What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-08 · 187 added, 116 removed, 503 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

ASSETS (unaudited)

30 unchanged sentences

Common stock, par value $ 0.30 per share, 12,000,000 shares authorized;

4,421,876 and 4,415,147 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

4,421,876 and 4,415,147 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital 460,329 458,614

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

22 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

6 unchanged sentences

Other comprehensive income (loss), before tax 4,599 ( 3,366 ) 1,581 ( 1,311 )

Tax provision attributable to other comprehensive income (loss) ( 5 ) ( 23 ) ( 5 ) ( 46 )

Tax benefit (provision) attributable to other comprehensive income (loss) 83 11 78 ( 35 )

Other comprehensive income (loss), net of tax 4,682 ( 3,355 ) 1,659 ( 1,346 )

25 unchanged sentences

Balance at June 30, 2024 4,422 $ 1,327 $ 459,862 $ ( 397,359 ) $ ( 39,955 ) $ 23,875

Net loss — — — ( 11,126 ) — ( 11,126 )

Foreign currency translation adjustment, net of tax — — — — 4,592 4,592

Defined benefit pension plans, net of tax

— — — — 90 90

Non-cash compensation — — 467 — — 467

Balance at September 30, 2024 4,422 $ 1,327 $ 460,329 $ ( 408,485 ) $ ( 35,273 ) $ 17,898

Balance at December 31, 2022 4,343 $ 1,303 $ 457,133 $ ( 301,679 ) $ ( 38,997 ) $ 117,760

9 unchanged sentences

Balance at June 30, 2023 4,368 $ 1,311 $ 457,692 $ ( 342,143 ) $ ( 36,988 ) $ 79,872

Net loss — — — ( 12,134 ) — ( 12,134 )

Foreign currency translation adjustment, net of tax — — — — ( 3,355 ) ( 3,355 )

Non-cash compensation — — 232 — — 232

Balance at September 30, 2023 4,368 $ 1,311 $ 457,924 $ ( 354,277 ) $ ( 40,343 ) $ 64,615

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization 27,934 28,481

Write-off of software cost — 629

Loss on debt extinguishment — 1,585

Amortization of debt issuance costs, debt discounts, and deferred financing costs 4,690 16,926

Paid-in-kind interest 6,318 7,117

Paid-in-kind (“PIK”) interest

11,020 10,906

Allowance for credit losses

Foreign currency gains

Foreign currency loss (gain)

1,504 ( 776 )

11 unchanged sentences

Income taxes 1,517 ( 224 )

Net cash used in operating activities

Net cash provided by (used in) operating activities

1,143 ( 22,069 )

6 unchanged sentences

Payments under Revolving Credit Loans ( 21,009 ) ( 16,293 )

Repayment of Convertible Debt — ( 41,161 )

Repayment of APSC Term Loan — ( 37,092 )

2 unchanged sentences

Payments under Corre Incremental Term Loan

Borrowings under Corre Incremental Term Loan — 42,500

Payments for debt issuance costs ( 7,371 ) ( 8,446 )

Other 1,153 ( 746 )

Net cash provided by (used in) financing activities

Net cash used in financing activities

( 9,927 ) ( 7,395 )

12 unchanged sentences

Our stock is traded on the New York Stock Exchange (the “NYSE”) under the symbol “TISI”.

We are a global, leading provider of specialty industrial services offering clients access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services.

We deploy conventional to highly specialized inspection, condition assessment, maintenance and repair services that result in greater safety, reliability, and operational efficiency for our clients’ most critical assets.

We are a global, leading provider of specialty industrial services offering customers access to a full suite of conventional, specialized, and proprietary mechanical, heat-treating, and inspection services.

We conduct operations in two segments:

3 unchanged sentences

engineering assessment to determine fitness for purpose in the context of industry standards and regulatory codes;

and mechanical services to repair, rerate or replace based upon the client’s election.

In addition, we are capable of escalating with the client’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry.

We also believe that we are unique in our ability to provide these services in three distinct client demand profiles:

and mechanical services to repair, rerate or replace based upon the customer’s election.

In addition, we are capable of escalating with the customer’s needs, as dictated by the severity of the damage found and the related operating conditions, from standard services to some of the most advanced services and integrated asset integrity and reliability management solutions available in the industry.

We also believe that we are unique in our ability to provide these services in three distinct customer demand profiles:

(i) turnaround or project services, (ii) call-out services, and (iii) nested or run-and-maintain services.

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IHT also provides advanced digital imaging including remote digital video imaging.

MS provides solutions designed to serve clients’ unique needs during both the operational (onstream) and off-line states of their assets.

MS provides solutions designed to serve customers’ unique needs during both the operational (onstream) and off-line states of their assets.

Our onstream services include our range of standard to custom-engineered leak repair and composite solutions;

1 unchanged sentence

hot tapping and line stopping;

and online valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes client production time.

and online valve insertion solutions, which are delivered while assets are in an operational condition, which maximizes customer production time.

Asset shutdowns can be planned, such as a turnaround maintenance event, or unplanned, such as those due to component failure or equipment breakdowns.

Our specialty maintenance, turnaround and outage services are designed to minimize client downtime and are primarily delivered while assets are off-line and often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed to achieve tight time schedules.

Our specialty maintenance, turnaround and outage services are designed to minimize customer downtime and are primarily delivered while assets are off-line and often through the use of cross-certified technicians, whose multi-craft capabilities deliver the production needed to achieve tight time schedules.

These critical services include on-site field machining;

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• Aerospace and Defense.

Recent Financing Amendments .

On September 30, 2024, we entered into certain amendments with our lenders.

Refer to Note 10 - Debt to the unaudited condensed consolidated financial statements for additional details.

Basis of presentation.

4 unchanged sentences

Certain disclosures have been condensed or omitted from the interim financial statements included in this report.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC (“our Annual Report on Form 10-K”).

These condensed consolidated financial

statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC (“our Annual Report on Form 10-K”).

Consolidation.

10 unchanged sentences

Essentially all of our revenues are associated with contracts with customers.

A disaggregation of our revenue from contracts with customers by geographic region, by reportable operating segment and by service type is presented below:

A disaggregation of our revenue from customer contracts by geographic region, by reportable operating segment and by service type is presented below:

Geographic area (in thousands):

Three Months Ended June 30, 2024 Three Months Ended June 30, 2023

Three Months Ended September 30, 2024 Three Months Ended September 30, 2023

(unaudited) (unaudited)

3 unchanged sentences

Total $ 172,871 $ 37,887 $ 210,758 $ 168,086 $ 38,629 $ 206,715

Six Months Ended June 30, 2024 Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Nine Months Ended September 30, 2023

(unaudited) (unaudited)

4 unchanged sentences

Revenue by Operating segment and service type (in thousands):

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

2 unchanged sentences

Total $ 83,461 $ 100,782 $ 18,399 $ 8,116 $ 210,758

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

2 unchanged sentences

Total $ 83,207 $ 101,663 $ 13,001 $ 8,844 $ 206,715

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

2 unchanged sentences

Total $ 254,584 $ 312,665 $ 49,697 $ 22,030 $ 638,976

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Non-Destructive Evaluation and Testing Services Repair and Maintenance Services Heat Treating Other Total

2 unchanged sentences

Total $ 259,118 $ 323,745 $ 42,935 $ 22,686 $ 648,484

For additional information on our reportable operating segments and geographic information, refer to Note 14 - Segment and Geographic Disclosures .

For additional information on our reportable operating segments, refer to Note 14 - Segment Disclosures .

As of September 30, 2024, we received $ 2.3 million of advance payments from a customer for equipment sales.

This amount is recorded as a contract liability and included in Other accrued liabilities.

See Note 8 - Other Accrued Liabilities for additional information.

There was no contract liability as of December 31, 2023.

Remaining performance obligations.

As permitted by ASC 606, Revenue from Contracts with Customers , we have elected not to disclose information about remaining performance obligations where (i) the performance obligation is part of a contract that has an original expected duration of one year or less or (ii) when we recognize revenue from the satisfaction of the performance obligation in accordance with the right-to-invoice practical expedient, which permits us to recognize revenue in the amount to which we have a right to invoice the customer if that amount corresponds directly with the value to the customer of our performance completed to date.

As most of our contracts with customers are short-term in nature and billed on a time and material basis, there were no material amounts of remaining performance obligations as of June 30, 2024 and December 31, 2023.

ACCOUNTS RECEIVABLE

A summary of accounts receivable as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024 December 31, 2023

A summary of accounts receivable as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024 December 31, 2023

Trade accounts receivable $ 145,991 $ 151,316

3 unchanged sentences

The following table shows a rollforward of the allowance for credit losses (in thousands):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Balance at beginning of period $ 3,738 $ 5,262

4 unchanged sentences

Balance at end of period $ 3,647 $ 3,738

A summary of inventory as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024 December 31, 2023

A summary of inventory as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024 December 31, 2023

Raw materials $ 10,183 $ 9,958

3 unchanged sentences

PREPAID AND OTHER CURRENT ASSETS

A summary of prepaid expenses and other current assets as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024 December 31, 2023

A summary of prepaid expenses and other current assets as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024 December 31, 2023

Insurance receivable $ 39,000 $ 39,000

5 unchanged sentences

The prepaid expenses primarily relate to prepaid insurance and other expenses that have been paid in advance of the coverage period.

Other current assets include other receivables, primarily related to insurance rebates, software implementation costs, and deferred financing charges.

Other current assets include other receivables, software implementation costs, and deferred financing charges.

PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024 December 31, 2023

A summary of property, plant and equipment as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024 December 31, 2023

Land $ 4,006 $ 4,006

9 unchanged sentences

Property, plant and equipment, net $ 116,490 $ 127,057

Included in the table above are assets under finance leases of $ 8.7 million and $ 8.5 million, and related accumulated amortization of $ 3.8 million and $ 3.3 million as of June 30, 2024 and December 31, 2023, respectively.

Depreciation expense for the three months ended June 30, 2024 and 2023 was $ 5.2 million and $ 5.5 million, respectively.

Depreciation expense for the six months ended June 30, 2024 and 2023 was $ 10.5 million and $ 11.1 million, respectively.

Included in the table above are assets under finance leases of $ 8.5 million as of September 30, 2024 and December 31, 2023, and related accumulated amortization of $ 3.8 million and $ 3.3 million as of September 30, 2024 and December 31, 2023, respectively.

Depreciation expense for the three months ended September 30, 2024 and 2023 was $ 5.1 million and $ 5.4 million, respectively, of which $ 3.4 million and $ 3.6 million, respectively, was included in “Operating expenses” and $ 1.7 million and $ 1.8 million, respectively, was included in “Selling, general and administrative expenses” on our Condensed Consolidated Statements of Operations.

Depreciation expense for the nine months ended September 30, 2024 and 2023 was $ 15.7 million and $ 16.5 million, respectively, of which $ 10.5 million and $ 11.0 million, respectively, was included in “Operating expenses” and $ 5.2 million and $ 5.5 million, respectively, was included in “Selling, general and administrative expenses” on our Condensed Consolidated Statements of Operations.

INTANGIBLE ASSETS

A summary of intangible assets as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024

A summary of intangible assets as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024

Amount Accumulated

13 unchanged sentences

Intangible assets $ 187,550 $ ( 124,857 ) $ 62,693

Amortization expense of intangible assets for the three months ended June 30, 2024 and 2023 was $ 3.1 million and $ 3.2 million, respectively.

Amortization expense of intangible assets for the six months ended June 30, 2024 and 2023 was $ 6.2 million and $ 6.4 million, respectively.

The weighted-average amortization period for intangible assets subject to amortization was 13.8 years as of June 30, 2024 and December 31, 2023.

Amortization expense of intangible assets for the three months ended September 30, 2024 and 2023 was $ 3.1 million and $ 3.2 million, respectively.

Amortization expense of intangible assets for the nine months ended September 30, 2024 and 2023 was $ 9.3 million and $ 9.6 million, respectively.

Amortization expense of intangible assets are included in “Selling, general and administrative expenses” on our Condensed Consolidated Statements of Operations.

The weighted-average amortization period for intangible assets was 13.8 years as of September 30, 2024 and December 31, 2023.

OTHER ACCRUED LIABILITIES

A summary of other accrued liabilities as of June 30, 2024 and December 31, 2023 is as follows (in thousands):

June 30, 2024 December 31, 2023

A summary of other accrued liabilities as of September 30, 2024 and December 31, 2023 is as follows (in thousands):

September 30, 2024 December 31, 2023

Legal and professional accruals $ 46,446 $ 53,972

4 unchanged sentences

Volume discount 2,397 2,479

Contract liabilities

Other accruals 3,715 2,790

6 unchanged sentences

Insurance accruals primarily relate to accrued medical and workers compensation costs.

Property, sales and other non-income related taxes include accruals for

items such as sales and use tax, property tax, and other related tax accruals.

Property, sales and other non-income related taxes include accruals for items such as sales and use tax, property tax, and other related tax accruals.

Accrued interest relates to the interest accrued on our long-term debt.

Contract liabilities represent advance payments received from a customer.

Other accruals include various business expense accruals.

We recorded an income tax provision of $ 1.5 million for the three and six months ended June 30, 2024, compared to a provision of $ 2.1 million and $ 2.9 million, respectively, for the three and six months ended June 30, 2023.

The effective tax rate, inclusive of discrete items, was a provision of 114.0 % for the three months ended June 30, 2024, compared to a provision of 15.3 % for the three months ended June 30, 2023.

For the six months ended June 30, 2024, our effective tax rate, inclusive of discrete items, was a provision of 8.4 %, compared to a provision of 7.7 % for the six months ended June 30, 2023.

The increase in effective tax rate for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 is due to the mix of pretax income in non-valuation allowance jurisdictions and pretax losses in valuation allowance jurisdictions.

The impact is additional income tax expense with minimal corresponding pretax income/(loss) movement and an increase in effective tax rate.

As of June 30, 2024 and December 31, 2023, our total long-term debt and finance lease obligations are summarized as follows (in thousands):

June 30, 2024 December 31, 2023

We recorded an income tax provision of $ 0.5 million and $ 2.0 million, respectively, for the three and nine months ended September 30, 2024, compared to a provision of $ 1.1 million and $ 4.0 million, respectively, for the three and nine months ended September 30, 2023.

The effective tax rate, inclusive of discrete items, was a provision of 4.7 % for the three months ended September 30, 2024, compared to a provision of 9.7 % for the three months ended September 30, 2023.

For the nine months ended September 30, 2024, our effective tax rate, inclusive of discrete items, was a provision of 7.1 %, compared to a provision of 8.3 % for the nine months ended September 30, 2023.

The decrease in effective tax rate for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 is due to the mix of pretax income in non-valuation allowance jurisdictions and pretax losses in valuation allowance jurisdictions, along with changes in valuation allowance in 2023.

The impact is a larger decrease in income tax expense as compared to pretax income resulting in a decrease of effective tax rate.

As of September 30, 2024 and December 31, 2023, our total long-term debt and finance lease obligations are summarized as follows (in thousands):

September 30, 2024 December 31, 2023

2022 ABL Credit Facility 1

$ 112,643 $ 113,415

ME/RE Loans 1

10 unchanged sentences

Total long-term debt and finance lease obligations, less current portion $ 314,182 $ 306,214

1 Comprised of principal amount outstanding, less unamortized discount and issuance costs.

1 Comprised of principal amount outstanding, less unamortized debt issuance costs.

See below for additional information.

2022 ABL Credit Facility

On February 11, 2022, we entered into a credit agreement, with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent, (the “ABL Agent”) (such agreement, as amended by Amendment No.1 dated as of May 6, 2022, Amendment No.2 dated as of November 1, 2022, Amendment No.3 dated as of June 16, 2023, and Amendment No.4 dated as of March 6, 2024, the “2022 ABL Credit Agreement”).

Available funding commitments under the 2022 ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $ 130.0 million to be provided by certain affiliates of the ABL Agent (the “Revolving Credit Loans”), with a $ 35.0 million sublimit for swingline borrowings, a $ 26.0 million sublimit for issuances of letters of credit, and an incremental delayed draw term loan of up to $ 35.0 million (the “Delayed Draw Term Loan”) originally provided by Corre Partners Management, LLC (“Corre”) and certain of its affiliates (collectively, the “2022 ABL Credit Facility”).

On February 11, 2022, we entered into a credit agreement, with the lender parties thereto, and Eclipse Business Capital, LLC, a Delaware limited liability company, as agent (the “ABL Agent”) (such agreement, as amended by Amendment No.1 dated as of May 6, 2022, Amendment No.2 dated as of November 1, 2022, Amendment No.3 dated as of June 16, 2023, Amendment No.4 dated as of March 6, 2024 and ABL Amendment No.5 (described below), the “2022 ABL Credit Agreement”).

Available funding commitments under the 2022 ABL Credit Agreement, subject to certain conditions, include a revolving credit line in an amount of up to $ 130.0 million to be provided by certain affiliates of the ABL Agent, with a $ 35.0 million sublimit for swingline borrowings, a $ 26.0 million sublimit for issuances of letters of credit (the “Revolving Credit Loans”), and an incremental delayed draw term loan of up to $ 35.0 million (the “Delayed Draw Term Loan”) provided by Corre Partners Management, LLC (“Corre”) and certain of its affiliates (collectively, the “2022 ABL Credit Facility”).

On September 30, 2024, the Company entered into Amendment No.5 (“ABL Amendment No.5”) to the 2022 ABL Credit Agreement.

ABL Amendment No.

5 amended the 2022 ABL Credit Agreement to, among other things, to:

(i) extend the scheduled maturity date from August 11, 2025 to September 30, 2027;

(ii) amend the applicable margin for Delayed Draw Term Loans from a flat rate of 10.00 % for SOFR Loans (as defined in the 2022 ABL Credit Agreement) and 9.00 % for Base Rate Loans (as defined in the 2022 ABL Credit Agreement) to a rate based on EBITDA ranging from 8.50 % to 10.00 % for SOFR Loans and 7.50 % to 9.00 % for Base Rate Loans;

(iii) amend the applicable margin for Revolving Credit Loans from a rate based on EBITDA ranging from 4.15 % to 4.65 % for SOFR Loans and 3.15 % to 3.65 % for Base Rate Loans to a rate based on both EBITDA and Average Historical Excess Availability (as defined in the 2022 ABL Credit Agreement) ranging from 3.50 % to 4.25 % for SOFR Loans and 2.50 % to 3.25 % for Base Rate Loans;

(iv) amend the applicable margin for ME/RE Loans (defined below) from a flat rate of 5.75 % for SOFR Loans to a flat rate of 5.00 % for SOFR Loans;

(v) amend the definitions of “Borrowing Base” and “Consolidated Fixed Charge Coverage Ratio” as well as related definitions in order to expand availability under the Revolving Credit Facility (as defined in the 2022 ABL Credit Agreement);

(vi) add a springing financial covenant requiring Excess Availability (as defined in the 2022 ABL Credit Agreement) to be above $ 7,500,000 only if the Consolidated Fixed Charge Coverage Ratio falls below 0.85 x for twelve month periods ending on or prior to December 31, 2024 and 1.00 x for twelve month periods ending after December 31, 2024.

ABL Amendment No.5 was accounted for in accordance with ASC 470-60, Troubled Debt Restructuring, and no gain or loss was recognized.

Amendment fees of $ 0.9 million related to the Revolving Credit Loans were deferred on September 30, 2024.

The amendment fees will be amortized to interest expense over the term of the 2022 ABL Credit Agreement.

The terms of the 2022 ABL Credit Facility are described in the table below (dollar amounts are presented in thousands):

Revolving Credit Loans Delayed Draw Term Loan

Maturity date 8/11/2025 8/11/2025

Stated interest rate SOFR + applicable margin (base + applicable margin 1 )

SOFR + 10 % (Base + 9 %)

Scheduled maturity date 1

9/30/2027 9/30/2027

Stated interest rate SOFR + applicable margin (base + applicable margin) SOFR + applicable margin (base + applicable margin)

Actual interest rate:

5 unchanged sentences

YTD 9/30/2023 $ 4,932 $ 3,951

Unamortized balance of deferred financing cost

Balances at 9/30/2024

Principal balance

$ 77,905 $ 35,000

Unamortized balance of debt issuance cost N/A

Net carrying balance

$ 77,905 $ 34,738

Balances at 12/31/2023

Principal balance

$ 78,415 $ 35,000

Unamortized balance of debt issuance cost N/A

Net carrying balance

$ 78,415 $ 35,000

Unamortized balance of deferred financing cost

9/30/2024 $ 1,102 N/A

12/31/2023 $ 267 N/A

Available amount at 9/30/2024 2

1 Applicable margin ranges based on EBITDA as defined in the 2022 ABL Credit Agreement

1 Amended maturity date is the earlier of (i) the Scheduled Maturity Date and (ii) the Springing Maturity Date (91 days prior to Scheduled Maturity Date of the A&R Term Loan Credit Agreement (defined below), or October 1, 2026).

2 Available amount following the execution of ABL Amendment No.5.

The 2022 ABL Credit Agreement contains customary conditions to borrowings and covenants, as described in the 2022 ABL Credit Agreement.

As of June 30, 2024, we are in compliance with the covenants.

As of June 30, 2024, $ 9.5 million in letters of credit were issued under the 2022 ABL Credit Agreement.

As of September 30, 2024, we are in compliance with the covenants.

As of September 30, 2024, $ 9.5 million in letters of credit were issued under the 2022 ABL Credit Agreement.

Such amounts remain undrawn and are off-balance sheet.

On June 16, 2023, we entered into ABL Amendment No.

3 which, in addition to making certain other changes to the 2022 ABL Credit Facility, provided us with $ 27.4 million of new term loans (the “ME/RE Loans”).

Amounts repaid or prepaid under the ME/RE Loans may not be reborrowed.

On June 16, 2023, we entered into ABL Amendment No.3 which, in addition to making certain other changes to the 2022 ABL Credit Facility, provided us with $ 27.4 million of new term loans (the “ME/RE Loans”).

On September 30, 2024, the Company entered into ABL Amendment No.5.

ABL Amendment No.5 amended the 2022 ABL Credit Agreement to, among other things, provide for the following changes to the ME/RE Loans:

(i) extended the scheduled maturity date from August 11, 2025 to September 30, 2027;

(ii) amended the applicable margin for ME/RE Loans from a flat rate of 5.75 % for SOFR Loans (as defined in the 2022 ABL Credit Agreement) to a flat rate of 5.00 % for SOFR Loans.

The terms of ME/RE Loans are described in the table below (dollar amounts are presented in thousands):

Maturity date

Scheduled maturity date 1

Stated interest rate

4 unchanged sentences

9/30/2023 16.75 %

Actual interest rate 1

Actual cash interest rate

9/30/2024 10.32 %

12 unchanged sentences

Net carrying balance $ 24,061

1 The effective interest rate as of June 30, 2024, consisted of an 11.19 % variable interest rate paid in cash and an additional 6.19 % due to non-cash amortization of the related debt issuance costs.

The effective interest rate as of June 30, 2023, consisted of an 11.02 % variable interest rate paid in cash and an additional 5.52 % due to non-cash amortization of the related debt issuance costs.

2 The effective interest rate as of September 30, 2024 consisted of 10.32 % variable interest rate paid in cash and an additional 2.79 % due to non-cash amortization of the related debt issuance costs.

The effective interest rate as of September 30, 2023, consisted of 11.19 % variable interest rate paid in cash and an additional 5.56 % due to non-cash amortization of the related debt issuance costs.

The ME/RE Loans are governed by the 2022 ABL Credit Agreement and are subject to the same restrictive covenants as described under the 2022 ABL Credit Facility.

2 unchanged sentences

The A&R Term Loan Credit Agreement included a term loan credit agreement entered into on November 9, 2021, as amended through March 29, 2023 (the “Uptiered Loan”), and an additional funding commitment, subject to certain conditions, consisting of a $ 57.5 million senior secured first lien term loan (the “Incremental Term Loan”) provided by Corre and certain of its affiliates and comprised of a $ 37.5 million term loan tranche and a $ 20.0 million delayed draw tranche.

The A&R Term Loan Credit Agreement contains certain customary conditions to borrowings, events of default and affirmative, negative, and financial covenants (as described in the A&R Term Loan Credit Agreement and further amended by Amendment No.

4 dated March 6, 2024).

As of June 30, 2024, we are in compliance with the A&R Term Loan Credit Agreement covenants.

As of September 30, 2024, we are in compliance with the A&R Term Loan Credit Agreement covenants.

On September 30, 2024 we entered into Amendment No.2 (“ Term Loan Amendment No.2”) to the A&R Term Loan Credit Agreement.

Term Loan Amendment No.2 amended the A&R Term Loan Credit Agreement to, among other things, make conforming changes to the A&R Term Loan Credit Agreement, consistent with the changes being made to the 2022 ABL Credit Agreement by ABL Amendment No.5.

The terms of Uptiered Loan and Incremental Term Loan are described in the table below (dollar amounts are presented in thousands):

6 unchanged sentences

9/30/2023 12 % PIK

12 % paid in cash

Principal payments at maturity $ 356 quarterly

5 unchanged sentences

YTD 9/30/2024 $ 2,775 $ 4,267

YTD 6/30/2023 $ — N/A

PIK interest added to principal

YTD 9/30/2023 $ — $ —

PIK interest added to principal

YTD 9/30/2024 $ 9,661 N/A

YTD 9/30/2023 $ 10,829 N/A

Balances at 9/30/2024

10 unchanged sentences

1 The principal balance of the Uptiered Loan is made up of $ 22.5 million drawn on November 9, 2021, $ 27.5 million drawn on December 8, 2021, and $ 57.0 million added as part of the exchange agreement on October 4, 2022.

In addition, the principal balance also includes paid-in-kind (“PIK”) interest recorded to date of $ 28.6 million and $ 22.2 million as of June 30, 2024 and December 31, 2023, respectively, and PIK fees of $ 0.9 million incurred as of December 31, 2022.

2 Cash and PIK split is based on the Net Leverage Ratio as defined in the A&R Term Loan Credit Agreement.

Cash interest rate increased by 1.5 % on January 31, 2024.

3 The effective interest rate on the Uptiered Loan as of June 30, 2024 consisted of a 13.50 % stated interest rate paid in PIK and cash and an additional 1.06 % due to the non-cash amortization of the related debt issuance costs.

The effective interest rate on the Uptiered Loan as of June 30, 2023 consisted of a 12.00 % stated interest rate paid in PIK and an additional 0.86 % due to the non-cash amortization of the related debt issuance costs.

4 The effective interest rate on the Incremental Term Loan as of June 30, 2024 consisted of a 12.00 % stated interest rate paid in cash and an additional 10.96 % due to the non-cash amortization of the related debt issuance costs.

As of June 30, 2024 and December 31, 2023, APSC Holdco II, L.P.

In addition, the principal balance also includes paid-in-kind (“PIK”) interest recorded of $ 31.8 million and $ 22.2 million as of September 30, 2024 and December 31, 2023, respectively, and PIK fees of $ 0.9 million incurred as of December 31, 2022.

2 Cash and PIK split is determined based on the Net Leverage Ratio as defined in the A&R Term Loan Credit Agreement.

3 The effective interest rate on the Uptiered Loan as of September 30, 2024 consisted of 13.50 % stated interest rate paid in PIK and cash, and an additional 1.06 % due to the non-cash amortization of the related debt issuance costs.

The effective interest rate on the Uptiered Loan as of September 30, 2023 consisted of 12.00 % stated interest rate paid in PIK and an additional 0.86 % due to the non-cash amortization of the related debt issuance costs.

4 The effective interest rate on the Incremental Term Loan as of September 30, 2024 consisted of 12.00 % stated interest rate paid in cash and an additional 10.96 % due to the non-cash amortization of the related debt issuance costs.

The effective interest rate on the Incremental Term Loan as of September 30, 2023 consisted of 12.00 % stated interest rate paid in cash and an additional 11.69 % due to the non-cash amortization of the related debt issuance costs.

As of September 30, 2024 and December 31, 2023, APSC Holdco II, L.P.

held 500,000 warrants and certain affiliates of Corre collectively held 500,000 warrants, in each case providing for the purchase of one share of the Company’s common stock per warrant at an exercise price of $ 15.00 .

3 unchanged sentences

Equipment Finance Loan

On March 6, 2024, we entered into agreements to sell various equipment to an equipment finance lender for $ 2.9 million and lease the equipment for monthly payments of $ 181 thousand over 18 months.

On March 6, 2024, we entered into agreements to sell various equipment to an equipment finance lender for $ 2.9 million and lease the equipment for monthly payments of $ 181 thousand over eighteen months .

The lease agreement provides for a bargain purchase option at the end of the lease term which we intend to exercise.

4 unchanged sentences

1970 Group Substitute Insurance Reimbursement Facility

On September 29, 2022, we entered into the Substitute Insurance Reimbursement Facility Agreement with 1970 Group Inc.

(“1970 Group”) (as amended by that certain first amendment thereto dated August 29, 2023, the “Substitute Insurance Reimbursement Facility Agreement”).

On September 16, 2024, we entered into an amended and restated substitute insurance reimbursement facility agreement with 1970 Group Inc.

(“1970 Group”) (such agreement, the “Substitute Insurance Reimbursement Facility Agreement”).

Under the Substitute Insurance Reimbursement Facility Agreement, the 1970 Group extended credit to us in the form of a substitute reimbursement facility (the “Substitute Reimbursement Facility”) to provide up to approximately $ 19.0 million of letters of credit on our behalf in support of our workers’ compensation, commercial automotive and general liability insurance policies.

As of June 30, 2024, we have $ 22.9 million of letters of credit outstanding under the Substitute Reimbursement Facility.

As of September 30, 2024, we have $ 19.0 million of letters of credit outstanding under the Substitute Reimbursement Facility.

According to the provisions of ASC 470, Debt , the arrangement is a “Substitute Insurance Reimbursement Facility” limited to the amounts drawn under the letters of credit.

Therefore, until we use or draw on such Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement.

Therefore, until we use or there is a draw on such Substitute Insurance Reimbursement Facility, the letters of credit are treated as an off-balance sheet credit arrangement.

The fees paid by us periodically under this arrangement are deferred and amortized to interest expense over the term of the arrangement.

As of June 30, 2024, all fees were fully amortized.

As of June 30, 2024, we had $ 17.9 million of unrestricted cash and cash equivalents and $ 4.6 million of restricted cash, including $ 3.2 million of restricted cash held as collateral for letters of credit and commercial card programs.

International cash balances as of June 30, 2024 were $ 6.1 million, and approximately $ 0.5 million of such cash is located in countries where currency or regulatory restrictions exist.

As of June 30, 2024, we had approximately $ 22.2 million of available borrowing capacity under our various credit agreements, consisting of $ 12.2 million available under the Revolving Credit Loans and $ 10.0 million available under the Incremental Term Loan under the A&R Term Loan Credit Agreement.

As of June 30, 2024, we had $ 34.7 million in letters of credit and $ 2.5 million in surety bonds outstanding and $ 0.7 million in miscellaneous cash deposits securing other required obligations.

As of September 30, 2024, we had approximately $ 2.2 million of unamortized deferred fees.

As of September 30, 2024, we had $ 14.9 million of unrestricted cash and cash equivalents and $ 4.2 million of restricted cash, including $ 2.9 million of restricted cash held as collateral for letters of credit and commercial card programs.

International cash balances as of September 30, 2024 were $ 6.2 million, and approximately $ 0.6 million of such cash is located in countries where currency or regulatory restrictions exist.

As of September 30, 2024, we had approximately $ 28.0 million of available borrowing capacity under our various credit agreements, consisting of $ 18.0 million available, following the execution of ABL Amendment No.5, under the Revolving Credit Loans and $ 10.0 million available under the Incremental Term Loan.

As of September 30, 2024, we had $ 30.8 million in letters of credit and $ 2.5 million in surety bonds outstanding and $ 1.3 million in miscellaneous cash deposits securing other required obligations.

As of December 31, 2023, our cash and cash equivalents consisted of $ 30.4 million of unrestricted cash and cash equivalents and $ 5.0 million of restricted cash, including $ 3.4 million of restricted cash held as collateral for letters of credit and commercial card programs.

3 unchanged sentences

Net periodic pension credit includes the following components (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2024 2023 2024 2023

6 unchanged sentences

Net periodic pension credit $ ( 111 ) $ ( 157 ) $ ( 326 ) $ ( 476 )

Net pension credit is included in “Other (expense) income, net” on our condensed consolidated statement of operations.

Net pension credit is included in “Other (expense) income, net” on our Condensed Consolidated Statements of Operations.

The expected long-term rate of return on invested assets is determined based on the weighted average of expected returns on asset investment categories for the U.K.

3 unchanged sentences

Shareholders’ Equity and Preferred Stock

As of June 30, 2024 there were 4,421,876 shares of our common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of June 30, 2024 we had 500,000 authorized shares of preferred stock, none of which had been issued.

As of September 30, 2024 there were 4,421,876 shares of our common stock outstanding and 12,000,000 shares authorized at $ 0.30 par value per share.

As of September 30, 2024 we had 500,000 authorized shares of preferred stock, none of which had been issued.

Accumulated Other Comprehensive Income (loss)

A summary of changes in accumulated other comprehensive loss included within shareholders’ equity is as follows (in thousands):

Six Months Ended

June 30, 2024 Six Months Ended

June 30, 2023

Nine Months Ended

September 30, 2024 Nine Months Ended

September 30, 2023

(unaudited) (unaudited)

23 unchanged sentences

On January 25, 2022, the trial court signed a final judgment in favor of the plaintiff and against Team Industrial Services, Inc.

Post-judgment motions challenging the judgment were filed on February 24, 2022 and were denied by the trial court on April 22, 2022.

Post-judgment motions challenging the judgment were filed on February 24, 2022 and were denied by the trial court on

April 22, 2022.

We appealed the trial court’s judgment to the Texas First Court of Appeals by timely filing a notice of appeal on April 25, 2022 and filed our initial appellate brief on December 23, 2022.

On May 16, 2024, the Texas First Court of Appeals issued a decision which vacated the trial court’s judgment and dismissed the case, holding that the trial court erred in refusing to dismiss the case on forum non conveniens grounds.

The plaintiff has filed a motion with the Texas First Court of Appeals for rehearing and a motion for en banc reconsideration and may seek review in the Texas Supreme Court.

The plaintiff filed a motion with the Texas First Court of Appeals for rehearing and a motion for en banc reconsideration, which was denied by the Court of Appeals on October 3, 2024.

The plaintiff has 45 days to seek review with the Texas Supreme Court.

After any further appellate review is exhausted, the plaintiff will be permitted to re-file the lawsuit in Kansas.

We currently have accrued a liability of $ 39.0 million as of June 30, 2024.

We have also recorded a related receivable from our third-party insurance providers in other current assets with a corresponding liability of the same amount in other accrued liabilities.

We currently have accrued a liability of $ 39.0 million as of September 30, 2024 in other accrued liabilities, and have recorded a related receivable from our third-party insurance providers in other current assets in the same amount.

Such amounts are treated as non-cash operating activities.

4 unchanged sentences

Following ongoing compliance reviews of these funding assistance programs, we received notices stating noncompliance with the requirements of one of these funding assistance programs.

Accordingly, based on the assessments completed by the government appointed administrative authority, as of June 30, 2024, we have accrued $ 5.5 million to be repaid over an extended period related to this noncompliance.

Accordingly, for all matters discussed within this Note 13 - Commitments and Contingencies , we have accrued in the aggregate approximately $ 44.5 million as of June 30, 2024, of which approximately $ 5.5 million is not covered by our various insurance policies.

Accordingly, based on the assessments completed by the government appointed administrative authority, previously we had accrued $ 5.5 million to be repaid over an extended period related to this noncompliance.

However, during the quarter ended September 30, 2024, we successfully appealed against $ 2.0 million of the assessment, which resulted in the reduction of the accrued liability from $ 5.5 million to $ 3.5 million as of September 30, 2024.

Accordingly, for all matters discussed within this Note 13 - Commitments and Contingencies , we have accrued in the aggregate approximately $ 42.5 million as of September 30, 2024, of which approximately $ 3.5 million is not covered by our various insurance policies.

In addition to legal matters discussed above, we are subject to various lawsuits, claims and proceedings encountered in the normal conduct of business (“Other Proceedings”).

Management believes that based on its current knowledge and after

consultation with legal counsel that the Other Proceedings, individually or in the aggregate, will not have a material effect on our condensed consolidated financial statements.

Management believes that based on its current knowledge and after consultation with legal counsel that the Other Proceedings, individually or in the aggregate, will not have a material effect on our condensed consolidated financial statements.

SEGMENT DISCLOSURES

3 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

9 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

6 unchanged sentences

$ 9,034 $ 9,396 $ 27,934 $ 28,481

1 Breakdown of depreciation and amortization included in the unaudited Condensed Consolidated Statements of Operations .

Three Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

Depreciation and amortization:

Amount included in operating expenses 3,429 3,613 10,520 11,026

Amount included in SG&A expenses 5,605 5,783 17,414 17,455

Total depreciation and amortization $ 9,034 $ 9,396 $ 27,934 $ 28,481

RELATED PARTY TRANSACTIONS

1 unchanged sentence

SUBSEQUENT EVENTS

As of August 8, 2024, the filing date of this Quarterly Report on Form 10-Q, management evaluated the existence of events occurring subsequent to the quarter ended June 30, 2024 and determined that there were no events or transactions that would have a material impact on the Company’s results of operations or financial position .

As of November 12, 2024, the filing date of this Quarterly Report on Form 10-Q, management evaluated the existence of events occurring subsequent to the quarter ended September 30, 2024 and determined that there were no events or transactions that would have a material impact on the Company’s results of operations or financial position .

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 1. Financial Statements