EX-99.2 4 ex_314892.htm EXHIBIT 99.2 ex_314892.htm

Exhibit 99.2

 

 

 

 

 

 

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

 

Interim Financial Statements

(Unaudited)

 

As of September 30, 2021 and December 31, 2020

and for the Nine Months Ended September 30, 2021 and 2020

 

 

 

 

 

 

 

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

INTERIM FINANCIAL STATEMENTS

TABLE OF CONTENTS

(Unaudited)

 

 

Page

   

Statements of Operations for the nine months ended September 30, 2021 and 2020

1

   

Balance Sheets as of September 30, 2021 and December 31, 2020

2

   

Statements of Changes in Equity for the nine months ended September 30, 2021 and 2020

3

   

Statements of Cash Flows for the nine months ended September 30, 2021 and 2020

4

   

Notes to Interim Financial Statements

5

 

 

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands)

 

   

Nine Months Ended September 30,

 
   

2021

   

2020

 
                 

Net sales

  $ 52,238     $ 49,888  

Cost of sales

    27,376       29,705  

Gross profit

    24,862       20,183  

Selling, general, and administrative expense

    21,855       12,744  

Depreciation and amortization expense

    607       622  

Operating income

    2,400       6,817  

Gain on forgiveness of paycheck protection program loan

    1,975       -  

Gain on sale of assets

    210       27  

Other income, net

    9       13  

Interest income

    2       84  

Interest expense

    -       (22

)

Net income

  $ 4,596     $ 6,919  

 

The accompanying notes are an integral part of these interim financial statements.

 

1

 

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

BALANCE SHEETS

(Unaudited)

(In thousands)

 

   

September 30, 2021

   

December 31, 2020

 
                 

Assets

               

Current assets:

               

Cash

  $ 2,545     $ 19,247  

Accounts receivable, net

    11,552       8,630  

Inventories

    7,403       5,577  

Prepaid expenses and other

    265       68  

Total current assets

    21,765       33,522  

Property and equipment, net

    5,261       5,037  

Intangible assets, net

    1,400       -  

Total assets

  $ 28,426     $ 38,559  
                 

Liabilities and Equity

               

Current liabilities:

               

Accounts payable

  $ 2,318     $ 1,678  

Paycheck protection program loan, current

    -       1,412  

Sales tax payable

    862       700  

Accrued bonus

    839       -  

Accrued employee benefits

    846       410  

Other accrued liabilities

    -       33  

Total current liabilities

    4,865       4,233  

Paycheck protection program loan, net of current

    -       563  

Total liabilities

    4,865       4,796  
                 

Commitments and contingencies (Note 8)

               
                 

Members’ equity at September 30, 2021 and Partners’ capital at December 31, 2020

    23,561       33,763  

Total liabilities and equity

  $ 28,426     $ 38,559  

 

The accompanying notes are an integral part of these interim financial statements.

 

2

 

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

STATEMENTS OF CHANGES IN EQUITY

(Unaudited)

(In thousands)

 

   

General Partner

   

Limited Partner

    Members Equity    

Total

 
                                 

Balances, January 1, 2021

  $ 338     $ 33,425     $ -     $ 33,763  

Net income

    46       4,550       -       4,596  

Distributions

    (148

)

    (14,650 )     -       (14,798

)

Reorganization from limited partnership to limited liability company     (236 )     (23,325 )     23,561       -  

Balances, September 30, 2021

  $ -     $ -     $ 23,561     $ 23,561  

 

   

General Partner

   

Limited Partner

    Members Equity    

Total

 
                                 

Balances, January 1, 2020

  $ 294     $ 29,091     $ -     $ 29,385  

Net income

    69       6,850       -       6,919  

Distributions

    (19

)

    (1,860

)

    -       (1,879

)

Balances, September 30, 2020

  $ 344     $ 34,081     $ -     $ 34,425  

 

The accompanying notes are an integral part of these interim financial statements.

 

3

 

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

   

Nine Months Ended September 30,

 
   

2021

   

2020

 
                 

Cash flows from operating activities:

               

Net income

  $ 4,596     $ 6,919  

Adjustments to reconcile net income to net cash provided by operating activities:

         

Depreciation and amortization

    607       622  

Gain on sale of assets

    (210 )     (27 )

Gain on forgiveness of paycheck protection program loan

    (1,975 )     -  

Changes in operating assets and liabilities:

         

Accounts receivable, net

    (2,922 )     (625 )

Inventories

    (1,826 )     (341 )

Prepaid expenses and other assets

    (197 )     (108 )
Related party notes receivable     -       (40 )

Accounts payable

    640       682  

Sales tax payable

    162       459  

Accrued bonus

    839       -  

Accrued employee benefits

    436       892  
Shareholder payable     -       (280 )

Other accrued liabilities

    (33 )     42  

Net cash provided by operating activities

    117       8,195  

Cash flows from investing activities:

               

Purchases of property and equipment

    (959

)

    (408

)

Purchases of intangible assets

    (1,400

)

    -  

Proceeds from sale of property and equipment

    338       27  

Net cash used in investing activities

    (2,021

)

    (381

)

Cash flows from financing activities:

               

Proceeds from paycheck protection program loan

    -       1,975  

Distributions made to members

    (14,798

)

    (1,879

)

Net cash provided by (used in) financing activities

    (14,798

)

    96

 

Change in cash     (16,702 )     7,910  

Cash, beginning of period

    19,247       9,959  

Cash, end of period

  $ 2,545     $ 17,869  
                 

Noncash investing and financing activities:

               

Forgiveness of paycheck protection program loan

  $ 1,975     $ -  

 

The accompanying notes are an integral part of these interim financial statements.

 

4

 

 

PARK ENVIRONMENTAL EQUIPMENT, LLC

NOTES TO INTERIM FINANCIAL STATEMENTS

(Unaudited)

 

1.

Organization

 

Park Environmental Equipment, LLC (fka Park Environmental Equipment, Ltd.) (the “Company”) has been a technology leader in the Water industry for over 35 years. The Company has three manufacturing facilities in Texas and operates five lines of products including Stormwater, Wastewater, Domestic & Fire protection, Pump Lift stations, and Chemical processing.

 

Park Environmental Equipment, Ltd., the Company’s predecessor, was a limited partnership until it undertook a series of reorganization transactions that resulted in its conversion from a limited partnership into a limited liability company effective September 30, 2021. This reorganization had no material impact on the interim financial statements.

 

 

2.

Summary of Significant Accounting Policies

 

Basis of Presentation

 

The interim financial statements are expressed in United States Dollars and include the accounts of the Company as of the financial statement dates.

 

Use of Estimates

 

The interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from these estimates.

 

Cash and Cash Equivalents

 

For purposes of the statement of cash flows and balance sheet presentation, cash equivalents include readily available marketable securities with an original maturity of 90 days or less. The Company had no cash equivalents as of September 30, 2021 or December 31, 2020.

 

Accounts Receivable

 

The Company has non-interest bearing accounts receivable from its customers. Management evaluates its customers’ credit risk prior to extending credit and will sometimes require a production charge of 50% due upon approval for new customers. Customers without established accounts must settle their account in full prior to delivery. Management considers trade receivables to be past due between 30 and 120 days after billing. The Company has the advantage of Mechanic Lien Laws, and has an immaterial amount of bad debt. Management reviews account receivables on a regular basis to determine if any receivable will be uncollectible. After all efforts to collect have failed, the receivable is written off. Bad debt expense totaled $41 thousand and $3 thousand for the nine months ended September 30, 2021 and 2020, respectively. The Company did not record an allowance for doubtful accounts as of September 30, 2021 or 2020, as any amounts are considered immaterial to the interim financial statements.

 

Inventories

 

Inventories, consisting of raw materials, work in process and finished goods, is stated at the lower of cost, determined on a first-in, first out basis, or net realizable value. Management provides an allowance for obsolete inventory based on the age and estimated marketability of its products relative to historical and anticipated future sales. Management has determined that no allowance was necessary as of September 30, 2021 or December 31, 2020.

 

5

 

Property and Equipment

 

Property and equipment is stated on the basis of cost less accumulated depreciation. Depreciation and amortization is calculated using an accelerated method over the estimated useful life of the respective asset ranging between 5 and 39 years, which reasonably approximates the straight-line method under U.S. GAAP. Leasehold improvements are amortized over the lesser of the useful life of the asset or the term of the lease. The cost of normal repairs and maintenance that do not extend the useful life or increase the productive capacity of the assets are charged to expense as incurred. The costs and accumulated depreciation and amortization of assets retired or sold are removed from assets and related accumulated depreciation and amortization accounts, and gains or losses thereon are included in income.

 

Intangible Assets

 

Intangible assets consist of patents. Intangible assets are amortized using the straight-line method over estimated useful lives ranging from 3 to 4 years.

 

Impairment of Long-lived Assets

 

The Company reviews long-lived assets, including property and equipment, for impairment indicators on an annual basis or whenever events or changes in circumstances indicate the carrying amount of the assets may not be fully recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. There was no impairment to long-lived assets for the nine months ended September 30, 2021 or 2020.

 

Revenue Recognition

 

The Company’s sales contain a single delivery element and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Delivery is considered to have occurred when the title and risk of loss passes to the customer, which occurs at the time of shipment. Revenue is recorded net of estimated returns and discounts.

 

Advertising Costs

 

Advertising costs are expensed as incurred and are included in general and administrative expenses in the accompanying statement of income. Advertising costs totaled $67 thousand and $111 thousand for the nine months ended September 30, 2021 and 2020, respectively.

 

Income Taxes

 

The Company is not liable for the payment of federal income taxes. All items of income and loss are reported to the members (after the conversion to a limited liability company) or partners (prior to the conversion to a limited liability company) who are responsible for the payment of any applicable taxes. Therefore, no provision or liability for federal income taxes has been recorded in the accompanying interim financial statements.

 

As of September 30, 2021 and December 31, 2020, no significant uncertain tax positions have been identified. If applicable, interest and penalties related to uncertain tax positions are recognized in income tax expense as incurred. No such amounts were recognized during the nine months ended September 30, 2021 and 2020.

 

Concentration of credit risk

 

Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable.

 

The Company has one customer who accounted for 12% of total revenues for the nine months ended September 30, 2021 and 2020. The Company has no customers representing greater than 10% of the Company’s accounts receivable as of September 30, 2021 or December 31, 2020.

 

The Company maintains its cash in bank deposit accounts which, at times, exceeds federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash.

 

6

 

3.

Inventories

 

Inventories consist of the following (in thousands):

 

   

September 30, 2021

   

December 31, 2020

 
                 

Raw materials and work-in-process

  $ 5,354     $ 4,203  

Finished goods

    2,049       1,374  

Total inventories

  $ 7,403     $ 5,577  

 

 

4.

Property and Equipment

 

Property and equipment, net consists of the following (in thousands):

 

   

September 30, 2021

   

December 31, 2020

 
                 

Equipment

  $ 3,130     $ 2,968  

Furniture

    348       348  

Leasehold improvements

    3,942       3,589  

Vehicles

    3,787       4,298  
      11,207       11,203  

Less accumulated depreciation

    (5,946

)

    (6,166

)

Property and equipment, net

  $ 5,261     $ 5,037  

 

 

5.

Intangible Assets

 

Intangible assets consist of the following (in thousands):

 

   

Gross Carrying Amount

   

Accumulated Amortization

   

Intangible Assets, Net

 
                         

As of September 30, 2021

                       

Patents

  $ 1,400     $ -     $ 1,400  

 

During the nine months ended September 30, 2021, the Company acquired two patents with a weighted-average estimated useful life of 3.6 years.

 

The estimated amortization expense for each of the next five years and thereafter is as follows (in thousands):

 

Year ending December 31,

       

Remainder of 2021

  $ 97  

2022

    391  

2023

    391  

2024

    374  

2025

    147  

Total amortization expense

  $ 1,400  

 

 

6.

Paycheck Protection Program Loan

 

The Company received a loan from a lending institution in the amount of $1,975,000 under the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security Act. The loan was subject to a note dated May 7, 2020. On March 30, 2021, the Company received legal forgiveness of this loan from its financial institution and the U.S. Small Business Administration.

 

7

 

7.

Related Party Transactions

 

The Company entered into certain leasing arrangements with an entity affiliated with the Company through common ownership and has guaranteed certain financing arrangements associated with the leased property. See Note 8 for further discussion.

 

 

8.

Commitments and Contingencies

 

The Company leases office equipment under multiple operating leases which expire in various years through 2025.

 

The scheduled minimum lease payments under the lease terms as of September 30, 2021 are as follows (in thousands):

 

Year ending December 31,

       

Remainder of 2021

  $ 11  

2022

    43  

2023

    28  

2024

    6  

2025

    3  

Total amortization expense

  $ 91  

 

Rent and lease expense totaled $2.6 million and $2.8 million for the nine months ended September 30, 2021 and 2020, respectively, of which $2.5 million and $2.7 million, respectively, is related to leasing arrangements with an affiliated company. Rental agreements with the affiliated company are on a month to month basis and future minimum payments relating to these agreement are not required.

 

All Sites

 

The Company operates its facilities under numerous governmental permits and licenses relating to air emissions, stormwater runoff, and other environmental matters. The Company’s operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations there under which, among other requirements, establish noise and dust standards. The Company believes it is in material compliance with its permits and licenses and these laws and regulations, and the Company does not believe that future compliance with such laws and regulations will have a material adverse effect on its financial position, results of operations, or cash flows.

 

Other Contingencies and Legal Proceedings

 

From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of its business. The Company maintains insurance coverage against potential claims in amounts that are believed to be adequate. To the extent that insurance does not cover legal, defense, and indemnification costs associated with a loss contingency, the Company records accruals when such losses are considered probable and reasonably estimable. The Company believes that it is not presently a party to litigation, the outcome of which would have a material adverse effect on its business, financial condition, results of operations, or cash flows.

 

 

9.

Profit Sharing Plan

 

The Company has a profit sharing plan with a 401(k) feature covering all qualified employees. The plan provides for contributions by employees and discretionary contributions by the Company, determined by the Company’s Board of Directors. The Company contributed $317 thousand and $247 thousand to the plan for the nine months ended September 30, 2021 and 2020, respectively.

 

8

 

10.

Subsequent Event

 

Management of the Company has evaluated subsequent events through December 22, 2021, the date the interim financial statements were available to be issued, and summarized below.

 

On October 5, 2021, Northwest Pipe Company (“NWP”) purchased all of the issued and outstanding membership interests of the Company for approximately $87.4 million, net of cash acquired, and subject to a post-closing adjustment based on changes in net working capital. The Membership Interest Purchase Agreement, dated October 5, 2021, by and among NWP, the Company, the Company’s parent entity EBSR, LLC, and the equity holders of EBSR, LLC, includes customary representations, warranties, covenants, and agreements by the parties, including mutual indemnification obligations.

 

9