What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-05 compared with 2020-05-07 · 160 added, 293 removed, 252 unchanged (64% of the section changed)

1 unchanged sentence

CRITICAL ACCOUNTING POLICIES

Except for the new accounting policy for leases described below, there have been no material changes in our critical accounting policies from those reported in our fiscal 2019 Annual Report on Form 10-K filed with the SEC.

There have been no material changes in our critical accounting policies from those reported in our fiscal 2020 Annual Report on Form 10-K filed with the SEC.

For more information on our critical accounting policies, see Part II, Item 7 of our fiscal 2020 Annual Report on Form 10-K.

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Unpriced Change Orders and Claims

Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $10.8 million at March 31, 2020 and $10.1 million at June 30, 2019 .

Costs and estimated earnings in excess of billings on uncompleted contracts included revenues for unpriced change orders and claims of $13.9 million at September 30, 2020 and $14.5 million at June 30, 2020.

The amounts ultimately realized may be significantly different than the recorded amounts resulting in a material adjustment to future earnings.

6 unchanged sentences

However, the results of litigation are inherently unpredictable and the possibility exists that the ultimate resolution of one or more of these matters could result in a material effect on our financial position, results of operations or liquidity.

Legal costs are expensed as incurred.

Goodwill represents the excess of the purchase price of acquisitions over the acquisition date fair value of the net identifiable tangible and intangible assets acquired.

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As a test for reasonableness, we also consider the combined carrying values of our reporting units to our market capitalization.

During the third quarter, the Company concluded that goodwill impairment indicators existed based on the uncertainties caused by the COVID-19 pandemic and the significant decline in the price of crude oil.

These uncertainties have resulted in lowered revenue expectations for the remainder of fiscal 2020 and fiscal 2021 and led to significant volatility in the Company's stock price.

Accordingly, the Company performed an interim test as of March 31, 2020, which did not result in any impairments.

While near-term revenue expectations were reduced, the Company also projected significant reductions in its cost structure.

As of March 31, 2020, there were three reporting units with goodwill totaling $14.1 million that had low headroom, which we define as the percentage difference between the fair value of a reporting unit and its carrying value.

Our financial projections were based on the current assessment of our markets.

Our markets are at historically volatile levels and future developments are difficult to predict.

If the markets that impact our business continue to deteriorate, particularly in the reporting units mentioned above, the Company could recognize a significant goodwill impairment.

In the second quarter, the Company concluded that a goodwill impairment indicator existed in the Electrical Infrastructure segment based on the recent history of depressed gross margins and the second quarter’s downward acceleration of revenue and gross margin.

Accordingly, the Company performed an interim impairment test as of December 31, 2019, reflecting updated revenue and gross margin assumptions, and concluded that the reporting unit's $24.9 million of goodwill was fully impaired.

Additionally, in December 2019, the Company concluded that a goodwill impairment indicator existed for an Industrial segment reporting unit based on several second quarter events.

These events included the deterioration of the relationship with a significant customer in the iron and steel industry in the second quarter.

As a result, the customer canceled other previously awarded work and the Company is expecting little to no business from this customer in the foreseeable future.

Accordingly, the Company performed an interim impairment test as of December 31, 2019 and concluded that the reporting unit's $8.0 million of goodwill was fully impaired.

The remaining goodwill in the Industrial segment is related to a separate reporting unit that serves a broader customer base beyond iron and steel.

Our significant assumptions, including revenue growth rates, gross margins, discount rate and other factors may change in light of changes in the economic and competitive environment in which we operate.

Assuming that all other components of our fair value estimate remain unchanged, a change in the following assumptions would have the following effect on headroom:

Headroom Sensitivity Analysis

Goodwill as of March 31, 2020 (in thousands)

Baseline Headroom

Headroom if Revenue Growth Rate

Declines by 100 Basis Points

Headroom if Gross Margin

Declines by 100 Basis Points

Headroom if Discount Rate Increases by 100 Basis Points

Reporting Unit 1

Reporting Unit 2

Reporting Unit 3

All other reporting units

We use the asset and liability approach for financial accounting and reporting for income taxes.

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The Company considers various factors, including economic incentives, intent, past history and business need, to determine the likelihood that a renewal option will be exercised.

Recently Issued Accounting Standards

Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

On June 16, 2016, the FASB issued ASU 2016-13, which will change how the Company accounts for its allowance for uncollectible accounts.

The amendments in this update require a financial asset (or a group of financial assets) to be presented at the net amount expected to be collected.

The income statement will reflect any increases or decreases of expected credit losses that have taken place during the period.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount.

Current GAAP delays the recognition of the full amount of credit losses until the loss is probable of occurring.

The amendments in this update eliminate the probable initial recognition threshold and, instead, reflect the Company's current estimate of all expected credit losses.

In addition, current guidance limits the information the Company may consider in measuring a credit loss to its past events and current conditions.

The amendments in this update broaden the information the Company may consider in developing its expected credit loss estimate to include forecasted information.

The amendments in this update are effective for the Company on July 1, 2020.

The Company must apply the amendments in this update through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.

At this time, the Company does not expect this update to have a material impact to its estimate of the allowance for uncollectible accounts.

Right-of-use assets are evaluated for impairment in accordance with our policy for impairment of long-lived assets.

RESULTS OF OPERATIONS

We operate our business through four reportable segments:

Electrical Infrastructure;

Oil Gas & Chemical;

Storage Solutions;

and Industrial.

The Electrical Infrastructure segment consists of power delivery services provided to investor owned utilities, including construction of new substations, upgrades of existing substations, short-run transmission line installations, distribution upgrades and maintenance, as well as emergency and storm restoration services.

We also provide construction and maintenance services to a variety of power generation facilities, such as combined cycle plants and other natural gas fired power stations.

The Oil Gas & Chemical segment serves customers primarily in the downstream and midstream petroleum industries who are engaged in refining crude oil and processing, fractionating, and marketing of natural gas and natural gas liquids.

We also perform work in the petrochemical, upstream petroleum, and sulfur extraction, recovery and processing markets.

Our services include plant maintenance, turnarounds, engineering and capital construction.

We also offer industrial cleaning services, including hydro-blasting, hydro-excavating, advanced chemical cleaning and vacuum services.

The Storage Solutions segment consists of work related to aboveground storage tanks ("AST") and terminals.

Also included in this segment are cryogenic and other specialty storage tanks and terminals including liquefied natural gas, liquid nitrogen/liquid oxygen, liquid petroleum and other specialty vessels such as spheres as well as marine structures and truck and rail loading/offloading facilities.

Our services include engineering, fabrication and construction, and maintenance and repair, which includes planned and emergency services for both tanks and full terminals.

Finally, we offer AST products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals.

The Industrial segment consists of work for various industries, including major mining and minerals companies engaged primarily in the extraction of non-ferrous metals, aerospace and defense, cement, agriculture, and various industrial facilities.

Our services include engineering, fabrication and construction, and maintenance and repair, which includes planned and emergency services.

We also design instrumentation and control systems and offer specialized expertise in the design and construction of bulk material handling systems.

Operational Update

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We transitioned the majority of our administrative and engineering team members to remote working conditions in March 2020.

Our project teams in coordination with our clients created work processes to integrate the guidance from governmental agencies and leading health organizations to protect the health and safety of everyone on our job sites while maintaining productivity.

There is significant uncertainty regarding the near- and intermediate-term economic impacts from the COVID-19 pandemic and the significant supply/demand dislocation in crude oil during the quarter, which has resulted in lowered revenue expectations for the remainder of fiscal 2020 and for fiscal 2021.

As a result, the Company is expanding its previously announced business improvement plan, which consists of discretionary cost reductions, workforce reductions and closures of certain offices in order to increase the utilization of the Company's staff and bring the cost structure of the business in line with the near-term expectation of lower revenue.

The Company incurred $6.6 million of restructuring costs during the three months ended March 31, 2020 and expects to incur an additional $4.0 to $6.0 million of restructuring costs related to activities planned during the fourth quarter of fiscal 2020.

The Company expects to save approximately $40.0 million in annual operating costs at the conclusion of the plan.

Approximately $12.0 million of the reductions are related to SG&A and approximately $28.0 million are related to construction overhead activities.

In order to more clearly depict the core profitability of the Company, the following table presents our net income (loss) and earnings (loss) per fully diluted share for the three and nine months ended March 31, 2020 after adjusting for expense items related to restructuring initiatives and impairments:

Reconciliation of Adjusted Net Income (Loss) and Diluted Earnings (Loss) per Common Share (1)

(In thousands, except per share data)

Three Months Ended March 31, 2020

Nine Months Ended March 31, 2020

Amount of Charge

Income Tax Effect of Charge

Net Income (Loss)

Earnings (Loss) Per Diluted Share

Net Income (Loss)

Earnings (Loss) Per Diluted Share

Net loss and diluted loss per common share, as reported

Restructuring costs incurred

Electrical Infrastructure segment goodwill impairment

Industrial segment goodwill and other intangible asset impairment

Valuation allowance placed on a deferred tax asset

Adjusted net income (loss) and diluted earnings (loss) per common share

Weighted average common shares outstanding - diluted:

Previously anti-dilutive common shares

Adjusted weighted average common shares outstanding - diluted

This table presents non-GAAP financial measures of our adjusted net income (loss) and adjusted diluted earnings (loss) per common share for the three and nine months ended March 31, 2020.

The most directly comparable financial measures are net income (loss) and diluted earnings (loss) per common share, respectively, presented in the Condensed Consolidated Statements of Income.

We have presented these financial measures because we believe they more clearly depict the core operating results of the Company during the periods presented and provide a more comparable measure of the Company's operating results to other companies considered to be in similar businesses.

Since adjusted net income (loss) and adjusted diluted earnings (loss) per common share are not measures of performance calculated in accordance with GAAP, they should be considered in addition to, rather than as a substitute for, the most directly comparable GAAP financial measures.

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019

Consolidated revenue was $248.3 million for the three months ended March 31, 2020 , compared to $358.9 million in the same period in the prior fiscal year.

On a segment basis, revenue decreased for the Industrial, Electrical Infrastructure, and Oil Gas & Chemical segments by $57.4 million, $32.3 million, and $30.2 million, respectively.

These decreases were partially offset by an increase in the Storage Solutions segment of $9.3 million.

Consolidated gross profit decreased to $20.5 million in the three months ended March 31, 2020 compared to $ 36.9 million in the same period in the prior fiscal year.

Gross margin decreased to 8.2% in the three months ended March 31, 2020 compared to 10.3% in the same period in the prior fiscal year.

Gross margins in Fiscal 2020 are the result of strong project execution, offset by the under recovery of construction overhead costs due to lower than anticipated revenue volumes.

Consolidated SG&A expenses were $19.7 million in the three months ended March 31, 2020 compared to $24.1 million in the same period a year earlier.

The decrease is primarily attributable to cost reduction initiatives and lower incentive compensation due to weaker operating results in the current year.

The Company recorded $6.6 million of restructuring costs due to actions taken under our business improvement plan.

See Operational Update in this Results of Operations section and Item 1.

Financial Statements, Note 10 - Restructuring Costs, for more information about the restructuring costs.

Interest expense was $0.4 million in the three months ended March 31, 2020 compared to $0.3 million in the same period a year ago.

The increase was due to a higher average debt balance during the three months ended March 31, 2020 .

Interest income was $0.4 million in the three months ended March 31, 2020 compared to $0.3 million in the same period a year ago due to an increase in our average cash balance.

Our effective tax rate for the three months ended March 31, 2020 was 16.9% compared to 30.5% for the same period a year ago.

The tax benefit for the three months ended March 31, 2020 was negatively impacted by higher than normal non-deductible expenses.

The effective tax rate in fiscal 2019 was negatively impacted by a valuation allowance of $0.6 million placed on foreign tax credits generated by our operations in Canada, which we believe will not be utilized prior to their expiration.

For the three months ended March 31, 2020 , we had a net loss of $5.5 million , or $0.21 per fully diluted share, compared to net income of $8.9 million , or $0.33 per fully diluted share, in the three months ended March 31, 2019 .

Electrical Infrastructure

Revenue for the Electrical Infrastructure segment was $28.4 million in the three months ended March 31, 2020 compared to $60.7 million in the same period a year earlier.

The decrease is primarily due to a lower volume of power delivery and power generation work.

The segment gross margin was 2.6% in fiscal 2020 and 10.2% in fiscal 2019.

Fiscal 2020 project execution met our expectations, but segment gross margin was negatively impacted by lower volumes, which lead to the under recovery of construction overhead costs.

The fiscal 2019 segment gross margin was positively impacted by strong project execution on power generation work.

In the second quarter of fiscal 2020, the Company announced a business improvement plan for this segment.

At this time, we have returned to the office in select locations where predetermined criteria have been met, but the majority of our administrative and engineering team members continue to work remotely.

Work at most customer locations continues to progress as our project teams in coordination with our clients created work processes to integrate the guidance from governmental agencies and leading health organizations to protect the health and safety of everyone on our job sites.

There continues to be significant uncertainty regarding the near- and intermediate-term economic impacts from the COVID-19 pandemic, which continues to disrupt the markets we serve.

In fiscal 2020, the Company implemented a business improvement plan related to:

• its strategic initiative to exit the domestic iron and steel industry;

• the implementation of business improvements in the power delivery portion of the Utility and Power Infrastructure segment;

• the reduction of its cost structure following the decline in revenue caused by the COVID-19 pandemic and related market disruption and the decline in the price of crude oil.

The business improvement plan consisted of discretionary cost reductions, workforce reductions and closures of certain offices in order to increase the utilization of the Company's staff and bring the cost structure of the business in line with the expected near-term decrease in revenue.

The Company incurred $14.0 million of restructuring costs during fiscal 2020 and substantially completed its restructuring activities under the business improvement plan.

However, the Company recognized a $0.3 million gain on restructuring activities during the three months ended September 30, 2020 as a result of various trailing restructuring expenses and credits.

These actions, along with lower incentive compensation, reduced first quarter of fiscal 2021 SG&A and construction overhead costs by $15.9 million when compared to the same quarter last year.

In addition to these actions, we have and will continue to look for opportunities to further reduce costs until we see project awards and revenue volume recover.

Change in Reportable Segments

Due to changing markets facing our clients and to better align the financial reporting of the Company with our long-term strategic growth areas, we began reporting our financial results under new reportable segments effective July 1, 2020.

The new reportable segments along with a description of each are as follows:

• Utility and Power Infrastructure :

consists of power delivery services provided to investor owned utilities, including construction of new substations, upgrades of existing substations, transmission and distribution line installations, upgrades and maintenance, as well as emergency and storm restoration services.

The Company also provides construction and maintenance services to a variety of power generation facilities, including gas fired facilities in simple or combined cycle design, and provides engineering, fabrication, and construction services for liquefied natural gas LNG utility peak shaving facilities.

• Process and Industrial Facilities :

primarily serves customers in the downstream and midstream petroleum industries who are engaged in refining crude oil and processing, fractionating, and marketing of natural gas and natural gas liquids.

The Company also serves customers in various other industries such as petrochemical, sulfur, mining and minerals companies engaged primarily in the extraction of non-ferrous metals, aerospace and defense, cement, agriculture, and other industrial customers.

The Company's services include plant maintenance, turnarounds, industrial cleaning services, engineering, fabrication, and capital construction.

• Storage and Terminal Solutions :

consists of work related to aboveground storage tanks and terminals.

Also included in this segment are cryogenic and other specialty storage tanks and terminals, including LNG, liquid nitrogen/liquid oxygen, liquid petroleum and other specialty vessels such as spheres, as well as marine structures and truck and rail loading/offloading facilities.

The Company's services include engineering, fabrication, construction, and maintenance and repair, which includes planned and emergency services for both tanks and full terminals.

Finally, the Company offers tank products, including geodesic domes, aluminum internal floating roofs, floating suction and skimmer systems, roof drain systems and floating roof seals.

All prior period segment information has been restated to conform with our new reportable segments.

In addition, beginning July 1, 2020, the Company is reporting separately corporate selling, general and administrative expenses and other corporate expenses that were previously allocated to the segments.

The Company evaluates performance and allocates resources based on operating income.

Intersegment sales and transfers are recorded at cost;

therefore, no intercompany profit or loss is recognized.

Segment assets consist primarily of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, property, plant and equipment, right-of-use lease assets, goodwill and other intangible assets.

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019

Consolidated revenue was $182.8 million for the three months ended September 30, 2020, compared to $338.1 million in the same period in the prior fiscal year.

On a segment basis, revenue decreased for the Process and Industrial Facilities and Storage and Terminal Solutions segments by $108.9 million, and $59.3 million, respectively.

These decreases were partially offset by an increase in the Utility and Power Infrastructure segment of $12.9 million.

Consolidated gross profit decreased to $14.4 million in the three months ended September 30, 2020 compared to $32.5 million in the same period in the prior fiscal year.

Gross margin decreased to 7.9% in the three months ended September 30, 2020 compared to 9.6% in the same period in the prior fiscal year.

Despite generally strong project execution, gross margins in fiscal 2021 were lower than fiscal 2020 due to lower than forecasted volumes, which led to higher under recovery of construction overhead costs.

Consolidated SG&A expenses were $18.1 million in the three months ended September 30, 2020 compared to $23.7 million in the same period a year earlier.

The decrease is primarily attributable to cost reductions we implemented under our business improvement and restructuring plan that began in late fiscal 2020 and lower incentive compensation.

Interest expense was $0.4 million in each of the three months ended September 30, 2020 and September 30, 2019.

Interest income was less than $0.1 million in the three months ended September 30, 2020 compared to $0.5 million in the same period a year ago primarily due to higher interest rates in the prior period.

Our effective tax rates for the three months ended September 30, 2020 and September 30, 2019 were (9.8)% and 30.6%, respectively.

We expect our effective tax rate to be approximately 27.0% in fiscal 2021.

The effective tax rate for the three months ended September 30, 2020 was negatively impacted by a $1.0 million deferred tax asset adjustment.

For the three months ended September 30, 2020, we had a net loss of $3.0 million, or $0.12 per fully diluted share, compared to net income of $6.2 million, or $0.22 per fully diluted share, in the three months ended September 30, 2019.

Utility and Power Infrastructure

Revenue for the Utility and Power Infrastructure segment was $60.7 million in the three months ended September 30, 2020 compared to $47.7 million in the same period a year earlier.

The increase is due to a higher volume of LNG utility peak shaving work, partially offset by lower volumes of power delivery and power generation work.

The segment gross margin was 11.4% in fiscal 2021 compared to (0.4)% in fiscal 2020.

The fiscal 2021 segment gross margin was positively impacted by strong project execution on LNG utility peak shaving capital projects and power delivery work.

The fiscal 2020 segment gross margin was negatively impacted by lower than previously expected margins on a transmission and distribution upgrade project due to lower than expected productivity and craft retention incentives, and an LNG utility peak shaving capital project due to purchased equipment that was found to be under performing.

In fiscal 2020, the Company announced a business improvement plan for the former Electrical Infrastructure segment, which is now included in the Utility and Power Infrastructure segment.

The plan included significant changes to the operations and management of the business, including changes to leadership and mid-level operational personnel, modifications to operational processes, and increased business development resources.

During the quarter, we partially completed the planned personnel changes and strengthened business processes, which has led to improved project execution.

However, it is still too early to assess the long-term effectiveness of the business improvement plan.

Furthermore, an improvement in the operating performance of this segment will be dependent upon the effectiveness and execution of the improvement plan, the markets we serve, the spending volumes of our existing clients and other external factors.

The geographic footprint of most work in this segment is concentrated in the Mid-Atlantic and Northeastern U.S., which has been severely affected by the COVID-19 pandemic.

As a result, we have experienced suspensions of work at certain job sites and client proposal activity has slowed as they manage other pandemic-related challenges.

We will continue to assess conditions in the areas we serve and resume normal operations based on the needs of our clients and safety guidelines to ensure the protection of our employees and customers.

Oil Gas & Chemical

Revenue for the Oil Gas & Chemical segment was $52.3 million in the three months ended March 31, 2020 compared to $82.5 million in the same period a year earlier.

The decrease of $30.2 million is primarily due to lower volumes of turnaround work.

The segment gross margin was 5.6% for the three months ended March 31, 2020 compared to 13.0% in the same period last year.

Fiscal 2020 segment gross margin was negatively impacted by lower volumes, which led to under recovery of construction overhead costs, and a lower than previously expected margin on a capital project due to purchased equipment that was found to be under performing during start-up and commissioning.

The fiscal 2019 segment gross margin benefited from improved recovery of construction overhead costs and strong execution on capital projects.

The short-term impact to the Company's refinery turnaround and maintenance operations as a result of direct and indirect conditions created by the global pandemic has been considerable.

There have been project cancellations, delays and temporary suspensions of planned seasonal work, however, in most cases the revenue volumes are moving out in time from a few weeks to quarters, but not eliminated.

The updated start dates on many of the delayed activities is uncertain and will depend on the needs of our clients, safety guidelines, and the market.

Storage Solutions

Revenue for the Storage Solutions segment was $143.7 million in the three months ended March 31, 2020 compared to $134.4 million in the same period a year earlier.

The increase in segment revenue is primarily a result of increased tank and terminal construction work and higher levels of work in Canada.

The segment gross margin was 12.5% in the three months ended March 31, 2020 compared to 10.8% in the three months ended March 31, 2019 .

The fiscal 2020 segment gross margin was positively impacted by strong project execution on large capital projects.

As a result of the COVID-19 pandemic, we experienced short-term suspensions of work on a limited number of projects.

Work on most of these projects has resumed.

In addition, some project starts have been delayed for varying durations from a few weeks to a few quarters.

While some project award cycles have been extended, key opportunities, including a medium-scale LNG terminal, a crude terminal and LNG peak shaving project continue to advance.

Revenue for the Industrial segment decreased $57.4 million to $23.9 million in the three months ended March 31, 2020 compared to $81.3 million in the same period a year earlier.

The decrease in revenue is primarily attributable to our strategic decision to exit the domestic iron and steel industry.

We no longer have a continuous presence in any domestic iron and steel facility with final wind-down of the business to occur in the fourth quarter.

The segment gross margin (loss) was (5.2)% in the three months ended March 31, 2020 compared to 6.6% in the same period a year earlier.

The fiscal 2020 segment gross loss was negatively impacted by the under recovery of construction overhead costs following the sharp decline in revenue from our strategic decision to exit the domestic iron and steel industry.

Nine Months Ended March 31, 2020 Compared to the Nine Months Ended March 31, 2019

Consolidated revenue was $905.1 million for the nine months ended March 31, 2020 , compared to $1.018 billion in the same period in the prior fiscal year.

On a segment basis, revenue decreased in the Oil Gas & Chemical, Electrical Infrastructure, and Industrial segments by $78.6 million, $73.5 million, and $24.5 million, respectively.

These decreases were partially offset by an increase in the Storage Solutions segment of $63.7 million.

Consolidated gross profit decreased to $82.9 million in the nine months ended March 31, 2020 compared to $88.2 million in the same period in the prior fiscal year.

Gross margin increased to 9.2% in the nine months ended March 31, 2020 compared to 8.7% in the same period in the prior fiscal year.

Fiscal 2020 gross margin was positively impacted by strong project execution in the Storage Solutions, Oil Gas & Chemical and Industrial segments, partially offset by poor project execution in the Electrical Infrastructure segment in the first and second quarters and the under-recovery of overhead costs due to the lower revenue volumes across most of the business.

Consolidated SG&A expenses were $66.6 million in the nine months ended March 31, 2020 compared to $67.7 million in the same period a year earlier.

The decrease is primarily attributable to lower incentive compensation due to weaker operating results in the current year.

The Company recorded non-cash goodwill and other intangible asset impairments of $38.5 million during the second quarter of Fiscal 2020.

Financial Statements, Note 4 - Intangible Assets Including Goodwill for more information about the impairments.

In addition, The Company recorded $6.6 million of restructuring costs due to actions taken under our business improvement plan.

See Operational Update in this Results of Operations section and Item 1.

Financial Statements, Note 10 - Restructuring Costs, for more information about the restructuring costs.

Interest expense was $1.2 million in the nine months ended March 31, 2020 compared to $1.0 million in the same period a year ago.

The increase was due to a higher average debt balance during the nine months ended March 31, 2020 .

Interest income was $1.2 million in the nine months ended March 31, 2020 compared to $0.9 million in the same period a year ago due to an increase in our average cash balance.

Our effective tax rate for the nine months ended March 31, 2020 was 5.9% compared to 27.9% for the same period a year ago.

The tax benefit for the nine months ended March 31, 2020 was negatively impacted by a $2.5 million valuation allowance placed on a deferred tax asset that was created by net operating loss carryforwards and other tax credits in Canada and by the non-deductible portion of the goodwill impairments booked in the second quarter of fiscal 2020.

The effective tax rate for the nine months ended March 31, 2019 was negatively impacted by a valuation allowance of $0.6 million placed on foreign tax credits generated by our operations in Canada, which we believe will not be utilized prior to their expiration.

This was partially offset by $0.3 million of excess tax benefits related to the vesting of stock-based compensation.

For the nine months ended March 31, 2020 , we had a net loss of $27.4 million , or $1.02 per fully diluted share, compared to net income of $15.2 million , or $0.55 per fully diluted share in the nine months ended March 31, 2019 .

Electrical Infrastructure

Revenue for the Electrical Infrastructure segment was $90.0 million in the nine months ended March 31, 2020 compared to $163.5 million in the same period a year earlier.

The decrease is primarily due to lower volumes of power delivery and power generation work.

The segment gross margin (loss) was (2.2)% in fiscal 2020 and 8.0% in fiscal 2019.

The fiscal 2020 segment gross loss was negatively impacted by poor execution in the first and second quarters.

In addition, the lower volumes led to the under recovery of construction overhead costs.

Oil Gas & Chemical

Revenue for the Oil Gas & Chemical segment was $165.8 million in the nine months ended March 31, 2020 compared to $244.3 million in the same period a year earlier.

The decrease of $78.5 million is primarily due to lower volumes of turnaround and refinery maintenance work.

The segment gross margin was 6.5% for the nine months ended March 31, 2020 compared to 10.4% in the same period last year.

The fiscal 2020 segment gross margin was negatively impacted by lower volumes, which led to the under recovery of construction overhead costs.

Fiscal 2020 segment gross margin was also negatively impacted by a lower than previously expected margin on a capital project due to purchased equipment that was found to be under performing during start-up and commissioning.

Storage Solutions

Revenue for the Storage Solutions segment was $436.6 million in the nine months ended March 31, 2020 compared to $372.9 million in the same period a year earlier.

The increase in segment revenue is primarily a result of increased tank and terminal construction work and higher levels of work in Canada.

The segment gross margin was 13.5% in the nine months ended March 31, 2020 and 9.5% in the nine months ended March 31, 2019 .

The fiscal 2020 segment gross margin was positively impacted by strong project execution on large capital projects.

For the first and second quarters of fiscal 2019, gross margin was negatively impacted by the wind down of lower margin work awarded in a highly competitive environment and lower than previously forecasted margins on a limited number of those projects.

Revenue for the Industrial segment was $212.7 million in the nine months ended March 31, 2020 compared to $237.2 million in the same period a year earlier.

The decrease in revenue is primarily attributable to reduced volumes of iron and steel maintenance spending due to our decision to exit the domestic iron and steel industry, and lower volumes of thermal vacuum chamber work.

The segment gross margin was 7.2% in the nine months ended March 31, 2020 compared to 6.0% in the same period a year earlier.

The fiscal 2020 segment gross margin was positively impacted by good project execution on both capital and repair and maintenance projects in the first and second quarters.

The fiscal 2019 segment gross margin was negatively impacted by a lower than previously forecasted margin on a thermal vacuum chamber project and a high volume of lower margin iron and steel work.

During the second half of fiscal 2020, we implemented the planned personnel changes, added business development resources and strengthened business processes, which has led to improved project execution, which has continued through the first quarter of fiscal 2021.

Continued improvement in the operating performance of this segment will be dependent upon the effectiveness and execution of the improvement plan, the markets we serve, the spending volumes of our existing clients and other external factors.

Process and Industrial Facilities

Revenue for the Process and Industrial Facilities segment was $45.9 million in the three months ended September 30, 2020 compared to $154.9 million in the same period a year earlier.

The decrease is primarily due to our strategic exit from the domestic iron and steel industry in the third quarter of fiscal 2020, lower volumes of turnaround, refinery maintenance, and midstream gas processing work.

The segment gross margin was 8.0% for the three months ended September 30, 2020 compared to 8.8% in the same period last year.

Project execution in fiscal 2021 has been strong, but gross margin was negatively impacted by lower volumes, which led to the under recovery of construction overhead costs.

Fiscal 2020 was positively impacted by strong project execution on capital and repair and maintenance iron and steel work.

The short-term impact to the Company's refinery turnaround and maintenance operations as a result of the global pandemic continues to be significant.

Although there have been project delays and suspensions of planned seasonal work, in most cases the revenue volumes are moving out in time, but not eliminated.

The updated start dates on many of the delayed activities are uncertain and will depend on the needs of our clients, safety guidelines, and the market.

Storage and Terminal Solutions

Revenue for the Storage and Terminal Solutions segment was $76.2 million in the three months ended September 30, 2020 compared to $135.5 million in the same period a year earlier.

The decrease in segment revenue is primarily a result of lower volumes of tank and crude oil terminal capital work and repair and maintenance work.

The segment gross margin was 5.0% in the three months ended September 30, 2020 compared to 14.6% in the three months ended September 30, 2019.

The fiscal 2021 segment gross margin was negatively impacted by lower volumes, which led to the under recovery of construction overhead costs, and a lower than previously forecasted margin on a crude oil storage terminal capital project that is nearing completion.

The fiscal 2020 segment gross margin was positively impacted by strong project execution on large capital projects and higher volumes than fiscal 2021, which led to better recovery of construction overhead costs.

As a result of the COVID-19 pandemic, global energy demand, and regulatory issues, we continue to experience slower project award activity that began in the third quarter of fiscal 2020.

Unallocated corporate expenses included in operating income were $6.9 million during the three months ended September 30, 2020 compared to $7.8 million in the same period last year.

The decrease is primarily attributable to lower incentive compensation and cost reductions we implemented under our business improvement plan in late fiscal 2020.

We define backlog as the total dollar amount of revenue that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, limited notice to proceed or other type of assurance that we consider firm.

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For long-term maintenance contracts with no minimum commitments and other established customer agreements, we include only the amounts that we expect to recognize as revenue over the next 12 months.

For arrangements in which we have received a limited notice to proceed, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding is high.

For all other arrangements, we calculate backlog as the estimated contract amount less revenues recognized as of the reporting date.

The following table provides a summary of changes in our backlog for the three months ended March 31, 2020 :

Infrastructure

(In thousands)

Backlog as of December 31, 2019

Project awards

Project cancellations (1)

Revenue recognized

Backlog as of March 31, 2020

Book-to-bill ratio (2)

Cancellations in the Industrial segment were due to transferring $3.5 million of our remaining iron and steel work to another contractor following the final wind-down of our domestic iron and steel maintenance business.

Cancellations totaling $6.7 million in the Oil, Gas and Chemical segment consist of turnaround work transferred to a local contractor as a result of COVID-19 precautions.

Calculated by dividing project awards by revenue recognized during the period.

The following table provides a summary of changes in our backlog for the nine months ended March 31, 2020 :

Infrastructure

For arrangements in which we have received a limited notice to proceed, we include the entire scope of work in our backlog if we conclude that the likelihood of the full project proceeding as high.

For all other arrangements, we calculate backlog as the estimated contract amount less revenue recognized as of the reporting date.

The following table provides a summary of changes in our backlog for the three months ended September 30, 2020:

Utility and Power Infrastructure Process and Industrial Facilities Storage and Terminal Solutions Total

(In thousands)

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Project awards 21,318 50,796 30,619 102,733

Project cancellations (1)

Revenue recognized (60,671) (45,931) (76,169) (182,771)

Backlog as of March 31, 2020

Backlog as of September 30, 2020 $ 233,463 $ 150,590 $ 294,374 $ 678,427

Book-to-bill ratio (1)

Primarily related to the deterioration of our relationship with a key customer in the iron and steel industry and the subsequent cancellations of work and the cancellation of a coke battery project in Canada during the second quarter totaling $88.3 million.

Subsequent cancellations in the third quarter were due to transferring $3.5 million of our remaining iron and steel work to another contractor following the final wind-down of our domestic iron and steel maintenance business.

Cancellations in the Oil, Gas and Chemical segment consist of $6.7 million of turnaround work transferred to a local contractor as a result of COVID-19 precautions.

0.4 1.1 0.4 0.6

(1) Calculated by dividing project awards by revenue recognized during the period.

Due to the impact of the COVID-19 pandemic and the resulting reduction in the price of crude oil, our customers have become cautious with their spending levels.

Therefore, we have seen deferrals in award dates across the business and lengthening award cycles.

In the Oil Gas & Chemical segment, we saw a shift in the timing of turnarounds.

Due to the impact of the COVID-19 pandemic and the resulting reduction in the price of crude oil, our customers continue to be cautious with their spending levels.

Therefore, we have seen deferrals in award dates across the business and lengthening award cycles, especially in the Storage and Terminal Solutions segment.

In the Process and Industrial Facilities segment, we continue to see delays in the timing of turnarounds.

The updated start dates on many of the delayed activities is uncertain and will depend on the needs of our clients, safety guidelines, and the market.

Key opportunities, including a medium-scale LNG terminal, a crude terminal and LNG peak shaving project continue to advance.

Project awards in all segments are cyclical and are typically the result of a sales process that can take several months or years to complete.

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Seasonality and Other Factors

Our operating results can exhibit seasonal fluctuations, especially in our Oil Gas & Chemical segment, for a variety of reasons.

Our operating results can exhibit seasonal fluctuations, especially in our Process and Industrial Facilities segment, for a variety of reasons.

Turnarounds and planned outages at customer facilities are typically scheduled in the spring and the fall when the demand for energy is lower.

Within the Electrical Infrastructure segment, transmission and distribution work is generally scheduled by the public utilities when the demand for electricity is at its lowest.

Within the Utility and Power Infrastructure segment, transmission and distribution work is generally scheduled by the public utilities when the demand for electricity is at its lowest.

Therefore, revenue volume in the summer months is typically lower than in other periods throughout the year.

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The differing types, sizes, and durations of our contracts, combined with their geographic diversity and stages of completion, often results in fluctuations in the Company's operating results.

Our overhead cost structure is generally fixed.

Significant fluctuations in revenue volumes usually leads to over or under recovery of fixed overhead costs, which can have a material impact on our gross margin and profitability.

Non-GAAP Financial Measure

Adjusted EBITDA

We have presented Adjusted EBITDA, which we define as net income (loss) before impairment of goodwill and other intangible assets, restructuring costs, interest expense, income taxes, depreciation and amortization, because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses.

We have presented Adjusted EBITDA, which we define as net income (loss) before restructuring costs, interest expense, income taxes, depreciation and amortization, because it is used by the financial community as a method of measuring our performance and of evaluating the market value of companies considered to be in similar businesses.

We believe that the line item on our Consolidated Statements of Income entitled “Net income (loss)” is the most directly comparable GAAP measure to Adjusted EBITDA.

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Our non-GAAP performance measure, Adjusted EBITDA, has certain material limitations as follows:

It does not include impairments to goodwill and other intangible assets.

While impairments to intangible assets are non-cash expenses in the period recognized, cash or other consideration was still transferred in exchange for intangible assets in the period of the acquisition.

Any measure that excludes impairments to intangible assets has material limitations since these expenses represent the loss of an asset that was acquired in exchange for cash or other assets.

• It does not include restructuring costs.

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Three Months Ended

Nine Months Ended

September 30,

2020 September 30,

(In thousands)

Net income (loss) $ (3,037) $ 6,151

Goodwill and other intangible asset impairment

Restructuring costs (320) —

Interest expense 375 389

Provision (benefit) for income taxes

Provision for income taxes 270 2,711

Depreciation and amortization 4,639 4,779

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We define liquidity as the ongoing ability to pay our liabilities as they become due, fund business operations and meet all monetary contractual obligations.

Our primary sources of liquidity as of March 31, 2020 were cash and cash equivalents on hand, capacity under our senior secured revolving credit facility and cash and cash equivalents generated from operations before consideration of changes in working capital.

Cash and cash equivalents on hand at March 31, 2020 totaled $87.5 million and availability under the senior secured revolving credit facility totaled $128.8 million resulting in available liquidity of $ 216.3 million as of March 31, 2020 .

There is significant uncertainty regarding the near and intermediate-term business impacts from the COVID-19 pandemic and the significant decline in the price of crude oil during the quarter.

These uncertainties have resulted in lowered revenue expectations for the remainder of fiscal 2020 and fiscal 2021.

However, the Company entered this environment with a strong balance sheet and liquidity, which it expects to be sufficient to support its near- to intermediate-term needs.

The Company is taking appropriate steps to preserve its financial position by:

restructuring the business to right-size the cost structure to the lower revenue volumes expected in the near to intermediate-term;

eliminating all non-critical capital expenditures for at least the remainder of fiscal 2020 and early fiscal 2021;

suspending share repurchases until further notice.

The Company expects to save approximately $40.0 million in annual operating costs as a result of these actions.

Approximately $12.0 million of the reductions are related to SG&A and approximately $28.0 million are related to construction overhead activities.

The following table provides a summary of changes in our liquidity for the three months ended March 31, 2020 (in thousands):

Liquidity as of December 31, 2019

Net decrease in cash and cash equivalents

Increase in credit facility capacity constraint

Decrease in net borrowings on credit facility

Increase in letters of credit outstanding

Foreign currency translation of outstanding borrowings

Liquidity as of March 31, 2020

The following table provides a summary of changes in our liquidity for the nine months ended March 31, 2020 (in thousands):

Our primary sources of liquidity as of September 30, 2020 were cash and cash equivalents on hand, capacity under our senior secured revolving credit facility and cash and cash equivalents generated from operations before consideration of changes in working capital.

Cash and cash equivalents on hand at September 30, 2020 totaled $82.2 million and availability under the senior secured revolving credit facility totaled $51.7 million resulting in available liquidity of $133.9 million as of September 30, 2020.

There continues to be significant uncertainty regarding the near- and intermediate-term business impacts from the COVID-19 pandemic.

However, the Company continues to maintain a strong balance sheet and liquidity, which it expects to be sufficient to support its near- to intermediate-term needs.

The Company continues to take the following actions:

• managing the cost structure of the business based on the expected near-term revenue;

• eliminating all non-critical capital expenditures;

• maintaining little or no debt.

The following table provides a summary of changes in our liquidity for the three months ended September 30, 2020 (in thousands):

Liquidity as of June 30, 2020 $ 193,435

Net decrease in cash and cash equivalents

Increase in credit facility capacity constraint

Increase in net borrowings on credit facility

Net cash reduction due to changes in working capital (18,375)

Net cash increase due to other activity 514

Change in credit facility capacity constraint (41,271)

Increase in letters of credit outstanding (237)

Foreign currency translation of outstanding borrowings (175)

Liquidity as of March 31, 2020

A detailed discussion of our credit agreement is provided under the caption "Senior Secured Revolving Credit Facility" included in the Liquidity and Capital Resources section of this Form 10-Q.

Liquidity as of September 30, 2020 $ 133,891

A detailed discussion of our credit agreement in effect at September 30, 2020 and as recently amended is provided under the caption "Senior Secured Revolving Credit Facility" below.

Factors that routinely impact our short-term liquidity and may impact our long-term liquidity include, but are not limited to:

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• Issuances of letters of credit.

Cash Flow for the Nine Months Ended March 31, 2020

Cash Flows Provided by Operating Activities

Cash provided by operating activities for the nine months ended March 31, 2020 totaled $31.5 million .

Cash Flow for the Three Months Ended September 30, 2020

Cash Flows Used by Operating Activities

Cash used by operating activities for the three months ended September 30, 2020 totaled $15.0 million.

The various components are as follows:

Net Cash Provided by Operating Activities

Net Cash Used by Operating Activities

(In thousands)

Net loss $ (3,037)

Non-cash expenses 6,002

Goodwill and other intangible asset impairment

Deferred income tax 289

Cash effect of changes in working capital

Net cash provided by operating activities

Working capital changes at March 31, 2020 in comparison to June 30, 2019 include the following:

Accounts receivable, net of bad debt expense recognized during the period, decreased $7.9 million during the nine months ended March 31, 2020 , which increased cash flows from operating activities.

Cash effect of changes in operating assets and liabilities (18,375)

Net cash used by operating activities $ (15,020)

Cash effect of changes in operating assets and liabilities at September 30, 2020 in comparison to June 30, 2020 include the following:

• Accounts receivable, net of credit losses recognized during the period, increased $10.8 million during the three months ended September 30, 2020, which decreased cash flows from operating activities.

The variance is primarily attributable to the timing of billing and collections.

• Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") decreased $1.9 million, which increased cash flows from operating activities.

The decrease in CIE is primarily attributable to the timing of billings on a specific iron and steel project.

Billings on uncompleted contracts in excess of costs and estimated earnings ("BIE") decreased $0.4 million, which decreased cash flows from operating activities.

CIE and BIE balances can experience significant fluctuations based on the timing of when job costs are incurred and the invoicing of those job costs to the customer.

Accounts payable and accrued expenses decreased by $50.2 million during the nine months ended March 31, 2020 , which decreased cash flows from operating activities.

The variance is primarily attributable to lower business volumes, the timing of vendor payments, the timing of incentive payments and other related payroll accruals.

• Inventories, income taxes receivable, other current assets, operating right-of-use assets and other assets increased $5.9 million, which decreased cash flows from operating activities.

The increase was primarily related to annual prepayments of insurance.

• Accounts payable, accrued wages and benefits, accrued insurance, operating lease liabilities, and other accrued expenses decreased by $6.5 million during the three months ended September 30, 2020, which decreased cash flows from operating activities.

The variance is primarily attributable to lower business volumes and the timing of vendor payments.

• Other liabilities increased by $3.5 million, which increased cash flows from operating activities.

This increase was primarily due to deferred payroll tax associated with the CARES Act.

Financial Information, Note 6 - Income Taxes for more information.

Cash Flows Used by Investing Activities

Investing activities used $16.6 million of cash in the nine months ended March 31, 2020 primarily due to $17.7 million of capital expenditures, partially offset by $1.0 million of proceeds from other assets sales.

Investing activities used $1.7 million of cash in the three months ended September 30, 2020 primarily due to $2.8 million of capital expenditures, offset by $1.1 million of proceeds from other asset sales.

Capital expenditures consisted of:

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Cash Flows Used by Financing Activities

Financing activities used $16.1 million of cash in the nine months ended March 31, 2020 primarily due to stock repurchases of $17.0 million and the repurchase of $3.5 million of Company stock for payment of withholding taxes due on equity-based compensation.

These uses of cash were partially offset by net borrowings of $4.2 million under the Company's Senior Secured Revolving Credit Facility.

Financing activities used $1.5 million of cash in the three months ended September 30, 2020 primarily due to the repurchase of $1.5 million of Company stock for payment of withholding taxes due on equity-based compensation.

Senior Secured Revolving Credit Facility

As noted previously in Note 5 of the Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, on February 8, 2017, the Company entered into the Fourth Amended and Restated Credit Agreement (the "Credit Agreement"), by and among the Company and certain foreign subsidiaries, as Borrowers, various subsidiaries of the Company, as Guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, and the other Lenders party thereto.

The Credit Agreement provides for a five-year senior secured revolving credit facility of $300.0 million that expires February 8, 2022 .

On November 2, 2020, the Company entered into the Fifth Amended and Restated Credit Agreement (the "Credit Agreement"), by and among the Company and certain foreign subsidiaries, as Borrowers, various subsidiaries of the Company, as Guarantors, JPMorgan Chase Bank, N.A., as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, and the other Lenders party thereto, which replaced the Fourth Amended and Restated Credit Agreement (the "Prior Credit Agreement") that was in place at September 30, 2020, and which is described in Part II, Item 8.

Financial Statements and Supplementary Data, Note 5 - Debt, in the Company's Annual Report on Form 10-K for the year ended June 30, 2020.

The Credit Agreement provides for a three-year senior secured revolving credit facility of $200.0 million that expires November 2, 2023.

The credit facility may be used for working capital, acquisitions, capital expenditures, issuances of letters of credit and other lawful purposes.

The Credit Agreement includes the following covenants and borrowing limitations:

Our Leverage Ratio, determined as of the end of each fiscal quarter, may not exceed 3.00 to 1.00 .

We are required to maintain a Fixed Charge Coverage Ratio, determined as of the end of each fiscal quarter, greater than or equal to 1.25 to 1.00 .

Asset dispositions (other than dispositions in which all of the net cash proceeds therefrom are reinvested into the Company and dispositions of inventory and obsolete or unneeded equipment in the ordinary course of business) are limited to $20.0 million per 12-month period.

The credit facility includes a U.S.

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• The Canadian Prime Rate or the CDOR rate, in the case of revolving loans denominated in Canadian Dollars;

The Adjusted LIBO Rate, in the case of revolving loans denominated in Pounds Sterling or Australian Dollars;

The EURIBO Rate, in the case of revolving loans denominated in Euros,

• The Adjusted LIBO Rate or the Adjusted EURIBOR Rate, in the case of revolving loans denominated in Pounds Sterling or Australian Dollars;

• The Adjusted EURIBOR Rate, in the case of revolving loans denominated in Euros,

in each case, plus the Applicable Margin, which is based on the Company's Leverage Ratio.

The Applicable Margin on ABR loans ranges between 1.00% and 2.00%.

The Applicable Margin for Adjusted LIBO, EURIBO and CDOR loans ranges between 1.625% and 2.625% and the Applicable Margin for Canadian Prime Rate loans ranges between 2.125% and 3.125% .

The Applicable Margin for Adjusted LIBO, Adjusted EURIBOR and CDOR loans ranges between 2.00% and 3.00% and the Applicable Margin for Canadian Prime Rate loans ranges between 2.50% and 3.50%.

The unused credit facility fee is between 0.35% and 0.50% based on the Leverage Ratio.

The Credit Agreement includes a Leverage Ratio covenant, which provides that Consolidated Funded Indebtedness, as of the end of any fiscal quarter, may not exceed 3.0 times Consolidated EBITDA, as defined in the Credit Agreement, or "Covenant EBITDA," over the previous four quarters.

For the four quarters ended March 31, 2020 , Covenant EBITDA was $64.4 million .

Consolidated Funded Indebtedness at March 31, 2020 was $64.2 million .

Covenants and limitations under the Credit Agreement are effective for the quarter ended September 30, 2020 and include the following:

• Our Leverage Ratio, determined as of the end of each fiscal quarter, may not exceed 3.00 to 1.00.

The Leverage Ratio covenant requires that Consolidated Funded Indebtedness, as defined in the Credit Agreement, as of the end of any fiscal quarter, may not exceed 3.0 times Consolidated EBITDA, as defined in the Credit Agreement, or "Covenant EBITDA," over the previous four quarters.

• We are required to maintain a Fixed Charge Coverage Ratio ("FCCR"), determined as of the end of each fiscal quarter, greater than or equal to 1.25 to 1.00.

The FCCR is calculated as follows:

◦ If no borrowings are outstanding at quarter end, then the FCCR covenant requires that, as of the end of any fiscal quarter, Covenant EBITDA, after deducting capital expenditures and dividends for the previous four quarters, may not be less than 1.25 times the total of interest expense and cash paid for income taxes over the previous four quarters plus scheduled maturities of certain indebtedness for the next four quarters.

◦ If borrowings are outstanding at quarter end:

▪ for the fiscal quarters ending September 30, 2020 through June 30, 2021, Covenant EBITDA, after deducting capital expenditures, dividends, and share repurchases in excess of $7.5 million for the previous four quarters, may not be less than 1.25 times the total of interest expense and cash paid for income taxes over the previous four quarters plus scheduled maturities of certain indebtedness for the next four quarters.

▪ for all fiscal quarters ending on or after September 30, 2021, the FCCR is calculated the same except that all share repurchases for the previous four quarters are deducted from Covenant EBITDA.

• Asset dispositions (other than dispositions in which all of the net cash proceeds therefrom are reinvested into the Company and dispositions of inventory and obsolete or unneeded equipment in the ordinary course of business) are limited to $20.0 million per 12-month period.

• Share repurchases are limited to $30.0 million per calendar year.

As of September 30, 2020, the Company is in compliance with all affirmative, negative, and financial covenants under the Credit Agreement.

Covenant EBITDA differs from Adjusted EBITDA, as reported under "Results of Operations - Non-GAAP Financial Measure," primarily because it permits the Company to:

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• exclude certain other extraordinary items, as defined in the Credit Agreement.

Availability under the senior secured revolving credit facility at March 31, 2020 was as follows:

Availability under the senior secured revolving credit facility at September 30, 2020 was as follows:

September 30,

2020 June 30,

(In thousands)

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Availability under the senior secured revolving credit facility $ 51,716 $ 93,399

At March 31, 2020 , the Company was in compliance with all affirmative, negative, and financial covenants under the Credit Agreement.

Availability under the new $200.0 million senior secured revolving credit facility at September 30, 2020 would have been the same if the Credit Agreement had been in place on such date due to the capacity constraint.

Dividend Policy

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Under the November 2018 Program, the Company may repurchase common stock up to a maximum of $30.0 million per calendar year provided that the aggregate number of shares repurchased may not exceed 10%, or approximately 2.7 million, of the Company's shares outstanding as of November 6, 2018.

In addition, the FCCR covenant in our Credit Agreement may limit our ability to repurchase shares.

The specific limitations are described in the Senior Secured Revolving Credit Facility section above.

The Company may repurchase its stock from time to time in the open market at prevailing market prices or in privately negotiated transactions and is not obligated to purchase any shares.

The November 2018 Program will continue unless and until it is modified or revoked by the Board of Directors.

The Company repurchased 547,606 shares for $7.1 million during the three months ended March 31, 2020 and repurchased 1,047,606 shares for $17.0 million during the nine months ended March 31, 2020.

There were 1,349,037 shares available for repurchase under the November 2018 Program as of March 31, 2020.

In order to maintain its strong financial position in the current environment, the Company suspended all share repurchases beginning in early March 2020.

The Company had 1,756,862 treasury shares as of March 31, 2020 and intends to utilize these treasury shares in connection with equity awards under the Company’s stock incentive plans and for sales to the Employee Stock Purchase Plan.

There were 1,349,037 shares available for repurchase under the November 2018 Program as of September 30, 2020.

The Company had 1,428,021 treasury shares as of September 30, 2020 and intends to utilize these treasury shares in connection with equity awards under the Company’s stock incentive plans and for sales to the Employee Stock Purchase Plan.

FORWARD-LOOKING STATEMENTS

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These forward-looking statements include, among others, such things as:

• the impact to our business of the COVID-19 pandemic;

• our ability to generate sufficient cash from operations, access our credit facility, or raise cash in order to meet our short and long-term capital requirements;

our expectations with respect to the likelihood of a future impairment;

• the impact to our business of changes in crude oil, natural gas and other commodity prices;

the impact to our business of the COVID-19 pandemic;

• our ability to comply with the covenants in our credit agreement;

• amounts and nature of future revenues and margins from each of our segments;

trends in the industries we serve;

• the likely impact of new or existing regulations or market forces on the demand for our services;

• our expectations with respect to the likelihood of a future impairment;

• expansion and other trends of the industries we serve.

our ability to comply with the covenants in our credit agreement.

These statements are based on certain assumptions and analyses we made in light of our experience and our historical trends, current conditions and expected future developments as well as other factors we believe are appropriate.

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• the risk factors discussed in our Form 10-K for the fiscal year ended June 30, 2020 and listed from time to time in our filings with the Securities and Exchange Commission;

economic, market or business conditions in general (including the length and severity of the current economic slowdown) and in the oil, natural gas, power, iron and steel, agricultural and mining industries in particular;

the under-utilization of our work force;

• economic, market or business conditions in general (including the length and severity of the COVID-19 pandemic) and in the oil, natural gas, power, agricultural and mining industries in particular;

• the transition to renewable energy sources and its impact on our current customer base;

• the under- or over-utilization of our work force;

• delays in the commencement of major projects, whether due to COVID-19 concerns, permitting issues or other factors;

reduced creditworthiness of our customer base and the higher risk of non-payment of receivables due to volatility of crude oil, natural gas, steel and other commodity prices to which our customers' businesses are affected;

• reduced creditworthiness of our customer base and the higher risk of non-payment of receivables due to volatility of crude oil, natural gas, and other commodity prices to which our customers' businesses are affected;

• the inherently uncertain outcome of current and future litigation;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis