Market Overview

Williams Industrial Services Group Reports Second Quarter 2018 Financial Results

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  • Revenue was $48.0 million with gross margin from continuing
    operations of 14.1%
  • Backlog at end of quarter was $174.5 million, up 16% from March 31,
    2018

Williams
Industrial Services Group Inc.
(OTC:WLMS) ("Williams" or the
"Company") today reported its financial results for its second quarter
ended June 30, 2018.

As previously reported, the former Mechanical Solutions and Electrical
Solutions segments have been classified as discontinued operations and,
accordingly, the results for those segments are presented as such.
Results of continuing operations are presented as a single segment
comprised of the former Services segment and corporate operations,
unless otherwise noted.

  • Second quarter 2018 revenue from continuing operations was $48.0
    million compared with $58.0 million in the prior-year period. Revenue
    increased 11% when compared with the trailing first quarter of 2018.
  • Loss from continuing operations for the 2018 second quarter increased
    $0.6 million to $6.0 million, compared with the prior-year period,
    which reflects the impact of $2.8 million in restructuring costs. On a
    diluted per share basis, loss from continuing operations was $(0.33)
    of which $(0.15) was attributable to restructuring costs.
  • Total net loss for the 2018 second quarter was reduced to $7.5
    million, or $(0.41) per share, compared with $10.2 million, or $(0.58)
    per share, for the prior-year period.
  • Adjusted EBITDA from continuing operations for the second quarter 2018
    was approximately breakeven compared with $(0.7) million for the
    second quarter 2017. See NOTE 1—Non-GAAP Financial Measures in the
    attached tables for important disclosures regarding Williams' use of
    Adjusted EBITDA, as well as a reconciliation of net loss to Adjusted
    EBITDA.

Tracy Pagliara, President and CEO of Williams, noted, "We are growing
our business while also pursuing our plans to transition our corporate
office from Dallas, Texas to Atlanta, Georgia and to recapitalize our
balance sheet by the end of the third quarter. We have continued to
aggressively cut general and administrative expenses to meet our
commitment to reduce those expenses to 7% to 9% of revenue for 2019,
excluding restructuring costs. This includes eliminating and
consolidating corporate positions as well as reducing IT infrastructure
and legal and audit costs and fees. Through these initiatives, the
business is being positioned to achieve its significant growth and
earnings potential."

Second Quarter 2018 and Subsequent Progress

  • Backlog has grown by double digits; strong position in base business
    with long-term customers and growing revenue in decommissioning market.
  • On track to move headquarters location to Atlanta from Dallas by the
    end of September.
  • General and administrative expenses were $7.0 million, or 15% of
    revenue, excluding restructuring costs of $2.8 million, including $0.6
    million in professional fees associated with strategic alternative
    reviews and the Koontz-Wagner bankruptcy.
  • Final terms being actively negotiated for the refinancing of the term
    debt loan, as well as a new asset-based revolver, based on mutually
    agreed upon term sheets.
  • Leadership for finance team established.
  • Koontz-Wagner bankruptcy ends the Electrical Solutions strategic
    efforts. In addition to writing off its net investment in
    Koontz-Wagner, the Company expects to record $12.5 million of
    liabilities related to the bankruptcy, including the $4.0 million term
    debt default waiver fee, in the third quarter. Koontz-Wagner operating
    activities used $3.6 million in cash in the first half of 2018.

Second Quarter 2018 Financial Results Review
(Discussion is regarding continuing operations and compared with the
corresponding period in 2017 unless noted otherwise)

Second Quarter 2018 Revenue Bridge

(in millions)     $ Change
Second quarter 2017 revenue $ 58.0
Plant Vogtle Units 3& 4 11.8
New decommissioning work 4.0
Other project revenue 1.4
Three non-recurring fixed price contracts (9.2)
Timing of scheduled outage   (18.0)
Total change   (10.0)
Second quarter 2018 revenue $ 48.0
 

Revenue for the quarter was down $10.0 million due to the net change in
project revenue.

Compared with the trailing first quarter of 2018, project revenue
associated with Plant Vogtle Units 3 & 4 increased $3.4 million, or 40%.

Second Quarter 2018 Gross Profit Bridge

(in millions)     $ Change
Second quarter 2017 gross profit $ 6.8
Project revenue and incremental margin   (0.1)
Total change   (0.1)
Second quarter 2018 gross profit $ 6.7
 

Despite the $10.0 million decline in revenue, gross profit remained
relatively unchanged for the quarter. Gross profit in the second quarter
last year was negatively impacted by $9.3 million of zero margin revenue
recognized on loss contracts for which the losses had previously been
accrued.

Operating expenses for the second quarter of 2018 were up $0.8 million
due primarily to an increase in general and administrative expenses, the
majority of which was attributed to a $2.2 million increase in severance
expense and a $0.6 million increase in professional fees related to
strategic alternative activities. This increase was partially offset by
a $0.7 million reduction in restatement expenses related to the filing
of the Annual Report on Form 10-K for the year ended December 31, 2015.

Interest expense increased $0.2 million due to the amortization of
deferred financing costs.

Year to Date 2018 Financial Results Review

Year to Date 2018 Revenue Bridge

(in millions)     $ Change
YTD 2017 revenue $ 103.6
Net change in project revenue (6.9)
Reserve release for liquidated damages in Q1 2017 (4.4)
Divestiture of Hetsco   (1.2)
Total change   (12.5)
YTD 2018 revenue $ 91.1
 

Revenue for the first half of 2018 was down $12.5 million due to the
timing of a nuclear outage, the substantial completion of four
non-recurring fixed price contracts in 2017, the non-recurrence of the
release of a $4.4 million liquidated damages contingent liability in the
first quarter 2017, the non-recurrence of nuclear, fossil fuel and other
industrial projects and the divestiture of Hetsco, Inc. in January 2017.
These decreases in revenue were partially offset by an increase from
construction activities at Plant Vogtle Units 3 & 4 and new
decommissioning work.

Year to Date 2018 Gross Profit Bridge

(in millions)     $ Change
YTD 2017 gross profit $ 5.2
Estimated contract losses 12.3
Reserve release for liquidated damages in Q2 2017 (4.4)
Divestiture of Hetsco (0.6)
Project revenue and incremental margin   0.7
Total change   8.0
YTD 2018 gross profit $ 13.2
 

Gross profit for the first half of 2018 was up $8.0 million due to the
non-recurrence of $12.3 million of losses recognized on three
non-recurring fixed price contracts in 2017 which was partially offset
by the non-recurrence of the release of a $4.4 million liquidated
damages contingent liability in the first quarter of 2017.

Operating expenses for the first half of 2018 were down $2.4 million due
primarily to a $2.3 million reduction in restatement expenses related to
the filing of the Annual Report on Form 10-K for the year ended December
31, 2015. General and administrative expenses, excluding restatement
expenses, were up $0.5 million as a result of an increase in severance
expense and professional fees related to strategic alternative
activities. The increase in general and administrative expenses was
partially offset by a decrease in stock-based compensation expense and
other expenses.

Balance Sheet and Cash Flow

For the six months ended June 30, 2018, the Company's operating
activities, including discontinued operations, used $4.3 million of
cash. Continuing operations in that period used $0.2 million in cash. At
the end of the second quarter, Williams had $11.7 million in cash, of
which $6.6 million was restricted. The Company is currently negotiating
the refinancing of its term-debt facility as well as a new asset-based
loan facility.

The Company's liquidity remains constrained as a result of continued
losses, inconsistent cash flows from operations and constraints on
borrowing additional amounts for short-term working capital needs or
issuing additional standby letters of credit.

Outlook

At June 30, 2018, backlog was $174.5 million, up 27% from $137.7 million
at the end of 2017 and up 16% from the end of the first quarter of 2018.
Driving the expansion of backlog was the increase in construction
activities at Plant Vogtle Units 3 & 4 and other new contract awards.

Webcast and Teleconference

The Company will host a conference call on Wednesday, August 15, 2018,
at 10:00 a.m. Eastern time (9:00 a.m. Central). A webcast of the call
and an accompanying slide presentation will be available at www.wisgrp.com.
To access the conference call by telephone, listeners should dial
201-493-6780.

An audio replay of the call will be available from 1:00 p.m. Eastern
time (12:00 p.m. Central) on the day of the teleconference until the end
of day on August 29, 2018. To listen to the audio replay, dial
412-317-6671 and enter conference ID number 13681634. Alternatively, you
may access the webcast replay at http://ir.wisgrp.com/,
where a transcript will be posted once available.

About Williams

Williams Industrial Services Group 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 and fossil power generation, pulp and paper,
refining, petrochemical and other process and manufacturing industries.
Williams' 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.

Additional information about Williams can be found on its website: www.wisg.com.

Forward-looking Statement Disclaimer

This press release contains "forward-looking statements" within the
meaning of the term set forth in the Private Securities Litigation
Reform Act of 1995. The forward-looking statements include statements or
expectations regarding the impact of Koontz-Wagner's bankruptcy,
management's ability to position the Company to fulfill its significant
potential for future growth and profitability, the Company's ability to
come to new terms under its lending agreement, including closing on an
asset-based loan, the Company's ability to comply with the terms of its
debt instruments, the impact of planned cost reductions, reorganization
and restructuring efforts, the Company's ability to implement its
liquidity plan, expectations for growth of the business in 2018 and
ability to realize the inherent value in the Company's capabilities,
ability to compete well in Williams' markets, and other related matters.
These statements reflect the Company's current views of future events
and financial performance and are subject to a number of risks and
uncertainties, including its ability to comply with the terms of its
credit facility and enter into new lending facilities and access letters
of credit, ability to timely file its periodic reports with the U.S.
Securities and Exchange Commission (the "SEC"), ability to implement
strategic initiatives, business plans, and liquidity plans, and ability
to maintain effective internal control over financial reporting and
disclosure controls and procedures. Actual results, performance or
achievements may differ materially from those expressed or implied in
the forward-looking statements. Additional risks and uncertainties that
could cause or contribute to such material differences include, but are
not limited to, decreased demand for new gas turbine power plants,
reduced demand for, or increased regulation of, nuclear power, loss of
any of the Company's major customers, whether pursuant to the loss of
pending or future bids for either new business or an extension of
existing business, termination of customer or vendor relationships, cost
increases and project cost overruns, unforeseen schedule delays, poor
performance by its subcontractors, cancellation of projects,
competition, including competitors being awarded business by current
customers, damage to the Company's reputation, warranty or product
liability claims, increased exposure to environmental or other
liabilities, failure to comply with various laws and regulations,
failure to attract and retain highly-qualified personnel, loss of
customer relationships with critical personnel, effective integration of
acquisitions, volatility of the Company's stock price, deterioration or
uncertainty of credit markets, changes in the economic and social and
political conditions in the United States, including the banking
environment or monetary policy, and any suspension of the Company's
continued reporting obligations under the Securities Exchange Act of
1934, as amended.

Other important factors that may cause actual results to differ
materially from those expressed in the forward-looking statements are
discussed in the Company's filings with the SEC, including the section
of the Annual Report on Form 10-K for its 2017 fiscal year titled "Risk
Factors." Any forward-looking statement speaks only as of the date of
this press release. Except as may be required by applicable law,
Williams undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, and you are cautioned to not to rely upon
them unduly.

Financial Tables Follow.

                 

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

 
Three Months Ended June 30, Six Months Ended June 30,
($ in thousands, except share and per share amounts)       2018     2017 2018     2017
Revenue $ 47,975 $ 57,981 $ 91,096 $ 103,613
Cost of revenue   41,228       51,227 77,899       98,414
 
Gross profit 6,747 6,754 13,197 5,199
Gross margin 14.1% 11.6% 14.5% 5.0%
 
Selling and marketing expenses 476 717 902 1,284
General and administrative expenses 9,751 8,593 16,341 18,138
Depreciation and amortization expense   220       329 441       664
Total operating expenses   10,447       9,639 17,684       20,086
 
Operating loss (3,700) (2,885) (4,487) (14,887)
Operating margin (7.7)% (5.0)% (4.9)% (14.4)%
 
Interest expense, net 2,397 2,243 3,775 3,944
Gain on sale of business and net assets held for sale (239)
Other (income) expense, net   (293)       1 (505)      
Total other (income) expenses, net   2,104       2,244 3,270       3,705
 
Loss from continuing operations before income tax expense (benefit) (5,804) (5,129) (7,757) (18,592)
Income tax expense (benefit)   220       300 505       (1,538)
Loss from continuing operations   (6,024)       (5,429) (8,262)       (17,054)
 
Loss from discontinued operations before income tax expense (benefit) (2,195) (4,523) (3,903) (8,767)
Income tax expense (benefit)   (725)       241 (683)       1,220
Loss from discontinued operations (1,470) (4,764) (3,220) (9,987)
                     
Net loss $ (7,494)     $ (10,193) $ (11,482)     $ (27,041)
 
Basic loss per common share
Loss from continuing operations $ (0.33) $ (0.31) $ (0.46) $ (0.97)
Loss from discontinued operations   (0.08)       (0.27)   (0.18)       (0.57)
Basic loss per common share $ (0.41)     $ (0.58) $ (0.64)     $ (1.54)
 
Diluted loss per common share
Loss from continuing operations $ (0.33) $ (0.31) $ (0.46) $ (0.97)
Loss from discontinued operations   (0.08)       (0.27)   (0.18)       (0.57)
Diluted loss per common share $ (0.41)     $ (0.58) $ (0.64)     $ (1.54)
 
Weighted average common shares outstanding (basic and diluted) 18,233,226 17,551,664 18,087,368 17,511,232
 
       

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 
($ in thousands, except share and per share amounts) June 30, 2018 December 31, 2017
ASSETS
Current assets:
Cash and cash equivalents $ 5,136 $ 4,594
Restricted cash 6,568 11,562
Accounts receivable, net of allowance of $1,014 and $1,568,
respectively
21,613 26,060
Costs and estimated earnings in excess of billings 14,115 11,487
Other current assets 1,638 4,006
Current assets of discontinued operations   21,271   27,922
Total current assets 70,341 85,631
 
Property, plant and equipment, net 1,175 1,712
Goodwill 35,400 35,400
Intangible assets 12,500 12,500
Other long-term assets   1,545   573
Total assets $ 120,961 $ 135,816
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 5,269 $ 5,080
Accrued compensation and benefits 10,516 7,481
Billings in excess of costs and estimated earnings 6,106 7,049
Other current liabilities 5,199 5,552
Current liabilities of discontinued operations   22,364   28,802
Total current liabilities 49,454 53,964
Long-term debt, net 25,717 24,304
Deferred tax liabilities 10,324 9,921
Other long-term liabilities 1,496 2,390
Long-term liabilities of discontinued operations   2,406   3,110
Total liabilities 89,397 93,689
Commitments and contingencies
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
18,486,758 and 17,946,386 shares
outstanding, respectively

197 193
Paid-in capital 79,823 78,910
Retained earnings (deficit) (48,444) (36,962)
Treasury stock, at par (1,228,847 and 1,413,640 common shares,
respectively)
  (12)   (14)
Total stockholders' equity   31,564   42,127
Total liabilities and stockholders' equity $ 120,961 $ 135,816
 
         

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
Six Months Ended June 30,
(in thousands) 2018 2017
Operating activities:
Net loss $ (11,482) $ (27,041)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Net loss from discontinued operations 3,220 9,987
Deferred income tax expense (benefit) 403 (1,602)
Depreciation and amortization on plant, property and equipment and
intangible assets
441 664
Amortization of deferred financing costs 219 81
Loss on disposals of property, plant and equipment 210 30
Gain on sale of business and net assets held for sale (239)
Bad debt expense (67) 45
Stock-based compensation 507 1,429
Payable-in-kind interest 1,301 531
Changes in operating assets and liabilities, net of business sold:
Accounts receivable 4,514 (6,212)
Costs and estimated earnings in excess of billings (2,628) 4,379
Other current assets 2,368 5,928
Other assets (1,079) 2,572
Accounts payable 189 (1,008)
Accrued and other liabilities 2,608 (4,110)
Billings in excess of costs and estimated earnings   (943)   1,475
Net cash provided by (used in) operating activities, continuing
operations
(219) (13,091)
Net cash provided by (used in) operating activities, discontinued
operations
  (4,110)   7,374
Net cash provided by (used in) operating activities (4,329) (5,717)
Investing activities:
Proceeds from sale of business, net of restricted cash and
transaction costs
20,206
Purchase of property, plant and equipment (114) (11)
Other investing activities     3,286
Net cash provided by (used in) investing activities, continuing
operations
(114) 23,481
Net cash provided by (used in) investing activities, discontinued
operations
  319   (573)
Net cash provided by (used in) investing activities 205 22,908
Financing activities:
Repurchase of stock-based awards for payment of statutory taxes due
on stock-based compensation
(328) (223)
Debt issuance costs (1,704)
Dividends paid (9)
Proceeds from long-term debt 161,599
Payments of long-term debt     (165,515)
Net cash provided by (used in) financing activities, continuing
operations
(328) (5,852)
Net cash provided by (used in) financing activities, discontinued
operations
   
Net cash provided by (used in) financing activities (328) (5,852)
Effect of exchange rate change on cash, continuing operations 25
Effect of exchange rate change on cash, discontinued operations     261
Effect of exchange rate change on cash     286
Net change in cash, cash equivalents and restricted cash (4,452) 11,625
Cash, cash equivalents and restricted cash, beginning of period   16,156   11,570
Cash, cash equivalents and restricted cash, end of period $ 11,704 $ 23,195
 
Supplemental Disclosures:
Cash paid for interest $ 1,498 $ 3,416
Cash paid for income taxes, net of refunds $ 16 $ 992
Noncash repayment of revolving credit facility $ $ (36,224)
Noncash upfront fee related to senior secured term loan facility $ $ (3,150)
 

WILLIAMS INDUSTRIAL SERVICES GROUP INC. AND SUBSIDIARIES
NON-GAAP
FINANCIAL MEASURE (UNAUDITED)

This press release contains financial measures not derived in accordance
with accounting principles generally accepted in the United States
("GAAP"). A reconciliation to the most comparable GAAP measure is
provided below.

CONSOLIDATED ADJUSTED EBITDA

                 
Three Months Ended June 30,     Six Months Ended June 30,
(in thousands) 2018 2017     2018 2017
Net loss-continuing operations $ (6,024) $ (5,429) $ (8,262) $ (17,054)
Add back:
Depreciation and amortization expense 220 329 441 664
Gain on sale of business and net assets held for sale (239)
Interest expense, net 2,397 2,243 3,775 3,944
Restatement expenses 30 713 160 2,433
Stock-based compensation 313 708 507 1,429
Income tax expense (benefit) 220 300 505 (1,538)
Bank restructuring costs 150 350
Severance costs 2,202 31 2,216 182
Asset disposition costs 489 208 815 244
Franchise taxes   65   76   130   152
Adjusted EBITDA-continuing operations (88) (671) 287 (9,433)
Adjusted EBITDA-discontinued operations   (1,831)   (2,406)   (3,537)   (5,003)
Adjusted EBITDA $ (1,919) $ (3,077) $ (3,250) $ (14,436)
 

NOTE 1—Non-GAAP Financial Measures

Adjusted EBITDA is not calculated through the application of GAAP and is
not the required form of disclosure by the U.S. Securities and Exchange
Commission. Adjusted EBITDA is the sum of our net loss before interest
expense, net, and income tax (benefit) expense and unusual gains or
charges. It also excludes non-cash charges such as depreciation and
amortization. The Company's management believes adjusted EBITDA is an
important measure of operating performance because it allows management,
investors and others to evaluate and compare the performance of its core
operations from period to period by removing the impact of the capital
structure (interest), tangible and intangible asset base (depreciation
and amortization), taxes and unusual gains or charges (stock-based
compensation, restatement expenses, asset disposition costs, gain on
sale of business and net assets held for sale, bank restructuring costs
and severance costs), which are not always commensurate with the
reporting period in which such items are included. Williams' credit
facility also contains ratios based on EBITDA. Adjusted EBITDA should
not be considered an alternative to net income or as a better measure of
liquidity than net cash flows from operating activities, as determined
by GAAP, and, therefore, should not be used in isolation from, but in
conjunction with, the GAAP measures. The use of any non-GAAP measure may
produce results that vary from the GAAP measure and may not be
comparable to a similarly defined non-GAAP measure used by other
companies.

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