog can be subject to change as a result of project accelerations, cancellations or delays due to various factors, including, but not limited to, the customer’s budgetary constraints and adverse weather. These factors can also cause revenue ~~amounts~~ to be ~~realized~~recognized in different periods and at levels other than those originally projected. Additional work that is not identified under the original contract is added to our estimated backlog when we reach an agreement with the customer as to the scope and pricing of that additional work. Capital project awards are typically defined in terms of scope and pricing at the time of a contractual commitment from the customer. Upon receipt of a customer commitment, we add capital project bookings to our backlog at full contract value, regardless of the time frame anticipated to complete the project. Maintenance services and capital project bookings are removed from our backlogBacklog is reduced as work is performed and revenue is recognized, or upon cancellation.

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Backlog is not a measure defined by GAAP, and our methodology for determining backlog may vary from the methodology used by other companies in determining their backlog amounts. Backlog may not be indicative of future operating results and projects in our backlog may be cancelled, modified or otherwise altered by our customers.

The following table summarizes our backlog:



(in thousands)	September 30, 2018		December 31, 2017		September 30, 2019		December 31, 2018
Backlog	$	187,786	$	137,691
Cost plus					$	367,560	$	487,033
Lump sum						23,073		14,571
Total					$	390,633	$	501,604


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Backlog - beginning of period	$	409,019	$	501,604
New awards		11,661		30,844
Adjustments and cancellations, net		26,815		37,165
Revenue recognized		(56,862)		(178,980)
Backlog - end of period	$	390,633	$	390,633

~~Backlog~~Total backlog as of September 30, ~~2018 increased $50.1~~2019 was $390.6 million, ~~from~~compared with $501.6 million at December 31, ~~2017.~~2018. The ~~increase~~decrease in backlog was primarily ~~driven by $25.2~~due to work that was completed during a nuclear outage and the completion of several projects during the first nine months of 2019. We estimate that approximately $151.3 million, ~~resulting from increases in~~or 38.7% of total backlog at September 30, 2019, will be converted to revenue within the ~~construction activities at Plant Vogtle Units 3 and 4 and $20.1~~next twelve months. As of December 31, 2018, we estimated that approximately $173.3 million, ~~attributable~~or 34.6% of total backlog, would convert to ~~the renewal of an existing nuclear maintenance and modification contract, which has a scheduled outage~~revenue in 2019.

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Results of Operations

The following summary and discussion of our results of operations is based on our continuing operations and excludes any results of our discontinued ~~operations.~~operations:



	Three Months Ended September 30,				Nine Months Ended September 30, 2018				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017			2018		2017	2019		2018		2019		2018
Revenue	$	53,467	$	39,040	$	144,563	$	142,653	$	56,862	$	53,467	$	178,980	$	144,563
Cost of revenue		43,255		34,280		121,154		132,694		50,906		43,255		157,150		121,154
Gross profit		10,212		4,760		23,409		9,959		5,956		10,212		21,830		23,409

Selling and marketing expenses		397		470		1,299		1,754		63		397		468		1,299
General and administrative expenses		7,529		9,124		21,485		24,829		5,091		7,529		16,327		21,485
Restructuring charges		1,436		—		3,661		—		—		1,436		—		3,661
Restatement expenses		—		526		160		2,959		—		—		—		160
Depreciation and amortization expense		192		484		633		1,148		77		192		225		633
Total operating expenses		9,554		10,604		27,238		30,690		5,231		9,554		17,020		27,238
Operating income (loss)		658		(5,844)		(3,829)		(20,731)		725		658		4,810		(3,829)

Interest expense, net		3,622		3,640		7,397		7,584		1,511		3,622		4,504		7,397
Gain on sale of business and net assets held for sale		—		—		—		(239)
Other (income) expense, net		(339)		(9)		(844)		(9)		(485)		(339)		(1,153)		(844)
Loss from continuing operations before income tax expense (benefit)		(2,625)		(9,475)		(10,382)		(28,067)
Income tax expense (benefit)		215		312		720		(1,226)
Loss from continuing operations	$	(2,840)	$	(9,787)	$	(11,102)	$	(26,841)
Income (loss) from continuing operations before income tax										(301)		(2,625)		1,459		(10,382)
Income tax (benefit) expense										62		215		141		720
Income (loss) from continuing operations									$	(363)	$	(2,840)	$	1,318	$	(11,102)

Revenue for the three months ended September 30, ~~2018~~2019 increased ~~$14.4~~$3.4 million, or 6.3%, compared with the corresponding period in ~~2017 due~~2018. The increase was driven primarily ~~to additional scope associated with construction activities at Plant Vogtle Units 3 and 4,~~by our recent entry into the nuclear industry in Canada, which ~~accounted~~contributed $5.0 million in new business revenue. This increase in new business revenue was partially offset by a $1.4 million decrease in revenue generated from our decommissioning projects.

Revenue for ~~$9.6~~the nine months ended September 30, 2019 increased $34.4 million, ~~of the increase. Additionally, revenue from decommissioning projects increased $4.0 million~~or 23.8%, compared with the corresponding period in ~~2017.~~2018. The increase was driven primarily by a planned utility outage related to our long term maintenance and modification contracts of $16.7 million and $17.5 million from our nuclear project contracts, partially offset by a decrease of

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$10.8 million in revenue from our decommissioning projects and fossil fuel power generation projects. Additionally, our recent entry into the nuclear industry in Canada contributed $11.0 million in new business revenue.

Gross profit for the three months ended September 30, ~~2018 increased $5.5~~2019 decreased $4.3 million, or 41.7%, compared with the corresponding period in ~~2017.~~2018, while gross margin declined to 10.5% from 19.1%. The ~~increase resulted from~~decrease in gross margin reflects the early termination of a contract under which we recognized $3.4 million of revenue with no additional associated costs in the current year quarter. At the time of termination, we recognized the difference between the contractually earned billings and the amount of revenue that we had recognized under the cost-to-cost methodology of percentage of completion accounting. Additionally, in the prior year quarter, we recognized $5.1 million of revenue related to three loss contracts with no associated gross profit recognized in the quarter. The cumulative impact of the ~~estimated losses~~completion of a fixed-price nuclear project in 2018 that contributed $3.3 million in gross profit and the recognition of a $1.3 million loss on ~~those~~a fixed-price fossil fuel project in 2019.

Gross profit for the nine months ended September 30, 2019 decreased $1.6 million, or 6.7%, compared with the corresponding period in 2018, while gross margin declined to 12.2% from 16.2%. The decrease in gross margin was due primarily to the completion of a fixed-price nuclear project in 2018 which contributed $3.4 million in gross profit and the recognition of a $1.3 million loss on a fixed-price fossil project in 2019. These declines were partially offset by gross profits earned from a planned utility outage related to our long term maintenance and modification contracts ~~had been recognized in the first quarter of 2017.~~and other nuclear project contracts.

Operating income for the three months ended September 30, ~~2018~~2019 was relatively unchanged compared with the corresponding period in 2018. The change in operating income was due to a $4.3 million decrease in operating expenses, which was offset by the decrease in gross profit discussed above. For the three months ended September 30, 2019, general and administrative expenses and restructuring charges decreased $2.4 million and $1.4 million, respectively, due to the restructuring efforts undertaken in 2018. Additionally, selling and marketing expenses decreased $0.3 million, as a result of our cost control efforts, and depreciation expense decreased $0.1 million.

Operating income for the nine months ended September 30, 2019 increased ~~$6.5~~$8.6 million compared with the corresponding period in ~~2017~~2018. The increase in operating income was due to ~~the $5.5 million increase in gross profit and~~ a ~~$1.1~~$10.2 million decrease in operating ~~expenses.~~expenses, which was partially offset by the decrease in gross profit discussed above. For the nine months ended September 30, 2019, general and administrative expenses and restructuring charges decreased $5.2 million and $3.7 million, respectively, due to the restructuring efforts undertaken in 2018. Furthermore, selling and marketing expenses decreased $0.8 million, as a result of our cost control efforts, and depreciation expense decreased $0.4 million. The ~~$1.6~~Company also benefited from a $0.2 million decrease in ~~general and administrative expense, a $0.3 million decrease~~costs related to restatement expenses recognized in ~~depreciation and amortization expenses and a $0.5 million decrease in restatement expense~~2018 due to the wind-down of restatement activities in conjunction with the March 15, 2017 filing of the Annual Report on Form 10-K for the year ended December 31, 2015, which included the restatement of certain prior period financial ~~results, were more than enough to offset the $1.4 million increase in restructuring charges.~~

Revenue for the nine months ended September 30, 2018 increased $1.9 million compared with the corresponding period in 2017. The primary drivers of the increase were a $29.7 million increase from construction activities at Plant Vogtle Units 3 and 4 and a $10.4 million increase from decommissioning projects. These increases were substantially offset by a $20.0 million decrease due to the timing of a nuclear outage; a $14.6 million decrease related to the substantial completion of four non-recurring fixed price contracts in 2017; and the non-recurrence of the first quarter 2017 release to revenue of a $4.4 million liquidated damages contingent liability.

Gross profit for the nine months ended September 30, 2018 increased $13.5 million compared with the corresponding period in 2017 primarily due to a decrease of $12.1 million in the amount of losses recognized on three non-recurring fixed price contracts that were substantially completed in 2017 ($0.2 million of losses in 2018 as compared to $12.3 million in 2017).

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Operating loss for the nine months ended September 30, 2018 decreased $16.9 million compared with the corresponding period in 2017 due to the $13.5 million increase in gross profit and a $3.5 million decrease in operating expenses. The $3.3 million decrease in general and administrative expenses as discussed below, a $0.5 million decrease in selling and marketing expenses, a $0.5 million decrease in depreciation and amortization expenses and a $2.8 million decrease in restatement expense due to the wind-down of restatement activities in conjunction with the March 15, 2017 filing of the Annual Report on Form 10-K for the year ended December 31, 2015, which included the restatement of certain prior period financial results, were more than enough to offset the $3.7 million increase in restructuring charges.results.

General and Administrative Expenses


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017
Labor-related expenses	$	4,316	$	5,415	$	11,986	$	13,964
($ in thousands)									2019		2018		2019		2018
Employee-related expenses									$	2,910	$	4,316	$	8,345	$	11,986
Stock-based compensation expense		222		407		687		1,779		120		222		1,011		687
Professional fees		1,262		1,533		4,621		3,672		1,052		1,262		2,366		4,621
Other expenses		1,729		1,769		4,191		5,414		1,009		1,729		4,605		4,191
Total	$	7,529	$	9,124	$	21,485	$	24,829	$	5,091	$	7,529	$	16,327	$	21,485

Total general and administrative expenses for the three months ended September 30, ~~2018~~2019 decreased ~~$1.6~~$2.4 million, or 32.4%, compared with the corresponding period in ~~2017.~~2018. For the three months ended September 30, ~~2018, total labor-related~~2019, employee-related expenses decreased ~~$1.1~~$1.4 million due primarily to an overall decrease in ~~on-going labor~~ongoing employee and ~~labor-related~~employee-related expenses and a reduction in headcount compared with the corresponding period in ~~2017. For~~2018. Stock-based compensation expense decreased $0.1 million for the three months ended September 30, ~~2018, professional fees decreased $0.3 million due primarily to a decrease in audit and tax related fees~~2019, compared with the corresponding period in ~~2017. Additionally, stock-based compensation expense~~2018. Professional fees decreased $0.2 million for the three months ended September 30, 2019, compared with the corresponding period in ~~2017.~~2018, primarily because of the completion of our restructuring initiatives. Further, other expenses decreased $0.7 million for the three months ended September 30, 2019, compared with the corresponding period in 2018 primarily due to a $0.2 million decrease in general liability insurance, a $0.1 million decrease in bad debt expense and other cost decreases, none of which were individually significant, compared with the corresponding period in 2018.

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Total general and administrative expenses for the nine months ended September 30, ~~2018~~2019 decreased ~~$3.3~~$5.2 million, or 24.0%, compared with the corresponding period in 2018. Employee-related expenses decreased $3.6 million due primarily to our ongoing employee and employee-related expense management efforts and a reduction in headcount compared with the corresponding period in 2018. The decrease in employee-related expenses was partially offset by costs recognized in connection with the retirement of our former Chief Financial Officer in June 2019, pursuant to the terms of his employment agreement. For the nine months ended September 30, 2019, professional fees decreased $2.3 million compared with the corresponding period in ~~2017. For~~2018, primarily because of the ~~nine months ended September 30, 2018, total labor-related~~completion of our restructuring initiatives and becoming current with our SEC reporting obligations. These decreases were partially offset by a $0.3 million increase in stock-based compensation expense and a $0.4 million increase in other expenses. The increase in other expenses ~~decreased $2.0~~was primarily related to a $0.7 million ~~due primarily to an overall~~increase in computer equipment expenses, a $0.1 million increase in bad debt expense, a $0.1 million increase in property and other business related taxes and a $0.1 million increase in employee training expenses. These increases in other expenses were partially offset by a $0.2 million decrease in ~~on-going labor~~computer software expenses, a $0.3 million decrease in rental expense and ~~labor-related expenses~~other cost decreases, none of which were individually significant, compared with the corresponding period in 2017. In addition, for the nine months ended September 30, 2018, stock-based compensation expense decreased $1.1 million compared with the corresponding period in 2017. Furthermore, other expenses decreased $1.2 million compared with the corresponding period in 2017 due to a $0.1 million decrease in travel and entertainment expense, a $0.6 million decrease in computer software expense, a $0.3 million decrease in bank fees and a $0.3 million decrease in bad debt expense compared with the corresponding period in 2017. These decreases in general and administrative expenses for the nine months ended September 30, 2018 were partially offset by a $0.9 million increase in professional fees due to strategic alternative activities compared with the corresponding period in 2017.2018.

Restructuring Charges


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017		2019		2018		2019		2018
Lease		418		—		418		—	$	—	$	418	$	—	$	418
Severance		1,018		—		3,243		—		—		1,018		—		3,243
Total	$	1,436	$	—	$	3,661	$	—	$	—	$	1,436	$	—	$	3,661

During 2018, we ~~made the decision~~initiated our plan to ~~relocate~~significantly reduce corporate overhead and staff by consolidating all our ~~corporate headquarters to~~administrative activities in our Tucker, Georgia offices. As a result of our restructuring efforts, we incurred $1.0 million and ~~vacated our leased office space~~$3.2 million in Irving, Texas on September 30, 2018. Presently, we are seeking to sublease the office space; however, we may choose to pay a termination fee and terminate the lease. We expect to complete our exit activities related to this office space by November 2019, when the lease expires.

~~Other (Income) Expense, Net~~

Three Months Ended September 30,

Nine Months Ended September 30,
(in thousands)

2018

2017

2018

2017
Interest expense, net

$
3,622

$
3,640

$
7,397

$
7,584
Gain on sale of business and net assets held for sale

—

—

—

(239)
Other (income) expense, net

(339)

(9)

(844)

(9)
Total

$
3,283

$
3,631

$
6,553

$
7,336

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~~Total other expense, net,~~severance charges for the three and nine months ended September 30, 2018, respectively. We completed our restructuring initiative in December 2018; therefore, we did not incur any restructuring charges for the three and nine months ended September 30, 2019.

Other (Income) Expense, Net


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2019		2018		2019		2018
Interest expense, net	$	1,511	$	3,622	$	4,504	$	7,397
Other income, net		(485)		(339)		(1,153)		(844)
Total	$	1,026	$	3,283	$	3,351	$	6,553

Total other expense, net, for the three months ended September 30, 2019 decreased ~~$0.3~~$2.3 million, ~~and $0.8 million, respectively,~~or 68.7%, compared with the corresponding ~~periods~~period in ~~2017~~2018. Interest expense, net, decreased $2.1 million due ~~primarily~~to a lower weighted average interest rate on our long-term borrowings, partially offset by higher outstanding debt obligations. The weighted average interest rate on borrowings under the New Centre Lane Facility for the three months ended September 30, 2019 was 12.5% compared with the weighted average interest rate on the Initial Centre Lane Facility of 21.4% in the corresponding period in 2018. The decrease in interest expense was partially offset by a slight increase in other income, net, due to income from ~~the Company’s~~our 25% ~~interest~~investment in an equity method ~~investment.~~investment and a foreign currency exchange translation gain related to our Canada operations.

Total other expense, net, for the nine months ended September 30, 2019 decreased $3.2 million, or 48.9%, compared with the corresponding period in 2018. Interest expense, net decreased $2.9 million due to a lower weighted average interest rate on our long-term borrowings, partially offset by higher outstanding debt obligations. The weighted average interest rate on borrowings under the New Centre Lane Facility for the nine months ended September 30, 2019 was 12.5% compared with the weighted average interest rate on the Initial Centre Lane Facility of 21.0% in the corresponding period in 2018. The decrease in interest expense was partially offset by a $0.3 million increase in other income, net, due to income from our 25% investment in an equity method investment and a foreign currency exchange translation gain related to our Canada operations.

Income Tax Expense (Benefit)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017
($ in thousands)									2019		2018		2019		2018
Income tax expense (benefit)	$	215	$	312	$	720	$	(1,226)	$	62	$	215	$	141	$	720

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Income tax expense for the interim reporting periods is based on estimates of the annual effective tax rate ~~during the entire fiscal year. The effective income tax rate is~~ based upon the estimated income during the calendar year, the estimated composition of the income in different jurisdictions, ~~and discrete adjustments,~~adjusted to reflect the effects of any significant or unusual items which are required to be discretely recognized within the current interim period, if any, in the applicable quarterly periods for settlements of tax audits or assessments and the resolution or identification of tax position uncertainties.

For the three ~~and nine~~ months ended September 30, ~~2018, we~~2019, the Company recorded income tax expense from continuing operations of less than $0.1 million compared with income tax expense from continuing operations of $0.2 million ~~or (8.2)% of pretax loss~~in the corresponding period in 2018. For the nine months ended September 30, 2019, the Company recorded income tax expense from continuing operations ~~and $0.7~~of $0.1 million ~~or (6.9)% of pretax loss from continuing operations, respectively,~~ compared with income tax expense from continuing operations of ~~$0.3~~$0.7 million ~~or (3.3)% of pretax loss from continuing operations, and income tax benefit from continuing operations of $1.2 million, or 4.4% of pretax loss from continuing operations, respectively,~~ in the corresponding ~~periods of 2017.~~period in 2018. The difference between our effective tax rate and the federal statutory tax rate for the three and nine months ended September 30, ~~2018~~2019 and ~~2017~~2018 was primarily related to the ~~full~~partial valuation allowance recorded on our U.S. deferred tax assets. The decrease in income tax provision from continuing operations for the three and nine months ended September 30, 2019 compared with the corresponding periods in 2018 was primarily related to the $0.6 million increase in indefinite-lived deferred tax assets related to the interest expense addback under Section 163(j) of the Internal Revenue Code and the post-2017 U.S. net operating loss that can be used to offset indefinitely-lived intangible deferred tax liabilities.

Discontinued Operations

See “Note 4—5—Changes in Business” to the unaudited condensed consolidated financial statements included in this Form 10-Q for information regarding discontinued operations.

Liquidity and Capital Resources

During the ~~three and~~ nine months ended September 30, ~~2018,~~2019, we continued to have significant liquidity constraints. Our principal sources of liquidity ~~were releases~~are borrowings under the MidCap Facility (as MidCap has dominion over our accounts receivable collection depository bank accounts) and effective management of ~~restricted cash and proceeds from the New Centre Lane Facility.~~our working capital. Our principal uses of cash were to pay for ~~customer contract-related material,~~ labor and subcontract labor, customer contract-related material, operating expenses, restructuring charges ~~resulting~~ from ~~the Koontz-Wagner bankruptcy, operating expenses~~our 2018 restructuring plan, and interest expense on the New Centre Lane Facility and MidCap Facility. See discussion in “Note 2—Liquidity” to the unaudited condensed consolidated financial statements included in this Form 10-Q.

Net Cash Flows

Our net consolidated cash flows, including cash flows related to discontinued operations, consisted of the following:


	Nine Months Ended September 30,				Nine Months Ended September 30,
Statement of Cash Flow Data (in thousands)		2018		2017
(in thousands)					2019		2018
Cash flows provided by (used in):
Operating activities	$	(6,697)	$	(18,967)	$	(2,412)	$	(6,697)
Investing activities		196		23,217		(178)		196
Financing activities		654		3,740		120		654
Effect of exchange rate change on cash		—		713
Net change in cash, cash equivalents and restricted cash	$	(5,847)	$	8,703	$	(2,470)	$	(5,847)

Cash and Cash Equivalents

As of September 30, ~~2018,~~2019, our operating unrestricted cash and cash equivalents decreased by ~~$0.2~~$2.5 million to ~~$4.4~~$2.0 million from ~~$4.6~~$4.5 million as of December 31, ~~2017.~~2018. As of September 30, ~~2018,~~2019, with the exception of $0.1 million, the operating cash balance of ~~$4.4~~$2.0 million was held in U.S. bank accounts.

Operating Activities

Cash flows used in operating activities were $2.4 million for the nine months ended September 30, 2019, a decrease of $4.3 million compared with the corresponding period in 2018. The improvement in the operating activities use of cash arose primarily from the increased earnings sources and the reduced requirements to support our discontinued operations. Net working capital assets and liabilities were impacted by the timing of customer billings and the effective control of our working capital requirements.

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~~Operating Activities~~

Cash flows from operating activities result primarily from earnings sources and are affected by changes in operating assets and liabilities, which consist primarily of working capital balances related to our projects. For the nine months ended September 30, 2018, cash used by operating activities decreased $12.3 million to $6.7 million. The $6.7 million usage of cash during the first nine months of 2018 was primarily attributed to our discontinued operations, which used $6.7 million of cash in its operating activities.

During the nine months ended September, 2018, our working capital decreased $13.4 million, or 42.2%, from December 31, 2017. Current assets decreased $35.4 million during the first nine months of 2018, due primarily to a $27.4 million decrease in current assets of discontinued operations in connection with the bankruptcy and deconsolidation of Koontz-Wagner, a $5.6 million decrease in restricted cash, a $2.3 million decrease in contract assets and a $2.5 million decrease in other current assets. These decreases were partially offset by a $3.0 million increase in accounts receivable, net. Current liabilities decreased $22.0 million during the first nine months of 2018 due primarily to a $26.3 million decrease in current liabilities of discontinued operations in connection with the bankruptcy and deconsolidation of Koontz-Wagner and a $4.3 million decrease in contract liabilities. These decreases were partially offset by a $2.0 million increase in accounts payable, a $5.7 million increase in accrued compensation and benefits, a $0.4 million increase in other current liabilities and $0.4 million increase in current portion of long-term debt.

Investing Activities

~~For the nine months ended September 30, 2018,~~Currently, our investing activities do not have a significant impact on our net cash provided by investing activities decreased $23.0 million due primarily to $20.2 million in net proceeds received as a result of the divestiture of Hetsco in January 2017. No significant divestitures occurred during the nine months ended September 30, 2018.flows.

Financing Activities

~~For~~The MidCap Facility grants the ~~nine months ended September 30, 2018, net cash used in financing activities decreased $3.1 million.~~lender dominion over our depository bank accounts. As such, our weekly borrowings under the MidCap Facility are our primary source of liquidity. During the first nine months of ~~2017, repayment~~2019, our borrowings under the MidCap Facility exceeded our repayments from customer cash receipts by $0.6 million. At any point in time, the outstanding balance under the MidCap Facility is a function of the timing of collections of our ~~previously outstanding Revolving Credit Facility used $165.5 million~~customer cash receipts and the timing of our cash ~~while proceeds from~~expenditure needs for the ~~Revolving Credit~~following week for payment of trade payable obligations and payroll and related tax obligations.

Both the MidCap Facility and ~~the~~New Centre Lane Facility ~~provided $171.6~~require the Company to maintain, among other things, a maximum total leverage ratio and minimum consolidated adjusted EBITDA. The Company determined that it was not in compliance with those covenants as of the last day of its third quarter, and accordingly, on November 14, 2019, the Company entered into amendments to both facilities that changed the required levels of both financial covenants so that the Company is now in compliance with both agreements as amended as of September 29, 2019. The Company’s cumulative expense related to these amendments was $0.4 million and will be reflected in the consolidated statement of cash. The Revolving Credit Facility was refinanced and replaced with the Centre Lane Facility in June 2017. We used $1.9 million in cash during the first nine months of 2017 in connection with the refinancing of our long-term debt. During the nine months ended September 30, 2018, we refinanced the $45 million Center Lane Facility with the $35 million New Centre Lane Facility. The refinancing provided $35 million of cash and used $31.2 million of cash to repay outstanding principal, $1.5 million in cash for refinancing costs, $0.6 million in cash to pay the 2% prepayment fee and $0.5 million in cash to payoperations for the ~~outstanding Fourth Amendment fee.~~ year ended December 31, 2019.

For additional information about our outstanding debt, including our outstanding term loan, please refer to “Note 8—9—Debt” to the unaudited condensed consolidated financial statements included in this Form 10-Q.

Effect of Exchange Rate Changes on Cash

For the three and nine months ended September 30, ~~2018, our cash flows were not impacted by fluctuations in foreign currency. For the nine months ended September 30, 2017,~~2019, the effect of Canadian foreign exchange rate changes ~~increased~~on our cash ~~by $0.7 million, primarily resulting from fluctuations in the Euro and the Mexican Peso against the U.S. Dollar.~~balances was not material.

Dividends

We have not ~~declared~~paid dividends to holders of our common stock since ~~the first quarter of~~March 2015, and ~~do not anticipate declaring dividends in the near term. As of September 30, 2018,~~ the terms of ~~our~~the New Centre Lane Facility ~~restricted~~currently restrict our ability to pay dividends. In addition, ~~the timing~~declaration and ~~amounts~~payment of ~~any~~future dividends would ~~be subject~~depend on many factors, including, but not limited to, ~~determination~~our earnings, financial condition, business development needs, regulatory considerations and ~~approval by~~the terms of the New Centre Lane Facility, and is at the discretion of our Board of Directors. ~~Dividends reported on the unaudited condensed consolidated statements of~~We currently have no plan in place to pay cash flows included in this Form 10-Q are related to dividends on unvested restricted stock awards and units granted under pre-2014 long-term incentive compensation plans and are not related to a declared dividend.dividends.

Liquidity Outlook

~~On July 11, Koontz-Wagner, the Company’s wholly owned subsidiary which comprised substantially all of current year discontinued operations, filed for Chapter 7 bankruptcy.~~ As noted in our 2018 Form 10-K, overall, we expect liquidity to improve through 2019 as a result of exiting our former loss-generating businesses and reducing our ongoing operating expenses. However, we may experience periodic short-term constraints on our liquidity as a result of the ~~Company~~cash flow requirements of specific projects. A high percentage of our cost of service comes from weekly craft labor payrolls, and the lag between incurrence of those payrolls and the subsequent collection of the resulting customer billings results in negative cash flows for that lag period. Although we utilize the MidCap Facility to address those lag period negative cash flows, contract terms restricting customer invoicing frequency, delays in customer payments, and underlying surety bonds negatively impact our availability under the MidCap Facility. Additionally, we anticipate the remaining 2019 cash expenditures related to our 2018 restructuring plan (including payments related to the Koontz-Wagner bankruptcy) will ~~no longer need~~be approximately $0.5 million.

While we believe that we have sufficient resources to satisfy our 2019 working capital requirements, we are currently engaged in a process to refinance our existing credit facilities with Centre Lane and MidCap. The debt refinancing process is expected to be completed by the end of 2019. In addition, we intend to file a registration statement on Form S-1 with the SEC for a rights offering (the “Rights Offering”) to existing holders of our common stock. The Rights Offering is supported by a commitment (the “Backstop Agreement”) with Wynnefield Capital, Inc. (referred to, along with its affiliates, as “Wynnefield”), our largest shareholder, to purchase all unsubscribed shares of common stock in the Rights Offering. We expect to receive aggregate gross proceeds of $7.0 million before fees and expenses from the Rights Offering, supported by the Backstop Agreement, if necessary. We intend that the combined net proceeds from our debt refinancing process and the Rights Offering, after the repayment or refinancing of our existing credit facilities, will be used for working capital to fund ~~Koontz-Wagner’s~~certain of our strategic growth initiatives and for general corporate purposes. A condition to the obligations of Wynnefield in the Backstop Agreement will be

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~~operations. The extent to which~~that the Company has consummated the refinancing of its existing credit facilities. In the event that we ~~may incur additional liabilities in excess of those for which we have already accrued is currently unknown.~~

On September 18, 2018, we refinanced and replaced our existing Centre Lane Facility with the New Centre Lane Facility, a four-year, $35.0 million senior secured credit agreement with an affiliate of Centre Lane as Administrative Agent and Collateral Agent, and the other lenders from time to time party thereto. After payment of the existing Centre Lane Facility and fees associated with the New Centre Lane Facility, net cash proceeds were $1.0 million. Please refer to “Note 8–Debt” for additional discussionare unable close on the ~~New Centre Lane Facility.~~

~~On October 11, 2018, we entered into a three-year, $15.0 million Credit Agreement. The Credit Agreement is a secured asset-based revolving~~new credit facility ~~that provides borrowing availability against 85% of eligible accounts receivable~~through our refinancing process, do not consummate the Rights Offering, and 80% of eligible costs and estimated earnings in excess of billings, after certain customary exclusions and reserves, and allows for up to $6.0 million of non-cash collateralized letters of credit. The Credit Agreement provides us with the necessary short-term borrowing capacityare unable to address potential liquidity shortfalls in the future, management will need to seek additional funding, which may not be available on reasonable terms, if at all, and may result in management concluding that our ~~day-to-day working capital needs, which we have not had since entering into the Initial Centre Lane Facility in June 2017. Please refer~~liquidity position raises substantial doubt about our ability to ~~“Note 12–Subsequent Event” for additional discussion of the Credit Agreement.~~continue as a going concern.

Restricted cash balances ~~decreased $5.6~~have remained constant at $0.5 million since the beginning of the year to $5.9 million as of September 30, 2018 as a result of the cancellation of a $3.5 million cash collateralized letter of credit and the release of escrow amounts related to certain of our sold former subsidiaries. As a result of the assumption of the outstanding letters of credit under the Credit Agreement, the $5.4 million of restricted cash which had collateralized those letters of credit was released to us in October 2018, net of $0.9 million in fees owed to the collateral agent. We anticipate that outstanding letters of credit, which currently reduce our borrowing availability under the Credit Agreement, will continue to decline during the remainder of 2018 as additional letters of credit are cancelled or reduced upon satisfaction of the underlying conditions.

Although we are aggressively executing our plan to reduce general and administrative expenses, our 2018 results of operations have been and will continue to be impacted by significant severance and other restructuring cash expenditures. Additionally, the cash flow requirements of executing the reduction plan will continue into 2019.year.

For additional information, please refer to “Note 2—Liquidity” to the unaudited condensed consolidated financial statements included in this Form 10-Q.

Off-Balance Sheet Transactions

Our liquidity is currently not dependent on the use of off-balance sheet transactions but, in line with industry practice, we are often required to provide performance and surety bonds to customers and may be required to provide letters of credit. If performance assurances are extended to customers, generally our maximum potential exposure is limited in the contract with our customers. We frequently obtain similar performance assurances from third-party vendors and subcontractors for work performed in the ordinary course of contract execution. However, the total costs of a project could exceed our original cost estimates, and we could experience reduced gross profit or possibly a loss for a given project. In some cases, if we fail to meet certain performance standards, we may be subject to contractual liquidated damages.

As of September 30, ~~2018,~~2019, we had a contingent liability for issued and outstanding standby letters of credit, generally issued to secure performance on customer contracts. As of September 30, ~~2018,~~2019, we had ~~$5.1~~$2.9 million of outstanding standby letters of credit ~~that were originally issued under the Revolving Credit Facility~~ and there were no amounts drawn upon these letters of credit. In addition, as of September 30, ~~2018,~~2019, we had outstanding surety bonds ~~on projects~~ of ~~$49.6~~$52.8 million. Our subsidiaries also provide financial guarantees for certain contractual obligations in the ordinary course of business.

Critical Accounting Policies

On January 1, ~~2018,~~2019, we adopted ~~ASC Topic 606, “Revenue from Contracts with Customers.”~~ASU 2016-02. In connection with the adoption, we implemented certain changes to our accounting policies and processes related to ~~revenue recognition.~~lease accounting. For additional information on changes to ~~our revenue recognition accounting policy,~~financial statements, please refer to “Note ~~5—Revenue”~~3—Recent Accounting Pronouncements” to the unaudited condensed consolidated financial statements included in this Form 10-Q. There were no other material changes to our critical accounting policies as set forth in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our ~~2017~~2018 Report, during the three and nine months ended September 30, ~~2018.~~2019.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Item 4. Controls and Procedures.

The Company has evaluated, under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of its disclosure controls and procedures as of September 30, ~~2018.~~2019. This is done in order to ensure that information the Company is required to disclose in reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of September 30, ~~2018,~~2019, due to the material weaknesses described in “Item 9A. Controls and Procedures” of the Company’s ~~2017~~2018 Report.

To address these control weaknesses, the Company performed additional analysis and performed other procedures in order to prepare the unaudited condensed consolidated financial statements in accordance with GAAP.

Notwithstanding the material weaknesses, management has concluded that the unaudited condensed consolidated financial statements included in this Form 10-Q present fairly, in all material aspects, the Company’s financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

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Changes in Internal Control over Financial Reporting

Under the applicable SEC rules, ~~(Exchange Act Rules 13a-15(f) and 15d-15(f)),~~ management is required to evaluate any changes in internal control over financial reporting that occurred during each fiscal quarter that materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting.

As discussed in “Item 9A. Controls and Procedures” of the ~~2017~~2018 Report, we have undertaken a broad range of remedial procedures to address material weaknesses in our internal control over financial reporting. These remedial procedures continued throughout the ~~nine~~three months ended September 30, ~~2018~~2019 and will continue throughout the remainder of ~~2018.~~2019.

On January 1, ~~2018,~~2019, we adopted ~~ASC Topic 606, “Revenue from Contracts with Customers.”~~ASU 2016-02. In connection with the adoption, we implemented certain changes to our processes and controls related to revenue recognition. These changes included the development of new policies and practices based on the five-step model outlined in ASC Topic 606, new contract review requirements and new processes and controls related to the additional disclosure requirements. In April 2018, we closed our internal audit department and reassigned that department’s responsibilities to other departments throughout the organization.lease accounting. While we continue to implement remediation efforts and design enhancements to our internal control procedures, we believe there were no other changes to our internal control over financial reporting that occurred during the ~~nine~~three months ended September 30, ~~2018~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II—OTHER INFORMATION

Item 1.Legal Proceedings.

The information included in “Note 4—5—Changes in ~~Business”~~Business—Discontinued Operations—Electrical Solutions” and “Note ~~10—~~11—Commitments and Contingencies” to the unaudited condensed consolidated financial statements in this Form 10-Q is incorporated by reference into this Item.

Item 1A.Risk Factors.

Our business faces significant risks and uncertainties. Certain important factors may have a material adverse effect on our business prospects, financial condition and results of operations, and you should carefully consider them. ~~Due to the bankruptcy filing by Koontz-Wagner, the Company has added the following risk factor that should be considered:~~

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~~Liabilities, fees, and expenses related to the Koontz-Wagner bankruptcy filing could have a material adverse effect on our results of operations, cash flows and financial position.~~

We may incur future liabilities as a result of the bankruptcy filing of our Koontz-Wagner subsidiary, and defending any claims relating to the Koontz-Wagner bankruptcy could require us to incur substantial legal fees and other expenses. Any such liabilities could have a material adverse effect on our results of operations, cash flows and financial position.

There have not been any ~~other~~ material changes to our risk factors from those reported in our ~~2017~~2018 Report.

~~Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.~~

~~Unregistered Sales of Equity Securities~~

~~There were no unregistered sales of equity securities during the period covered by this Form 10-Q.~~

~~Issuer Purchases of Equity Securities~~

~~There were no issuer purchases of equity securities during the period covered by this Form 10-Q.~~

~~Item 3.Defaults Upon Senior Securities.~~

~~None.~~

~~Item 4.Mine Safety Disclosures.~~

~~Not applicable.~~

Item 5. Other Information~~Item 5.Other Information.~~

None.

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Item 6.Exhibits.

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Exhibit		Description

10.1		~~Consent and Fifth Amendment to Senior Secured Credit~~Employment Agreement, dated ~~July 11, 2018, by~~August 12, 2019, between the Company and among Williams Industrial Services Group Inc. (f/k/a Global Power Equipment Group Inc.), as Borrower, the Lenders party thereto, and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral AgentCharles E. Wheelock (filed as Exhibit ~~10.2~~10.5 to our Form 10-Q for the quarter ended June 30, 2019, filed with the Commission on August 14, ~~2018 and incorporated herein by reference)~~2019).*
10.2		Employment Agreement, dated ~~July 31, 2018, by~~September 30, 2019, between the Company and ~~between Williams Industrial Services Group Inc. and Timothy M. Howsman (filed as Exhibit 10.6 to our Form 10-Q filed with the Commission on August 14, 2018 and incorporated herein by reference).~~Randall R. Lay.*♦
10.3		~~Senior Secured Credit~~Time-Based Restricted Share Unit Agreement (Inducement Grant), dated ~~as of~~ September ~~18, 2018, by~~30, 2019, between the Company and ~~among Williams Industrial Services Group Inc., as Borrower, the lenders party thereto and Centre Lane Partners Master Credit Fund II, L.P., as Administrative Agent and Collateral Agent.~~Randall R. Lay.*♦
10.4		~~Credit~~Performance-Based Restricted Share Unit Agreement (Inducement Grant), dated September 30, 2019, between the Company and Security Agreement, dated as of October 11, 2018, by and among Williams Industrial Services Group Inc. and the other borrowers from time to time party thereto, as Borrowers, MidCap Financial Trust, as Agent and as a Lender, and the additional lenders from time to time party thereto.Randall R. Lay.*♦
31.1		Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.♦
31.2		Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.♦
32.1		Certification by the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2		Certification by the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS		XBRL Instance Document♦
101.SCH		XBRL Taxonomy Extension Schema Document♦
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document♦
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document♦
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document♦
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document♦

*Indicates a management contract or compensatory plan or arrangement.

♦ Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	WILLIAMS INDUSTRIAL SERVICES GROUP INC.

Date: November 14, ~~2018~~2019	By:	/s/ ~~Timothy M. Howsman~~Randall R. Lay
		~~Timothy M. Howsman,~~Randall R. Lay
		Senior Vice President and Chief Financial Officer (Duly authorized officer and principal financial and accounting officer of the registrant)

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	September 30, 2018				December 31, 2017 (1)
(in thousands)	Asset		Liability		Asset		Liability
Costs and estimated earnings on contracts in progress	$	51,590	$	(360)	$	22,274	$	(422)
Billings on contracts in progress		(42,439)		(2,428)		(10,787)		(6,627)
Contracts in progress, net	$	9,151	$	(2,788)	$	11,487	$	(7,049)



(in thousands)	As of September 30, 2018
Current portion of term loan	$	438

Term loan, due 2021		34,562
Unamortized deferred financing costs		(1,504)
Long-term debt, net	$	33,058

Total term loan, net	$	33,496