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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-36541
LIMBACH HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Delaware, USA | | 46-5399422 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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1251 Waterfront Place, Suite 201797 Commonwealth Drive,
Pittsburgh,Warrendale, Pennsylvania
| | 1522215086 |
(Address of principal executive offices) | | (Zip Code) |
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1-412-359-2100
(Registrant’s telephone number, including area code)
Not Applicable | | | | | | | | |
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1251 Waterfront Place, Suite 201 Pittsburgh, Pennsylvania | | 15222 |
(Former Address of principal executive offices) | | (Former Zip Code) |
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of Each Class | | Trading Symbol(s) | | Name of Each Exchange on Which Registered |
Common Stock, par value $0.0001 per share | | LMB | | The Nasdaq Stock Market LLC |
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.
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Large accelerated filer | ☐ | | Accelerated filer | ☐☒ |
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Non-accelerated filer | ☒ ☐ | | Smaller reporting company | ☒ |
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| | | 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 August 11, 2021,May 9, 2022, there were 10,267,84110,423,068 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.
LIMBACH HOLDINGS, INC.
Form 10-Q
TABLE OF CONTENTS
Part IPART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIMBACH HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| (in thousands, except share and per share data) | (in thousands, except share and per share data) | June 30, 2021 | | December 31, 2020 | (in thousands, except share and per share data) | March 31, 2022 | | December 31, 2021 |
ASSETS | ASSETS | | | | ASSETS | | | |
Current assets | | | | |
Current assets: | | Current assets: | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 27,693 | | | $ | 42,147 | | Cash and cash equivalents | $ | 18,066 | | | $ | 14,476 | |
Restricted cash | Restricted cash | 113 | | | 113 | | Restricted cash | 113 | | | 113 | |
Accounts receivable, net | 94,615 | | | 85,767 | | |
Accounts receivable (net of allowance for doubtful accounts of $270 and $263 as of March 31, 2022 and December 31, 2021, respectively) | | Accounts receivable (net of allowance for doubtful accounts of $270 and $263 as of March 31, 2022 and December 31, 2021, respectively) | 108,969 | | | 89,327 | |
Contract assets | Contract assets | 70,815 | | | 67,098 | | Contract assets | 75,543 | | | 83,863 | |
Income tax receivable | Income tax receivable | 891 | | | 0 | | Income tax receivable | 161 | | | 114 | |
Other current assets | Other current assets | 5,599 | | | 4,292 | | Other current assets | 7,143 | | | 5,013 | |
Total current assets | Total current assets | 199,726 | | | 199,417 | | Total current assets | 209,995 | | | 192,906 | |
| Property and equipment, net | Property and equipment, net | 17,433 | | | 19,700 | | Property and equipment, net | 20,759 | | | 21,621 | |
Intangible assets, net | Intangible assets, net | 11,473 | | | 11,681 | | Intangible assets, net | 16,508 | | | 16,907 | |
Goodwill | Goodwill | 6,129 | | | 6,129 | | Goodwill | 11,370 | | | 11,370 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 16,852 | | | 18,751 | | Operating lease right-of-use assets | 17,719 | | | 20,119 | |
Deferred tax asset | Deferred tax asset | 6,393 | | | 6,087 | | Deferred tax asset | 4,407 | | | 4,330 | |
Other assets | Other assets | 283 | | | 392 | | Other assets | 245 | | | 259 | |
Total assets | Total assets | $ | 258,289 | | | $ | 262,157 | | Total assets | $ | 281,003 | | | $ | 267,512 | |
| LIABILITIES | LIABILITIES | | LIABILITIES | |
Current liabilities | | |
Current liabilities: | | Current liabilities: | |
Current portion of long-term debt | Current portion of long-term debt | $ | 8,454 | | | $ | 6,536 | | Current portion of long-term debt | $ | 13,222 | | | $ | 9,879 | |
Current operating lease liabilities | Current operating lease liabilities | 4,122 | | | 3,929 | | Current operating lease liabilities | 3,762 | | | 4,366 | |
Accounts payable, including retainage | Accounts payable, including retainage | 66,954 | | | 66,763 | | Accounts payable, including retainage | 63,734 | | | 63,840 | |
Contract liabilities | Contract liabilities | 39,179 | | | 46,648 | | Contract liabilities | 34,444 | | | 26,712 | |
Accrued income taxes | Accrued income taxes | 0 | | | 1,671 | | Accrued income taxes | — | | | 501 | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | 19,215 | | | 24,747 | | Accrued expenses and other current liabilities | 26,428 | | | 24,444 | |
Total current liabilities | Total current liabilities | 137,924 | | | 150,294 | | Total current liabilities | 141,590 | | | 129,742 | |
Long-term debt | Long-term debt | 24,721 | | | 36,513 | | Long-term debt | 34,220 | | | 29,816 | |
Long-term operating lease liabilities | Long-term operating lease liabilities | 13,454 | | | 15,459 | | Long-term operating lease liabilities | 14,787 | | | 16,576 | |
Other long-term liabilities | Other long-term liabilities | 4,031 | | | 6,159 | | Other long-term liabilities | 3,535 | | | 3,540 | |
Total liabilities | Total liabilities | 180,130 | | | 208,425 | | Total liabilities | 194,132 | | | 179,674 | |
Commitments and contingencies (Note 15) | 0 | | 0 | |
Commitments and contingencies (Note 13) | | Commitments and contingencies (Note 13) | 0 | | 0 |
| STOCKHOLDERS’ EQUITY | STOCKHOLDERS’ EQUITY | | STOCKHOLDERS’ EQUITY | |
Common stock, $0.0001 par value; 100,000,000 shares authorized, 10,251,696 issued and outstanding at June 30, 2021 and 7,926,137 at December 31, 2020 | 1 | | | 1 | | |
Common stock, $0.0001 par value; 100,000,000 shares authorized, 10,423,068 issued and outstanding as of March 31, 2022 and 10,304,242 at December 31, 2021 | | Common stock, $0.0001 par value; 100,000,000 shares authorized, 10,423,068 issued and outstanding as of March 31, 2022 and 10,304,242 at December 31, 2021 | 1 | | | 1 | |
Additional paid-in capital | Additional paid-in capital | 83,589 | | | 57,612 | | Additional paid-in capital | 85,553 | | | 85,004 | |
Accumulated deficit | (5,431) | | | (3,881) | | |
Retained Earnings | | Retained Earnings | 1,317 | | | 2,833 | |
Total stockholders’ equity | Total stockholders’ equity | 78,159 | | | 53,732 | | Total stockholders’ equity | 86,871 | | | 87,838 | |
Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | $ | 258,289 | | | $ | 262,157 | | Total liabilities and stockholders’ equity | $ | 281,003 | | | $ | 267,512 | |
The accompanying notes are an integral part of these condensed consolidated financial statements
LIMBACH HOLDINGS, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
| | | Three Months Ended June 30, | | Six Months Ended June 30, | | | | Three Months Ended March 31, |
(in thousands, except share and per share data) | (in thousands, except share and per share data) | | 2021 | | 2020 | | 2021 | | 2020 | (in thousands, except share and per share data) | | | 2022 | | 2021 |
Revenue | Revenue | | $ | 121,019 | | | $ | 135,185 | | | $ | 234,363 | | | $ | 273,957 | | Revenue | | | $ | 114,822 | | | $ | 113,344 | |
Cost of revenue | Cost of revenue | | 102,329 | | | 114,850 | | | 198,444 | | | 235,398 | | Cost of revenue | | | 96,482 | | | 96,115 | |
Gross profit | Gross profit | | 18,690 | | | 20,335 | | | 35,919 | | | 38,559 | | Gross profit | | | 18,340 | | | 17,229 | |
Operating expenses: | Operating expenses: | | Operating expenses: | | |
Selling, general and administrative | Selling, general and administrative | | 17,232 | | | 13,752 | | | 34,377 | | | 30,552 | | Selling, general and administrative | | | 18,734 | | | 17,145 | |
Amortization of intangibles | Amortization of intangibles | | 104 | | | 274 | | 208 | | | 417 | Amortization of intangibles | | | 399 | | | 104 |
Total operating expenses | Total operating expenses | | 17,336 | | | 14,026 | | | 34,585 | | | 30,969 | | Total operating expenses | | | 19,133 | | | 17,249 | |
Operating income | | 1,354 | | | 6,309 | | | 1,334 | | | 7,590 | | |
Other income (expenses): | | | | | | | | | |
Operating loss | | Operating loss | | | (793) | | | (20) | |
Other (expenses) income: | | Other (expenses) income: | | | | | |
Interest expense, net | Interest expense, net | | (452) | | | (2,137) | | | (1,716) | | | (4,295) | | Interest expense, net | | | (486) | | | (1,264) | |
Gain (loss) on disposition of property and equipment | | 94 | | | (13) | | | 8 | | | 17 | | |
Loss on disposition of property and equipment | | Loss on disposition of property and equipment | | | (36) | | | (86) | |
Loss on early termination of operating lease | | Loss on early termination of operating lease | | | (817) | | | — | |
Loss on early debt extinguishment | Loss on early debt extinguishment | | 0 | | | 0 | | | (1,961) | | | 0 | | Loss on early debt extinguishment | | | — | | | (1,961) | |
Gain (loss) on change in fair value of warrant liability | | 0 | | | (102) | | | 14 | | | 59 | | |
Gain on change in fair value of warrant liability | | Gain on change in fair value of warrant liability | | | — | | | 14 | |
Total other expenses | Total other expenses | | (358) | | | (2,252) | | | (3,655) | | | (4,219) | | Total other expenses | | | (1,339) | | | (3,297) | |
Income (loss) before income taxes | | 996 | | | 4,057 | | | (2,321) | | | 3,371 | | |
Income tax provision (benefit) | | 264 | | | 1,110 | | | (771) | | | 476 | | |
Net income (loss) | | $ | 732 | | | $ | 2,947 | | | $ | (1,550) | | | $ | 2,895 | | |
Loss before income taxes | | Loss before income taxes | | | (2,132) | | | (3,317) | |
Income tax benefit | | Income tax benefit | | | (616) | | | (1,035) | |
Net loss | | Net loss | | | $ | (1,516) | | | $ | (2,282) | |
| Earnings Per Share (“EPS”) | Earnings Per Share (“EPS”) | | | | | | | | | Earnings Per Share (“EPS”) | | |
Income (loss) per common share: | | |
Loss per common share: | | Loss per common share: | | |
Basic | Basic | | $ | 0.07 | | | $ | 0.38 | | | $ | (0.16) | | | $ | 0.37 | | Basic | | | $ | (0.15) | | | $ | (0.25) | |
Diluted | Diluted | | $ | 0.07 | | | $ | 0.37 | | | $ | (0.16) | | | $ | 0.37 | | Diluted | | | $ | (0.15) | | | $ | (0.25) | |
Weighted average number of shares outstanding: | Weighted average number of shares outstanding: | | Weighted average number of shares outstanding: | | |
Basic | Basic | | 10,251,696 | | | 7,845,515 | | | 9,737,801 | | | 7,821,594 | | Basic | | | 10,420,690 | | | 9,218,087 | |
Diluted | Diluted | | 10,469,028 | | | 7,905,368 | | | 9,737,801 | | | 7,878,246 | | Diluted | | | 10,420,690 | | | 9,218,087 | |
The accompanying notes are an integral part of these condensed consolidated financial statements
LIMBACH HOLDINGS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
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| Common Stock | | | | | | |
(in thousands, except share amounts) | Number of shares outstanding | | Par value amount | | Additional paid-in capital | | Accumulated deficit | | Stockholders’ equity |
Balance at December 31, 2020 | 7,926,137 | | | $ | 1 | | | $ | 57,612 | | | $ | (3,881) | | | $ | 53,732 | |
Stock-based compensation | — | | | — | | | 677 | | | — | | | 677 | |
Shares issued related to vested restricted stock units | 89,446 | | | — | | | — | | | — | | | 0 | |
Tax withholding related to vested restricted stock units | — | | | — | | | (183) | | | — | | | (183) | |
Shares issued related to employee stock purchase plan | 8,928 | | | — | | | 92 | | | — | | | 92 | |
Shares issued related to the exercise of warrants | 172,869 | | | — | | | 1,989 | | | — | | | 1,989 | |
Shares issued related to sale of common stock | 2,051,025 | | | — | | | 22,773 | | | — | | | 22,773 | |
Net loss | — | | | — | | | — | | | (2,282) | | | (2,282) | |
Balance at March 31, 2021 | 10,248,405 | | | 1 | | | 82,960 | | | (6,163) | | | 76,798 | |
Stock-based compensation | — | | | — | | | 636 | | | — | | | 636 | |
Shares issued related to vested restricted stock units | 3,291 | | | — | | | — | | | — | | | 0 | |
Tax withholding related to vested restricted stock units | — | | | — | | | (7) | | | — | | | (7) | |
Net income | — | | | — | | | — | | | 732 | | | 732 | |
Balance at June 30, 2021 | 10,251,696 | | | $ | 1 | | | $ | 83,589 | | | $ | (5,431) | | | $ | 78,159 | |
| | | Common Stock | | | | | | | | Common Stock | | | | | | |
(in thousands, except share amounts) | (in thousands, except share amounts) | Number of shares outstanding | | Par value amount | | Additional paid-in capital | | Accumulated deficit | | Stockholders’ equity | (in thousands, except share amounts) | Number of shares outstanding | | Par value amount | | Additional paid-in capital | | Accumulated deficit | | Stockholders’ equity |
Balance at December 31, 2019 | 7,688,958 | | | $ | 1 | | | $ | 56,557 | | | $ | (9,688) | | | $ | 46,870 | | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | 10,304,242 | | | $ | 1 | | | $ | 85,004 | | | $ | 2,833 | | | $ | 87,838 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | 295 | | | — | | | 295 | | Stock-based compensation | — | | | — | | | 599 | | | — | | | 599 | |
Shares issued related to vested restricted stock units | Shares issued related to vested restricted stock units | 104,905 | | | — | | | — | | | — | | | 0 | | Shares issued related to vested restricted stock units | 105,928 | | | — | | | — | | | — | | | — | |
Tax withholding related to vested restricted stock units | | Tax withholding related to vested restricted stock units | — | | | — | | | (148) | | | — | | | (148) | |
Shares issued related to employee stock purchase plan | | Shares issued related to employee stock purchase plan | 12,898 | | | — | | | 98 | | | — | | | 98 | |
| Net loss | Net loss | — | | | — | | | — | | | (52) | | | (52) | | Net loss | — | | | — | | | — | | | (1,516) | | | (1,516) | |
Balance at March 31, 2020 | 7,793,863 | | | 1 | | | 56,852 | | | (9,740) | | | 47,113 | | |
Stock-based compensation | — | | | — | | | 140 | | | — | | | 140 | | |
Shares issued related to vested restricted stock units | 59,514 | | | — | | | — | | | — | | | 0 | | |
Net income | — | | | — | | | — | | | 2,947 | | | 2,947 | | |
Balance at June 30, 2020 | 7,853,377 | | | $ | 1 | | | $ | 56,992 | | | $ | (6,793) | | | $ | 50,200 | | |
Balance at March 31, 2022 | | Balance at March 31, 2022 | 10,423,068 | | | $ | 1 | | | $ | 85,553 | | | $ | 1,317 | | | $ | 86,871 | |
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| Common Stock | | | | | | |
(in thousands, except share amounts) | Number of shares outstanding | | Par value amount | | Additional paid-in capital | | Accumulated deficit | | Stockholders’ equity |
Balance at December 31, 2020 | 7,926,137 | | | $ | 1 | | | $ | 57,612 | | | $ | (3,881) | | | $ | 53,732 | |
Stock-based compensation | — | | | — | | | 677 | | | — | | | 677 | |
Shares issued related to vested restricted stock units | 89,446 | | | — | | | — | | | — | | | — | |
Tax withholding related to vested restricted stock units | — | | | — | | | (183) | | | — | | | (183) | |
Shares issued related to employee stock purchase plan | 8,928 | | | — | | | 92 | | | — | | | 92 | |
Shares issued related to the exercise of warrants | 172,869 | | | — | | | 1,989 | | | — | | | 1,989 | |
Shares issued related to sale of common stock | 2,051,025 | | | — | | | 22,773 | | | — | | | 22,773 | |
Net loss | — | | | — | | | — | | | (2,282) | | | (2,282) | |
Balance at March 31, 2021 | 10,248,405 | | | $ | 1 | | | $ | 82,960 | | | $ | (6,163) | | | $ | 76,798 | |
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The accompanying notes are an integral part of these condensed consolidated financial statements
LIMBACH HOLDINGS, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | Six months ended June 30, | | Three Months Ended March 31, |
(in thousands) | (in thousands) | 2021 | | 2020 | (in thousands) | 2022 | | 2021 |
Cash flows from operating activities: | Cash flows from operating activities: | | | | Cash flows from operating activities: | | | |
Net (loss) income | $ | (1,550) | | | $ | 2,895 | | |
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: | | |
Net loss | | Net loss | $ | (1,516) | | | $ | (2,282) | |
Adjustments to reconcile net loss to cash used in operating activities: | | Adjustments to reconcile net loss to cash used in operating activities: | |
Depreciation and amortization | Depreciation and amortization | 2,964 | | | 3,140 | | Depreciation and amortization | 2,062 | | | 1,495 | |
Provision for doubtful accounts | Provision for doubtful accounts | 70 | | | 27 | | Provision for doubtful accounts | 56 | | | 28 | |
Stock-based compensation expense | Stock-based compensation expense | 1,313 | | | 435 | | Stock-based compensation expense | 599 | | | 677 | |
Noncash operating lease expense | Noncash operating lease expense | 2,091 | | | 2,025 | | Noncash operating lease expense | 1,157 | | | 1,043 | |
Amortization of debt issuance costs | Amortization of debt issuance costs | 220 | | | 1,080 | | Amortization of debt issuance costs | 32 | | | 190 | |
Deferred income tax provision | Deferred income tax provision | (306) | | | 798 | | Deferred income tax provision | (77) | | | (336) | |
Gain on sale of property and equipment | (8) | | | (17) | | |
Loss on sale of property and equipment | | Loss on sale of property and equipment | 36 | | | 86 | |
Loss on early termination of operating lease | | Loss on early termination of operating lease | 817 | | | — | |
Loss on early debt extinguishment | Loss on early debt extinguishment | 1,961 | | | 0 | | Loss on early debt extinguishment | — | | | 1,961 | |
Gain on change in fair value of warrant liability | Gain on change in fair value of warrant liability | (14) | | | (59) | | Gain on change in fair value of warrant liability | — | | | (14) | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable | Accounts receivable | (8,918) | | | 3,588 | | Accounts receivable | (19,698) | | | 2,584 | |
Contract assets | Contract assets | (3,717) | | | 4,901 | | Contract assets | 8,320 | | | (1,986) | |
Other current assets | Other current assets | (1,306) | | | (166) | | Other current assets | (2,130) | | | (2,025) | |
Accounts payable, including retainage | Accounts payable, including retainage | 190 | | | (19,519) | | Accounts payable, including retainage | (105) | | | (8,813) | |
Prepaid income taxes | Prepaid income taxes | (891) | | | (171) | | Prepaid income taxes | (47) | | | — | |
Accrued taxes payable | Accrued taxes payable | (1,671) | | | (11) | | Accrued taxes payable | (501) | | | (654) | |
Contract liabilities | Contract liabilities | (7,469) | | | 16,254 | | Contract liabilities | 7,732 | | | (8,853) | |
Operating lease liabilities | Operating lease liabilities | (2,004) | | | (2,399) | | Operating lease liabilities | (1,117) | | | (994) | |
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities | (5,450) | | | 9,419 | | Accrued expenses and other current liabilities | 1,419 | | | 513 | |
Other long-term liabilities | Other long-term liabilities | (114) | | | 237 | | Other long-term liabilities | (4) | | | 5 | |
Net cash (used in) provided by operating activities | (24,609) | | | 22,457 | | |
Net cash used in operating activities | | Net cash used in operating activities | (2,965) | | | (17,375) | |
Cash flows from investing activities: | Cash flows from investing activities: | | | | Cash flows from investing activities: | | | |
Proceeds from sale of property and equipment | Proceeds from sale of property and equipment | 361 | | | 64 | | Proceeds from sale of property and equipment | 39 | | | 226 | |
Advances to joint ventures | 0 | | | (1) | | |
| Purchase of property and equipment | Purchase of property and equipment | (501) | | | (660) | | Purchase of property and equipment | (169) | | | (221) | |
Net cash used in investing activities | (140) | | | (597) | | |
Net cash used in (provided by) investing activities | | Net cash used in (provided by) investing activities | (130) | | | 5 | |
Cash flows from financing activities: | Cash flows from financing activities: | | | | Cash flows from financing activities: | | | |
Proceeds from Wintrust Term Loan | 30,000 | | | 0 | | |
Payments on Wintrust Term Loan | (2,000) | | | — | | |
Proceeds from Wintrust Term Loan (as defined in Note 6) | | Proceeds from Wintrust Term Loan (as defined in Note 6) | — | | | 30,000 | |
Payments on Wintrust and A&R Wintrust Term Loans | | Payments on Wintrust and A&R Wintrust Term Loans | (1,857) | | | (500) | |
Proceeds from A&R Wintrust Revolving Loan (as defined in Note 6) | | Proceeds from A&R Wintrust Revolving Loan (as defined in Note 6) | 9,400 | | | — | |
| Proceeds from 2019 Revolving Credit Facility | 0 | | | 7,250 | | |
Payments on 2019 Revolving Credit Facility | 0 | | | (7,250) | | |
Payments on 2019 Refinancing Term Loan | (39,000) | | | 0 | | |
Payments on 2019 Refinancing Term Loan (as defined in Note 6) | | Payments on 2019 Refinancing Term Loan (as defined in Note 6) | — | | | (39,000) | |
Prepayment penalty and other costs associated with early debt extinguishment | Prepayment penalty and other costs associated with early debt extinguishment | (1,376) | | | 0 | | Prepayment penalty and other costs associated with early debt extinguishment | — | | | (1,376) | |
Proceeds from the sale of common stock | Proceeds from the sale of common stock | 22,773 | | | 0 | | Proceeds from the sale of common stock | — | | | 22,773 | |
Proceeds from the exercise of warrants | Proceeds from the exercise of warrants | 1,989 | | | 0 | | Proceeds from the exercise of warrants | — | | | 1,989 | |
Payments on finance leases | Payments on finance leases | (1,318) | | | (1,285) | | Payments on finance leases | (660) | | | (667) | |
Payments of debt issuance costs | Payments of debt issuance costs | (593) | | | 0 | | Payments of debt issuance costs | — | | | (593) | |
Taxes paid related to net-share settlement of equity awards | Taxes paid related to net-share settlement of equity awards | (401) | | | (90) | | Taxes paid related to net-share settlement of equity awards | (363) | | | (384) | |
Proceeds from contributions to Employee Stock Purchase Plan | Proceeds from contributions to Employee Stock Purchase Plan | 221 | | | 0 | | Proceeds from contributions to Employee Stock Purchase Plan | 165 | | | 167 | |
Net cash provided by (used in) financing activities | 10,295 | | | (1,375) | | |
Net cash provided by financing activities | | Net cash provided by financing activities | 6,685 | | | 12,409 | |
(Decrease) increase in cash, cash equivalents and restricted cash | (Decrease) increase in cash, cash equivalents and restricted cash | (14,454) | | | 20,485 | | (Decrease) increase in cash, cash equivalents and restricted cash | 3,590 | | | (4,961) | |
Cash, cash equivalents and restricted cash, beginning of period | Cash, cash equivalents and restricted cash, beginning of period | 42,260 | | | 8,457 | | Cash, cash equivalents and restricted cash, beginning of period | 14,589 | | | 42,260 | |
Cash, cash equivalents and restricted cash, end of period | Cash, cash equivalents and restricted cash, end of period | $ | 27,806 | | | $ | 28,942 | | Cash, cash equivalents and restricted cash, end of period | $ | 18,179 | | | $ | 37,299 | |
Supplemental disclosures of cash flow information | Supplemental disclosures of cash flow information | | | | Supplemental disclosures of cash flow information | | | |
Noncash investing and financing transactions: | Noncash investing and financing transactions: | | Noncash investing and financing transactions: | |
Right of use assets obtained in exchange for new operating lease liabilities | Right of use assets obtained in exchange for new operating lease liabilities | $ | 156 | | | $ | 0 | | Right of use assets obtained in exchange for new operating lease liabilities | $ | — | | | $ | 156 | |
Right of use assets obtained in exchange for new finance lease liabilities | Right of use assets obtained in exchange for new finance lease liabilities | 336 | | | 1,050 | | Right of use assets obtained in exchange for new finance lease liabilities | 864 | | | 87 | |
Right of use assets disposed or adjusted modifying operating lease liabilities | Right of use assets disposed or adjusted modifying operating lease liabilities | 36 | | | 586 | | Right of use assets disposed or adjusted modifying operating lease liabilities | (1,276) | | | 36 | |
Right of use assets disposed or adjusted modifying finance lease liabilities | Right of use assets disposed or adjusted modifying finance lease liabilities | 0 | | | (64) | | Right of use assets disposed or adjusted modifying finance lease liabilities | (19) | | | — | |
Interest paid | Interest paid | 1,741 | | | 3,250 | | Interest paid | 459 | | | 1,319 | |
Cash paid for income taxes | $ | 2,096 | | | $ | 734 | | |
Cash paid (received) for income taxes | | Cash paid (received) for income taxes | $ | 9 | | | $ | (45) | |
The accompanying notes are an integral part of these condensed consolidated financial statements
LIMBACH HOLDINGS, INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – OrganizationBusiness and Plan of Business OperationsOrganization
Limbach Holdings, Inc. (the “Company,” “we” or “us”), is a Delaware corporation headquartered in Pittsburgh,Warrendale, Pennsylvania, that was formed on July 20, 2016 as a result of a business combination with Limbach Holdings LLC (“LHLLC”). The Company’s condensed consolidated financial statements includeCompany is an integrated building systems solutions firm whose expertise is in the accountsdesign, modular prefabrication, installation, management and maintenance of Limbach Holdings, Inc.heating, ventilation, air-conditioning (“HVAC”), mechanical, electrical, plumbing and its wholly-owned subsidiaries,controls systems. The Company provides comprehensive facility services consisting of mechanical construction, full HVAC service and maintenance, energy audits and retrofits, engineering and design build services, constructability evaluation, equipment and materials selection, offsite/prefabrication construction, and the complete range of sustainable building solutions. The Company's customers operate in diverse industries including, LHLLC, Limbach Facility Services LLC, Limbachbut not limited to, healthcare, life sciences, data centers, industrial and light manufacturing, entertainment, education and government. The Company LLC, Limbach Company LP, Harper Limbach LLC,operates primarily in the Northeast, Mid-Atlantic, Southeast, Midwest, and Harper Limbach Construction LLC.Southwestern regions of the United States.
As of January 1, 2021, the Company renamed its existing 2 reportable segments to reflect our 2 distinct approaches to our customer base and to better align with our owner direct strategy. The previously named Construction Segment is now known as General Contractor Relationships (“GCR”); the previously named Service Segment is now known as Owner Direct Relationships (“ODR”). The Company operates in 2 segments, that are based on the relationship with its customer, (i) GCR,General Contractor Relationships (“GCR”), in which the Company generally manages new construction or renovation projects that involve primarily heating, ventilation, and air conditioning (“HVAC”),HVAC, plumbing, or electrical services awarded to the Company by general contractors or construction managers, and (ii) ODR,Owner Direct Relationships (“ODR”), in which the Company provides maintenance or service primarily on HVAC, plumbing or electrical systems, building controls and specialty contracting projects direct to, or assigned by, building owners or property managers. This work is primarily performed under fixed price, modified fixed price, and time and material contracts over periods of typically less than two years.
The Company's customers operate in diverse industries including, but not limited to, healthcare, life sciences, data centers, industrial and light manufacturing, entertainment, education and government. The Company operates primarily in the Northeast, Mid-Atlantic, Southeast, Midwest, and Southwestern regions of the United States.
Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. The COVID-19 pandemic has caused significant disruption and volatility on a global scale resulting in, among other things, an economic slowdown and the possibility of a continued economic recession. In response to the COVID-19 outbreak, national and local governments around the world instituted certain measures, including travel bans, restrictions on group events and gatherings, shutdowns of certain non-essential businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. The various governmental actions have abated over time, but remain applicable to Limbach's operations in various ways, often varying by state. In some instances, these orders continued to affect certain projects in our GCR and ODR segments into the first quarter of 2021. In limited instances, during fiscal 2020, projects chose to shutdown work irrespective of the existence or applicability of government action. In most markets, construction is considered an essential business and Limbach continued to staff its projects and perform work during fiscal 2020 and into 2021, and most of the projects that were in progress at the time shutdowns commenced were restarted. The Company’s branches are expecting building owners to maintain or retrofit current facilities in lieu of funding larger capital projects as the effects of the pandemic remain ongoing and uncertain.
During fiscal 2020 and through the second quarter of 2021, the Company continued to take several actions to combat the adverse impacts that the COVID-19 outbreak had on our business including, but not limited to the following:
• Identification of projects that have been shut down and methods for seeking to preserve any contractual entitlement that may exist to recover monetary and time impacts;
• Establishment of a task force to identify possible types and areas of impact from COVID-19 for both shutdown and continuing operations;
• Examination of the Company's productivity and potential impact on gross profit as a result of COVID-19;
• Implementation of the Company's pandemic response plan;
• Implemented our furlough and work schedule reduction plans, as well as permanent reductions in force; and
• Temporarily suspended substantially all discretionary, non-essential expenditures, including but not limited to, auto allowances, deferral of rent ranging between 1 and 3 months; and
• A temporary 10% salary reduction for a select group of corporate and regional management, along with a 10% fee reduction in director compensation, and cost reduction opportunities identified by our external consultant.
During the month of July 2020, with the substantial restart and return of project and service work, the Company removed the 10% salary reduction for the select group of corporate and regional management, along with the fee reduction for director compensation, returned auto allowances, reinstated positions, removed schedule reduction plans and discontinued our hiring freeze. During the remainder of 2020 and into 2021, the Company reinstituted limited travel and in-person meetings, along with encouraging employees to return to the office, field and training settings in a partial, flexible manner that is consistent with our Work From Home Policy and our COVID-19 Policy. The Company has remained steadfastly committed to our COVID-19 Policy as our work environment evolves in response to the changing landscape of the pandemic and in response to the increasing availability of vaccinations.
We continue to monitor the short and long term impacts of the pandemic. While our employees and customers have adapted to a new work environment and there continues to be scientific, societal and economic progress to address the effect of COVID-19, there remains significant uncertainty about the future impacts of the pandemic, including the potential effects on our operations. We remain cautiously optimistic about the markets in which we operate and the customers we serve; however, the spread of more contagious variants of the virus, including the current rapid increase of the Delta Variant, may impact economic activity and could cause projects to be delayed or canceled, or we may experience access restrictions to our customers’ facilities and project sites. Additionally, the spread of the Delta Variant has the near-term possibility of causing some state and local governments where we work to reinstitute restrictions that could impact our customers, vendors and our own ability to perform existing projects.
The ongoing effects of the pandemic, including decreased consumer confidence and economic instability, can make it extremely difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and could cause constrained spending on our services, delays and a lengthening of our business development efforts, the demand for more favorable pricing or other terms, and/or difficulty in collection of our accounts receivable. Our clients may face budget deficits or other financial constraints that prohibit them from funding proposed and existing projects. During the fourth quarter of 2020 and the first half of 2021, several of our business units experienced slowdowns in the closing of sales related to the ongoing effects of the pandemic, which impacted our revenue and profitability. These impacts may continue as the pandemic persists. Further, ongoing economic instability in the global markets, including from the pandemic, could limit our ability to access the capital markets at a time when we would like, or need, to raise capital, which could have an impact on our ability to react to changing business conditions or new opportunities. If economic conditions remain uncertain or weaken, or spending continues to be reduced, our financial condition and results of operations may be adversely affected.
The Company continues to take steps to minimize the adverse impacts of the COVID-19 pandemic on its business and to protect the safety of its employees, and the Company continues to emphasize wearing of masks, more frequent washing of hands and tools, social distancing, and work protocols. Limbach's COVID-19 Policy is based on the best practices provided by the Centers for Disease Control and Prevention (“CDC”) and Occupational Safety and Health Administration for essential workers. Our updated Work From Home Policy, along with the Company's business continuity planning and information technology enhancements enabled an orderly transition to remote work and facilitated social distancing for salaried employees. Although the Company has not mandated vaccinations for employees, it is encouraging all employees to be vaccinated, in accordance with CDC recommendations.
Testing and inpatient treatment for COVID-19 is covered under our medical plan and fees have been waived since the onset of the pandemic. Counseling is available through our employee assistance plan to assist employees with financial, mental and emotional stress related to the virus and other issues.
Note 2 – Significant Accounting Policies
Basis of Presentation
Condensed Consolidated Financial StatementsReferences in these financial statements to the Company refer collectively to the accounts of Limbach Holdings, Inc. and its wholly-owned subsidiaries, including LHLLC, Limbach Facility Services LLC (“LFS”), Limbach Company LLC, Limbach Company LP, Harper Limbach LLC, Harper Limbach Construction LLC, Limbach Facility & Project Solutions LLC, Jake Marshall, LLC (“JMLLC”) and Coating Solutions, LLC (“CSLLC”) for all periods presented, unless otherwise indicated. All intercompany balances and transactions have been eliminated.
The accompanying unaudited Condensed Consolidated Financial Statements condensed consolidated financial statements have been prepared in accordance with instructions togenerally accepted accounting principles in the Quarterly Report onUnited States (“GAAP”) for interim financial information and with the requirements of Form 10-Q and Rule 8-03 of Regulation S-X for smaller reporting companies. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”)GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. Readers of this report should refer to the consolidated financial statements and the notes thereto included in ourthe Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”(“SEC”) on March 25, 2021.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements for assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of revenue and expenses during the reported period, and the accompanying notes. Management believes that its most significant estimates and assumptions have been based on reasonable and supportable assumptions and the resulting estimates are reasonable for use in the preparation of the condensed consolidated financial statements. The Company’s significant estimates include estimates associated with revenue recognition on construction contracts, costs incurred through each balance sheet date, intangibles, property and equipment, fair value accounting for acquisitions, insurance reserves and contingencies. If the underlying estimates and assumptions upon which the condensed consolidated financial statements are based change in the future, actual amounts may differ from those included in the accompanying condensed consolidated financial statements.
Unaudited Interim Financial Information
The accompanying interim Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Operations, Condensed Consolidated Statements of Stockholders’ Equity and Condensed Consolidated Statements of Cash Flows for the periods presented are unaudited. Also, within the notes to the Condensed Consolidated Financial Statements, we havecondensed consolidated financial statements, the Company has included unaudited information for these interim periods. These unaudited interim Condensed Consolidated Financial Statements condensed consolidated financial statements
have been prepared in accordance with GAAP. In ourthe Company's opinion, the accompanying unaudited Condensed Consolidated Financial Statementscondensed consolidated financial statements contain all normal and recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2021,March 31, 2022, its results of operations and its cash flows for the three and six months ended June 30, 2021.March 31, 2022. The results for the three and six months ended June 30, 2021March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.2022.
The Condensed Consolidated Balance Sheet as of December 31, 20202021 was derived from ourthe Company's audited financial statements included in ourits Annual Report on Form 10-K filed with the SEC on March 25, 2021,16, 2022, but is presented as condensed and does not contain all of the footnote disclosures from the annual financial statements.
Note 3 – Accounting Standards
Recently Adopted Accounting Standards
In December 2019,November 2021, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income TaxesAccounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 740)805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which affects general principles within Topic 740, and is meant to simplify and reduce the cost of accounting for income taxes. It removes certain exceptionscreates an exception to the general principles in Topic 740recognition and simplifies areas including franchise taxes that are partially based on income, transactionsmeasurement principle for contract assets and contract liabilities from contracts with a government that resultcustomers acquired in a step upbusiness combination. Under this exception, an acquirer applies ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities on the acquisition date. ASC 805 generally requires the acquirer in a business combination to recognize and measure the tax basis of goodwill,assets it acquires and the incremental approach for intraperiod tax allocation, interim period income tax accounting for year-to-date losses that exceed anticipated losses and enacted changes in tax laws in interim periods.liabilities it assumes at fair value on the acquisition date. The changes are effective for annual periods beginning after December 15, 2020.2022. The adoption ofCompany early adopted ASU 2021-08 in December 2021. The contract assets and contract liabilities associated with the Jake Marshall Transaction have been valued in accordance with this pronouncement did not have a material impact on our condensed consolidated financial statements or presentation thereof.
Also in October 2020, the FASB issued ASU 2020-10, Codification Improvements. The amendments in this update remove references to various FASB Concepts Statements, situates all disclosure guidance in the appropriate disclosure section of the Codification, and makes other improvements and technical corrections to the Codification. The amendments in Sections B and C of this amendment are effective for annual periods beginning after December 15, 2020, for public business entities, with early adoption permitted. The adoption of this pronouncement did not have a material impact on our condensed consolidated financial statements or presentation thereof.standard.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial instruments, including trade receivables and off-balance sheet credit exposure. Under this guidance, an entity is required to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. This ASU also requires disclosure of information regarding how a company developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes. The guidance is effective for smaller reporting companies on January 1, 2023 with early adoption permitted. The adoption of this standard will be through a cumulative-effect adjustment to retained earnings as of the effective date. Based on ourits historical experience, the Company does not expect that this pronouncement will have a significant impact in its condensed consolidated financial statements or on the estimate of the allowance for doubtful accounts.
The FASB has issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting in March 2020. This new guidance provides optional expedients for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform, on financial reporting. The risk of termination of the London Interbank Offered Rate (LIBOR), has caused regulators to undertake reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based that are less susceptible to manipulation. ASU 2020-04 is effective between March 12, 2020 and December 31, 2022.
In addition, in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this update refine the scope for certain optional expedients and exceptions for contract modifications and hedge accounting to apply to derivative contracts and certain hedging relationships affected by the discounting transition. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adopting the reference rate reform guidance (both ASU 2020-04 and ASU 2021-01) on its condensed consolidated financial statements. Management has identified that its credit agreement utilizesAs discussed in Note 6, the A&R Credit Agreement removed LIBOR as a benchmark rate. Management will continue to evaluaterate and now utilizes SOFR (as defined in the impact of adopting reference rate reformA&R Credit Agreement) as the LIBOR benchmark rate within the credit agreement is phased out.its replacement.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity and amends the scope guidance for contracts in an entity's own equity. The ASU addresses how convertible instruments are accounted for in the calculation of diluted earnings per share by using the if-converted method. The guidance is effective for all entities for fiscal years beginning after March 31, 2024, albeit early adoption is permitted no earlier than fiscal years beginning after December 15, 2020. Management is currently assessing the impact of this pronouncement on its condensed consolidated financial statements.
Note 3 – Acquisitions
Jake Marshall Transaction
On December 2, 2021 (the “Effective Date”), the Company and LFS entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with JMLLC, CSLLC (together with JMLLC, the “Acquired Companies” and each an “Acquired Company”) and the owners of the Acquired Companies (collectively, the “Sellers”), pursuant to which LFS purchased all of the outstanding membership interests in the Acquired Companies from the Sellers (the transactions contemplated by the Purchase Agreement collectively being the “Jake Marshall Transaction”). The Jake Marshall Transaction closed on the Effective Date. As a result of the Jake Marshall Transaction, each of the Acquired Companies became wholly-owned indirect subsidiaries of the Company. The acquisition expands the Company’s market share within its existing product and service lines.
Total consideration paid by the Company for the Jake Marshall Transaction at closing was $21.3 million (the “Closing Purchase Price”), consisting of cash paid to the Sellers, net of adjustments for working capital. Of the consideration paid to the Sellers, $1.0 million is being held in escrow for indemnification purposes. The purchase price is subject to customary post-closing adjustments. In addition, the Sellers may receive up to an aggregate of $6.0 million in cash, consisting of 2 tranches of $3.0 million, as defined in the Purchase Agreement, if the gross profit of the Acquired Companies equals or exceeds $10.0 million in (i) the approximately 13 month period from closing through December 31, 2022 (the “2022 Earnout Period”) or (ii) fiscal year 2023 (the “2023 Earnout Period”), respectively (collectively, the “Earnout Payments”). To the extent, however, that the gross profit of the Acquired Companies is less than $10.0 million, but exceeds $8.0 million, during any of the 2022 Earnout Period or 2023 Earnout Period, the $3.0 million amount will be prorated for such period.
Allocation of Purchase Price. The Jake Marshall Transaction was accounted for as a business combination using the acquisition method. The following table summarizes the final purchase price and estimated fair values of assets acquired and liabilities assumed as of the Effective Date, with any excess of purchase price over estimated fair value of the identified net assets acquired recorded as goodwill. As a result of the acquisition, the Company recognized $5.2 million of goodwill, all of which was allocated to the ODR segment and fully deductible for tax purposes. Such goodwill primarily related to anticipated future earnings. The following table summarizes the allocation of the fair value of the assets and liabilities of the Jake Marshall Transaction as of the Effective Date by the Company.
| | | | | | | | |
(in thousands) | | Purchase Price Allocation |
Consideration: | | |
Cash | | $ | 21,313 | |
Earnout provision | | 3,089 | |
Total Consideration | | 24,402 | |
| | |
Fair value of assets acquired: | | |
Cash and cash equivalents | | 2,336 | |
Accounts receivable | | 7,165 | |
Contract assets | | 1,711 | |
Other current assets | | 164 | |
Property and equipment | | 5,762 | |
Intangible assets | | 5,710 | |
Amount attributable to assets acquired | | 22,848 | |
| | |
Fair value of liabilities assumed: | | |
Accounts payable, including retainage | | 2,655 | |
Accrued expenses and other current liabilities | | 570 | |
Contract liabilities | | 462 | |
Amount attributable to liabilities assumed | | 3,687 | |
Goodwill | | $ | 5,241 | |
Note 4 – Accounts ReceivableRevenue from Contracts with Customers
The Company generates revenue principally from fixed-price construction contracts to deliver HVAC, plumbing, and Allowance for Doubtful Accountselectrical construction services to its customers. The duration of its contracts generally ranges from six months to two years. Revenue from fixed price contracts is recognized on the cost-to-cost method, measured by the relationship of total cost incurred to total estimated contract costs. Revenue from time and materials contracts is recognized as services are performed. The Company believes that its extensive experience in HVAC, plumbing, and electrical projects, and its internal cost review procedures during the bidding process, enable it to reasonably estimate costs and mitigate the risk of cost overruns on fixed price contracts.
Accounts receivableThe Company generally invoices customers on a monthly basis, based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings on uncompleted contracts are recorded as a contract asset until billable under the allowance for doubtful accountscontract terms. Billings in excess of costs and estimated earnings on uncompleted contracts are comprised ofrecorded as a contract liability until the following:
| | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 |
Accounts receivable - trade | $ | 94,881 | | | $ | 86,033 | |
Allowance for doubtful accounts | (266) | | | (266) | |
Accounts receivable, net | $ | 94,615 | | | $ | 85,767 | |
Note 5 – Contract Assets and Liabilities
related revenue is recognizable. The Company classifies contract assets and liabilities that may be settled beyond one year from the balance sheet date as current, consistent with the length of time of the Company’s project operating cycle.
Contract assets
Contract assets include costs in excess of billings and estimated earnings and amounts due under retainage provisions.provisions and costs and estimated earnings in excess of billings. The components of the contract asset balances as of the respective dates were as follows:
| (in thousands) | (in thousands) | June 30, 2021 | | December 31, 2020 | | Change | (in thousands) | March 31, 2022 | | December 31, 2021 | | Change |
Contract assets | Contract assets | | | | | | Contract assets | | | | | |
Costs in excess of billings and estimated earnings | Costs in excess of billings and estimated earnings | $ | 38,200 | | | $ | 31,894 | | | $ | 6,306 | | Costs in excess of billings and estimated earnings | $ | 41,949 | | | $ | 47,447 | | | $ | (5,498) | |
Retainage receivable | Retainage receivable | 32,615 | | | 35,204 | | | (2,589) | | Retainage receivable | 33,594 | | | 36,416 | | | (2,822) | |
Total contract assets | Total contract assets | $ | 70,815 | | | $ | 67,098 | | | $ | 3,717 | | Total contract assets | $ | 75,543 | | | $ | 83,863 | | | $ | (8,320) | |
Retainage receivable represents amounts invoiced to customers where payments have been partially withheld, typically 10%, pending the completion of certain milestones, satisfaction of other contractual conditions or the completion of the project. Retainage agreements vary from project to project and balances could be outstanding for several months or years depending on a number of circumstances such as contract-specific terms, project performance and other variables that may arise as the Company makes progress towards completion.
Contract assets represent the excess of contract costs and profits (or contract revenue) over the amount of contract billings to date and are classified as a current asset. Contract assets result when either: 1)(1) the appropriate contract revenue amount has been recognized over time in accordance with ASC Topic 606, but a portion of the revenue recorded cannot be currently billed due to the billing terms defined in the contract, or 2)(2) costs are incurred related to certain claims and unapproved change orders. Claims occur when there is a dispute regarding both a change in the scope of work and the price associated with that change. Unapproved change orders occur when a change in the scope of work results in additional work being performed before the parties have agreed on the corresponding change in the contract price. The Company routinely estimates recovery related to claims and unapproved change orders as a form of variable consideration at the most likely amount it expects to receive and to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Claims and unapproved change orders are billable upon the agreement and resolution between the contractual parties and after the execution of contractual amendments. Increases in claims and unapproved change orders typically result from costs being incurred against existing or new positions; decreases normally result from resolutions and subsequent billings.
The current estimated net realizable value on such claims and unapproved change ordersitems as recorded in contract assets and contract liabilities in the condensed consolidated balance sheets was $40.1$39.9 million and $33.6$38.1 million as of June 30, 2021March 31, 2022 and December 31, 2020,2021, respectively. The Company currently anticipates that the majority of such amounts will be approved or executed within one year. The resolution of thesethose claims and unapproved change orders that may require litigation or other forms of dispute resolution proceedings.proceedings may delay the timing of billing beyond one year.
Contract liabilities
Contract liabilities include billings in excess of contract costs and estimated earnings and provisions for losses. The components of the contract liability balances as of the respective dates were as follows:
| | | | | | | | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 | | Change |
Contract liabilities | | | | | |
Billings in excess of costs and estimated earnings | $ | 38,611 | | | $ | 46,020 | | | $ | (7,409) | |
Provisions for losses | 568 | | | 628 | | | (60) | |
Total contract liabilities | $ | 39,179 | | | $ | 46,648 | | | $ | (7,469) | |
| | | | | | | | | | | | | | | | | |
(in thousands) | March 31, 2022 | | December 31, 2021 | | Change |
Contract liabilities | | | | | |
Billings in excess of costs and estimated earnings | $ | 34,053 | | | $ | 26,293 | | | $ | 7,760 | |
Provisions for losses | 391 | | | 419 | | | (28) | |
Total contract liabilities | $ | 34,444 | | | $ | 26,712 | | | $ | 7,732 | |
Billings in excess of costs and estimated earnings represent the excess of contract billings to date over the amount of contract costs and profits (or contract revenue) recognized to date. The balance may fluctuate depending on the timing of contract billings and the recognition of contract revenue.
Provisions for losses are recognized in the condensed consolidated statements of operations at the uncompleted performance obligation level for the amount of total estimated losses in the period that evidence indicates that the estimated total cost of a performance obligation exceeds its estimated total revenue.
The net overbillingunderbilling position for contracts in process consistconsisted of the following:
| (in thousands) | (in thousands) | June 30, 2021 | | December 31, 2020 | (in thousands) | March 31, 2022 | | December 31, 2021 |
Revenue earned on uncompleted contracts | Revenue earned on uncompleted contracts | $ | 691,473 | | | $ | 752,564 | | Revenue earned on uncompleted contracts | $ | 679,170 | | | $ | 758,450 | |
Less: Billings to date | Less: Billings to date | (691,884) | | | (766,690) | | Less: Billings to date | (671,274) | | | (737,296) | |
Net overbilling | $ | (411) | | | $ | (14,126) | | |
Net underbilling | | Net underbilling | $ | 7,896 | | | $ | 21,154 | |
| (in thousands) | (in thousands) | June 30, 2021 | | December 31, 2020 | (in thousands) | March 31, 2022 | | December 31, 2021 |
Costs in excess of billings and estimated earnings | Costs in excess of billings and estimated earnings | $ | 38,200 | | | $ | 31,894 | | Costs in excess of billings and estimated earnings | $ | 41,949 | | | $ | 47,447 | |
Billings in excess of costs and estimated earnings | Billings in excess of costs and estimated earnings | (38,611) | | | (46,020) | | Billings in excess of costs and estimated earnings | (34,053) | | | (26,293) | |
Net overbilling | $ | (411) | | | $ | (14,126) | | |
Net underbilling | | Net underbilling | $ | 7,896 | | | $ | 21,154 | |
Revisions in Contract Estimates
ForThe following table summarizes the three and six months ended June 30, 2021 and 2020, weCompany’s recorded revisions in ourits contract estimates for certain GCR and ODR projects.projects for the three months ended March 31, 2022 and 2021 (includes material gross profit changes of $0.25 million or more).
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2022 | | 2021 |
(in thousands except number of projects ) | | | Number of Projects | | | | Number of Projects |
Gross profit write-ups: | | | | | | | |
GCR | $ | 533 | | | 2 | | | $ | 743 | | | 2 | |
ODR | — | | | — | | | — | | | — | |
Total gross profit write-ups | $ | 533 | | | 2 | | | $ | 743 | | | 2 | |
| | | | | | | |
Gross profit write-downs: | | | | | | | |
GCR | $ | (604) | | | 2 | | | $ | (768) | | | 2 | |
ODR | — | | | — | | | — | | | — | |
Total gross profit write-downs | $ | (604) | | | 2 | | | $ | (768) | | | 2 | |
| | | | | | | |
Total gross profit write-downs, net | $ | (71) | | | | | $ | (25) | | | |
During the three months ended March 31, 2022, the Company recorded total net gross profit write-downs, regardless of materiality, of $1.4 million compared to total net gross profit write-downs of $0.5 million for the three months ended March 31, 2021.
ForRemaining Performance Obligations
Remaining performance obligations represent the three months ended June 30, 2021transaction price of firm orders for which work has not been performed and 2020, total net gross profit write-downsexclude unexercised contract options. The Company’s remaining performance obligations include projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions.
As of March 31, 2022, the aggregate amount of the transaction prices allocated to the remaining performance obligations of the Company's GCR and ODR segment contracts were $1.1$340.7 million and $2.0$90.4 million, respectively. For projects having a material gross profit impactThe Company currently estimates that 60% and 73% of $0.25 million or more for the three months ended June 30, 2021, this resulted in material gross profit write downs on 3its GCR segment projectsand ODR remaining performance obligations as of $1.7 million and 1 ODR project for $0.3 million. Of the material GCR segment write downs, 1 project was within the Michigan region for a total of $1.0 million, 1 project was within the New England region for $0.3 million and 1 project was within the Southern California region for $0.4 million. Of the material ODR segment write downs, 1 project was within the Eastern Pennsylvania region for $0.3 million. We also recorded material gross profit write ups of $0.3 million on 1 GCR segment project in the Florida region and $0.3 million on 1 ODR segment project in the Michigan region. For the three months ended June 30, 2020, we recorded material revisions in our contract estimates on 4 GCR projects which resulted in gross profit write downs of $1.5 million. NaN of these projects were within the Southern California region for a total of $0.7 million. NaN project revisions resulting in material gross profit write ups were recordedMarch 31, 2022, respectively, will be recognized as revenue during the threeremainder of 2022, with the substantial majority of remaining performance obligations to be recognized within 24 months, ended June 30, 2020.although the timing of the Company's performance is not always under its control.
ForAdditionally, the six months ended June 30, 2021difference between remaining performance obligations and 2020, total net gross profit write-downs were $1.7 million and $3.4 million, respectively. For projects havingbacklog is due to the exclusion of a material gross profit impactportion of $0.25 millionthe Company’s ODR agreements under certain contract types from the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time by the Company or more, we recorded gross profit write downs on 8 GCR segment projects of $3.5 million and 1 ODR project for $0.3 million. Of the material GCR segment write downs, 2 projects were withincustomer without considerable cost incurred by the Michigan region for a total of $1.2 million, 2 projects were within the Eastern Pennsylvania region for $1.0 million, 2 projects were within the Southern California region for $0.8 million, 1 project was within the New England region for $0.3 million, and 1 project was within the Mid-Atlantic region for $0.3 million. We also materially wrote down 1 ODR segment project within the Eastern Pennsylvania region for $0.3 million. We also recorded material GCR segment gross profit write ups of $0.9 million on 1 GCR segment project in the Michigan region for $0.5 million and 1 project within the Ohio region for $0.4 million. For the six months ended June 30, 2020, we recorded material gross profit write downs on 8 GCR projects and 2 gross profit write ups on GCR projects, for an aggregate revision of $5.2 million and $1.2 million, respectively.customer.
Note 65 – Goodwill and Intangibles
Goodwill
Goodwill was $6.1$11.4 million at both June 30, 2021as of March 31, 2022 and December 31, 2020. The goodwill2021 and is entirely associated with the Company's ODR segment. The Company tests its goodwill and indefinite-lived intangible assets allocated to its reporting units for impairment annually on October 1, or more frequently if events or circumstances indicate that it is more likely than not that the fair value of its reporting units and indefinite-lived intangible asset are less than their carrying amount. The Company has the option to assess goodwill for possible impairment by performing a qualitative analysis to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. A quantitative assessment is performed if the qualitative assessments results in a more-likely-than-not determination or if a qualitative assessment is not performed.
The Company did not recognize any impairment charges on its goodwill or intangible assets for the three months ended March 31, 2022 or March 31, 2021.
Intangible Assets
Intangible assets are comprised of the following:
| | | | | | | | | | | | | | | | | |
(in thousands) | Gross carrying amount | | Accumulated amortization | | Net intangible assets, excluding goodwill |
June 30, 2021(1) | | | | | |
Amortized intangible assets: | | | | | |
Customer Relationships – ODR | $ | 4,710 | | | $ | (3,312) | | | $ | 1,398 | |
Favorable Leasehold Interests(2) | 190 | | | (75) | | | 115 | |
Total amortized intangible assets | 4,900 | | | (3,387) | | | 1,513 | |
Unamortized intangible assets: | | | | | |
Trade Name | 9,960 | | | — | | | 9,960 | |
Total unamortized intangible assets | 9,960 | | | — | | | 9,960 | |
Total amortized and unamortized assets, excluding goodwill | $ | 14,860 | | | $ | (3,387) | | | $ | 11,473 | |
| (in thousands) | (in thousands) | Gross carrying amount | | Accumulated amortization | | Net intangible assets, excluding goodwill | (in thousands) | Gross carrying amount | | Accumulated amortization | | Net intangible assets, excluding goodwill |
December 31, 2020(1) | | | | | | |
March 31, 2022 | | March 31, 2022 | | | | | |
Amortized intangible assets: | Amortized intangible assets: | | | | | | Amortized intangible assets: | |
Customer Relationships – ODR | $ | 4,710 | | | $ | (3,112) | | | $ | 1,598 | | |
Favorable Leasehold Interests | 530 | | | (407) | | | 123 | | |
Customer relationships – GCR – Jake Marshall | | Customer relationships – GCR – Jake Marshall | $ | 570 | | | $ | (27) | | | $ | 543 | |
Customer relationships – ODR – Jake Marshall | | Customer relationships – ODR – Jake Marshall | 3,050 | | | (134) | | | 2,916 | |
Customer relationships – ODR – Limbach | | Customer relationships – ODR – Limbach | 4,710 | | | (3,555) | | | 1,155 | |
Favorable leasehold interests – Limbach | | Favorable leasehold interests – Limbach | 190 | | | (86) | | | 104 | |
Backlog – GCR – Jake Marshall | | Backlog – GCR – Jake Marshall | 260 | | | (55) | | | 205 | |
Backlog – ODR – Jake Marshall | | Backlog – ODR – Jake Marshall | 680 | | | (143) | | | 537 | |
Trade name – Jake Marshall | | Trade name – Jake Marshall | 1,150 | | | (62) | | | 1,088 | |
Total amortized intangible assets | Total amortized intangible assets | 5,240 | | | (3,519) | | | 1,721 | | Total amortized intangible assets | 10,610 | | | (4,062) | | | 6,548 | |
Unamortized intangible assets: | Unamortized intangible assets: | | Unamortized intangible assets: | |
Trade Name | 9,960 | | | — | | | 9,960 | | |
Trade name – Limbach(1) | | Trade name – Limbach(1) | 9,960 | | | — | | | 9,960 | |
Total unamortized intangible assets | Total unamortized intangible assets | 9,960 | | | — | | | 9,960 | | Total unamortized intangible assets | 9,960 | | | — | | | 9,960 | |
Total amortized and unamortized assets, excluding goodwill | Total amortized and unamortized assets, excluding goodwill | $ | 15,200 | | | $ | (3,519) | | | $ | 11,681 | | Total amortized and unamortized assets, excluding goodwill | $ | 20,570 | | | $ | (4,062) | | | $ | 16,508 | |
(1)The Backlog-Construction intangible asset previously shown at December 31, 2020 has been fully amortized. Accordingly, its gross carrying amount of $4.8 million and corresponding accumulated amortization of $4.8 million have been removed from the table.
(2) The gross carrying amount and accumulated amortization associated with our Favorable leasehold interests intangible asset was reduced by $0.3 million due to the lease termination of our Western Pennsylvania office associated with the intangible asset.
The definite-lived intangible assets are amortized over the period the Company expects to receive the related economic benefit, which for customer relationships is based upon estimated future net cash inflows. The Company has previously determined that its trade name has an indefinite useful life. The Limbach trade name has been in existence since the Company’s founding in 1901 and therefore is an established brand within the industry.
| | | | | | | | | | | | | | | | | |
(in thousands) | Gross carrying amount | | Accumulated amortization | | Net intangible assets, excluding goodwill |
December 31, 2021 | | | | | |
Amortized intangible assets: | | | | | |
Customer relationships – GCR – Jake Marshall | $ | 570 | | | $ | (6) | | | $ | 564 | |
Customer relationships – ODR – Jake Marshall | 3,050 | | | (35) | | | 3,015 | |
Customer relationships – ODR – Limbach | 4,710 | | | (3,475) | | | 1,235 | |
Favorable leasehold interests – Limbach | 190 | | | (82) | | | 108 | |
Backlog – GCR – Jake Marshall | 260 | | | (14) | | | 246 | |
Backlog – ODR – Jake Marshall | 680 | | | (36) | | | 644 | |
Trade name – Jake Marshall | 1,150 | | | (15) | | | 1,135 | |
Total amortized intangible assets | 10,610 | | | (3,663) | | | 6,947 | |
Unamortized intangible assets: | | | | | |
Trade name – Limbach | 9,960 | | | — | | | 9,960 | |
Total unamortized intangible assets | 9,960 | | | — | | | 9,960 | |
Total amortized and unamortized assets, excluding goodwill | $ | 20,570 | | | $ | (3,663) | | | $ | 16,907 | |
Total amortization expense for these amortizablethe Company's definite-lived intangible assets was $0.1$0.4 million and $0.2$0.1 million for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $0.3 million and $0.4 million for the three and six months ended June 30, 2020, respectively.
The Company did 0t recognize any impairment charges on its goodwill or intangible assets for the three and six months ended June 30, 2021 or 2020.
Note 76 – Debt
Long-term debt consists of the following obligations as of:
| (in thousands) | (in thousands) | June 30, 2021 | | December 31, 2020 | (in thousands) | March 31, 2022 | | December 31, 2021 |
2019 Refinancing Term Loan - term loan payable in quarterly installments of principal, (commencing in September 2020) plus interest through April 2022 | $ | 0 | | | $ | 39,000 | | |
2019 Refinancing Revolving Credit Facility | 0 | | | 0 | | |
Wintrust Term Loan - term loan payable in quarterly installments of principal, (commencing in March 2021) plus interest through February 2026 | 28,000 | | | 0 | | |
Wintrust Revolving Loan | 0 | | | 0 | | |
Finance leases – collateralized by vehicles, payable in monthly installments of principal, plus interest ranging from 4.70% to 6.45% through 2025 | 5,476 | | | 6,459 | | |
A&R Wintrust Term Loan - term loan payable in quarterly installments of principal, (commencing in December 2021) plus interest through February 2026 | | A&R Wintrust Term Loan - term loan payable in quarterly installments of principal, (commencing in December 2021) plus interest through February 2026 | 33,024 | | | 34,881 | |
A&R Wintrust Revolving Loan | | A&R Wintrust Revolving Loan | 9,400 | | | — | |
Finance leases – collateralized by vehicles, payable in monthly installments of principal, plus interest ranging from 4.40% to 6.45% through 2025 | | Finance leases – collateralized by vehicles, payable in monthly installments of principal, plus interest ranging from 4.40% to 6.45% through 2025 | 5,317 | | | 5,132 | |
Total debt | Total debt | 33,476 | | | 45,459 | | Total debt | 47,741 | | | 40,013 | |
Less - Current portion of long-term debt | Less - Current portion of long-term debt | (8,454) | | | (6,536) | | Less - Current portion of long-term debt | (13,222) | | | (9,879) | |
Less - Unamortized discount and debt issuance costs | Less - Unamortized discount and debt issuance costs | (301) | | | (2,410) | | Less - Unamortized discount and debt issuance costs | (299) | | | (318) | |
Long-term debt | Long-term debt | $ | 24,721 | | | $ | 36,513 | | Long-term debt | $ | 34,220 | | | $ | 29,816 | |
TheOn February 24, 2021 (the “2021 Refinancing Date”), the Company refinanced its 2019 Refinancing Term Loan (as defined below) and 2019 Revolving Credit Facility (as defined below) with proceeds from the issuance of the Wintrust Term Loan (as defined below) (the “2021 Refinancing”). As a result of the 2021 Refinancing, the Company prepaid all principal, interest, fees and other obligations outstanding under the 2019 Refinancing Agreements (as defined below) and terminated its 2019 Refinancing Term Loan, 2019 Refinancing Revolving Credit Facility and the CB Warrants (as defined below). In addition, on February 24,the 2021 described below and therefore had 0 amounts outstanding under these agreements at June 30, 2021. Accordingly,Refinancing Date, the Company recognized a loss on the early debt extinguishment related to the refinancingof debt of $2.0 million, on the refinancing date. This losswhich consisted of the write-off of $2.6 million of debt issuanceunamortized discount and debt discountfinancing costs, the reversal of the $2.0 million CB warrants (defined below) liability due to the warrants being cancelled on the refinancing date and the prepayment penalty and other extinguishment costs of $1.4 million.
2019 Refinancing Agreement
- 2019 Term Loans
On April 12, 2019 (the “Refinancing“2019 Refinancing Closing Date”), Limbach Facility Services LLC (“LFS”)LFS entered into a financing agreement (the “2019 Refinancing Agreement”) with the lenders thereto and Cortland Capital Market Services LLC, as collateral agent and administrative agent and CB Agent Services LLC (“CB”), as origination agent (“CB”).agent. The 2019 Refinancing Agreement consisted of (i) a $40.0 million term loan (the “2019 Refinancing Term Loan”) and (ii) a new $25.0 million multi-draw delayed draw term loan (the “2019 Delayed Draw Term Loan” and, collectively with the 2019 Refinancing Term Loan, the “2019 Term Loans”). Proceeds fromOn November 14, 2019, the 2019 Refinancing Term Loan were usedCompany entered into an amendment to repay the then existing Credit Agreement, to pay related fees and expenses thereof and to fund working capital of the 2019 Refinancing Borrowers (defined below). Management intended for proceeds of the 2019 Delayed Draw Term Loan to be used to fund permitted acquisitions under the 2019 Refinancing Agreement which, among other things, amended the interest rate and related fees and expensescertain covenants in connection therewith.
LFS and each of its subsidiaries were borrowers (the “2019 Refinancing Borrowers”) under the 2019 Refinancing Agreement. In addition,
Prior to its refinancing in February 2021, the 2019 Refinancing Agreement was guaranteed by the Company and LHLLC (each, a “2019 Refinancing Guarantor”, and together with the 2019 Refinancing Borrowers, the “Loan Parties”).
The 2019 Refinancing Agreement was secured by a first-priority lien on the real property of the Loan Parties and a second-priority lien on substantially all other assets of the Loan Parties, behind the 2019 ABL Credit Agreement (as defined below). The respective lien priorities of the 2019 Refinancing Agreement and the 2019 ABL Credit Agreement were governed by an intercreditor agreement.
2019 Refinancing Agreement - Interest Rates and Fees
The interest rate on borrowings under the 2019 Refinancing Agreement was, at the 2019 Refinancing Borrowers’ option, either LIBOR (with a 2.00% floor) plus 11.00% or a base rate (with a 3.00% minimum) plus 10.00%. At February 24, 2021 (the 2021 refinancing date) and June 30, 2020, the interest rate in effect on the 2019 Refinancing Term Loan was 13.00%.
2019 Refinancing Agreement - Other Terms and Conditions
The 2019 Refinancing Agreement was set to maturewould have matured on April 12, 2022, subject to certain adjustment.2022. Required amortization was $1.0 million per quarter and commenced with the fiscal quarter ending September 30, 2020. There was an unused line fee of 2.0% per annum on the undrawn portion of the 2019 Delayed Draw Term Loan, and there was a make-whole premium on prepayments made prior to the 19-month anniversary of the 2019 Refinancing Closing Date. This make-whole provision guaranteed that the Company would pay no less than 18 months’ applicable interest to the lenders under the 2019 Refinancing Agreement.
The 2019 Refinancing Agreement contained representations and warranties, and covenants which were customary for debt facilities of this type. Unless the Required Lenders (as defined in the 2019 Refinancing Agreement) otherwise consented in writing, the covenants limited the ability of the Company and its restricted subsidiaries to, among other things, (i) incur additional indebtedness or issue preferred stock, (ii) pay dividends or make distributions to the Company’s stockholders, (iii) purchase or redeem the Company’s equity interests, (iv) make investments, (v) create liens on their assets, (vi) enter into transactions with the Company’s affiliates, (vii) sell assets and (viii) merge or consolidate with, or dispose of substantially all of the Company’s assets to, other companies.
In addition, the 2019 Refinancing Agreement included customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company failed to comply with the terms of the 2019 Refinancing Agreement or if other customary events occur.
Furthermore, the 2019 Refinancing Agreement also contained 2 financial maintenance covenants for the 2019 Refinancing Term Loan, including a requirement to have sufficient collateral coverage of the aggregate outstanding principal amount of the 2019 Term Loans and as of the last day of each month for the total leverage ratio of the Company and its subsidiaries (the “Total Leverage Ratio”) not to exceed an amount beginning at 4.25 to 1.00 through June 30, 2019, and stepping down to 2.00 to 1.00 effective July 1, 2021. From July 1, 2019 through September 30, 2019, the Total Leverage Ratio may not exceed 4.00 to 1.00. In addition, the parties to the 2019 Refinancing Agreement entered into an amendment which, among other changes, revised the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 through the term of such agreement. The 2019 Refinancing Agreement contained a post-closing covenant requiring the remediation of the Company’s material weakness, as described in Item 9A of its 2018 Annual Report on Form 10-K, no later than December 31, 2020 and provision for updates as to the progress of such remediation, provided that, if such remediation was not completed on or prior to December 31, 2019, (x) the Company would be required to pay the post-closing fee pursuant to the terms of the Origination Agent Fee Letter (as defined in the 2019 Refinancing Agreement) and (y) the applicable margin shall be increased by 1.00% per annum for the period from January 1, 2020 until the date at which the material weakness was no longer disclosed or required to be disclosed in the Company’s SEC filings or audited financial statements of the Company or related auditor’s reports.
In connection with the 2019 Refinancing Amendment Number One and Waiver, dated November 14, 2019, the parties amended certain provisions of the 2019 Refinancing Agreement, including, among other changes to: (i) require, commencing October 1, 2019, a 3.00% increase in the interest rate on borrowings under the 2019 Refinancing Agreement; (ii) requireAgreement was, at the approvaloption of CBLFS and generally,its subsidiaries, either LIBOR (with a 2.00% floor) plus 11.00% or a base rate (with a 3.00% minimum) plus 10.00%. At the lenders representing at least 50.1% of2021 Refinancing Date, the aggregate undrawn term loan commitment or unpaid principal amount of the 2019 Term Loans, prior to effecting any permitted acquisition; (iii) revise the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00interest rate in effect on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 and thereafter through the term of the 2019 Refinancing Agreement; and (iv) require the liquidity of the loan parties, which is generally calculated by adding (a) unrestricted cash on hand of the Loan Parties maintained in deposit accounts subject to control agreements granting control to the collateral agent for the 2019 ABL Credit Agreement, to (b) the difference between (1) the lesser of (x) $15 million, as adjusted from time to time, and (y) 75% of certain customer accounts resulting from the sale of goods or services in the ordinary course of business minus certain reserves established by the administrative agent and (2) the sum of (x) the outstanding principal balance of all revolving loans under the 2019 ABL Credit Agreement plus (y) the aggregate undrawn available amount of all letters of credit then outstanding plus the amount of any obligations that arise from any draw against any letter of credit that have not been reimbursed by the borrowers or funded with a revolving loan under the 2019 ABL Credit Agreement (the “Loan Parties Liquidity”), as of the last day of any fiscal month ending on or after November 30, 2019, of at least $10,000,000. As a condition to executing the 2019 Refinancing Amendment Number One and Waiver, the loan parties were required to pay a non-refundable waiver fee of $400,000 and a non-refundable amendment fee of $1,000,000 (the “PIK First Amendment Fee”, which shall be paid in kind by adding the PIK First Amendment Fee to the outstanding principal amount of the 2019 Refinancing Term Loan as additional principal obligations thereunder on and as of the effective date 2019 Refinancing Amendment Number One and Waiver).
During December 2020, the Company was not in compliance with the collateral coverage debt covenant as defined by the 2019 Term Loan financing agreement. The Company was required to maintain at all times a Collateral Coverage Amount (as defined in the 2019 Refinancing Term Loan financing agreement) equal to or greater than the aggregate outstanding principal amount of the 2019 Term Loans. The Company calculated its Collateral Coverage amount at $37.9 million as of December 31, 2020, the aggregate outstanding principal amount of Term Loans was $39.0 million as of that same date for an excess of debt over collateral of $1.1 million. On February 1, 2021, the Company, LFS and LHLLC entered into a Waiver - Collateral Coverage Amount (December 2020) ("December 2020 Waiver") with the lenders party thereto and Cortland Capital Market Services LLC as collateral agent and administrative agent. The December 2020 Waiver included a waiver of the Company's compliance with the Collateral Coverage Amount for the month ending December 31, 2020. The lender waived the event of default arising from this noncompliance as of December 31, 2020, while reserving its rights with respect to covenant compliance in future months.
The 2019 Refinancing Term Loan was paid in full on February 24, 2021 as part of the refinancing transaction.
2019 Refinancing Agreement - CB Warrants
In connection with the 2019 Refinancing Agreement, on the 2019 Refinancing Closing Date, the Company issued to CB and the other lenders under the 2019 Refinancing Agreement warrants (the “CB Warrants”) to purchase up to a maximum of 263,314 shares of the Company's common stock at an exercise price of $7.63 per share subject to certain adjustments, including for stock dividends, stock splits or reclassifications. The actual number of shares of common stock into which the CB Warrants were exercisable at any given time were equal to: (i) the product of (x) the number of shares equal to 2% of the Company’s issued and outstanding shares of common stock on the 2019 Refinancing Closing Date on a fully diluted basis and (y) the percentage of the total 2019 Delayed Draw Term Loan made as of the exercise date, minus (ii) the number of shares previously issued under the CB Warrants. As of the 2019 Refinancing Closing Date through February 24,the 2021 0Refinancing Date, no amounts had been drawn on the 2019 Delayed Draw Term Loan, so 0no portion of the CB Warrants were exercisable. The CB Warrants were to be exercised for cash or on a “cashless basis,” subject to certain adjustments, at any time after the 2019 Refinancing Closing Date until the expiration of such warrant at 5:00 p.m., New York time, on the earlier of (i) the five (5) year anniversary of the 2019 Refinancing Closing Date, or (ii) the liquidation of the Company.
Accounting for the 2019 Term Loans and CB Warrants
The CB Warrants represented a freestanding financial instrument that was classified as a liability because the CB Warrants met the definition of a derivative instrument that does not meet the equity scope exception (i.e., the CB Warrants were not indexed to the entity’s own equity). In addition, the material weakness penalty described above was evaluated as an embedded derivative liability and bifurcated from the 2019 Term Loans as it represented a non-credit related embedded feature that provides for net settlement. Both the CB Warrants liability and the embedded derivative liability were required to be initially and subsequently measured at fair value. The initial fair values of the CB Warrants liability and the embedded derivative liability approximated $0.9 million and $0.4 million, respectively, on the Refinancing Closing Date. The Company estimated these fair values by using the Black-Scholes-Merton option pricing model and a probability-weighted discounted cash flow approach.
The CB Warrants liability was included in other long-term liabilities. The Company remeasured the fair value of the CB Warrants liability as of December 31, 2020 and February 24, 2021 prior to the refinancing date and recorded any adjustments as other income (expense). At both February 24, 2021 and December 31, 2020, the CB Warrants liability was $2.0 million. Due to the extinguishment of the CB Warrants on February 24, 2021, there was 0 liability associated with the CB Warrants recorded as of June 30, 2021. For the six months ended June 30,period from January 1, 2021 through the Company recorded other income of $0.1 million to reflect2021 Refinancing Date, the change in the fair value of the CB Warrants liability. The Company did not record a change in fair value of the warrant liability during the three months ended June 30, 2021 as the CB Warrants liability was extinguished as part of the debt refinancing on February 24, 2021. For the three and six months ended June 30, 2020, the Company recorded other income of $0.1 million and other expense of $0.1 million to reflect the change in the CB Warrants liability.
The proceeds for the 2019 Refinancing Term Loan were first allocated to the CB Warrants liability and embedded derivative liability based on their respective fair values with a corresponding amount of $1.3 million recorded as a debt discount to the 2019 Term Loans. In addition, the Company incurred approximately $3.9 million of debt issuance costs, including $1.4 million related to the first amendment, for the 2019 Term Loans that have also been recorded as a debt discount. The combined debt discount from the CB Warrants liability, embedded derivative liability and the debt issuance costs were being amortized into interest expense over the term of the 2019 Term Loans using the effective interest method and were expensed on the refinancing date as a loss on early debt extinguishment. The Company recorded interest expense for the amortization of the CB Warrants liability and embedded derivative debt discounts of $0.1 million for the six months ended June 30, 2021. The Company did 0t record interest expense for the amortization of the CB Warrants liability and embedded derivative liability debt discounts for the three months ended June 30, 2021 as these debt discounts were extinguished as part of the debt refinancing on February 24, 2021. The Company recorded interest expense for the amortization of the CB Warrants liability and embedded derivative debt discounts of $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively.
In addition to the amortization of the debt discounts into interest expense, the Company recorded an additional $0.1 million of interest expense for the amortization of debt issuance costs related to the 2019 Refinancing Term Loan for the six months ended June 30, 2021. The Company did 0t record any interest expense for the amortization of debt issuance costs for the three months ended June 30, 2021 as the debt issuance costs were extinguished as part of the debt refinancing on February 24, 2021. For the three and six months ended June 30, 2020, the Company recorded an additional $0.4 million and $0.7 million of interest expense, respectively, for the amortization of the debt issuance costs related to the 2019 Refinancing Term Loan.
2019 ABL Credit Agreement
On the 2019 Refinancing Closing Date, LFS also entered into a financing agreement with the lenders thereto and Citizens Bank, N.A., as collateral agent, administrative agent and origination agent (the “2019 ABL Credit Agreement” and, together with the 2019 Refinancing Agreement, the “Refinancing Agreements”). The 2019 ABL Credit Agreement consisted of a $15.0 million revolving credit facility (the “2019 Revolving Credit Facility”). Proceeds of the 2019 Revolving Credit Facility were to be used for general corporate purposes. On the 2019 Refinancing Closing Date, the Company had nothing drawn onentered into an amendment to the 2019 ABL Credit Agreement (as amended, 2019 ABL Credit Amendment Number One and $14.0 million of available borrowing capacity thereunder (net of a $1.0 million reserve imposed by the lender).
The 2019 Refinancing Borrowers and 2019 Refinancing GuarantorsWaiver), which amended certain provisions under the 2019 ABL Credit Agreement were the same as under the 2019 Refinancing Agreement. The 2019 ABL Credit Agreement was secured by a second-priority lien on the real property of the Loan Parties (behind the 2019 Refinancing Agreement) and a first-priority lien on substantially all other assets of the Loan Parties.
2019 ABL Credit Agreement - Interest Rates and Fees
The interest rate on borrowings under the 2019 ABL Credit Agreement was, at the 2019 Refinancing Borrowers’ option of LFS and its subsidiaries, either LIBOR (with a 2.0% floor) plus an applicable margin ranging from 3.00% to 3.50% or a base rate (with a 3.0% minimum) plus an applicable margin ranging from 2.00% to 2.50%. At February 24,the 2021 (the 2021 refinancing date) and June 30, 2020,Refinancing Date, the interest rate in effect on the 2019 ABL Credit Agreement was 5.25%.
2019 ABL Credit Agreement - Other Terms and Conditions
The 2019 ABL Credit Agreement was set to mature on April 12, 2022. There was also an unused line fee ranging from 0.250% to 0.375% per annum on undrawn amounts.
The 2019 ABL Credit Agreement contained representations and warranties, and covenants which are customary for debt facilities of this type. Unless the Required Lenders otherwise consented in writing, the covenants limited the abilityAs of the Company and its restricted subsidiaries to, among other things, generally, to (i) incur additional indebtedness or issue preferred stock, (ii) pay dividends or make distributions to the Company’s stockholders, (iii) purchase or redeem the Company’s equity interests, (iv) make investments, (v) create liens on their assets, (vi) enter into transactions with the Company’s affiliates, (vii) sell assets other than in the ordinary course of business or another permitted disposition of assets and (viii) merge or consolidate with, or dispose of substantially all of the Company’s assets to, other companies.
The 2019 ABL Credit Agreement included customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company failed to comply with the terms of the 2019 ABL Credit Agreement or if other customary events occur.
The 2019 ABL Credit Agreement also contained a financial maintenance covenant for the 2019 Revolving Credit Facility, which is a requirement for the Total Leverage Ratio of the Company and its subsidiaries not to exceed an amount beginning at 4.00 to 1.00 through September 30, 2019, and stepping down to 1.75 to 1.00 effective July 1, 2021. In addition, the parties to the 2019 ABL Credit Agreement entered into an amendment which, among other changes revises the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 through the term of such agreement.
In connection with the 2019 ABL Credit Amendment Number One and Waiver, the parties amended certain provisions of the 2019 ABL Credit Agreement, including, among other changes to (i) require the approval of the origination agent and, generally, the lenders representing at least 50.1% of the aggregate undrawn revolving loan commitment or unpaid principal amount of the 2019 Term Loans, prior to effecting any permitted acquisition; (ii) revise the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 through the term of the 2019 ABL Credit Agreement; and (iii) require the Loan Parties Liquidity as of the last day of any fiscal month ending on or after November 30, 2019, of at least $10,000,000, as described above in the Amendment Number One to 2019 Refinancing Agreement and Waiver. As a condition to executing the 2019 ABL Credit Amendment Number One and Waiver, the loan parties were required to pay a non-refundable waiver fee of $7,500.
As noted above in the section titled: 2019 Refinancing Agreement - Other Terms and Conditions, the Company was subject to cross-default under our 2019 Revolving Credit Facility as a result of our failure to satisfy the Collateral Coverage Amount as defined in the 2019 Term Loan financing agreement, which required the company to obtain a waiver. Accordingly, on February 1, 2021, the Company, LFS and LHLLC entered into a Waiver - Collateral Coverage Amount (December 2020) (“December 2020 Waiver”) with the lenders party thereto and Citizens Bank, N.A., as collateral agent and administrative agent. The December 2020 Waiver included a waiver of the Company's compliance with the Collateral Coverage Amount for the month ending December 31, 2020. The lender has waived the event of default arising from this noncompliance as of December 31, 2020, while reserving its rights with respect to covenant compliance in future months.
At February 24, 2021 (the 2021 refinancing date) and December 31, 2020,Date, the Company had irrevocable letters of credit in the amount of $3.4 million with its lender to secure obligations under its self-insurance program.
Accounting for Prior to its refinancing in February 2021, the 2019 ABL Credit Agreement
The Company incurred approximately $0.9 million of debt issuance costs for the 2019 ABL Credit Agreement that had been recorded as a non-current deferred asset. The deferred asset was amortized into interest expense over the term of the 2019 Term ABL Credit Agreement using the effective interest method and then expensed on the February 24, 2021 refinancing date as a loss on early debt extinguishment. The Company recorded $0.1 million of interest expense for the amortization of debt issuance costs for the six months ended June 30, 2021. The Company did 0t record any interest expense for the amortization of debt issuance costs for the three months ended June 30, 2021 as the debt issuance costs were extinguished as part of the debt refinancing on February 24, 2021. For both the three and six months ended June 30, 2020, the Company recorded $0.1 million of interest expense for the amortization of debt issuance costs.
would have matured in April 2022.
Wintrust Term and Revolving Loans
On February 24,the 2021 Refinancing Date, LFS, LHLLC and the direct and indirect subsidiaries of LFS from time to time included as parties to the agreement (the “Wintrust Guarantors”) entered into a Credit Agreementcredit agreement (the “Credit“Wintrust Credit Agreement”) by and among the LFS, LHLLC, Wintrust Guarantors, the lenders party thereto from time to time, Wheaton Bank & Trust Company, N.A., a subsidiary of Wintrust Financial Corporation (collectively, “Wintrust”), as administrative agent and L/C issuer, Bank of the West as documentation agent, M&T Bank as syndication agent, and Wintrust as lead arranger and sole book runner.
In accordance with the terms of the Wintrust Credit Agreement, Lenders provideprovided to LFS (i) a $30.0 million senior secured term loan (the “Wintrust Term Loan”); and (ii) a $25.0 million senior secured revolving credit facility with a $5.0 million sublimit for the issuance of letters of credit (the “Wintrust Revolving Loan” and, together with the Wintrust Term Loan, the “Wintrust Loans”). Proceeds of the Wintrust Loans were used to refinance certain existing indebtedness, finance working
capital and other general corporate purposes and fund certain fees and expenses associated with the closing of the Wintrust Loans.
The Wintrust Revolving Loan bearsbore interest, at the LFS’s option, at either LIBOR (with a 0.25% floor) plus 3.5% or a base rate (with a 3.0% floor) plus 0.50%, subject to a 50 basis point step-down based on the ratio between the senior debt of the Company and its subsidiaries to the EBITDA (earnings before interest, income taxes, depreciation and amortization) of the LFS and its subsidiaries for the most recently ended four fiscal quarters (the “Senior Leverage Ratio”).quarters. The Wintrust Term Loan bearsbore interest, at LFS’s option, at either LIBOR (with a 0.25% floor) plus 4.0% or a base rate (with a 3.0% floor) plus 1.00%, subject to a 50 (for LIBOR) or 75 (for base rate) basis point step-down based on the Senior Leverage Ratio.
LFS iswas required to make principal payments on the Wintrust Term Loan in $0.5 million installments on the last business day of each month commencing on March 31, 2021 with a final payment of all principal and interest not sooner paid on the Wintrust Term Loan due and payable on February 24, 2026.
In conjunction with the Jake Marshall Transaction, the Company entered into an amendment to the Wintrust Credit Agreement (the “A&R Wintrust Credit Agreement”). In accordance with the terms of the A&R Credit Agreement, Lenders provided to LFS (i) a $35.5 million senior secured term loan (the “A&R Wintrust Term Loan”); and (ii) a $25 million senior secured revolving credit facility with a $5 million sublimit for the issuance of letters of credit (the “A&R Wintrust Revolving Loan” and, together with the Term Loan, the “A&R Wintrust Loans”). The overall Wintrust Term Loan commitment under the A&R Wintrust Credit Agreement was recast at $35.5 million in connection with the A&R Credit Agreement. A portion of the A&R Wintrust Term Loan commitment was used to fund the closing purchase price of the Jake Marshall Transaction. The A&R Credit Agreement was also amended to: (i) permit the Company to undertake the Jake Marshall Transaction (ii) make certain adjustments to the covenants under the A&R Credit Agreement (which were largely done to make certain adjustments for the Jake Marshall Transaction) (iii) allow for the Earnout Payments under the Jake Marshall Transaction and (iv) make other corresponding changes to the A&R Credit Agreement.
The A&R Wintrust Revolving Loan will maturebears interest, at LFS’s option, at either Term SOFR (as defined in the A&R Credit Agreement) (with a 0.15% floor) plus 3.60%, 3.76% or 3.92% for a tenor of one month, three months or six months, respectively, or a base rate (as set forth in the A&R Credit Agreement) (with a 3.0% floor) plus 0.50%, subject to a 50 basis point step-down based on the ratio between the senior debt of the Company and becomeits subsidiaries to the EBITDA of LFS and its subsidiaries for the most recently ended four fiscal quarters (the “Senior Leverage Ratio”). The A&R Wintrust Term Loan bears interest, at LFS’s option, at either Term SOFR (with a 0.15% floor) plus 4.10%, 4.26% or 4.42% for a tenor of one month, three months or six months, respectively, or a base rate (with a 3.0% floor) plus 1.00%, subject to a 50 (for Term SOFR) or 75 (for base rate) basis point step-down based on the Senior Leverage Ratio. At March 31, 2022, the interest rate in effect on the Wintrust Term Loan was 4.50%
LFS is required to make principal payments on the A&R Wintrust Term Loan in installments of approximately $0.6 million on the last business day of each month commencing on December 31, 2021. Subject to defaults and remedies under the A&R Credit Agreement, the final payment of all principal and interest not sooner paid on the A&R Wintrust Term Loan is due and payable on February 24, 2026. Subject to defaults and remedies under the A&R Credit Agreement, the A&R Wintrust Revolving Loan matures and becomes due and payable by LFS on February 24, 2026.
The A&R Wintrust Loans are secured by (i) a valid, perfected and enforceable lien of the administrative agent on the ownership interests held by each of LFS and Wintrust Guarantors in their respective subsidiaries; and (ii) a valid, perfected and enforceable lien of the administrative agent on each of LFS and Wintrust Guarantors’ personal property, fixtures and real estate, subject to certain exceptions and limitations. Additionally, the re-payment of the A&R Wintrust Loans shall be jointly and severally guaranteed by each Wintrust Guarantor.
The A&R Credit Agreement contains representations and warranties, covenants and events of default that are customary for facilities of this type, as more particularly described in the A&R Credit Agreement. The A&R Wintrust Loans also contain 3 financial maintenance covenants, including (i) a requirement to have as of the last day of each quarter for the senior leverage ratio of the Company and its subsidiaries not to exceed an amount beginning at 2.25 to 1.00 through December 31, 2021, and stepping down to 2.00 to 1.00 at all times thereafter, (ii) a fixed charge coverage ratio of not less than 1.20 to 1.00 as of the last day of each fiscal quarter commencing with the fiscal quarter ending MarchDecember 31, 2021, and (iii) 0no unfinanced capital expenditures, except for unfinanced capital expenditures in the ordinary course of business not exceeding in the aggregate $4.0 million during any fiscal year; and no default or event of default (as defined by the agreement) has occurred and is continuing, 50% of any portion of this annual limit, if not expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next following fiscal year as stipulated by the agreement. LFS and its affiliates maintain various commercial and service relationships with certain members of the syndicate and their affiliates in the ordinary course of business.
As of June 30, 2021,March 31, 2022, the Company had $9.4 million of borrowings outstanding under the A&R Wintrust Revolving Loan. The Company did not have any borrowings outstanding under the A&R Wintrust Revolving Loan as of December 31, 2021. During the three months ended March 31, 2022, the maximum outstanding borrowings under the A&R Wintrust Revolving Loan at any time was $9.4 million and the average daily balance was approximately $0.1 million. For the three months ended March 31, 2022, the Company incurred interest on the A&R Wintrust Revolving Loan at a weighted average annual interest rate of 4.00%. For the three months ended March 31, 2022, commitment fees of approximately $14 thousand were paid to maintain credit availability under the A&R Wintrust Revolving Loan.
At March 31, 2022, the Company had irrevocable letters of credit in the amount of $3.3 million with the lenders under the A&R Wintrust Credit Agreement to secure obligations under its self-insurance program.
The following is a summary of the applicable margin and commitment fees payable on the available A&R Wintrust Term Loan and A&R Wintrust Revolving Loan credit commitment:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Level | | Senior Leverage Ratio | | Additional Margin for Prime Rate loans | | Additional Margin for Prime Revolving loans | | Additional Margin for Eurodollar Term loans |
I | | Greater than 1.00 to 1.00 | | 1.00 | % | | 0.50 | % | | 0.25 | % |
II | | Less than or equal to 1.00 to 1.00 | | 0.25 | % | | — | % | | 0.25 | % |
As of March 31, 2022, the Company was in compliance with all financial maintenance covenants as required by the A&R Wintrust Loans.
The following is a summary of the additional margin and commitment fees payable on the available Wintrust Term Loan and Wintrust Revolving Loan credit commitment:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Level | | Senior Leverage Ratio | | Additional Margin for Prime Rate loans | | Additional Margin for Prime Revolving loans | | Additional Margin for Eurodollar Term loans | | Additional Margin for Eurodollar Revolving loans | | Commitment Fee |
I | | Greater than 1.00 to 1.00 | | 1.00 | % | | 0.50 | % | | 4.00 | % | | 3.50 | % | | 0.25 | % |
II | | Less than or equal to 1.00 to 1.00 | | 0.25 | % | | 0 | % | | 3.50 | % | | 3.00 | % | | 0.25 | % |
At June 30, 2021, the interest rate in effect on the Wintrust Term Loan was 4.25% and the interest rate in effect on the Wintrust Revolving Loan was 3.75%.
At June 30, 2021, the Company had irrevocable letters of credit in the amount of $3.4 million with its lender to secure obligations under its self-insurance program.
Note 87 – Equity
The Company’s second amended and restated certificate of incorporation currently authorizes the issuance of 100,000,000 shares of common stock, par value $0.0001, and 1,000,000 shares of preferred stock, par value $0.0001. The Public, Private and $15 Exercise Price Sponsor warrants were issued in
Warrants
In conjunction with the Company's initial public offering, the Company issued Public Warrants, Private Warrants and the$15 Exercise Price Sponsor Warrants. The Company issued certain Merger Warrants and Additional Merger warrants were issuedWarrants in conjunction with the Company's business combination with LHLLC.
LHLLC in July 2016 (the “Business Combination”). On July 20, 2021, the Public Warrants, Private Warrants, and Additional Merger Warrants expired by their terms.
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Public Warrants(1)(5) | 2,140,219 | | | 2,300,000 | |
Private Warrants(1)(5) | 99,000 | | | 99,000 | |
$15 Exercise Price Sponsor Warrants(2)(5) | 600,000 | | | 600,000 | |
Merger Warrants(3)(6) | 629,643 | | | 631,119 | |
Additional Merger Warrants(4)(6) | 935,068 | | | 946,680 | |
Total | 4,403,930 | | | 4,576,799 | |
(1) Exercisable for one-half of one shareThe following table summarizes the underlying shares of common stock at an exercise price of $5.75 per half share ($11.50 per whole share)with respect to outstanding warrants:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| | | |
| | | |
$15 Exercise Price Sponsor Warrants(1)(2) | 600,000 | | | 600,000 | |
Merger Warrants(3)(4) | 629,643 | | | 629,643 | |
| | | |
Total | 1,229,643 | | | 1,229,643 | |
(2)(1) Exercisable for 1 share of common stock at an exercise price of $15.00 per share (“$15 Exercise Price Sponsor Warrants”).
(3)(2) Exercisable for 1 share of common share at an exercise price of $12.50 per share
(4) Exercisable for 1 share of common stock at an exercise price of $11.50 per share
(5)Issued under a warrant agreement dated July 15, 2014, between Continental Stock Transfer and Trust Company, as warrant agent, and the CompanyCompany.
(6)(3) Exercisable for 1 share of common stock at an exercise price of $12.50 per share (“Merger Warrants”).
(4) Issued to the sellers of LHLLCLHLLC.
Subsequent to June 30, 2021, on July 20, 2021, the Public Warrants, Private Warrants, and Additional Merger Warrants expired by their terms.
On May 24, 2020 the Board of Directors approved further amendments to the Company's amended and restated Omnibus Incentive Plan to increase
Upon the number of sharesconsummation of the Company's common stock that mayBusiness Combination, the Company adopted an omnibus incentive plan (the “Omnibus Incentive Plan”) for which all future equity awards will be issued pursuant to awards by 500,000, for a total of 1,650,000 shares, and extend the term of the plan so that it will expire on the tenth anniversary of the date the stockholders approve the Amended Incentive Plan. The amendments were approved by the Company's stockholders at the Annual Meeting held on July 14, 2020.granted thereunder.
On March 9, 2021, the Board of Directors approved furthercertain amendments to the Company's amended and restated Omnibus Incentive Plan (the “2021 Amended and Restated Omnibus Incentive Plan”) to increase the number of shares of the Company's common stock that may be issued pursuant to awards by 600,000, for a total of 2,250,000 shares, and extendextended the term of the plan so that it will expire on the tenth anniversary of the date the stockholders approve the 2021 Amended and Restated Omnibus Incentive Plan. The amendments were approved by the Company's stockholders at the Annual Meeting held on June 16, 2021.
See Note 17 - Management Incentive Plans14 for RSUsa discussion of the Company's management incentive plans for restricted stock units (“RSUs”) granted, vested, forfeited and remaining unvested.
Employee Stock Purchase Plan
Upon approval of the Company's stockholders on May 30, 2019, the Company adopted the Limbach Holdings, Inc. 2019 Employee Stock Purchase Plan (“the ESPP”(the “ESPP”). On January 1, 2020, the ESPP went into effect. The ESPP enables eligible employees, as defined by the ESPP, the right to purchase the Company's common stock through payroll deductions during consecutive subscription periods at a purchase price of not less than 85% of the fair market value of a common share at the end of each offering period. Annual purchases by participants are limited to the number of whole shares that can be purchased by an amount equal to 10 percent of the participant's compensation or $5,000, whichever is less. Each offering period of the ESPP lasts six months, commencing on January 1 and July 1 of each year. The amounts collected from participants during a subscription period are used on the exercise date to purchase full shares of common stock. Participants may withdraw from an offering before the exercise date and obtain a refund of amounts withheld through payroll deductions. Compensation cost, representing the 15% discount applied to the fair market value of common stock, is recognized on a straight-line basis over the six-month vesting period during which employees perform related services. Under the ESPP, 500,000 shares are authorized to be issued. In July 2020 and January 2021,2022, the Company issued 30,825 and 8,92812,898 shares of its common stock respectively, to participants in the ESPP who contributed to the plan throughduring the June 30, 2020 andoffering period ending December 31, 20202021. In January 2021, the Company issued a total of 8,928 shares of its common stock to participants in the ESPP who contributed to the plan during the offering periods, respectively.period ending December 31, 2020. As of March 31, 2022, 431,209 shares remain available for future issuance under the ESPP.
2021 Public Offering
On February 10, 2021 the Company entered into an underwriting agreement (“Underwriting Agreement”) with Lake Street Capital Markets, LLC (“Underwriter”) relating to an underwritten public offering (the “Offering”“2021 Public Offering”). On February 12, 2021, the Company sold to the Underwriter 1,783,500 shares of its Common Stock. The Underwriting Agreement provided for purchase and sale of the Shares by the company to the Underwriter at a price of $11.28 per share. The price to the public in the 2021 Public Offering was $12.00 per share. In addition, under the terms of the Underwriting Agreement, the Company granted the Underwriter a 30-day option to purchase up to an additional 267,525 shares of Common Stock to cover over-allotments, if any, on the same terms and conditions. The net proceeds to the Company from the 2021 Public Offering after deducting the underwriting discounts and commissions were approximately $19.8 million. On February 18, 2021, the Company received approximately $3.0 million of net proceeds for the sale of 267,525 shares in connection with the exercise of the over-allotment option.
Note 98 – Fair Value Measurements
The Company measures the fair value of financial assets and liabilities in accordance with ASC Topic 820 – Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
•Level 1 — inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date;
•Level 2 — inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly such as quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of assets or liabilities; and
•Level 3 — unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
The Company believes that the carrying amounts of its financial instruments, including cash and cash equivalents, trade accounts receivable and accounts payable, consist primarily of instruments without extended maturities, which approximate fair value primarily due to their short-term maturities and low risk of counterparty default. WeThe Company also believebelieves that the carrying valuevalues of the 2019 Refinancing Agreement term loan and 2021A&R Wintrust Term Loan approximates itsand the A&R Wintrust Revolving Loan approximate their respective fair values due to the variable raterates on such debt. As of February 24, 2021 and DecemberMarch 31, 2020,2022, the Company determined that the fair value of its 2019 Revolving Agreement term loan was $39.0 million. As of June 30, 2021, the Company determined that the fair value of its 2021A&R Wintrust Term Loan was $28.0$33.0 million and the A&R Wintrust Revolving Loan was $9.4 million. There were 0 outstanding borrowings on the Company's 2019 ABL Credit Agreement revolver at February 24, 2021 and December 31, 2020. Such fair values werevalue was determined using discounted estimated future cash flows using level 3 inputs.
As a part of the total consideration for the Jake Marshall Transaction, the Company recognized $3.1 million in contingent consideration, of which the entire balance was included in other long-term liabilities in the Company’s condensed consolidated balance sheet as of March 31, 2022. The Company determined the initial fair value of the Earnout Payments based on the Monte Carlo Simulation method, which represented a Level 3 measurement. As of the Effective Date, the Earnout Payments associated with the Jake Marshall Transaction were valued utilizing a discount rate of 6.83%. The discount rate was calculated using the build-up method with a risk-free rate commensurate with the term of the Earnout Payments based on the U.S. Treasury Constant Maturity Yield. Subsequent to the Effective Date, the Earnout Payments are re-measured at fair value each reporting period. No changes in the estimated fair value of the contingent payments were recognized during the three months ended March 31, 2022.
Prior to its termination as a result of the 2021 Refinancing, the Company's CB Warrants were determined using the Black-Scholes-Merton option pricing model. The valuation inputs included the quoted price of the Company’s common stock in an active market, volatility and expected life of the warrants, which were considered Level 3 inputs. The CB Warrants liability was included in other long-term liabilities on the Company's Condensed Consolidated Balance Sheets. The Company remeasured the fair value of the CB Warrants liability as of February 24, 2021 and recorded any adjustments to other income (expense). At February 24, 2021, the CB Warrants liability was $2.0 million. Due to the extinguishment of the CB Warrants on the 2021 Refinancing Date, there was no liability associated with the CB Warrants recorded as of March 31, 2021. For the period from January 1, 2021 through the 2021 Refinancing Date, the Company recorded other income of $14 thousand to reflect the change in the CB Warrants liability.
Note 109 – Earnings per Share
Earnings per Share
The Company calculates earnings per share in accordance with ASC Topic 260 - Earnings Per Share (“EPS”). Basic earnings per common share applicable to common stockholders is computed by dividing earnings applicable to common stockholders by the weighted-average number of common shares outstanding and assumed to be outstanding. Diluted EPS assumes the dilutive effect of outstanding common stock warrants, shares issued in conjunction with the Company’s ESPP and RSUs, all using the treasury stock method.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
(in thousands, except per share amounts) | | 2021 | | 2020 | | 2021 | | 2020 |
EPS numerator: | | | | | | | | |
Net income (loss) | | $ | 732 | | | $ | 2,947 | | | $ | (1,550) | | | $ | 2,895 | |
| | | | | | | | |
EPS denominator: | | | | | | | | |
Weighted average shares outstanding – basic | | 10,252 | | | 7,846 | | | 9,738 | | | 7,822 | |
Impact of dilutive securities | | 217 | | | 59 | | | 0 | | | 56 | |
Weighted average shares outstanding – diluted | | 10,469 | | | 7,905 | | | 9,738 | | | 7,878 | |
| | | | | | | | |
EPS: | | | | | | | | |
Basic | | $ | 0.07 | | | $ | 0.38 | | | $ | (0.16) | | | $ | 0.37 | |
Diluted | | $ | 0.07 | | | $ | 0.37 | | | $ | (0.16) | | | $ | 0.37 | |
The following table sets forth the computation of the basic and diluted earnings per share attributable to the Company's common shareholders for the three months ended March 31, 2022 and 2021: | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | | | |
(in thousands, except per share amounts) | | 2022 | | 2021 | | | | |
EPS numerator: | | | | | | | | |
Net loss | | $ | (1,516) | | | $ | (2,282) | | | | | |
| | | | | | | | |
EPS denominator: | | | | | | | | |
Weighted average shares outstanding – basic | | 10,421 | | | 9,218 | | | | | |
Impact of dilutive securities(1) | | — | | | — | | | | | |
Weighted average shares outstanding – diluted | | 10,421 | | | 9,218 | | | | | |
| | | | | | | | |
EPS: | | | | | | | | |
Basic | | $ | (0.15) | | | $ | (0.25) | | | | | |
Diluted | | $ | (0.15) | | | $ | (0.25) | | | | | |
(1) For the three months ended March 31, 2022 and 2021, the Company excluded 153,741 and 603,847, respectively, of weighted average anti-dilutive securities related to certain of the Company's outstanding common stock warrants, shares issued in conjunction with the Company's ESPP and nonvested RSUs.
The following table summarizes the securities that were antidilutive or out-of-the-money, and therefore, were not included in the computations of diluted lossincome per common share:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, | | Six months ended June 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
In-the-money warrants | 0 | | | 0 | | | 0 | | | 0 | |
Out-of-the-money warrants (see Note 8) | 4,403,930 | | | 4,576,799 | | | 4,403,930 | | | 4,576,799 | |
Service-based RSUs (See Note 17) | 334 | | | 463 | | | 142,120 | | | 1,255 | |
Performance and market-based RSUs(1) | 13,929 | | | 9,674 | | | 79,971 | | | 0 | |
Employee Stock Purchase Plan | 0 | | | 0 | | | 4,778 | | | 0 | |
Total | 4,418,193 | | | 4,586,936 | | | 4,630,799 | | | 4,578,054 | |
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | |
| 2022 | | 2021 | | | | |
In-the-money warrants | — | | | 365,556 | | | | | |
Out-of-the-money warrants (see Note 7) | 1,229,643 | | | 600,000 | | | | | |
Service-based RSUs (See Note 14) | 70,999 | | | 143,647 | | | | | |
Performance and market-based RSUs(1) | 87,053 | | | 90,729 | | | | | |
Employee Stock Purchase Plan | 3,547 | | | 3,627 | | | | | |
Total | 1,391,242 | | | 1,203,559 | | | | | |
(1) For the three and six months ended June 30,March 31, 2022 and 2021, and 2020, certain PRSU and MRSU awards (each defined in Note 14) were not included in the computation of diluted lossincome per common share because the performance and market conditions were not satisfied during the periods and would not be satisfied if the reporting date was at the end of the contingency period.
Note 1110 – Income Taxes
The Company is taxed as a C corporation.
For interim periods, the provision for income taxes (including federal, state, local and foreign taxes) is calculated based on the estimated annual effective tax rate, adjusted for certain discrete items for the full fiscal year. Cumulative adjustments to the Company's estimate are recorded in the interim period in which a change in the estimated annual effective rate is determined.
Each quarter we update ourthe Company updates its estimate of the annual effective tax rate, and if ourits estimated tax rate changes, we makethe Company makes a cumulative adjustment.
The Company had an effective tax benefit rate of 26.5%28.9% and an31.2% for the three months ended March 31, 2022 and 2021, respectively. The decrease in the effective tax benefit rate was the result of 33.2% forcertain discrete tax items. During the three and six months ended June 30,March 31, 2022 and 2021, respectively. For the three and six months ended June 30, 2020, the Company had an incomerecorded discrete tax rateitems of 27.4%approximately $0.1 million and 14.1%, respectively.$0.2 million, respectively, related to excess tax benefits associated with stock based compensation.
NaNNo valuation allowance was required as of June 30, 2021March 31, 2022 or December 31, 2020.
The Company had previously recorded a liability for unrecognized tax benefits (“UTB”) related to tax positions taken on its various income tax returns in open tax periods. If recognized, a portion of unrecognized tax benefits would favorably impact the effective tax rate that is reported in future periods. The Company filed to change an improper tax method of accounting in the fourth quarter of 2020 related to the UTB that affords the Company IRS audit protection in past periods. Therefore, the total unrecognized tax benefits were reduced in the fourth quarter of 2020.
The following is a reconciliation of the beginning and ending unrecognized tax benefits:
| | | | | | | | | | | |
| June 30, 2021 | | December 31, 2020 |
Balance at beginning of period | $ | 0 | | | $ | 1,130 | |
Gross increases in prior period tax positions | 0 | | | 0 | |
Gross increases in current period tax positions | 0 | | | 0 | |
Decreases related to prior year tax positions | 0 | | | (1,130) | |
Balance at end of period | $ | 0 | | | $ | 0 | |
2021.
Note 1211 – Operating Segments
TheAs discussed in Note 1, the Company determined its operating segments on the same basis that it assesses performance and makes operating decisions. The Company manages and measures the performance of its businessoperates in 2 distinct operating segments. As of January 1, 2021,segments, (i) GCR, in which the Company renamed its existing 2 reportable segmentsgenerally manages new construction or renovation projects that involve primarily HVAC, plumbing, or electrical services awarded to reflect its 2 distinct approachesthe Company by general contractors or construction managers, and (ii) ODR, in which the Company provides maintenance or service primarily on HVAC, plumbing or electrical systems, building controls and specialty contracting projects direct to, our customer base and to better align with our owner direct strategy. The previously named Construction Segment is now known as General Contractor Relationships (“GCR”); the previously named Service Segment is now known as Owner Direct Relationships (“ODR”).or assigned by, building owners or property managers. These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of allocating resources and assessing performance. The Company's CODM is comprised of its Chief Executive Officer, Chief Financial Officer and Chief Operating Officer.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The CODM evaluates performance based on income from operations of the respective segmentsbranches after the allocation of corporateCorporate office operating expenses. In accordance with ASC Topic 280 – Segment Reporting, the Company has elected to aggregate all of the construction activitybranches into 1 GCR reportable segment and all of the service branches into 1 ODR reportable segment. All transactions between segments are eliminated in consolidation. OurThe Company's corporate department provides general and administrative support services to ourits 2 operating segments. The CODM allocates costs between segments for selling, general and administrative expenses and depreciation expense.
All of the Company’s identifiable assets are located in the United States, which is where the Company is domiciled. Interest expense is not allocated to segments because of the corporate management of debt service including interest.
Condensed consolidated segment information for the three months ended March 31, 2022 and 2021 were as follows:
Condensed consolidated | | | | | | | | | | | | | | | |
| Three months ended March 31, | | |
(in thousands) | 2022 | | 2021 | | | | |
Statement of Operations Data: | | | | | | | |
Revenue: | | | | | | | |
GCR | $ | 71,932 | | | $ | 84,804 | | | | | |
ODR | 42,890 | | | 28,540 | | | | | |
Total revenue | 114,822 | | | 113,344 | | | | | |
| | | | | | | |
Gross profit: | | | | | | | |
GCR | 8,358 | | | 9,395 | | | | | |
ODR | 9,982 | | | 7,834 | | | | | |
Total gross profit | 18,340 | | | 17,229 | | | | | |
| | | | | | | |
Selling, general and administrative: | | | | | | | |
GCR | 8,565 | | | 9,114 | | | | | |
ODR | 9,570 | | | 7,354 | | | | | |
Corporate | 599 | | | 677 | | | | | |
Total selling, general and administrative | 18,734 | | | 17,145 | | | | | |
Amortization of intangibles | 399 | | | 104 | | | | | |
Operating loss | $ | (793) | | | $ | (20) | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Less unallocated amounts: | | | | | | | |
Interest expense, net | (486) | | | (1,264) | | | | | |
Loss on disposition of property and equipment | (36) | | | (86) | | | | | |
Loss on early termination of operating lease | (817) | | | — | | | | | |
Loss on early debt extinguishment | — | | | (1,961) | | | | | |
Gain on change in fair value of warrant liability | — | | | 14 | | | | | |
Total unallocated amounts | (1,339) | | | (3,297) | | | | | |
Loss before income taxes | $ | (2,132) | | | $ | (3,317) | | | | | |
| | | | | | | |
Other Data: | | | | | | | |
Depreciation and amortization: | | | | | | | |
GCR | $ | 1,108 | | | $ | 1,036 | | | | | |
ODR | 555 | | | 355 | | | | | |
Corporate | 399 | | | 104 | | | | | |
Total other data | $ | 2,062 | | | $ | 1,495 | | | | | |
The Company does not identify capital expenditures and total assets by segment information forin its internal financial reports due in part to the three months ended June 30, 2021shared use of a centralized fleet of vehicles and 2020specialized equipment. Interest expense is as follows:
| | | | | | | | | | | |
| Three months ended June 30, |
(in thousands) | 2021 | | 2020 |
Statement of Operations Data: | | | |
Revenue: | | | |
GCR | $ | 87,550 | | | $ | 105,937 | |
ODR | 33,469 | | | 29,248 | |
Total revenue | 121,019 | | | 135,185 | |
| | | |
Gross profit: | | | |
GCR | 8,885 | | | 12,213 | |
ODR | 9,805 | | | 8,122 | |
Total gross profit | 18,690 | | | 20,335 | |
| | | |
Selling, general and administrative: | | | |
GCR | 9,070 | | | 8,024 | |
ODR | 7,526 | | | 5,588 | |
Corporate | 636 | | | 140 | |
Total selling, general and administrative | 17,232 | | | 13,752 | |
Amortization of intangibles | 104 | | | 274 | |
Operating income | $ | 1,354 | | | $ | 6,309 | |
| | | |
Operating income for reportable segments | $ | 1,354 | | | $ | 6,309 | |
| | | |
Less unallocated amounts: | | | |
Interest expense, net | (452) | | | (2,137) | |
| | | |
Gain (loss) on disposition of property and equipment | 94 | | | (13) | |
Loss on change in fair value of warrant liability | 0 | | | (102) | |
Total unallocated amounts | (358) | | | (2,252) | |
Income before income taxes | $ | 996 | | | $ | 4,057 | |
| | | |
Other Data: | | | |
Depreciation and amortization: | | | |
GCR | $ | 1,020 | | | $ | 1,032 | |
ODR | 345 | | | 330 | |
Corporate | 104 | | | 274 | |
Total other data | $ | 1,469 | | | $ | 1,636 | |
Summarized segment information is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, 2021 | | Three months ended June 30, 2020 |
(in thousands) | GCR | | ODR | | Total | | GCR | | ODR | | Total |
| | | | | | | | | | | |
Revenue | $ | 87,550 | | | $ | 33,469 | | | $ | 121,019 | | | $ | 105,937 | | | $ | 29,248 | | | $ | 135,185 | |
Gross Profit | 8,885 | | | 9,805 | | | 18,690 | | | 12,213 | | | 8,122 | | | 20,335 | |
Selling, general and administrative | 9,070 | | | 7,526 | | | 16,596 | | | 8,024 | | | 5,588 | | | 13,612 | |
EBIT | $ | (185) | | | $ | 2,279 | | | $ | 2,094 | | | $ | 4,189 | | | $ | 2,534 | | | $ | 6,723 | |
Reconciliationthe Company’s corporate management of segment gross profit to income before income taxes:
| | | | | | | | | | | |
| Three months ended June 30, |
(in thousands) | 2021 | | 2020 |
Total gross profit from reportable segments | $ | 18,690 | | | $ | 20,335 | |
Selling, general and administrative | (17,232) | | | (13,752) | |
Amortization of intangibles | (104) | | | (274) | |
Total other expenses | (358) | | | (2,252) | |
Income before income taxes | $ | 996 | | | $ | 4,057 | |
Condensed consolidated segment information for the six months ended June 30, 2021 and 2020 is as follows: | | | | | | | | | | | |
| Six months ended June 30, |
(in thousands) | 2021 | | 2020 |
Statement of Operations Data: | | | |
Revenue: | | | |
GCR | $ | 172,354 | | | $ | 215,423 | |
ODR | 62,009 | | | 58,534 | |
Total revenue | 234,363 | | | 273,957 | |
| | | |
Gross profit: | | | |
GCR | 18,280 | | | 23,195 | |
ODR | 17,639 | | | 15,364 | |
Total gross profit | 35,919 | | | 38,559 | |
| | | |
Selling, general and administrative: | | | |
GCR | 18,184 | | | 18,200 | |
ODR | 14,880 | | | 11,917 | |
Corporate | 1,313 | | | 435 | |
Total selling, general and administrative | 34,377 | | | 30,552 | |
Amortization of intangibles | 208 | | | 417 | |
Operating income | $ | 1,334 | | | $ | 7,590 | |
| | | |
Operating income for reportable segments | $ | 1,334 | | | $ | 7,590 | |
| | | |
Less unallocated amounts: | | | |
Interest expense, net | (1,716) | | | (4,295) | |
| | | |
Gain on disposition of property and equipment | 8 | | | 17 | |
Loss on early debt extinguishment | (1,961) | | | 0 | |
Gain on change in fair value of warrant liability | 14 | | | 59 | |
Total unallocated amounts | (3,655) | | | (4,219) | |
(Loss) income before income taxes | $ | (2,321) | | | $ | 3,371 | |
| | | |
Other Data: | | | |
Depreciation and amortization: | | | |
GCR | $ | 2,056 | | | $ | 2,062 | |
ODR | 700 | | | 661 | |
Corporate | 208 | | | 417 | |
Total other data | $ | 2,964 | | | $ | 3,140 | |
Summarized segment information is as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, 2021 | | Six months ended June 30, 2020 |
(in thousands) | GCR | | ODR | | Total | | GCR | | ODR | | Total |
| | | | | | | | | | | |
Revenue | $ | 172,354 | | | $ | 62,009 | | | $ | 234,363 | | | $ | 215,423 | | | $ | 58,534 | | | $ | 273,957 | |
Gross Profit | 18,280 | | | 17,639 | | | 35,919 | | | 23,195 | | | 15,364 | | | 38,559 | |
Selling, general and administrative | 18,184 | | | 14,880 | | | 33,064 | | | 18,200 | | | 11,917 | | | 30,117 | |
EBIT | $ | 96 | | | $ | 2,759 | | | $ | 2,855 | | | $ | 4,995 | | | $ | 3,447 | | | $ | 8,442 | |
Reconciliation of segment gross profit to (loss) income before income taxes:
| | | | | | | | | | | |
| Six months ended June 30, |
(in thousands) | 2021 | | 2020 |
Total gross profit from reportable segments | $ | 35,919 | | | $ | 38,559 | |
Selling, general and administrative | (34,377) | | | (30,552) | |
Amortization of intangibles | (208) | | | (417) | |
Total other expenses | (3,655) | | | (4,219) | |
(Loss) income before income taxes | $ | (2,321) | | | $ | 3,371 | |
debt service, including interest.Note 1312 - Leases
The Company leases real estate, trucks and other equipment. The determination of whether an arrangement is, or contains, a lease is performed at the inception of the arrangement. Classification and initial measurement of the right-of-use asset and lease liability are determined at the lease commencement date. The Company elected the short-term lease measurement and recognition exemption; therefore, leases with an initial term of 12 months or less are not recorded on the condensed consolidated balance sheets. Instead, the short-term leases are recognized in expense on a straight-line basis over the lease term.
The Company's arrangements include certain non-lease components such as common area and other maintenance for leased real estate, as well as mileage, fuel and maintenance costs related to leased vehicles. For all leased asset classes, the Company has elected to not separate non-lease components from lease components and will account for each separate lease component and
non-lease component associated with the lease as a single lease component. The Company does not guarantee any residual value in its lease agreements, and there are no material restrictions or covenants imposed by lease arrangements. Real estate leases typically include one1 or more options to extend the lease. The Company regularly evaluates the renewal options, and when they are reasonably certain of exercise, the Company includes the renewal period in its lease term. For ourthe Company's leased vehicles, the Company uses the interest rate implicit in its leases with the lessor to discount lease payments at the lease commencement date. When the implicit rate is not readily available, as is the case with ourthe Company's real estate leases, the Company uses quoted borrowing rates on ourits secured debt.
Related Party Lease Agreement. In conjunction with the closing of the Jake Marshall Transaction, the Company entered into an operating lease for certain land and facilities owned by a former member of JMLLC who became a full-time employee of the Company. The lease term is 10 years and includes an option to extend the lease for 2 successive periods of 2 years each through November 2035. Base rent for the term of the lease is $37,500 per month for the first five years with payment commencing on January 1, 2022. The fixed rent payment is escalated to $45,000 per month for years 6 through 10 of the lease term. Fixed rent payments for the extension term shall be increased from $45,000 by the percentage increase, if any, in the consumer price index from the lease commencement date. In addition, under the agreement, the Company is required to pay its share of estimated property taxes and operating expenses, both of which are variable lease expenses.
Southern California Sublease. In June, 2021, the Company entered into a sublease agreement with a third party for the entire ground floor of its leased space in Southern California, consisting of 71,787 square feet. Under the terms of the sublease agreement, the sublessee is obligated to pay the Company base rent of approximately $0.6 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses and other costs. The initial lease term commenced in September 2021 and continues through April 30, 2027. As of March 31, 2022, the Company remains obligated under the original lease for such office space and, in the event the subtenant of such office space fails to satisfy its obligations under the sublease, the Company would be required to satisfy its obligations directly to the landlord under such original lease.
In addition, during the first quarter of 2022, the Company entered into an amendment to the aforementioned sublease agreement, which, among other things, expanded the sublease premises to include the entire second floor of its leased space in Southern California, consisting of 16,720 square feet. Under the terms of the amended sublease agreement, the sublessee is obligated to pay the Company base rent of approximately $0.8 million per year, which is subject to a 3.0% annual rent increase, plus certain operating expenses and other costs. The amended sublease term commenced in March 2022 and continues through April 30, 2027. For the three months ended March 31, 2022, the Company recorded approximately $0.2 million of income in selling, general and administrative expenses related to this sublease agreement.
Pittsburgh Lease Termination. In March, 2022, the Company entered into a lease termination agreement (the “Lease Termination Agreement”) to terminate, effective March 31, 2022, the lease associated with the Company’s office space located in Pittsburgh, Pennsylvania, which previously served as its corporate headquarters. Absent the Lease Termination Agreement, the lease would have expired in accordance with its terms in July 2025. Pursuant to the Lease Termination Agreement, in exchange for allowing the Company to terminate the lease early, the Company agreed to pay a termination fee in the aggregate of approximately $0.7 million in 16 equal monthly installments commencing on April 1, 2022.
In connection with the lease termination, the Company recognized a gain of $0.1 million associated with the derecognition of the operating lease right-of-use asset and corresponding operating lease liabilities associated with the operating lease and recorded a $0.1 million loss on the disposal of leasehold improvements.
The following table summarizes the lease amounts included in the Company's condensed consolidated balance sheets:
The following table summarizes the lease amounts included in our condensed consolidated balance sheets:
| (in thousands) | (in thousands) | Classification on the Condensed Consolidated Balance Sheets | | June 30, 2021 | | December 31, 2020 | (in thousands) | Classification on the Condensed Consolidated Balance Sheets | | March 31, 2022 | | December 31, 2021 |
Assets | Assets | | | | | | Assets | | | | | |
Operating | Operating | Operating lease right-of-use assets (a) | | $ | 16,852 | | | $ | 18,751 | | Operating | Operating lease right-of-use assets(1) | | $ | 17,719 | | | $ | 20,119 | |
Finance | Finance | Property and equipment, net (b) | | 5,251 | | | 6,242 | | Finance | Property and equipment, net(2) | | 5,111 | | | 4,916 | |
Total lease assets | Total lease assets | | $ | 22,103 | | | $ | 24,993 | | Total lease assets | | $ | 22,830 | | | $ | 25,035 | |
| Liabilities | Liabilities | | Liabilities | |
Current | Current | | Current | |
Operating | Operating | Current operating lease liabilities | | $ | 4,122 | | | $ | 3,929 | | Operating | Current operating lease liabilities | | $ | 3,762 | | | $ | 4,366 | |
Finance | Finance | Current portion of long-term debt | | 2,454 | | | 2,536 | | Finance | Current portion of long-term debt | | 2,458 | | | 2,451 | |
Noncurrent | Noncurrent | | Noncurrent | |
Operating | Operating | Long-term operating lease liabilities | | 13,454 | | | 15,459 | | Operating | Long-term operating lease liabilities | | 14,787 | | | 16,576 | |
Finance | Finance | Long-term debt | | 3,022 | | | 3,923 | | Finance | Long-term debt | | 2,859 | | | 2,681 | |
Total lease liabilities | Total lease liabilities | | $ | 23,052 | | | $ | 25,847 | | Total lease liabilities | | $ | 23,866 | | | $ | 26,074 | |
(1)
(a) Operating lease assets are recorded net of accumulated amortization of $13.9$15.6 million at June 30, 2021March 31, 2022 and $11.9$15.9 million at December 31, 2020.2021.
(b)(2) Finance lease assets are recorded net of accumulated amortization of $5.6$6.4 million at June 30, 2021March 31, 2022 and $5.3$5.9 million at December 31, 2020.
2021.
The following table summarizes the lease costs included in ourthe Company's condensed consolidated statements of operations for the three and six months ended June 30, 2021March 31, 2022 and 2020:2021:
| | | Three months ended June 30, | | Six months ended June 30, | | Three Months Ended March 31, | |
(in thousands) | (in thousands) | Classification on the Condensed Consolidated Statement of Operations | | 2021 | | 2020 | | 2021 | | 2020 | (in thousands) | Classification on the Condensed Consolidated Statement of Operations | | 2022 | | 2021 | |
Operating lease cost | Operating lease cost | Cost of revenue(a) | | $ | 685 | | | $ | 893 | | | $ | 1,375 | | | $ | 1,777 | | Operating lease cost | Cost of revenue(1) | | $ | 694 | | | $ | 690 | | |
Operating lease cost | Operating lease cost | Selling, general and administrative(a) | | 584 | | | 376 | | | 1,169 | | | 757 | | Operating lease cost | Selling, general and administrative(1) | | 704 | | | 584 | | |
Finance lease cost | Finance lease cost | | Finance lease cost | | |
Amortization | Amortization | Cost of revenue(b) | | 652 | | | 645 | | | 1,327 | | | 1,311 | | Amortization | Cost of revenue(2) | | 651 | | | 674 | | |
Interest | Interest | Interest expense, net(b) | | 78 | | | 86 | | | 164 | | | 179 | | Interest | Interest expense, net(2) | | 66 | | | 86 | | |
Total lease cost | Total lease cost | | $ | 1,999 | | | $ | 2,000 | | | $ | 4,035 | | | $ | 4,024 | | Total lease cost | | $ | 2,115 | | | $ | 2,034 | | |
(1)
(a) Operating lease costs recorded in cost of sales includesrevenue included $0.1 million and $0.2 million of variable lease costs for both the three and six months ended June 30, 2021, respectively,March 31, 2022 and $0.1 million and $0.4 million for the three and six months ended June 30, 2020, respectively.2021. In addition, $0.1 million and $0.2 million of variable leaseslease costs are included in Selling,selling, general and administrative for the three and six months ended June 30, 2021, respectively, and $0.1 million for both the three and six months ended June 30, 2020.March 31, 2022 and 2021. These variable costs consist of ourthe Company's proportionate share of operating expenses, real estate taxes and utilities.
(b)(2) Finance lease costs recorded in cost of revenue include variable lease costs of $0.7 million and $1.3$0.8 million for the three and six months ended June 30, 2021, respectively, March 31, 2022 and $0.5 million and $1.2$0.6 million for the three and six months ended June 30, 2020, respectively.March 31, 2021. These variable lease costs consist of fuel, maintenance, and sales tax charges. NaN variable lease costs for finance leases were recorded in selling, general and administrative.
Future minimum commitments for finance and operating leases that have non-cancelable lease terms in excess of one year as of June 30, 2021March 31, 2022 were as follows:
| | | | | | | | | | | |
Year ending (in thousands): | Finance Leases | | Operating Leases |
Remainder of 2021 | $ | 1,401 | | | $ | 2,479 | |
2022 | 2,404 | | | 4,616 | |
2023 | 1,409 | | | 3,516 | |
2024 | 598 | | | 2,917 | |
2025 | 50 | | | 2,409 | |
Thereafter | 0 | | | 4,043 | |
Total minimum lease payments | $ | 5,862 | | | $ | 19,980 | |
Amounts representing interest | (386) | | | |
Present value of net minimum lease payments | $ | 5,476 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Operating Leases |
Year ending (in thousands): | | Finance Leases | | Non-Related Party | | Related Party(1) | | Sublease Receipts(2) | | Total Operating |
Remainder of 2022 | | $ | 1,934 | | | $ | 3,252 | | | $ | 338 | | | $ | (623) | | | $ | 2,967 | |
2023 | | 1,758 | | | 3,108 | | | 450 | | | (885) | | | 2,673 | |
2024 | | 1,026 | | | 2,502 | | | 450 | | | (912) | | | 2,040 | |
2025 | | 500 | | | 2,148 | | | 450 | | | (939) | | | 1,659 | |
2026 | | 99 | | | 2,010 | | | 450 | | | (967) | | | 1,493 | |
Thereafter | | — | | | 2,033 | | | 4,815 | | | (327) | | | 6,521 | |
Total minimum lease payments | | $ | 5,317 | | | $ | 15,053 | | | $ | 6,953 | | | $ | (4,653) | | | $ | 17,353 | |
Amounts representing interest | | 358 | | | | | | | | | |
Present value of net minimum lease payments | | $ | 5,675 | | | | | | | | | |
(1) Associated with the aforementioned related party lease entered into with a former member of JMLLC.
(2) Associated with the aforementioned third party sublease.
The following is a summary of the lease terms and discount rates:
| | | | | | | | | | | | | | |
| | June 30, 2021 | | December 31, 2020 |
Weighted average lease term (in years): | | | | |
Operating | | 5.15 | | 5.48 |
Finance | | 2.49 | | 2.78 |
| | | | |
Weighted average discount rate: | | | | |
Operating | | 4.84 | % | | 4.83 | % |
Finance | | 5.45 | % | | 5.50 | % |
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Weighted average lease term (in years): | | | |
Operating | 7.30 | | 7.10 |
Finance | 2.60 | | 2.51 |
| | | |
Weighted average discount rate: | | | |
Operating | 4.67 | % | | 4.68 | % |
Finance | 5.14 | % | | 5.27 | % |
The following is a summary of other information and supplemental cash flow information related to finance and operating leases:
| | | | | | | | | | | | | | |
| | Six months ended June 30, |
(in thousands) | | 2021 | | 2020 |
Cash paid for amounts included in the measurement of lease liabilities: | | | | |
Operating cash flows from operating leases | | $ | 2,456 | | | $ | 2,910 | |
Operating cash flows from finance leases | | 164 | | | 179 | |
Financing cash flows from finance leases | | 1,318 | | | 1,285 | |
Right-of-use assets exchanged for lease liabilities: | | | | |
Operating leases | | $ | 156 | | | $ | 0 | |
Finance leases | | 336 | | | 1,050 | |
Right-of-use assets disposed or adjusted modifying operating leases liabilities | | $ | 36 | | | $ | 586 | |
Right-of-use assets disposed or adjusted modifying finance leases liabilities | | $ | 0 | | | $ | (64) | |
| | | | | | | | | | | | | | |
| | Three months ended March 31, |
(in thousands) | | 2022 | | 2021 |
Cash paid for amounts included in the measurement of lease liabilities: | | | | |
Operating cash flows from operating leases | | $ | 1,358 | | | $ | 1,225 | |
Operating cash flows from finance leases | | 66 | | | 86 | |
Financing cash flows from finance leases | | 660 | | | 667 | |
Right-of-use assets exchanged for lease liabilities: | | | | |
Operating leases | | — | | | 156 | |
Finance leases | | 864 | | | 87 | |
Right-of-use assets disposed or adjusted modifying operating leases liabilities | | (1,276) | | | 36 | |
Right-of-use assets disposed or adjusted modifying finance leases liabilities | | $ | (19) | | | — | |
Note 14 – Self-Insurance
The Company purchases workers’ compensation and general liability insurance under policies with per-incident deductibles of $250 thousand and a $4.4 million maximum aggregate deductible loss limit per year.
The components of the self-insurance liability as of June 30, 2021 and December 31, 2020 are as follows:
| | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 |
Current liability — workers’ compensation and general liability | $ | 105 | | | $ | 197 | |
Current liability — medical and dental | 511 | | | 764 | |
Non-current liability | 776 | | | 890 | |
Total liability shown in Accrued expenses and other current liabilities | $ | 1,392 | | | $ | 1,851 | |
Restricted cash | $ | 113 | | | $ | 113 | |
The restricted cash balance represents an imprest cash balance set aside for the funding of workers' compensation and general liability insurance claims. This amount is replenished either when depleted or at the beginning of each month.
Note 1513 – Commitments and Contingencies
Legal. The Company is continually engaged in administrative proceedings, arbitrations, and litigation with owners, general contractors, suppliers, and other unrelated parties, all arising in the ordinary courses of business. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to the condensed consolidated financial statements. In the opinion of the Company’s management, the current belief is that the results of these actions will not have a material adverse effect on the financial position, results of operations, or cash flows of the Company.
On November 13, 2019, claimant, Lanzo Trenchless Technologies, Inc. - North, filed a Demand for Arbitration in the state of Michigan against the Company's wholly-owned subsidiary, Limbach Company LLC. The demand seeks damages in excess of $0.4 million based upon the allegation that Limbach breached a construction contract by improperly terminating Lanzo’s subcontract, and for withholding payment from Lanzo based upon deficient performance. Limbach has asserted a counterclaim seeking damages caused by Lanzo’s deficient performance. Lanzo has recently abandoned its claims and the parties are attempting to negotiate a consent judgement in Limbach's favor that will result in the matter being concluded.
On January 23, 2020, plaintiff, Bernards Bros. Inc. (“Bernards”), filed a complaint against Limbach Holdings, Inc.the Company in Superior Court of the State of California for the County of Los Angeles against Limbach Holdings, Inc.Angeles. The complaint alleges that ourthe Company's Southern California operations refused to honor a proposal made to Bernards to act as a subcontractor on a construction project, and that, as a result of the
wrongful failure to honor the proposal, Bernards suffered damages in excess of $3.0 million, including alleged increased costs for hiring a different subcontractor to perform the work. The Company is vigorously defending the suit. A non-binding mediation is scheduled fortook place on August 19, 2021 that did not result in a settlement. Per the agreement of the Company and Bernards, in January 2022, the Court appointed a private referee to manage the case and adjudicate the dispute. A trial date before the private referee is currently expected to take place in February 2022.pending scheduling. The Company believes that a loss is neither probable nor reasonably estimable for this matter, and, as such, has not recorded a loss contingency.
On April 17, 2020, plaintiff, LA Excavating, Inc., filed a complaint against ourthe Company's wholly-owned subsidiary, Limbach Company LP, and several other parties, in Superior Court of the State of California, for the County of Los Angeles. The complaint seeks damages of approximately $1.0 million for alleged failure to pay contract balances and extra work ordered by Limbach Company LP, as well as seeks to enforce payment obligations under a payment and stop notice release bonds.bond. The Company disputes the allegations and intends to vigorously defend the suit, which is currently set for mediation on May 11, 2022 and trial in November of 2021.beginning on February 7, 2023. The Company believes that a loss is neither probable nor reasonably estimable for this matter, and, as such, has not recorded a loss contingency.
In July of 2020, plaintiff, KimballOn January 26, 2022, claimant, Suffolk Construction Co.,Company, Inc., (“Suffolk”) filed a complaintDemand for Arbitration in Massachusetts against ourBoston Medical Center Corporation (“BMC”) and numerous of Suffolk’s trade subcontractors, including, the Company’s wholly-owned subsidiary, Limbach Company LLC, in circuit Courtseeking to recover monies BMC withheld from Suffolk and its subcontractors based on an audit of project billings. Suffolk has demanded the Company defend and indemnify Suffolk against BMC’s audit findings that the Company overbilled the project just over $0.3 million and for Montgomery County, Maryland. The complaint seeks damagesthe Company’s share of approximately $1.7 million for alleged failure to pay contract balancesBMC’s audit costs, which share has not been, and extra work, as well as to enforce payment obligations under a payment bond issued by Limbach's surety provider.cannot currently be, quantified. The Company disputes the findings of BMC’s audit and Kimball have reachedintends to vigorously defend the allegation that it overbilled the project. A final arbitration hearing has not been scheduled. The Company believes that a cooperative resolution of these claims, which resulted inloss is neither probable nor reasonably estimable for this matter, and, as such, has not recorded a Stipulation of Dismissal of the suit on or about June 21, 2021.
Surety. The terms of ourits construction contracts frequently require that wethe Company obtain from surety companies, and provide to ourits customers, payment and performance bonds (“Surety Bonds”) as a condition to the award of such contracts. The Surety Bonds secure ourits payment and performance obligations under such contracts, and we havethe Company has agreed to indemnify the surety companies for amounts, if any, paid by them in respect of Surety Bonds issued on ourits behalf. In addition, at the request of labor unions representing certain of ourthe Company's employees, Surety Bonds are sometimes provided to secure obligations for wages and benefits payable to or for such employees. Public sector contracts require Surety Bonds more frequently than private sector contracts, and accordingly, ourthe Company's bonding requirements typically increase as the amount of public sector work increases. As of June 30, 2021,March 31, 2022, the Company had approximately $265.3$134.9 million in surety bonds outstanding. The Surety Bonds are issued by surety companies in return for premiums, which vary depending on the size and type of bond.
Collective Bargaining Agreements. Many of the Company’s craft labor employees are covered by collective bargaining agreements. The agreements require the Company to pay specified wages, provide certain benefits and contribute certain amounts to multi-employer pension plans. If the Company withdraws from any of the multi-employer pension plans or if the plans were to otherwise become underfunded, the Company could incur additional liabilities related to these plans. Although the Company has been informed that some of the multi-employer pension plans to which it contributes have been classified as “critical” status, the Company is not currently aware of any significant liabilities related to this issue.
Note 16 – Remaining Performance Obligations
Remaining performance obligations representSelf-insurance. The Company is substantially self-insured for workers’ compensation and general liability claims, in the transaction price of firm orders for which work has not been performed and exclude unexercised contract options. The Company’s remaining performance obligations includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions.
As of June 30, 2021, the aggregate amountview of the transaction prices allocatedrelatively high per-incident deductibles the Company absorbs under its insurance arrangements for these risks. The Company purchases workers’ compensation and general liability insurance under policies with per-incident deductibles of $250,000 per occurrence and a $4.4 million maximum aggregate deductible loss limit per year. Losses incurred over primary policy limits are covered by umbrella and excess policies up to specified limits with multiple excess insurers. The Company accrues for the remaining performance obligationsunfunded portion of costs for both reported claims and claims incurred but not reported. The liability for unfunded reported claims and future claims is reflected on the consolidated balance sheets as current and non-current liabilities. The liability is determined by determining a reserve for each reported claim on a case-by-case basis based on the nature of the Company's GCRclaim and ODR segment contracts were $378.9 million and $44.2 million, respectively. Ashistorical loss experience for similar claims plus an allowance for the cost of December 31, 2020, the aggregate amount of the transaction prices allocated to the remaining performance obligations of the Company's GCR and ODR segment contracts were $393.5 million and $35.7 million, respectively.
We estimate that 44% and 62% of our GCR and ODR segment remaining performance obligations as of June 30, 2021, respectively, will be recognized as revenue during 2021, with the substantial majority of remaining performance obligations to be recognized within 24 months, although the timing of the Company's performance isincurred but not always under its control.
Additionally, the difference between remaining performance obligations and backlog is due to the exclusion of areported claims. The current portion of the Company’s ODR agreements under certain contract types fromliability is included in accrued expenses and other current liabilities on the Company’s remaining performance obligations as these contracts can be canceled for convenience at any time byconsolidated balance sheet. The non-current portion of the liability is included in other long-term liabilities on the consolidated balance sheet.
The Company or the customer without considerable cost incurred by the customer. Additional informationis self-insured related to backlogmedical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits. The Company accrues for the unfunded portion of costs for both reported claims and claims incurred but not reported. The liability for unfunded reported claims and future claims is providedreflected on the consolidated balance sheets as a current liability in “Item 2. Management’s Discussionaccrued expenses and Analysisother current liabilities.
The components of Financial Conditionthe self-insurance liability as of March 31, 2022 and ResultsDecember 31, 2021 are as follows:
| | | | | | | | | | | |
(in thousands) | March 31, 2022 | | December 31, 2021 |
Current liability — workers’ compensation and general liability | $ | 173 | | | $ | 184 | |
Current liability — medical and dental | 373 | | | 456 | |
Non-current liability | 447 | | | 451 | |
Total liability | $ | 993 | | | $ | 1,091 | |
Restricted cash | $ | 113 | | | $ | 113 | |
The restricted cash balance represents an imprest cash balance set aside for the funding of this Quarterly Report on Form 10-Q.workers' compensation and general liability insurance claims. This amount is replenished either when depleted or at the beginning of each month.
Note 1714 – Management Incentive Plans
The Company initially adopted the Omnibus Incentive Plan on July 20, 2016 for the purpose of: (a) encouraging the profitability and growth of the Company through short-term and long-term incentives that are consistent with the Company’s objectives; (b) giving participants an incentive for excellence in individual performance; (c) promoting teamwork among participants; and (d) giving the Company a significant advantage in attracting and retaining key employees, directors and consultants. To accomplish such purposes, the Omnibus Incentive Plan, and such subsequent amendments to the Omnibus Incentive Plan, provides that the Company may grant options, stock appreciation rights, restricted shares, restricted stock units,RSUs, performance-based awards (including performance-based restricted shares and restricted stock units), other share based awards, other cash-based awards or any combination of the foregoing.
Following the further amendmentapproval of the 2021 Amended and restatement of theRestated Omnibus Incentive Plan, upon approval of the Company's stockholders on June 16, 2021, the Company has reserved a total of 2,250,000 shares of its common stock for issuance under the Omnibus Incentive Plan.issuance. The number of shares issued or reserved pursuant to the Omnibus Incentive Plan will be adjusted by the plan administrator, as they deem appropriate and equitable, as a result of stock splits, stock dividends, and similar changes in the Company’s common stock. In connection with the grant of an award, the plan administrator may provide for the treatment of such award in the event of a change in control. All awards are made in the form of shares only.
Service-Based Awards
DuringThe Company grants service-based stock awards in the first six monthsform of 2021, the CompanyRSUs. Service-based RSUs granted 120,899 service-based RSUs to its executives, certain employees, and non-employee directors undervest ratably, on an annual basis, over three years and in the Omnibus Incentive Plan.
certain awards to non-employee directors, one year. The grant date fair value of the service-based awards was equal to the closing market price of the Company’s common stock on the date of grant.
The following table summarizes ourthe Company's service-based RSU activity for the sixthree months ended June 30, 2021:March 31, 2022:
| | | Awards | | Weighted-Average Grant Date Fair Value | | Awards | | Weighted-Average Grant Date Fair Value |
Unvested at December 31, 2020 | 285,799 | | | $ | 6.32 | | |
Unvested at December 31, 2021 | | Unvested at December 31, 2021 | 266,089 | | | $ | 8.45 | |
Granted | Granted | 120,899 | | | 12.25 | | Granted | 180,739 | | | 9.00 | |
Vested | Vested | (106,383) | | | 6.66 | | Vested | (120,401) | | | 7.43 | |
Forfeited | Forfeited | (2,333) | | | 8.27 | | Forfeited | (10,958) | | | 9.29 | |
Unvested at June 30, 2021 | 297,982 | | | $ | 8.59 | | |
Unvested at March 31, 2022 | | Unvested at March 31, 2022 | 315,469 | | | $ | 9.13 | |
Performance-Based Awards
During the first six months of 2021, theThe Company granted 185,367grants performance-based RSUsrestricted stock units (“PRSUs”) under which shares of the Company’s common stock may be earned based on the Company’s performance compared to its executivesdefined metrics. The number of shares earned under a performance award may vary from zero to 150% of the target shares awarded, based upon the Company’s performance compared to the metrics. The metrics used for the grant are determined by the Company’s Compensation Committee of the Board of Directors and are based on internal measures such as the achievement of certain employees under the Omnibus Incentive Plan. predetermined adjusted EBITDA, EPS growth and EBITDA margin performance goals over a three year period.
The Company will recognizerecognizes stock-based compensation expense for these awards over the vesting period based on the projected probability of achievement of certainthe performance conditions as of the end of each reporting period during the performance period and may periodically adjust the recognition of such expense, as necessary, in response to any changes in the Company’s
forecasts with respect to the performance conditions. For both the three and six months ended June 30,March 31, 2022 and 2021, the Company recognized $0.2 million and $0.4 million, respectively, of stock-based compensation expense related to outstanding PRSUs. For the three and six months ended June 30, 2020, the Company recognized $0.1 million of stock-based compensation expense related to outstanding PRSUs.
The following table summarizes ourthe Company's PRSU activity for the sixthree months ended June 30, 2021:March 31, 2022:
| | | Awards | | Weighted-Average Grant Date Fair Value | | Awards | | Weighted-Average Grant Date Fair Value |
Unvested at December 31, 2020 | 99,500 | | | $ | 4.23 | | |
Unvested at December 31, 2021 | | Unvested at December 31, 2021 | 280,700 | | | $ | 9.46 | |
Granted | Granted | 185,367 | | | 12.26 | | Granted | 249,885 | | | 7.17 | |
Vested | Vested | 0 | | | 0 | | Vested | — | | | — | |
Forfeited | Forfeited | (4,167) | | | 8.92 | | Forfeited | (6,500) | | | 9.04 | |
Unvested at June 30, 2021 | 280,700 | | | $ | 9.46 | | |
Unvested at March 31, 2022 | | Unvested at March 31, 2022 | 524,085 | | | $ | 8.38 | |
Market-Based Awards
The following table summarizes the Company's market-based RSU (“MRSUs”) activity for the three months ended March 31, 2022:
| | | | | | | | | | | |
| Awards | | Weighted-Average Grant Date Fair Value |
Unvested at December 31, 2021 | 102,500 | | | $ | 8.26 | |
Granted | — | | | — | |
Vested | — | | | — | |
Forfeited | — | | | — | |
Unvested at March 31, 2022 | 102,500 | | | $ | 8.26 | |
The vesting of the MRSUs is contingent upon the Company’s closing price of a share of the Company's common stock on the Nasdaq Capital market, or such other applicable principal securities exchange or quotation system, achieving at least $18.00 over a period of eighty (80) consecutive trading days during the three-year period commencing on August 1, 2018 and concluding on July 31, 2021. On September 4, 2020, the Compensation Committee (the “Committee”) of the Board of Directors of the Company approved amendmentsan amendment to certain restricted stock units initially awarded on August 30, 2017 by the Company to certain employees. Pursuant to the amendment adopted on September 4, 2020,extend the measurement period was extended to July 16, 2022. In addition to the market performance-based vesting condition, the vesting of such restricted stock unit is subject to continued employment from August 1, 2017 through the later of July 31, 2019 or the date on which the Committee certifies the achievement of the performance goal. The Company has accounted for this amendment as a Type I modification and will recognize approximately $0.2 million of incremental stock-based compensation expense over 1.26 years based on an updated Monte Carlo simulation model.
The following table summarizes our market-based RSU (“MRSUs”) activity for the six months ended June 30, 2021:
| | | | | | | | | | | |
| Awards | | Weighted-Average Grant Date Fair Value |
Unvested at December 31, 2020 | 102,500 | | | $ | 8.26 | |
Granted | 0 | | | 0 | |
Vested | 0 | | | 0 | |
Forfeited | 0 | | | 0 | |
Unvested at June 30, 2021 | 102,500 | | | $ | 8.26 | |
Total recognized stock-based compensation expense amounted to $0.7$0.6 million and $1.3$0.7 million for the three and six months ended June 30,March 31, 2022 and 2021, respectively, and $0.1 million and $0.4 million for the three and six months ended June 30, 2020, respectively. The aggregate fair value as of the vest date of RSUs that vested during the sixthree months ended June 30,March 31, 2022 and 2021 and 2020 was $1.3$1.1 million and $0.6$1.3 million, respectively. Total unrecognized stock-based compensation expense related to unvested RSUs which are probable of vesting was $3.6$5.0 million at June 30, 2021.March 31, 2022. These costs are expected to be recognized over a weighted average period of 2.01.97 years.
Note 15 – Subsequent Events
On May 5, 2022, the Company, LFS and LHLLC entered into a first amendment and waiver to the A&R Wintrust Credit Agreement (the “First Amendment to the A&R Wintrust Credit Agreement”) with the lenders party thereto and Wintrust, as administrative agent. The First Amendment to the A&R Wintrust Credit Agreement modifies certain definitions within the A&R Wintrust Credit Agreement, and make other corresponding changes, including: (i) the definition of EBITDA to allow for the recognition of certain restructuring charges and lease breakage costs not previously specified, (ii) the definition of Excess Cash Flow to exclude the aggregate amount of the Earnout Payments paid in cash, (iii) the definition of Total Funded Debt to exclude certain capitalized lease obligations for real estate based on the approval of each lender and (iv) the definition of Disposition to include a clause for the sale and leaseback of certain real property based on the approval of each lender.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our management’s expectations. Factors that could cause such differences are discussed in “Forward-Looking Statements” and “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20202021 and in subsequent Quarterly Reports on Form 10-Q. See “Item 1A. Risk Factors” in this Form 10-Q for certain periodic updates to the Company's risk factors. We assume no obligation to update any of these forward-looking statements.
Unless the context otherwise requires, a reference to a “Note” herein refers to the accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) contained in Part I, "Item 1. Financial Statements."
Overview
We areThe Company is an integrated building systems solutions firm whose expertise is in the design, modular prefabrication, installation, management and maintenance of heating, ventilation, and air conditioning (“HVAC”),HVAC, mechanical, electrical, plumbing and control systems. Oursystems for commercial, institutional and light industrial markets. The Company operates primarily in the Northeast, Mid-Atlantic, Southeast, Midwest, and Southwestern regions of the United States.
The Company’s market sectors primarily include the following: healthcare, life sciences,
•Healthcare, including research, acute care and inpatient hospitals for regional and national hospital groups, and pharmaceutical and biotech laboratories and manufacturing facilities;
•Education, including both public and private colleges, universities, research centers and K-12 facilities;
•Sports and entertainment, including sports arenas, entertainment facilities (including casinos) and amusement rides;
•Infrastructure, including passenger terminals and maintenance facilities for rail and airports;
•Government, including various facilities for federal, state and local agencies;
•Hospitality, including hotels and resorts;
•Commercial, including office building, warehouse and distribution centers and other commercial structures;
•Mission critical facilities, including data centers, industrialcenters; and light
•Industrial manufacturing entertainment, educationfacilities, including indoor grow farms and government. Our customers are primarily located throughout Florida, California, Massachusetts, New Jersey, Pennsylvania, Delaware, Maryland, Washington, D.C., Virginia, West Virginia, Ohioautomotive, energy and Michigan. As of January 1, 2021, the Company renamed its existing two reportable segments to reflect our distinct approaches to our customer base and to better align with our owner direct strategy. The previously named Construction Segment is now known as General Contractor Relationships (“GCR”); the previously named Service Segment is now known as Owner Direct Relationships (“ODR”). general manufacturing plants.
The Company operates in two segments, that are based on the relationship with its customer, (i) GCR, in which the Company generally manages new construction or renovation projects that involve primarily HVAC, plumbing, or electrical services and are awarded to the Company by general contractors or construction managers, and (ii) ODR, in which the Company provides maintenance or service primarily on HVAC, plumbing or electrical systems, building controls and specialty contracting projects direct to, or assigned by, building owners or property managers. This work is primarily performed under fixed price, modified fixed price, and time and material contracts over periods of typically less than two years.
Key Components of Condensed Consolidated Statements of Operations
Revenue
We generateThe Company generates revenue principally from fixed-price construction contracts to deliver HVAC, plumbing, and electrical construction services to ourits customers. The duration of ourthe Company's contracts generally ranges from six months to two years. Revenue from fixed price contracts is recognized on the cost-to-cost method, measured by the relationship of total cost incurred to total estimated contract costs. Revenue from time and materials service contracts is recognized as services are performed. We believeThe Company believes that ourits extensive experience in HVAC, plumbing, and electrical projects, and ourits internal cost review procedures during the bidding process, enable usit to reasonably estimate costs and mitigate the risk of cost overruns on fixed price contracts.
WeThe Company generally invoiceinvoices customers on a monthly basis based on a schedule of values that breaks down the contract amount into discrete billing items. Costs and estimated earnings in excess of billings on uncompleted contracts are recorded as a contract asset until
billable under the contract terms. Billings in excess of costs and estimated earnings on uncompleted contracts are recorded as a contract liability until the related revenue is recognizable.
Cost of Revenue
Cost of revenue primarily consists of the labor, equipment, material, subcontract, and other job costs in connection with fulfilling the terms of our contracts. Labor costs consist of wages plus taxes, fringe benefits, and insurance. Equipment costs consist of the ownership and operating costs of company-owned assets, in addition to outside-rented equipment. If applicable, job costs include estimated contract losses to be incurred in future periods. Due to the varied nature of ourthe Company's services, and the risks associated therewith, contract costs as a percentage of contract revenue have historically fluctuated and we expectit expects this fluctuation to continue in future periods.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses consist primarily of personnel costs for ourits administrative, estimating, human resources, safety, information technology, legal, finance and accounting employees and executives. Also included are non-personnel costs, such as travel-related expenses, legal and other professional fees and other corporate expenses to support the growth of ourthe Company's business and to meet the compliance requirements associated with operating as a public company. Those costs include accounting, human resources, information technology, legal personnel, additional consulting, legal and audit fees, insurance costs, board of directors’ compensation and the costs of achieving and maintaining compliance with Section 404 of the Sarbanes-Oxley Act.
Amortization of Intangibles
Amortization expense represents periodic non-cash charges that consist of amortization of various intangible assets primarily including favorable leasehold interests and certain customer relationships in the ODR segment. As a result of the Jake Marshall Transaction, the Company recognized, in the aggregate, an additional $5.7 million of intangible assets associated with customer relationships with third-party customers, the acquired trade name and acquired backlog. The Jake Marshall-related intangible assets were recorded under the acquisition method of accounting at their estimated fair values at the acquisition date.
Other Income/Expense(Expenses) Income
Other income/expense, net(expenses) income consists primarily of interest expense incurred in connection with ourthe Company's debt, net of interest income, a loss associated with the early termination of an operating lease, a loss on early debt extinguishment, gain and loss onlosses associated with the saledisposition of property and equipment and changes in fair value of warrant liability. Deferred financing costs are amortized to interest expense using the effective interest method.
Provision for Income Taxes
We areThe Company is taxed as a C corporation and ourits financial results include the effects of federal income taxes which arewill be paid at the parent level.
For interim periods, the provision for income taxes (including federal, state and local taxes) is calculated based on the estimated annual effective tax rate. The Company accounts for income taxes in accordance with ASC Topic 740 -– Income Taxes, which requires the use of the asset and liability method. Under this method, deferred tax assets and liabilities and income or expense are recognized for the expected future tax consequences of temporary differences between the financial statement carrying values and their respective tax bases, using enacted tax rates expected to be applicable in the years in which the temporary differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes.
Operating Segments
As of January 1, 2021, theThe Company renamed its existing two reportable segments to reflect our two distinct approaches to our customer basemanages and to better align with our owner direct strategy. The previously named Construction Segment is now known as General Contractor Relationships (“GCR”); the previously named Service Segment is now known as Owner Direct Relationships (“ODR”). We manage and measuremeasures the performance of ourits business in these two operating segments.segments: GCR and ODR. These segments are reflective of how the Company’s Chief Operating Decision Makers (“CODM”)CODM reviews its operating results for the purposes of allocating resources and assessing performance. OurThe Company's CODM is comprised of ourits Chief Executive Officer, Chief Financial Officer and Chief Operating Officer.
The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The CODM evaluates performance based on income from operations of the respective branches after the allocation of corporate office operating expenses. In accordance with ASC Topic 280 – Segment Reporting, the Company has elected to aggregate all of the GCR work performed at branches into one GCR reportable segment and all of the ODR work performed at branches into one ODR reportable segment. All transactions between segments are eliminated in consolidation. OurThe Company's corporate department provides general and administrative support services to ourits two operating segments. We allocateThe Company allocates costs
between segments for selling, general and administrative and depreciation expense. Interest expense is not allocated to segments because of the corporate management of debt service. See Note 12 – Operating Segments in11 for further discussion on the notes to condensed consolidated financial statements.
Company's operating segments.Comparison of Results of Operations for the three months ended June 30,March 31, 2022 and 2021 and 2020
The following table presents operating results for the three months ended June 30,March 31, 2022 and 2021 and 2020 in dollars and expressed as a percentage of total revenue (except as indicated below), as compared below:
| | | | Three months ended June 30, | | | | Three Months Ended March 31, | |
| | | 2021 | | 2020 | | | | 2022 | | 2021 | |
(in thousands except for percentages) | (in thousands except for percentages) | | | | | | (in thousands except for percentages) | | | | | |
Statement of Operations Data: | Statement of Operations Data: | | | | | | | | | | Statement of Operations Data: | | | | | | | | | |
Revenue: | Revenue: | | | | | | | | | | Revenue: | | | | | | | | | |
GCR | GCR | | $ | 87,550 | | | 72.3 | % | | $ | 105,937 | | | 78.4 | % | | GCR | | $ | 71,932 | | | 62.6 | % | | $ | 84,804 | | | 74.8 | % | |
ODR | ODR | | 33,469 | | | 27.7 | % | | 29,248 | | | 21.6 | % | | ODR | | 42,890 | | | 37.4 | % | | 28,540 | | | 25.2 | % | |
Total revenue | Total revenue | | 121,019 | | | 100.0 | % | | 135,185 | | | 100.0 | % | | Total revenue | | 114,822 | | | 100.0 | % | | 113,344 | | | 100.0 | % | |
| Gross profit: | Gross profit: | | | | | | | | | | Gross profit: | | | | | | | | | |
GCR | GCR | | 8,885 | | | 10.1 | % | (1) | 12,213 | | | 11.5 | % | (1) | GCR | | 8,358 | | | 11.6 | % | (1) | 9,395 | | | 11.1 | % | (1) |
ODR | ODR | | 9,805 | | | 29.3 | % | (2) | 8,122 | | | 27.8 | % | (2) | ODR | | 9,982 | | | 23.3 | % | (2) | 7,834 | | | 27.4 | % | (2) |
Total gross profit | Total gross profit | | 18,690 | | | 15.4 | % | | 20,335 | | | 15.0 | % | | Total gross profit | | 18,340 | | | 16.0 | % | | 17,229 | | | 15.2 | % | |
| Selling, general and administrative: | Selling, general and administrative: | | | | | | | | | | Selling, general and administrative: | | | | | | | | | |
GCR | GCR | | 9,070 | | | 10.4 | % | (1) | 8,024 | | | 7.6 | % | (1) | GCR | | 8,565 | | | 11.9 | % | (1) | 9,114 | | | 10.7 | % | (1) |
ODR | ODR | | 7,526 | | | 22.5 | % | (2) | 5,588 | | | 19.1 | % | (2) | ODR | | 9,570 | | | 22.3 | % | (2) | 7,354 | | | 25.8 | % | (2) |
Corporate | Corporate | | 636 | | | 0.5 | % | | 140 | | | 0.1 | % | | Corporate | | 599 | | | 0.5 | % | | 677 | | | 0.6 | % | |
Total selling, general and administrative | Total selling, general and administrative | | 17,232 | | | 14.2 | % | | 13,752 | | | 10.2 | % | | Total selling, general and administrative | | 18,734 | | | 16.3 | % | | 17,145 | | | 15.1 | % | |
| Amortization of intangibles (Corporate) | Amortization of intangibles (Corporate) | | 104 | | | 0.1 | % | | 274 | | | 0.2 | % | | Amortization of intangibles (Corporate) | | 399 | | | 0.3 | % | | 104 | | | 0.1 | % | |
| Operating (loss) income: | Operating (loss) income: | | | | | | | | | | Operating (loss) income: | | | | | | | | | |
GCR | GCR | | (185) | | | (0.2) | % | (1) | 4,189 | | | 4.0 | % | (1) | GCR | | (207) | | | (0.3) | % | (1) | 281 | | | 0.3 | % | (1) |
ODR | ODR | | 2,279 | | | 6.8 | % | (2) | 2,534 | | | 8.7 | % | (2) | ODR | | 412 | | | 1.0 | % | (2) | 480 | | | 1.7 | % | (2) |
Corporate | Corporate | | (740) | | | — | % | | (414) | | | — | % | | Corporate | | (998) | | | (0.9) | % | | (781) | | | (0.7) | % | |
Total operating income | | 1,354 | | | 1.1 | % | | 6,309 | | | 4.7 | % | | |
Total operating loss | | Total operating loss | | (793) | | | (0.7) | % | | (20) | | | — | % | |
| Other expenses (Corporate) | Other expenses (Corporate) | | (358) | | | (0.3) | % | | (2,252) | | | (1.7) | % | | Other expenses (Corporate) | | (1,339) | | | (1.2) | % | | (3,297) | | | (2.9) | % | |
Total consolidated income before income taxes | | 996 | | | 0.8 | % | | 4,057 | | | 3.0 | % | | |
Income tax provision | | 264 | | | 0.2 | % | | 1,110 | | | 0.8 | % | | |
Net income | | $ | 732 | | | 0.6 | % | | $ | 2,947 | | | 2.2 | % | | |
Total consolidated loss before income taxes | | Total consolidated loss before income taxes | | (2,132) | | | (1.9) | % | | (3,317) | | | (2.9) | % | |
Income tax benefit | | Income tax benefit | | (616) | | | (0.5) | % | | (1,035) | | | (0.9) | % | |
Net loss | | Net loss | | $ | (1,516) | | | (1.3) | % | | $ | (2,282) | | | (2.0) | % | |
(1)As a percentage of GCR revenue.
(2)As a percentage of ODR revenue.
Revenue | | | Three months ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | Increase/(Decrease) | | 2022 | | 2021 | | Increase/(Decrease) |
(in thousands except for percentages) | (in thousands except for percentages) | | | | | | (in thousands except for percentages) | | | | | |
Revenue: | Revenue: | | | | | | | | Revenue: | | | | | | | |
GCR | GCR | $ | 87,550 | | | $ | 105,937 | | | $ | (18,387) | | | (17.4) | % | GCR | $ | 71,932 | | | $ | 84,804 | | | $ | (12,872) | | | (15.2) | % |
ODR | ODR | 33,469 | | | 29,248 | | | 4,221 | | | 14.4 | % | ODR | 42,890 | | | 28,540 | | | 14,350 | | | 50.3 | % |
Total revenue | Total revenue | $ | 121,019 | | | $ | 135,185 | | | $ | (14,166) | | | (10.5) | % | Total revenue | $ | 114,822 | | | $ | 113,344 | | | $ | 1,478 | | | 1.3 | % |
Revenue for the three months ended June 30, 2021 decreasedMarch 31, 2022 increased by $14.2$1.5 million compared to the revenue for the three months ended June 30, 2020.March 31, 2021. GCR revenue decreased by $18.4$12.9 million, or 17.4%15.2%, while ODR revenue increased by $4.2$14.4 million, or 14.4%50.3%. The decrease in period over period GCR segment revenue of $87.6 million decreasedwas primarily due to a planned decreaserevenue declines in the Michigan, Mid-Atlantic and Southern California operating regions. The Company continued to focus on improving project execution and profitability by pursuing GCR opportunities that were smaller in size, shorter in duration, and where the Company can leverage its captive design and engineering services. In addition, in February 2022, the Company announced its strategic decision to wind down its Southern California operations. The Company expects to fully exit the Southern California operating region and other decreasesRegion in the Florida, Eastern Pennsylvania and Ohio operating regions. These decreases were partially offset by2022. The increase in period over period ODR segment revenue increases in the New England and Michigan operating regions largelywas primarily due to the startCompany's continued focus on the accelerated growth of new projectsits ODR business. For the three months ended March 31, 2022, GCR and the continuation of work on existing projects. Ohio, Michigan, and Eastern Pennsylvania regions' ODR revenue increased quarter over quarter offset by declines in ODR revenue in Florida and Mid-Atlantic. Maintenance contract revenue, a component of ODRsegment revenue increased by $0.3$4.5 million comparedand $7.2 million, respectively, as a result of revenue generated by the Acquired Entities in the Jake Marshall Transaction. See Note 3 for further information on the Jake Marshall Transaction.
In addition, during the first quarter of 2022, the Company was impacted by supply chain issues delaying equipment delivery, which resulted in revenue being pushed to June 30, 2020.future periods.
Gross Profit
| | | Three months ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | Increase/(Decrease) | | 2022 | | 2021 | | Increase/(Decrease) |
(in thousands except for percentages) | (in thousands except for percentages) | | | | | | (in thousands except for percentages) | | | | | |
Gross Profit: | | | | | | | | |
Gross profit: | | Gross profit: | | | | | | | |
GCR | GCR | $ | 8,885 | | | $ | 12,213 | | | $ | (3,328) | | | (27.2) | % | GCR | $ | 8,358 | | | $ | 9,395 | | | $ | (1,037) | | | (11.0) | % |
ODR | ODR | 9,805 | | | 8,122 | | | 1,683 | | | 20.7 | % | ODR | 9,982 | | | 7,834 | | | 2,148 | | | 27.4 | % |
Total gross profit | Total gross profit | $ | 18,690 | | | $ | 20,335 | | | $ | (1,645) | | | (8.1) | % | Total gross profit | $ | 18,340 | | | $ | 17,229 | | | $ | 1,111 | | | 6.4 | % |
| Total gross profit as a percentage of consolidated total revenue | Total gross profit as a percentage of consolidated total revenue | 15.4 | % | | 15.0 | % | | | | | Total gross profit as a percentage of consolidated total revenue | 16.0 | % | | 15.2 | % | | | | |
OurThe Company's gross profit for the three months ended June 30, 2021 decreasedMarch 31, 2022 increased by $1.6$1.1 million compared to our gross profit for the three months ended June 30, 2020.March 31, 2021. GCR gross profit decreased $3.3$1.0 million, or 27.2%11.0%, largelyprimarily due to lower revenue at reduceddespite slightly higher margins. ODR gross profit increased $1.7$2.1 million, or 20.7%27.4%, due to an increase in revenue at higherdespite lower margins. The total gross profit percentage increased from 15.0%15.2% for the three months ended June 30, 2020March 31, 2021 to 15.4%16.0% for the same period ended in 2021,2022, mainly driven by the mix of higher margin ODR segment work.
We
The following table summarizes the Company’s recorded revisions in ourits contract estimates for certain GCR and ODR projects. For the three months ended June 30, 2021 and 2020, total net gross profit write-downs were $1.1 million and $2.0 million, respectively. For projects having a material gross profit impact of $0.25 million or more for the three months ended June 30,March 31, 2022 and 2021 this resulted in(includes material gross profit write downs on three GCR segment projectschanges of $1.7$0.25 million and one ODR project for $0.3 million. Of the material GCR segment write downs, one project was within the Michigan region for a total of $1.0 million, one project was within the New England region for $0.3 million and one project was within the Southern California region for $0.4 million. Of the material ODR segment write downs, one project was within the Eastern Pennsylvania region for $0.3 million. We also recorded material gross profit write ups of $0.3 million on one GCR segment project in the Florida region and $0.3 million on one ODR segment project in the Michigan region. For the three months ended June 30, 2020, we recorded material revisions in our contract estimates on four GCR projects which resulted in gross profit write downs of $1.5 million. Two of these projects were within the Southern California region for a total of $0.7 million. No project revisions resulting in material gross profit write ups were recorded during the three months ended June 30, 2020.
or more).
Selling, General and Administrative | | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2022 | | 2021 |
(in thousands except number of projects ) | | | Number of Projects | | | | Number of Projects |
Gross profit write-ups: | | | | | | | |
GCR | $ | 533 | | | 2 | | | $ | 743 | | | 2 | |
ODR | — | | | — | | | — | | | — | |
Total gross profit write-ups | $ | 533 | | | 2 | | | $ | 743 | | | 2 | |
| | | | | | | |
Gross profit write-downs: | | | | | | | |
GCR | $ | (604) | | | 2 | | | $ | (768) | | | 2 | |
ODR | — | | | — | | | — | | | — | |
Total gross profit write-downs | $ | (604) | | | 2 | | | $ | (768) | | | 2 | |
| | | | | | | |
Total gross profit write-downs, net | $ | (71) | | | | | $ | (25) | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three months ended June 30, |
| 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | |
Selling, general and administrative: | | | | | | | |
GCR | $ | 9,070 | | | $ | 8,024 | | | $ | 1,046 | | | 13.0 | % |
ODR | 7,526 | | | 5,588 | | | 1,938 | | | 34.7 | % |
Corporate | 636 | | | 140 | | | 496 | | | 354.3 | % |
Total selling, general and administrative | $ | 17,232 | | | $ | 13,752 | | | $ | 3,480 | | | 25.3 | % |
| | | | | | | |
Selling, general and administrative as a percentage of consolidated total revenue | 14.2 | % | | 10.2 | % | | | | |
OurDuring the three months ended March 31, 2022, the Company recorded total selling, general and administrative (“SG&A”) increased by approximately $3.5net gross profit write-downs, regardless of materiality, of $1.4 million compared to $17.2total net gross profit write-downs of $0.5 million for the three months ended June 30, 2021 compared to $13.8 millionMarch 31, 2021.
Selling, General and Administrative
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | |
Selling, general and administrative: | | | | | | | |
GCR | $ | 8,565 | | | $ | 9,114 | | | $ | (549) | | | (6.0) | % |
ODR | 9,570 | | | 7,354 | | | 2,216 | | | 30.1 | % |
Corporate | 599 | | | 677 | | | (78) | | | (11.5) | % |
Total selling, general and administrative | $ | 18,734 | | | $ | 17,145 | | | $ | 1,589 | | | 9.3 | % |
| | | | | | | |
Total selling, general and administrative as a percentage of consolidated total revenue | 16.3 | % | | 15.1 | % | | | | |
The Company's SG&A expense for the three months ended June 30, 2020. TotalMarch 31, 2022 increased by approximately $1.6 million compared to the three months ended March 31, 2021. The increase in SG&A increasedwas primarily due to $0.6 million in additional payroll expenses, a $0.5$1.4 million increase associated with costs incurred by the Acquired Entities in professional fees,the Jake Marshall Transaction, a $0.4 million increase in rent, a $0.5$0.6 million increase in travel and entertainment expense and a $0.3 million increase in professional fees, partially offset by a $0.5 million increasedecrease in stock based compensation expense. Our payroll and travel and entertainmentrelated expenses duringprimarily related to the three months ended June 30, 2021 were higher than the three months ended June 30, 2020 due to pandemic-driven operational reductions in 2020 and our continued investment in ODR expansion in 2021.wind down of its Southern California branch. Additionally, total SG&A as a percentage of revenuesrevenue were 14.2%16.3% for the three months ended June 30, 2021March 31, 2022 and 10.2%15.1% for the three months ended June 30, 2020.March 31, 2021.
Amortization of Intangibles
| | | Three months ended June 30, | | Three Months Ended March 31, |
| | 2021 | | 2020 | | Increase/(Decrease) | | 2022 | | 2021 | | Increase/(Decrease) |
(in thousands except for percentages) | (in thousands except for percentages) | | | | | | (in thousands except for percentages) | | | | | |
Amortization of intangibles (Corporate) | Amortization of intangibles (Corporate) | $ | 104 | | | $ | 274 | | | $ | (170) | | | (62.0) | % | Amortization of intangibles (Corporate) | $ | 399 | | | $ | 104 | | | $ | 295 | | | 283.7 | % |
Total amortization expense for the three months ended June 30, 2021March 31, 2022 was $0.1$0.4 million as compared to $0.2$0.1 million for the three months ended June 30, 2020.March 31, 2021. As a result of the Jake Marshall Transaction, the Company acquired certain intangible assets in which the Company recognized approximately $0.3 million of amortization expense for the three months ended March 31, 2022. See Note 5 for further information on the Company's intangible assets.
Other Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended June 30, |
| | 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | | |
Other income (expenses): | | | | | | | | |
Interest expense, net | | $ | (452) | | | $ | (2,137) | | | $ | 1,685 | | | (78.8) | % |
Gain (loss) on disposition of property and equipment | | 94 | | | (13) | | | 107 | | | (823.1) | % |
| | | | | | | | |
Loss on change in fair value of warrant liability | | — | | | (102) | | | 102 | | | (100.0) | % |
Total other expenses | | $ | (358) | | | $ | (2,252) | | | $ | 1,894 | | | (84.1) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2022 | | 2021 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | | |
Other (expenses) income: | | | | | | | | |
Interest expense, net | | $ | (486) | | | $ | (1,264) | | | $ | 778 | | | (61.6) | % |
Gain on disposition of property and equipment | | (36) | | | (86) | | | 50 | | | (58.1) | % |
Loss on early termination of operating lease | | (817) | | | — | | | (817) | | | 100.0 | % |
Loss on early debt extinguishment | | — | | | (1,961) | | | 1,961 | | | 100.0 | % |
Gain on change in fair value of warrant liability | | — | | | 14 | | | (14) | | | (100.0) | % |
Total other expenses | | $ | (1,339) | | | $ | (3,297) | | | $ | 1,958 | | | (59.4) | % |
Other (expenses) income (expenses) consistconsisted of interest expense of $0.5 million for the three months ended June 30, 2021March 31, 2022 as compared to $2.1$1.3 million of interest expense for the three months ended June 30, 2020.March 31, 2021. The reduction in interest expense yearperiod over year isperiod was due to the refinancing of the higher interest rate debt with a lower interest rate debt instrument as a result of the 2021 Refinancing and the A&R Wintrust Agreement. The decrease in late February 2021.other expenses period over period was also attributable to a prior year loss of $2.0 million on the early extinguishment of debt associated with the Company's 2021 Refinancing. During the three months ended March 31, 2022, the Company recognized an $0.8 million loss as a result of the early termination of its Pittsburgh operating lease. See Note 12 for further information.
Income Taxes
The Company recorded a $0.3$0.6 million and $1.1$1.0 million income tax provisionbenefit for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively.
The effective tax rate was 26.5%28.9% and 27.4%31.2% for the three months ended June 30,March 31, 2022 and 2021, and 2020, respectively.
Comparison of Results of Operations for the six months ended June 30, 2021 and 2020
The following table presents operating results for the six months ended June 30, 2021 and 2020 in dollars and expressed as a percentage of total revenue (except as indicated below), as compared below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, | |
| | 2021 | | 2020 | |
(in thousands except for percentages) | | | | | | | | | |
Statement of Operations Data: | | | | | | | | | |
Revenue: | | | | | | | | | |
GCR | | $ | 172,354 | | | 73.5 | % | | $ | 215,423 | | | 78.6 | % | |
ODR | | 62,009 | | | 26.5 | % | | 58,534 | | | 21.4 | % | |
Total revenue | | 234,363 | | | 100.0 | % | | 273,957 | | | 100.0 | % | |
| | | | | | | | | |
Gross profit: | | | | | | | | | |
GCR | | 18,280 | | | 10.6 | % | (1) | 23,195 | | | 10.8 | % | (1) |
ODR | | 17,639 | | | 28.4 | % | (2) | 15,364 | | | 26.2 | % | (2) |
Total gross profit | | 35,919 | | | 15.3 | % | | 38,559 | | | 14.1 | % | |
| | | | | | | | | |
Selling, general and administrative: | | | | | | | | | |
GCR | | 18,184 | | | 10.6 | % | (1) | 18,200 | | | 8.4 | % | (1) |
ODR | | 14,880 | | | 24.0 | % | (2) | 11,917 | | | 20.4 | % | (2) |
Corporate | | 1,313 | | | 0.6 | % | | 435 | | | 0.2 | % | |
Total selling, general and administrative | | 34,377 | | | 14.7 | % | | 30,552 | | | 11.2 | % | |
| | | | | | | | | |
Amortization of intangibles (Corporate) | | 208 | | | 0.1 | % | | 417 | | | 0.2 | % | |
| | | | | | | | | |
Operating (loss) income: | | | | | | | | | |
GCR | | 96 | | | 0.1 | % | (1) | 4,995 | | | 2.3 | % | (1) |
ODR | | 2,759 | | | 4.4 | % | (2) | 3,447 | | | 5.9 | % | (2) |
Corporate | | (1,521) | | | — | % | | (852) | | | — | % | |
Total operating income | | 1,334 | | | 0.6 | % | | 7,590 | | | 2.8 | % | |
| | | | | | | | | |
Other expenses (Corporate) | | (3,655) | | | (1.6) | % | | (4,219) | | | (1.5) | % | |
Total consolidated (loss) income before income taxes | | (2,321) | | | (1.0) | % | | 3,371 | | | 1.2 | % | |
Income tax (benefit) provision | | (771) | | | (0.3) | % | | 476 | | | 0.2 | % | |
Net (loss) income | | $ | (1,550) | | | (0.7) | % | | $ | 2,895 | | | 1.1 | % | |
(1)As a percentage of GCR revenue.
(2)As a percentage of ODR revenue.
Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | |
Revenue: | | | | | | | |
GCR | $ | 172,354 | | | $ | 215,423 | | | $ | (43,069) | | | (20.0) | % |
ODR | 62,009 | | | 58,534 | | | 3,475 | | | 5.9 | % |
Total revenue | $ | 234,363 | | | $ | 273,957 | | | $ | (39,594) | | | (14.5) | % |
Revenue for the six months ended June 30, 2021 decreased by $39.6 million compared to the revenue for the six months ended June 30, 2020. GCR revenue decreased by $43.1 million, or 20.0%, while ODR revenue increased by $3.5 million, or 5.9%. GCR segment revenue of $172.4 million decreased due to a planned decrease in the Southern California and Mid-Atlantic operating regions and other decreases in the Florida, Eastern Pennsylvania, Ohio, and Western Pennsylvania operating regions. These decreases were partially offset by revenue increases in the Michigan and New England operating regions largely due to the start of new projects and the continuation of work on existing projects. Ohio, Eastern Pennsylvania, Michigan, and New England regions' ODR revenue increased nearly offset by declines in ODR revenue in Florida and Mid-Atlantic. Maintenance contract revenue, a component of ODR revenue, increased by $0.4 million compared to the six months ended June 30, 2020.
Gross Profit
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | |
Gross Profit: | | | | | | | |
GCR | $ | 18,280 | | | $ | 23,195 | | | $ | (4,915) | | | (21.2) | % |
ODR | 17,639 | | | 15,364 | | | 2,275 | | | 14.8 | % |
Total gross profit | $ | 35,919 | | | $ | 38,559 | | | $ | (2,640) | | | (6.8) | % |
| | | | | | | |
Total gross profit as a percentage of consolidated total revenue | 15.3 | % | | 14.1 | % | | | | |
Our gross profit for the six months ended June 30, 2021 decreased by $2.6 million compared to our gross profit for the six months ended June 30, 2020. GCR gross profit decreased $4.9 million, or 21.2%, largely due to lower revenue at slightly lower margins. ODR gross profit increased $2.3 million, or 14.8%, due to an increase in revenue at higher margins. The total gross profit percentage increased from 14.1% for the six months ended June 30, 2020 to 15.3% for the same period ended in 2021, mainly driven by the mix of higher margin ODR segment work.
For the six months ended June 30, 2021 and 2020, total net gross profit write-downs were $1.7 million and $3.4 million, respectively. For projects having a material gross profit impact of $0.25 million or more, we recorded gross profit write downs on eight GCR segment projects of $3.5 million and one ODR project for $0.3 million. Of the material GCR segment write downs, two projects were within the Michigan region for a total of $1.2 million, two projects were within the Eastern Pennsylvania region for $1.0 million, two projects were within the Southern California region for $0.8 million, one project was within the New England region for $0.3 million, and one project was within the Mid-Atlantic region for $0.3 million. We also materially wrote down one ODR segment project within the Eastern Pennsylvania region for $0.3 million. We also recorded material GCR segment gross profit write ups of $0.9 million on one GCR segment project in the Michigan region for $0.5 million and one project within the Ohio region for $0.4 million. For the six months ended June 30, 2020, we recorded material gross profit write downs on eight GCR projects and two gross profit write ups on GCR projects, for an aggregate revision of $5.2 million and $1.2 million, respectively.
Selling, General and Administrative
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | |
Selling, general and administrative: | | | | | | | |
GCR | $ | 18,184 | | | $ | 18,200 | | | $ | (16) | | | (0.1) | % |
ODR | 14,880 | | | 11,917 | | | 2,963 | | | 24.9 | % |
Corporate | 1,313 | | | 435 | | | 878 | | | 201.8 | % |
Total selling, general and administrative | $ | 34,377 | | | $ | 30,552 | | | $ | 3,825 | | | 12.5 | % |
| | | | | | | |
Selling, general and administrative as a percentage of consolidated total revenue | 14.7 | % | | 11.2 | % | | | | |
Our total selling, general and administrative (“SG&A”) increased by approximately $3.8 million to $34.4 million for the six months ended June 30, 2021 compared to $30.6 million for the six months ended June 30, 2020. Total SG&A increased due to a $1.1 million increase in professional fees, a $0.8 million increase in rent and a $0.9 million increase in stock based compensation expense. Our payroll and travel and entertainment expenses remained flat during the six months ended June 30, 2021 compared to the six months ended June 30, 2020, as our investment in ODR expansion in 2021 was offset by severance expense incurred in 2020 due to our pandemic-driven operational reductions. Additionally, total SG&A as a percentage of revenues were 14.7% for the six months ended June 30, 2021 and 11.2% for the six months ended June 30, 2020.
Amortization of Intangibles
| | | | | | | | | | | | | | | | | | | | | | | |
| Six months ended June 30, |
| 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | |
Amortization of intangibles (Corporate) | $ | 208 | | | $ | 417 | | | $ | (209) | | | (50.1) | % |
Total amortization expense for the six months ended June 30, 2021 was $0.2 million compared to $0.4 million for the six months ended June 30, 2020.
Other Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended June 30, |
| | 2021 | | 2020 | | Increase/(Decrease) |
(in thousands except for percentages) | | | | | | | | |
Other income (expenses): | | | | | | | | |
Interest expense, net | | $ | (1,716) | | | $ | (4,295) | | | $ | 2,579 | | | (60.0) | % |
Gain on disposition of property and equipment | | 8 | | | 17 | | | (9) | | | (52.9) | % |
Loss on early debt extinguishment | | (1,961) | | | — | | | (1,961) | | | 100.0 | % |
Gain on change in fair value of warrant liability | | 14 | | | 59 | | | (45) | | | (76.3) | % |
Total other expenses | | $ | (3,655) | | | $ | (4,219) | | | $ | 564 | | | (13.4) | % |
Other income (expenses) consist of interest expense of $1.7 million for the six months ended June 30, 2021 as compared to $4.3 million of interest expense for the six months ended June 30, 2020. The reduction in interest expense year over year is due to the refinancing of the higher interest rate debt with a lower interest rate debt instrument in late February 2021. The Company recognized a loss on early debt extinguishment of $2.0 million in connection with its refinancing of the 2019 Refinancing Term Loan and 2019 Revolving Credit Facility with the Wintrust Term Loan and Wintrust Revolving Loan.
Income Taxes
The Company recorded a $0.8 million income tax benefit and a $0.5 million income tax provision for the six months ended June 30, 2021 and 2020, respectively.
The Company had a 33.2% effective tax benefit rate for the six months ended June 30, 2021 and a 14.1% effective tax rate for the six months ended June 30, 2020.
GCR and ODR Backlog Information
We referThe Company refers to ourits estimated revenue on uncompleted contracts, including the amount of revenue on contracts for which work has not begun, less the revenue we haveit had recognized under such contracts, as “backlog.” Backlog includes unexercised contract options. OurThe Company's backlog includes projects that have a written award, a letter of intent, a notice to proceed or an agreed upon work order to perform work on mutually accepted terms and conditions. Additionally, the difference between ourthe Company's backlog and remaining performance obligations is due to the portion of unexercised contract options that are excluded, under certain contract types, from ourthe Company's remaining performance obligations as these contracts can be canceled for convenience at any time by usthe Company or the customer without considerable cost incurred by the customer. Additional information related to ourthe Company's remaining performance obligations is provided in Note 16 — Remaining Performance Obligations in the accompanying notes to our condensed consolidated financial statements.4.
Given the multi-year duration of many of ourthe Company's contracts, revenue from backlog is expected to be earned over a period that will extend beyond one year. OurThe Company's GCR backlog as of June 30, 2021March 31, 2022 was $378.9$340.7 million compared to $393.5$337.2 million at December 31, 2020.2021. In addition, ODR backlog as of June 30, 2021March 31, 2022 was $60.6$106.9 million compared to $50.9$98.0 million at December 31, 2020.2021. Of the total backlog at June 30, 2021, we expectMarch 31, 2022, the Company expects to recognize approximately $211.0$294.7 million by the end of 2021.2022.
COVID-19 Update
In March 2020, the World Health Organization declared the outbreak of the coronavirus disease 2019 (“COVID-19”) a global pandemic. The COVID-19 pandemic has caused significant disruption and volatility on a global scale resulting in, among other things, an economic slowdown, impacts to global supply chains, and the possibility of a continued economic recession. In limited instances, during fiscal 2020, the Company faced disruptions due to the COVID-19 pandemic as certain projects chose to shutdown work irrespective of the existence or applicability of government action. In most markets, construction is considered an essential business and the Company continued to staff its projects and perform work during fiscal 2020 and into 2021, and most of the projects that were in progress at the time shutdowns commenced were restarted.
As new variants of the virus emerge, the Company remains cautious as many factors remain unpredictable. The Company actively monitors and responds to the changing conditions created by the pandemic, with focus on prioritizing the health and safety of the Company’s employees, dedicating resources to support the Company’s communities, and innovating to address the Company’s customers’ needs. During 2021, the Company faced impacts of both the Delta and Omicron variants, with disruptions to the Company’s workforce, which impacted revenue.
Supply chain disruptions, material shortages and escalating commodity prices as a result of COVID-19 have continued into 2022. During the first quarter of 2022, the Company was impacted by supply chain issues delaying equipment delivery, which resulted in revenue being pushed to future periods. The impact of the COVID-19 pandemic on the Company’s vendors and the pricing and availability of materials or supplies utilized in the Company’s operations continues to evolve and may have an adverse impact on the Company’s operations in future periods. The Company continues to monitor the short- and long-term impacts of the pandemic, including the current supply chain disruptions.
As vaccines have become more readily available, the Company has experienced a growing number of its clients requiring that the Company's workforce present on the client's property be vaccinated against the virus. Additionally, requirements to mandate COVID-19 vaccination of the Company's workforce or requirements of its unvaccinated employees to be tested could result in labor disruptions, employee attrition and difficulty securing future labor needs. Additionally, see “Item 1A. Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for discussion of risks associated with the COVID-19 pandemic.
The Company continues to monitor developments involving our workforce, customers, suppliers and vendors and take steps to mitigate against additional impacts, but given the unprecedented and evolving nature of these circumstances, it cannot predict the full extent of the impact that COVID-19 will have on the Company's operating results, financial condition and liquidity.
Seasonality, Cyclicality and Quarterly Trends
Severe weather can impact ourthe Company’s operations. In the northern climates where we operate,it operates, and to a lesser extent the southern climates as well, severe winters can slow ourthe Company’s productivity on construction projects, which shifts revenue and gross profit recognition to a later period. OurThe Company’s maintenance operations may also be impacted by mild or severe weather. Mild weather tends to reduce demand for ourits maintenance services, whereas severe weather may increase the demand for ourits maintenance and spot services. OurThe Company’s operations also experience mild cyclicality, as building owners typically work through maintenance and capital projects at an increased level during the third and fourth calendar quarters of each year.
Effect of Inflation and Tariffs
The prices of products such as steel, pipe, copper and equipment from manufacturers are subject to fluctuation and increases. It is difficult to accurately measure the impact of inflation, tariffs and price escalation due to the imprecise nature of the estimates required. However, these effects are, at times, material to our results of operations and financial condition. During fiscal year 2021 and through the first halfquarter of 2021,2022, we have experienced higher cost of materials on specific projects and delays in our supply chain for equipment and service vehicles from the manufacturers, and we expect these higher costs and delays in our supply chain to persist through 2021.the remainder of 2022. When appropriate, we include cost escalation factors into our bids and proposals, as well as limit the acceptance time of our bid. In addition, we are often able to mitigate the impact of future price increases by entering into fixed price purchase orders for materials and equipment and subcontracts on our projects. Notwithstanding these efforts, if we experience significant disruptions to our supply chain, we may need to delay certain projects that would otherwise be accretive to our business and this may also impact the conversion rate of our current backlog into revenue.
Liquidity and Capital Resources
Cash Flows
OurThe Company's liquidity needs relate primarily to the provision of working capital (defined as current assets less current liabilities) to support operations, funding of capital expenditures, and investment in strategic opportunities. Historically, liquidity has been provided by operating activities and borrowings from commercial banks and institutional lenders.
The following table presents summary cash flow information for the periods indicated:
| | | | Six months ended June 30, | | | Three months ended March 31, |
| | 2021 | | 2020 | | 2022 | | 2021 |
(in thousands) | (in thousands) | | | | | (in thousands) | | | | |
Net cash (used in) provided by: | Net cash (used in) provided by: | | | | | Net cash (used in) provided by: | | | | |
Operating activities | Operating activities | | $ | (24,609) | | | $ | 22,457 | | Operating activities | | $ | (2,965) | | | $ | (17,375) | |
Investing activities | Investing activities | | (140) | | | (597) | | Investing activities | | (130) | | | 5 | |
Financing activities | Financing activities | | 10,295 | | | (1,375) | | Financing activities | | 6,685 | | | 12,409 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | | $ | (14,454) | | | $ | 20,485 | | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | | $ | 3,590 | | | $ | (4,961) | |
| Noncash investing and financing transactions: | Noncash investing and financing transactions: | | Noncash investing and financing transactions: | |
Right of use assets obtained in exchange for new operating lease liabilities | Right of use assets obtained in exchange for new operating lease liabilities | | $ | 156 | | | $ | — | | Right of use assets obtained in exchange for new operating lease liabilities | | $ | — | | | $ | 156 | |
Right of use assets obtained in exchange for new finance lease liabilities | Right of use assets obtained in exchange for new finance lease liabilities | | 336 | | | 1,050 | | Right of use assets obtained in exchange for new finance lease liabilities | | 864 | | | 87 | |
Right of use assets disposed or adjusted modifying operating lease liabilities | Right of use assets disposed or adjusted modifying operating lease liabilities | | 36 | | | 586 | | Right of use assets disposed or adjusted modifying operating lease liabilities | | (1,276) | | | 36 | |
Right of use assets disposed or adjusted modifying finance lease liabilities | Right of use assets disposed or adjusted modifying finance lease liabilities | | — | | | (64) | | Right of use assets disposed or adjusted modifying finance lease liabilities | | (19) | | | — | |
Interest paid | Interest paid | | 1,741 | | | 3,250 | | Interest paid | | 459 | | | 1,319 | |
Cash paid for income taxes | | $ | 2,096 | | | $ | 734 | | |
Cash paid (received) for income taxes | | Cash paid (received) for income taxes | | $ | 9 | | | $ | (45) | |
OurThe Company's cash flows are primarily impacted from period to period by fluctuations in working capital. Factors such as ourthe Company's contract mix, commercial terms, days sales outstanding (“DSO”) and delays in the start of projects may impact ourthe Company's working capital. In line with industry practice, we accumulatethe Company accumulates costs during a given month then billbills those costs in the current month for many of ourits contracts. While labor costs associated with these contracts are paid weekly and salary costs associated with the contracts are paid bi-weekly, certain subcontractor costs are generally not paid until we receivethe Company receives payment from ourits customers (contractual “pay-if-paid” terms). We haveThe Company has not historically experienced a large volume of write-offs related to ourits receivables and contract assets. WeThe Company regularly assess ourassesses its receivables for collectability and provideprovides allowances for doubtful accounts where appropriate. We believeThe Company believes that ourits reserves for doubtful accounts are appropriate as of June 30, 2021March 31, 2022 and December 31, 2020,2021, but adverse changes in the economic environment may impact certain of ourits customers’ ability to access capital and compensate usthe Company for ourits services, as well as impact project activity for the foreseeable future.
The Company's existing current backlog is projected to provide substantial coverage of forecasted GCR revenue for one year from the date of the financial statement issuance. OurThe Company's current cash balance, together with cash we expectit expects to generate from future operations along with borrowings available under our Wintrust Loans,its credit facility, are expected to be sufficient to finance ourits short- and long-term capital requirements (or meet working capital requirements) for the next twelve months. In addition to the future operating cash flows of the Company, along with its existing borrowing availability and access to financial markets, the Company currently believes it will be able to meet any working capital and future operating requirements, and capital investment forecast opportunities for the next twelve months.
The following table represents our summarized working capital information:
| (in thousands, except ratios) | (in thousands, except ratios) | | June 30, 2021 | | December 31, 2020 | (in thousands, except ratios) | | March 31, 2022 | | December 31, 2021 |
Current assets | Current assets | | $ | 199,726 | | | $ | 199,417 | | Current assets | | $ | 209,995 | | | $ | 192,906 | |
Current liabilities | Current liabilities | | (137,924) | | | (150,294) | | Current liabilities | | (141,590) | | | (129,742) | |
| Net working capital | Net working capital | | $ | 61,802 | | | $ | 49,123 | | Net working capital | | $ | 68,405 | | | $ | 63,164 | |
Current ratio* | | 1.45 | | | 1.33 | | |
Current ratio (1) | | Current ratio (1) | | 1.48 | | | 1.49 | |
*(1) Current ratio is calculated by dividing current assets by current liabilities.
As discussed above and in Note 7 to the accompanying condensed consolidated financial statements,6, as of June 30, 2021,March 31, 2022, the Company was in compliance with all financial maintenance covenants as required by its credit facility.
Cash Flows (Used in) Provided by Operating Activities
The following is a summary of the Wintrust Loans.
significant sources (uses) of cash from operating activities:
Cash Flows (Used in) Provided by Operating Activities
Cash flows | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
(in thousands) | 2022 | | 2021 | | Cash Inflow (outflow) |
Cash flows from operating activities: | | | | | |
Net loss | $ | (1,516) | | | $ | (2,282) | | | $ | 766 | |
Non-cash operating activities(1) | 4,682 | | | 5,130 | | | (448) | |
Changes in operating assets and liabilities: | | | | | |
Accounts receivable | (19,698) | | | 2,584 | | | (22,282) | |
Contract assets | 8,320 | | | (1,986) | | | 10,306 | |
Other current assets | (2,130) | | | (2,025) | | | (105) | |
Accounts payable, including retainage | (105) | | | (8,813) | | | 8,708 | |
Prepaid income taxes | (47) | | | — | | | (47) | |
Accrued taxes payable | (501) | | | (654) | | | 153 | |
Contract liabilities | 7,732 | | | (8,853) | | | 16,585 | |
Operating lease liabilities | (1,117) | | | (994) | | | (123) | |
Accrued expenses and other current liabilities | 1,419 | | | 513 | | | 906 | |
Other long-term liabilities | (4) | | | 5 | | | (9) | |
Cash used in working capital | (6,131) | | | (20,223) | | | 14,092 | |
Net cash used in operating activities | $ | (2,965) | | | $ | (17,375) | | | $ | 14,410 | |
(1)Represents non-cash activity associated with depreciation and amortization, provision for doubtful accounts, stock-based compensation expense, operating lease expense, amortization of debt issuance costs, deferred income tax provision, gain on sale of property and equipment, loss on early debt extinguishment, loss on early termination of operating lease and changes in the fair value of warrant liabilities.
During the three months ended March 31, 2022, the Company used $3.0 million in cash in its operating activities, were $24.6 million for the six months ended June 30, 2021 compared to cash flows provided by operating activitieswhich consisted of $22.5 million for the six months ended June 30, 2020. For the six months ended June 30, 2021, cash used in working capital of $6.1 million and a net loss for the period of $1.5 million, partially offset by non-cash adjustments of $4.7 million (primarily depreciation and amortization, stock-based compensation expense and operating lease expense). During the three months ended March 31, 2021, the Company used $17.4 million from its operating activities, were negatively impacted by an $8.9which consisted of cash used in working capital of $20.2 million increase in accounts receivable, a $7.5 million decrease in contract liabilities, a $5.5 million decrease in accrued expenses and other current liabilities, and a $3.7net loss of $2.3 million, increase in contract assets.
Cash flows provided by operating activities were $22.5 million for the six months ended June 30, 2020. For the six months ended June 30, 2020, the key components included cash inflows of $3.6 million related to our accounts receivable, $4.9 million related to our contract assets, $16.3 million for our contract liabilities shifting from an underbilled to an overbilled position consistent with our renewed focus on project cash flows and $9.4 million related to accrued expenses and other current liabilities. These cash inflows werepartially offset by outflowsnon-cash adjustments of $19.5$5.1 million related to our accounts payable, including retainage.(primarily depreciation and amortization, stock-based compensation expense, operating lease expense and a loss on early debt extinguishment).
The decreaseincrease in operating cash flows during the sixthree months ended June 30, 2021March 31, 2022 compared to the sixthree months ended June 30, 2020 were mostlyMarch 31, 2021 was primarily attributable to the reduction of our net overbilling position, which resulted in a $32.3$26.9 million cash outflowinflow period-over-period related to the aggregate change in our contract assets and liabilities and a $12.5$8.7 million period-over-period cash inflow related to the change in accounts payable, including retainage. These cash inflows were partially offset by a $22.2 million period-over-period cash outflow related to the change in accounts receivable. The decreaseincrease in our overbilled position was due to the reduction in GCR revenue and the timing of contract billings and the recognition of contract revenue. In addition, the reduction incash inflow associated with accounts payable, including retainage was due to the timing of payments, and the cash outflow associated with our accounts receivable was due to the timing of billings and collections.
Non-cash charges for depreciation and amortization were $3.0 million for the six months ended June 30, 2021 and $3.1 million for the six months ended June 30, 2020.receipts.
Cash Flows Used in(Used in) Provided by Investing Activities
Cash flows used in investing activities were $0.1 million and $0.6 million for the sixthree months ended June 30,March 31, 2022 compared to cash flows provided by investing activities $5.0 thousand for the three months ended March 31, 2021 and 2020, respectively. For the sixthree months ended June 30, 2021, $0.5March 31, 2022, $0.2 million was used to purchase property and equipment, offset by $0.4 million$39.0 thousand in proceeds from the sale of property and equipment. For the sixthree months ended June 30, 2020, $0.7March 31, 2021, $0.2 million was used to purchase property and equipment, offset by $0.1$0.2 million in proceeds from the sale of property and equipment.
The majority of our cash used for investing activities in both periods was for capital additions pertaining to tools and equipment, computer software and hardware purchases, office furniture and office related leasehold improvements.
Cash Flows Provided by (Used in) Financing Activities
Cash flows provided by financing activities were $10.3$6.7 million and $12.4 million for the sixthree months ended June 30,March 31, 2022 and 2021, comparedrespectively. For the three months ended March 31, 2022, we received proceeds from the following: $9.4 million in
proceeds from borrowings under the A&R Wintrust Revolving Loan and $0.2 million associated with proceeds from contributions to cash flows used in financing activitiesthe ESPP. These proceeds were partly offset by $1.9 million of $1.4scheduled principal payments on the Wintrust Term Loan, $0.7 million for payments on finance leases and $0.4 million in taxes related to net share settlement of equity awards.
For the sixthree months ended June 30, 2020. For the six months ended June 30,March 31, 2021, we received proceeds from the following: $22.8 million, net of fees and expenses, in conjunction with our common stock offering in February 2021, $2.0 million from the exercise of warrants and $30.0 million in connection with the refinancing of the 2019 Refinancing Term Loan with the Wintrust Loans. These proceeds were offset by the $39.0 million payment in full of the 2019 Refinancing Term Loan and associated $1.4 million prepayment penalty and other extinguishment costs, $2.0a $0.5 million of scheduled principal paymentspayment on the Wintrust Term Loan, $1.3$0.7 million for payments on finance leases, $0.4 million in taxes related to net share settlement of equity awards and $0.6 million for payments related to debt issuance costs related to the Wintrust Term Loan and Wintrust Revolving Loan.
For the six months ended June 30, 2020, we borrowed and repaid $7.3 million on the 2019 Revolving Credit Facility and made capital lease payments of $1.3 million.
Debt and Other Obligations
The Company refinanced its 2019 Refinancing and ABL Credit Agreements on February 24, 2021, described below and therefore had no amounts outstanding under these agreements at June 30, 2021. Accordingly, the Company recognized a loss on the early debt extinguishment of $2.0 million. This loss consisted of $2.6 million of debt issuance and debt discount costs, reversed $2.0 million of the CB warrant liability due to the warrants being cancelled on the refinancing date and paid a prepayment penalty of $1.4 million.
2019 Refinancing Agreement
On April 12, 2019 (the “Refinancing Closing Date”), Limbach Facility Services LLC (“LFS”) entered into a financing agreement (the “2019 Refinancing Agreement”) with the lenders thereto and Cortland Capital Market Services LLC, as collateral agent and administrative agent and CB Agent Services LLC, as origination agent (“CB”). The 2019 Refinancing Agreement consisted of (i) a $40.0 million term loan (the “2019 Refinancing Term Loan”) and (ii) a new $25.0 million multi-draw delayed draw term loan (the “2019 Delayed Draw Term Loan” and, collectively with the 2019 Refinancing Term Loan, the “2019 Term Loans”). Proceeds from the 2019 Refinancing Term Loan were used to repay the then existing Credit Agreement, to pay related fees and expenses thereof and to fund working capital of the 2019 Refinancing Borrowers (defined below). Management intended for proceeds of the 2019 Delayed Draw Term Loan to be used to fund permitted acquisitions under the 2019 Refinancing Agreement and related fees and expenses in connection therewith.
LFS and each of its subsidiaries were borrowers (the “2019 Refinancing Borrowers”) under the 2019 Refinancing Agreement. In addition, the 2019 Refinancing Agreement was guaranteed by the Company and LHLLC (each, a “2019 Refinancing Guarantor”, and together with the 2019 Refinancing Borrowers, the “Loan Parties”).
The 2019 Refinancing Agreement was secured by a first-priority lien on the real property of the Loan Parties and a second-priority lien on substantially all other assets of the Loan Parties, behind the 2019 ABL Credit Agreement (as defined below). The respective lien priorities of the 2019 Refinancing Agreement and the 2019 ABL Credit Agreement were governed by an intercreditor agreement.
2019 Refinancing Agreement - Interest Rates and Fees
The interest rate on borrowings under the 2019 Refinancing Agreement was, at the 2019 Refinancing Borrowers’ option, either LIBOR (with a 2.00% floor) plus 11.00% or a base rate (with a 3.00% minimum) plus 10.00%. At February 24, 2021 (the 2021 refinancing date) and June 30, 2020, the interest rate in effect on the 2019 Refinancing Term Loan was 13.00%.
2019 Refinancing Agreement - Other Terms and Conditions
The 2019 Refinancing Agreement was set to mature on April 12, 2022, subject to certain adjustment. Required amortization was $1.0 million per quarter and commenced with the fiscal quarter ending September 30, 2020. There was an unused line fee of 2.0% per annum on the undrawn portion of the 2019 Delayed Draw Term Loan, and there was a make-whole premium on prepayments made prior to the 19-month anniversary of the Refinancing Closing Date. This make-whole provision guaranteed that the Company would pay no less than 18 months’ applicable interest to the lenders under the 2019 Refinancing Agreement.
The 2019 Refinancing Agreement contained representations and warranties, and covenants which were customary for debt facilities of this type. Unless the Required Lenders (as defined in the 2019 Refinancing Agreement) otherwise consented in writing, the covenants limited the ability of the Company and its restricted subsidiaries to, among other things, (i) incur additional indebtedness or issue preferred stock, (ii) pay dividends or make distributions to the Company’s stockholders, (iii) purchase or redeem the Company’s equity interests, (iv) make investments, (v) create liens on their assets, (vi) enter into transactions with the Company’s affiliates, (vii) sell assets and (viii) merge or consolidate with, or dispose of substantially all of the Company’s assets to, other companies.
In addition, the 2019 Refinancing Agreement included customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company failed to comply with the terms of the 2019 Refinancing Agreement or if other customary events occur.
Furthermore, the 2019 Refinancing Agreement also contained two financial maintenance covenants for the 2019 Refinancing Term Loan, including a requirement to have sufficient collateral coverage of the aggregate outstanding principal amount of the 2019 Term Loans and as of the last day of each month for the total leverage ratio of the Company and its subsidiaries (the “Total Leverage Ratio”) not to exceed an amount beginning at 4.25 to 1.00 through June 30, 2019, and stepping down to 2.00 to 1.00 effective July 1, 2021. From July 1, 2019 through September 30, 2019, the Total Leverage Ratio may not exceed 4.00 to 1.00. In addition, the parties to the 2019 Refinancing Agreement entered into an amendment which, among other changes, revised the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 through the term of such agreement. The 2019 Refinancing Agreement contained a post-closing covenant requiring the remediation of the Company’s material weakness, as described in Item 9A of its 2018 Annual Report on Form 10-K, no later than December 31, 2020 and provision for updates as to the progress of such remediation, provided that, if such remediation was not completed on or prior to December 31, 2019, (x) the Company would be required to pay the post-closing fee pursuant to the terms of the Origination Agent Fee Letter (as defined in the 2019 Refinancing Agreement) and (y) the applicable margin shall be increased by 1.00% per annum for the period from January 1, 2020 until the date at which the material weakness was no longer disclosed or required to be disclosed in the Company’s SEC filings or audited financial statements of the Company or related auditor’s reports.
In connection with the 2019 Refinancing Amendment Number One and Waiver, dated November 14, 2019, the parties amended certain provisions of the 2019 Refinancing Agreement, including, among other changes to: (i) require, commencing October 1, 2019, a 3.00% increase in the interest rate on borrowings under the 2019 Refinancing Agreement; (ii) require the approval of CB and, generally, the lenders representing at least 50.1% of the aggregate undrawn term loan commitment or unpaid principal amount of the 2019 Term Loans, prior to effecting any permitted acquisition; (iii) revise the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 and thereafter through the term of the 2019 Refinancing Agreement; and (iv) require the liquidity of the loan parties, which is generally calculated by adding (a) unrestricted cash on hand of the Loan Parties maintained in deposit accounts subject to control agreements granting control to the collateral agent for the 2019 ABL Credit Agreement, to (b) the difference between (1) the lesser of (x) $15 million, as adjusted from time to time, and (y) 75% of certain customer accounts resulting from the sale of goods or services in the ordinary course of business minus certain reserves established by the administrative agent and (2) the sum of (x) the outstanding principal balance of all revolving loans under the 2019 ABL Credit Agreement plus (y) the aggregate undrawn available amount of all letters of credit then outstanding plus the amount of any obligations that arise from any draw against any letter of credit that have not been reimbursed by the borrowers or funded with a revolving loan under the 2019 ABL Credit Agreement (the “Loan Parties Liquidity”), as of the last day of any fiscal month ending on or after November 30, 2019, of at least $10,000,000. As a condition to executing the 2019 Refinancing Amendment Number One and Waiver, the loan parties were required to pay a non-refundable waiver fee of $400,000 and a non-refundable amendment fee of $1,000,000 (the “PIK First Amendment Fee”, which shall be paid in kind by adding the PIK First Amendment Fee to the outstanding principal amount of the 2019 Refinancing Term Loan as additional principal obligations thereunder on and as of the effective date 2019 Refinancing Amendment Number One and Waiver).
During December 2020, the Company was not in compliance with the collateral coverage debt covenant as defined by the 2019 Term Loan financing agreement. The Company was required to maintain at all times a Collateral Coverage Amount (as defined in the 2019 Refinancing Term Loan financing agreement) equal to or greater than the aggregate outstanding principal amount of the 2019 Term Loans. The Company calculated its Collateral Coverage amount at $37.9 million as of December 31, 2020, the aggregate outstanding principal amount of Term Loans was $39.0 million as of that same date for an excess of debt over collateral of $1.1 million. On February 1, 2021, the Company, LFS and LHLLC entered into a Waiver - Collateral Coverage Amount (December 2020) ("December 2020 Waiver") with the lenders party thereto and Cortland Capital Market Services LLC as collateral agent and administrative agent. The December 2020 Waiver included a waiver of the Company's compliance with the Collateral Coverage Amount for the month ending December 31, 2020. The lender waived the event of default arising from this noncompliance as of December 31, 2020, while reserving its rights with respect to covenant compliance in future months.
The 2019 Refinancing Term Loan was paid in full on February 24, 2021 as part of the refinancing transaction.
2019 Refinancing Agreement - CB Warrants
In connection with the 2019 Refinancing Agreement, on the Refinancing Closing Date, the Company issued to CB and the other lenders under the 2019 Refinancing Agreement warrants (the “CB Warrants”) to purchase up to a maximum of 263,314 shares of the Company's common stock at an exercise price of $7.63 per share subject to certain adjustments, including for stock dividends, stock splits or reclassifications. The actual number of shares of common stock into which the CB Warrants were exercisable at any given time were equal to: (i) the product of (x) the number of shares equal to 2% of the Company’s issued and outstanding shares of common stock on the Refinancing Closing Date on a fully diluted basis and (y) the percentage of the total 2019 Delayed Draw Term Loan made as of the exercise date, minus (ii) the number of shares previously issued under the CB Warrants. As of the Refinancing Closing Date through February 24, 2021, no amounts had been drawn on the 2019 Delayed Draw Term Loan, so no portion of the CB Warrants were exercisable. The CB Warrants were to be exercised for cash or on a “cashless basis,” subject to certain adjustments, at any time after the 2019 Refinancing Closing Date until the expiration of such warrant at 5:00 p.m., New York time, on the earlier of (i) the five (5) year anniversary of the 2019 Refinancing Closing Date, or (ii) the liquidation of the Company.
Accounting for the 2019 Term Loans and CB Warrants
The CB Warrants represented a freestanding financial instrument that was classified as a liability because the CB Warrants met the definition of a derivative instrument that does not meet the equity scope exception (i.e., the CB Warrants were not indexed to the entity’s own equity). In addition, the material weakness penalty described above was evaluated as an embedded derivative liability and bifurcated from the 2019 Term Loans as it represented a non-credit related embedded feature that provides for net settlement. Both the CB Warrants liability and the embedded derivative liability were required to be initially and subsequently measured at fair value. The initial fair values of the CB Warrants liability and the embedded derivative liability approximated $0.9 million and $0.4 million, respectively, on the Refinancing Closing Date. The Company estimated these fair values by using the Black-Scholes-Merton option pricing model and a probability-weighted discounted cash flow approach.
The CB Warrants liability was included in other long-term liabilities. The Company remeasured the fair value of the CB Warrants liability as of December 31, 2020 and February 24, 2021 prior to the refinancing date and recorded any adjustments as other income (expense). At both February 24, 2021 and December 31, 2020, the CB Warrants liability was $2.0 million. Due to the extinguishment of the CB Warrants on February 24, 2021, there was no liability associated with the CB Warrants recorded as of June 30, 2021. For the six months ended June 30, 2021, the Company recorded other income of $0.1 million to reflect the change in the fair value of the CB Warrants liability. The Company did not record a change in fair value of the warrant liability during the three months ended June 30, 2021 as the CB Warrants liability was extinguished as part of the debt refinancing on February 24, 2021. For the three and six months ended June 30, 2020, the Company recorded other income of $0.1 million and other expense of $0.1 million to reflect the change in the CB Warrants liability.
The proceeds for the 2019 Refinancing Term Loan were first allocated to the CB Warrants liability and embedded derivative liability based on their respective fair values with a corresponding amount of $1.3 million recorded as a debt discount to the 2019 Term Loans. In addition, the Company incurred approximately $3.9 million of debt issuance costs, including $1.4 million related to the first amendment, for the 2019 Term Loans that have also been recorded as a debt discount. The combined debt discount from the CB Warrants liability, embedded derivative liability and the debt issuance costs were being amortized into interest expense over the term of the 2019 Term Loans using the effective interest method and were expensed on the refinancing date as a loss on early debt extinguishment. The Company recorded interest expense for the amortization of the CB Warrants liability and embedded derivative debt discounts of $0.1 million for the six months ended June 30, 2021. The Company did not record interest expense for the amortization of the CB Warrants liability and embedded derivative liability debt discounts for the three months ended June 30, 2021 as these debt discounts were extinguished as part of the debt refinancing on February 24, 2021. The Company recorded interest expense for the amortization of the CB Warrants liability and embedded derivative debt discounts of $0.1 million and $0.2 million for the three and six months ended June 30, 2020, respectively.
In addition to the amortization of the debt discounts into interest expense, the Company recorded $0.1 million of interest expense for the amortization of debt issuance costs related to the 2019 Refinancing Term Loan for the six months ended June 30, 2021. The Company did not record any interest expense for the amortization of debt issuance costs for the three months ended June 30, 2021 as the debt issuance costs were extinguished as part of the debt refinancing on February 24, 2021. For the three and six months ended June 30, 2020, the Company recorded an additional $0.4 million and $0.7 million of interest expense, respectively, for the amortization of the debt issuance costs related to the 2019 Refinancing Term Loan.
2019 ABL Credit Agreement
On the Refinancing Closing Date, LFS also entered into a financing agreement with the lenders thereto and Citizens Bank, N.A., as collateral agent, administrative agent and origination agent (the “2019 ABL Credit Agreement” and, together with the 2019 Refinancing Agreement, the “Refinancing Agreements”). The 2019 ABL Credit Agreement consisted of a $15.0 million revolving credit facility (the “2019 Revolving Credit Facility”). Proceeds of the 2019 Revolving Credit Facility were to be used for general corporate purposes. On the Refinancing Closing Date, the Company had nothing drawn on the ABL Credit Agreement and $14.0 million of available borrowing capacity thereunder (net of a $1.0 million reserve imposed by the lender).
The 2019 Refinancing Borrowers and 2019 Refinancing Guarantors under the 2019 ABL Credit Agreement were the same as under the 2019 Refinancing Agreement. The 2019 ABL Credit Agreement was secured by a second-priority lien on the real property of the Loan Parties (behind the 2019 Refinancing Agreement) and a first-priority lien on substantially all other assets of the Loan Parties.
2019 ABL Credit Agreement - Interest Rates and Fees
The interest rate on borrowings under the 2019 ABL Credit Agreement was, at the 2019 Refinancing Borrowers’ option, either LIBOR (with a 2.0% floor) plus an applicable margin ranging from 3.00% to 3.50% or a base rate (with a 3.0% minimum) plus an applicable margin ranging from 2.00% to 2.50%. At February 24, 2021 (the 2021 refinancing date) and June 30, 2020, the interest rate in effect on the 2019 ABL Credit Agreement was 5.25%.
2019 ABL Credit Agreement - Other Terms and Conditions
The 2019 ABL Credit Agreement was set to mature on April 12, 2022. There was also an unused line fee ranging from 0.250% to 0.375% per annum on undrawn amounts.
The 2019 ABL Credit Agreement contained representations and warranties, and covenants which are customary for debt facilities of this type. Unless the Required Lenders otherwise consented in writing, the covenants limited the ability of the Company and its restricted subsidiaries to, among other things, generally, to (i) incur additional indebtedness or issue preferred stock, (ii) pay dividends or make distributions to the Company’s stockholders, (iii) purchase or redeem the Company’s equity interests, (iv) make investments, (v) create liens on their assets, (vi) enter into transactions with the Company’s affiliates, (vii) sell assets other than in the ordinary course of business or another permitted disposition of assets and (viii) merge or consolidate with, or dispose of substantially all of the Company’s assets to, other companies.
The 2019 ABL Credit Agreement included customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the lenders, if the Company failed to comply with the terms of the 2019 ABL Credit Agreement or if other customary events occur.
The 2019 ABL Credit Agreement also contained a financial maintenance covenant for the 2019 Revolving Credit Facility, which is a requirement for the Total Leverage Ratio of the Company and its subsidiaries not to exceed an amount beginning at 4.00 to 1.00 through September 30, 2019, and stepping down to 1.75 to 1.00 effective July 1, 2021. In addition, the parties to the 2019 ABL Credit Agreement entered into an amendment which, among other changes revises the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 through the term of such agreement.
In connection with the 2019 ABL Credit Amendment Number One and Waiver, the parties amended certain provisions of the 2019 ABL Credit Agreement, including, among other changes to (i) require the approval of the origination agent and, generally, the lenders representing at least 50.1% of the aggregate undrawn revolving loan commitment or unpaid principal amount of the 2019 Term Loans, prior to effecting any permitted acquisition; (ii) revise the maximum permitted Total Leverage Ratio, starting at 3.30 to 1.00 on October 1, 2019 with a peak ratio of 4.25 during March 2020 along with varying monthly rates culminating in the lowest Total Leverage Ratio of 2.00 to 1.00 on April 1, 2021 through the term of the 2019 ABL Credit Agreement; and (iii) require the Loan Parties Liquidity as of the last day of any fiscal month ending on or after November 30, 2019, of at least $10,000,000, as described above in the Amendment Number One to 2019 Refinancing Agreement and Waiver. As a condition to executing the 2019 ABL Credit Amendment Number One and Waiver, the loan parties were required to pay a non-refundable waiver fee of $7,500.
As noted above in the section titled: 2019 Refinancing Agreement - Other Terms and Conditions, the Company was subject to cross-default under our 2019 Revolving Credit Facility as a result of our failure to satisfy the Collateral Coverage Amount as defined in the 2019 Term Loan financing agreement, which required the company to obtain a waiver. Accordingly, on February 1, 2021, the Company, LFS and LHLLC entered into a Waiver - Collateral Coverage Amount (December 2020) (“December 2020 Waiver”) with the lenders party thereto and Citizens Bank, N.A., as collateral agent and administrative agent. The December 2020 Waiver included a waiver of the Company's compliance with the Collateral Coverage Amount for the month ending December 31, 2020. The lender has waived the event of default arising from this noncompliance as of December 31, 2020, while reserving its rights with respect to covenant compliance in future months.
At February 24, 2021 (the 2021 refinancing date) and December 31, 2020, the Company had irrevocable letters of credit in the amount of $3.4 million with its lender to secure obligations under its self-insurance program.
Accounting for the 2019 ABL Credit Agreement
The Company incurred approximately $0.9 million of debt issuance costs for the 2019 ABL Credit Agreement that had been recorded as a non-current deferred asset. The deferred asset was amortized into interest expense over the term of the 2019 Term ABL Credit Agreement using the effective interest method and then expensed on the February 24, 2021 refinancing date as a loss on early debt extinguishment. The Company recorded $0.1 million of interest expense for the amortization of debt issuance costs for the six months ended June 30, 2021. The Company did not record any interest expense for the amortization of debt issuance costs for the three months ended June 30, 2021 as the debt issuance costs were extinguished as part of the debt refinancing on February 24, 2021. For both the three and six months ended June 30, 2020, the Company recorded $0.1 million of interest expense for the amortization of debt issuance costs.
Wintrust Term and Revolving Loans
On February 24, 2021, LFS, LHLLC and the direct and indirect subsidiaries of LFS from time to time included as parties to the agreement (the “Wintrust Guarantors”) entered into a Credit Agreement (the “Credit Agreement”) by and among the LFS, LHLLC, Wintrust Guarantors, the lenders party thereto from time to time, Wheaton Bank & Trust Company, N.A., a subsidiary of Wintrust Financial Corporation (collectively, “Wintrust”), as administrative agent and L/C issuer, Bank of the West as documentation agent, M&T Bank as syndication agent, and Wintrust as lead arranger and sole book runner.
In accordance with the terms of the Credit Agreement, Lenders provide to LFS (i) a $30.0 million senior secured term loan (the “Wintrust Term Loan”); and (ii) a $25.0 million senior secured revolving credit facility with a $5.0 million sublimit for the issuance of letters of credit (the “Wintrust Revolving Loan” and, together with the Wintrust Term Loan, the “Wintrust Loans”). Proceeds of the Wintrust Loans were used to refinance certain existing indebtedness, finance working capital and other general corporate purposes and fund certain fees and expenses associated with the closing of the Wintrust Loans.
The Wintrust Revolving Loan bears interest, at the LFS’s option, at either LIBOR (with a 0.25% floor) plus 3.5% or a base rate (with a 3.0% floor) plus 0.50%, subject to a 50 basis point step-down based on the ratio between the senior debt of the Company and its subsidiaries to the EBITDA (earnings before interest, income taxes, depreciation and amortization) of the LFS and its subsidiaries for the most recently ended four fiscal quarters (the “Senior Leverage Ratio”). The Wintrust Term Loan bears interest, at LFS’s option, at either LIBOR (with a 0.25% floor) plus 4.0% or a base rate (with a 3.0% floor) plus 1.00%, subject to a 50 (for LIBOR) or 75 (for base rate) basis point step-down based on the Senior Leverage Ratio.
LFS is required to make principal payments on the Wintrust Term Loan in $0.5 million installments on the last business day of each month commencing on March 31, 2021 with a final payment of all principal and interest not sooner paid on the Wintrust Term Loan due and payable on February 24, 2026. The Wintrust Revolving Loan will mature and become due and payable by LFS on February 24, 2026.
The Wintrust Loans are secured by (i) a valid, perfected and enforceable lien of the administrative agent on the ownership interests held by each of LFS and Wintrust Guarantors in their respective subsidiaries; and (ii) a valid, perfected and enforceable lien of the administrative agent on each of LFS and Wintrust Guarantors’ personal property, fixtures and real estate, subject to certain exceptions and limitations. Additionally, the re-payment of the Wintrust Loans shall be jointly and severally guaranteed by each Wintrust Guarantor.
The Credit Agreement contains representations and warranties, covenants and events of default that are customary for facilities of this type, as more particularly described in the Credit Agreement. The Wintrust Loans also contain three financial maintenance covenants, including (i) a requirement to have as of the last day of each quarter for the senior leverage ratio of the Company and its subsidiaries not to exceed an amount beginning at 2.25 to 1.00 through December 31, 2021, and stepping down to 2.00 to 1.00 at all times thereafter, (ii) a fixed charge coverage ratio of not less than 1.20 to 1.00 as of the last day of each fiscal quarter commencing with the fiscal quarter ending March 31, 2021, and (iii) no unfinanced capital expenditures, except for unfinanced capital expenditures in the ordinary course of business not exceeding in the aggregate $4.0 million during any fiscal year; and no default or event of default (as defined by the agreement) has occurred and is continuing, 50% of any portion of this annual limit, if not expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next following fiscal year as stipulated by the agreement. LFS and its affiliates maintain various commercial and service relationships with certain members of the syndicate and their affiliates in the ordinary course of business. As of June 30, 2021, the Company was in compliance with all financial maintenance covenants as required by the Wintrust Loans.
The following is a summary of the additional margin and commitment fees payable on the available Wintrust Term Loan and Wintrust Revolving Loan credit commitment:
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Level | | Senior Leverage Ratio | | Additional Margin for Prime Rate loans | | Additional Margin for Prime Revolving loans | | Additional Margin for Eurodollar Term loans | | Additional Margin for Eurodollar Revolving loans | | Commitment Fee |
I | | Greater than 1.00 to 1.00 | | 1.00 | % | | 0.50 | % | | 4.00 | % | | 3.50 | % | | 0.25 | % |
II | | Less than or equal to 1.00 to 1.00 | | 0.25 | % | | — | % | | 3.50 | % | | 3.00 | % | | 0.25 | % |
At June 30, 2021, the interest rate in effect on the Wintrust Term Loan was 4.25% and the interest rate in effect on the Wintrust Revolving Loan was 3.75%.
At June 30, 2021, the Company had irrevocable letters of credit in the amount of $3.4 million with its lender to secure obligations under its self-insurance program.
Revolver.
The following table reflects our available funding capacity as of June 30, 2021:March 31, 2022:
| | | | | | | | | | | | | | |
(in thousands) | | | | |
Cash & cash equivalents | | | | $ | 27,69318,066 | |
Credit agreement: | | | | |
A&R Wintrust Revolving credit facilityLoan | | $ | 25,000 | | | |
Outstanding revolving credit facilityborrowings on the A&R Wintrust Revolving Loan | | — (9,400) | | | |
Outstanding letters of credit | | (3,405)(3,300) | | | |
Net credit agreement capacity available | | | | 21,59512,300 | |
Total available funding capacity | | | | $ | 49,28830,366 | |
Cash Flow Summary
Management continuescontinued to devote additional resources to its billing and collection efforts during the sixthree months ended June 30, 2021.March 31, 2022. Management continues to expect that growth in its ODR business, which is less sensitive to the cash flow issues presented by large GCR projects, will positively impact our cash flow trends.
Provided that the Company’s lenders continue to provide working capital funding, we believethe Company believes based on the Company'sits current reforecast that our current cash and cash equivalents of $27.7$18.1 million as of June 30, 2021,March 31, 2022, cash payments to be received from existing and new customers, and availability of borrowing under the revolving line of credit under ourA&R Wintrust LoansRevolving Loan (pursuant to which we had $21.6$12.3 million of availability as of June 30, 2021)March 31, 2022) will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months. See Note 1 - Organization and Plan of Business Operations.
Debt and Related Obligations
Long-term debt consists of the following obligations as of:
| | | | | | | | | | | |
(in thousands) | March 31, 2022 | | December 31, 2021 |
A&R Wintrust Term Loan - term loan payable in quarterly installments of principal, (commencing in December 2021) plus interest through February 2026 | 33,024 | | | 34,881 | |
A&R Wintrust Revolving Loan | 9,400 | | | — | |
Finance leases – collateralized by vehicles, payable in monthly installments of principal, plus interest ranging from 4.40% to 6.45% through 2025 | 5,317 | | | 5,132 | |
Total debt | 47,741 | | | 40,013 | |
Less - Current portion of long-term debt | (13,222) | | | (9,879) | |
Less - Unamortized discount and debt issuance costs | (299) | | | (318) | |
Long-term debt | $ | 34,220 | | | $ | 29,816 | |
On the 2021 Refinancing Date, the Company refinanced its 2019 Refinancing Term Loan and 2019 Revolving Credit Facility with proceeds from the issuance of the Wintrust Term Loan. As a result of the 2021 Refinancing, the Company prepaid all principal, interest, fees and other obligations outstanding under the 2019 Refinancing Agreements and terminated its 2019 Refinancing Term Loan and 2019 Refinancing Revolving Credit Facility. In addition, on the 2021 Refinancing Date, the Company recognized a loss on the early extinguishment of debt of $2.0 million, which consisted of the write-off of $2.6 million of unamortized discount and financing costs, the reversal of the $2.0 million CB warrants liability and the prepayment penalty and other extinguishment costs of $1.4 million.
In conjunction with the Jake Marshall Transaction, the Company entered into the A&R Wintrust Credit Agreement. In accordance with the terms of the A&R Wintrust Credit Agreement, Lenders provided to LFS (i) a $35.5 million senior secured term loan; and (ii) a $25 million senior secured revolving credit facility with a $5 million sublimit for the issuance of letters of credit. The overall A&R Wintrust Term Loan commitment under the A&R Wintrust Credit Agreement was recast at $35.5 million in connection with the A&R Wintrust Credit Agreement. A portion of the A&R Wintrust Term Loan commitment was used to fund the closing purchase price of the Jake Marshall Transaction. The A&R Credit Agreement was also amended to: permit the Company to undertake the Jake Marshall Transaction, make certain adjustments to the covenants under the A&R Wintrust Credit Agreement (which were largely done to make certain adjustments for the Jake Marshall Transaction), allow for the Earnout Payments under the Jake Marshall Transaction and make other corresponding changes to the A&R Wintrust Credit Agreement.
See Note6 for further discussion.
Surety Bonding
In connection with our business, we are occasionally required to provide various types of surety bonds that provide an additional measure of security to our customers for our performance under certain government and private sector contracts. Our ability to obtain surety bonds depends upon our capitalization, working capital, past performance, management expertise and external factors, including the capacity of the overall surety market. Surety companies consider such factors in light of the amount of our backlog that we have currently bonded and their current underwriting standards, which may change from time-to-time. The bonds we provide typically reflect the contract value. As of June 30, 2021March 31, 2022 and December 31, 2020,2021, the Company had approximately $265.3$134.9 million and $79.4$159.2 million in surety bonds outstanding, respectively. In January 2022, our bonding capacity was increased from $700.0 million to $800.0 million. We believe that our $700.0$800.0 million bonding capacity provides us with a significant competitive advantage relative to many of our competitors which have limited bonding capacity. See Note 13 for further discussion.
Insurance and Self-Insurance
We purchase workers’ compensation and general liability insurance under policies with per-incident deductibles of $250,000 per occurrence. Losses incurred over primary policy limits are covered by umbrella and excess policies up to specified limits with multiple excess insurers. We accrue for the unfunded portion of costs for both reported claims and claims incurred but not reported. The liability for unfunded reported claims and future claims is reflected on the Condensed Consolidated Balance Sheets as current and non-current liabilities. The liability is computed by determining a reserve for each reported claim on a case-by-case basis based on the nature of the claim and historical loss experience for similar claims plus an allowance for the cost of incurred but not reported claims. The current portion of the liability is included in accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets. The non-current portion of the liability is included in other long-term liabilities on the Condensed Consolidated Balance Sheets.
We are self-insured related to medical and dental claims under policies with annual per-claimant and annual aggregate stop-loss limits. We accrue for the unfunded portion of costs for both reported claims and claims incurred but not reported. The liability for unfunded reported claims and future claims is reflected on the Condensed Consolidated Balance Sheets as a current liability in accrued expenses and other current liabilities.
The components of the self-insurance liability are reflected below as of June 30, 2021 and December 31, 2020:
| | | | | | | | | | | |
(in thousands) | June 30, 2021 | | December 31, 2020 |
Current liability – workers’ compensation and general liability | $ | 105 | | | $ | 197 | |
Current liability – medical and dental | 511 | | | 764 | |
Non-current liability | 776 | | | 890 | |
Total liability | $ | 1,392 | | | $ | 1,851 | |
Restricted cash | $ | 113 | | | $ | 113 | |
The restricted cash balance represents cash set aside See Note 13 for the funding of workers’ compensation and general liability insurance claims. This amount is replenished when depleted, or at the beginning of each month.further discussion.
Multiemployer Pension Plans
We participate in approximately 40 multiemployer pension plans (“MEPPs”) that provide retirement benefits to certain union employees in accordance with various collective bargaining agreements (“CBAs”). As one of many participating employers in these MEPPs, we are responsible with the other participating employers for any plan underfunding. Our contributions to a particular MEPP are established by the applicable CBAs; however, required contributions may increase based on the funded status of an MEPP and legal requirements of the Pension Protection Act of 2006 (the “PPA”), which requires substantially underfunded MEPPs to implement a funding improvement plan (“FIP”) or a rehabilitation plan (“RP”) to improve their funded status. Factors that could impact funded status of an MEPP include, without limitation, investment performance, changes in the participant demographics, decline in the number of contributing employers, changes in actuarial assumptions and the utilization
of extended amortization provisions. Assets contributed to the MEPPs by us may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to an MEPP, the unfunded obligations of the MEPP may be borne by the remaining participating employers.
An FIP or RP requires a particular MEPP to adopt measures to correct its underfunding status. These measures may include, but are not limited to an increase in a company’s contribution rate as a signatory to the applicable CBA, or changes to the benefits paid to retirees. In addition, the PPA requires that a 5.0% surcharge be levied on employer contributions for the first year commencing shortly after the date the employer receives notice that the MEPP is in critical status and a 10.0% surcharge on each succeeding year until a CBA is in place with terms and conditions consistent with the RP.
We could also be obligated to make payments to MEPPs if we either cease to have an obligation to contribute to the MEPP or significantly reduce our contributions to the MEPP because we reduce the number of employees who are covered by the relevant MEPP for various reasons, including, but not limited to, layoffs or closure of a subsidiary assuming the MEPP has unfunded vested benefits. The amount of such payments (known as a complete or partial withdrawal liability) would equal our proportionate share of the MEPPs’ unfunded vested benefits. We believe that certain of the MEPPs in which we participate may have unfunded vested benefits. Due to uncertainty regarding future factors that could trigger withdrawal liability, we are unable to determine (a) the amount and timing of any future withdrawal liability, if any, and (b) whether our participation in these MEPPs could have a material adverse impact on our financial condition, results of operations or liquidity.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”); therefore, pursuant to Item 301(c) of Regulation S-K, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on that evaluation as of June 30, 2021,March 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that our Company’s disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors
There have been no material changes to ourfrom the risk factors previously disclosed in Part I, Item 1A of our 2020the Company's Annual Report on Form 10-K.10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
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Exhibit | | Description |
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| | Limbach Holdings, Inc.First Amendment and Waiver to the Amended and Restated Omnibus Incentive Plan.Credit Agreement, dated as of May 5, 2022, by and among Limbach Facility Services LLC, Limbach Holdings LLC, the other Loan Parties party thereto, the Lenders party thereto and Wheaton Bank & Trust Company, N.A., as Administrative Agent and L/C Issuer, filed herewith as Exhibit 10.1. |
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101.INS | | XBRL Instance Document. |
101.SCH | | XBRL Taxonomy Extension Schema Document. |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF | | XBRL Taxonomy Extension Definition Document. |
*Filed herewith.
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.
| | | | | |
| LIMBACH HOLDINGS, INC. |
| |
| /s/ Charles A. Bacon, III |
| Charles A. Bacon, III |
| Chief Executive Officer |
| (Principal Executive Officer) |
| |
| /s/ Jayme L. Brooks |
| Jayme L. Brooks |
| Chief Financial Officer |
| (Principal Financial and Accounting Officer) |
Date: August 12, 2021May 10, 2022 | |