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Item 9A. Controls and Procedures

2021-03-02 compared with 2020-02-28 · 390 added, 443 removed, 860 unchanged (49% of the section changed)

2 unchanged sentences

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)) are designed to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Based on management’s evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2019.

Our management, including our principal executive officer and principal financial officer, believes that the audited consolidated financial statements contained in this Annual Report on Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows for the years presented in conformity with U.S.

1 unchanged sentence

Changes in Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management Report on Internal Control over Financial Reporting

There were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act).

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States.

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of our management;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Management, under the oversight of our principal executive officer and principal financial officer, and Audit Committee, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal control - An Integrated Framework (“2013 Framework”).

Our system of internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

generally accepted accounting principles and that receipts and expenditures are being made only in accordance with authorizations of our management; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.

Management, under the oversight of our principal executive officer and principal financial officer, and Audit Committee, assessed the effectiveness of our internal control over financial reporting as of December 31, 2020 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal control - An Integrated Framework (“2013 Framework”).

Based on its assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance U.S.

1 unchanged sentence

Our independent registered public accounting firm, KPMG LLP, who audited the consolidated financial statements included in this annual report, has audited the effectiveness of our internal control over financial reporting as of December 31, 2020.

KPMG LLP’s report appears on page F‑3 of this annual report on Form 10‑K.

KPMG LLP’s report appears on page F-4 of this annual report on Form 10-K.

Inherent Limitations on Effectiveness of Controls

Our management, including the principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute,

assurance that the control system’s objectives will be met.

A control system, no matter how well-designed and implemented, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

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Directors, Executive Officers, Promoters and Control Persons

The information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of Regulation S-K (except for information required by Paragraph (e) of that Item to the extent the required information pertains to our executive officers) and Item 405 of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

The following table presents the information required by Paragraph (b) of Item 401 of Regulation S-K.

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Corporate Governance

The information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

EXECUTIVE COMPENSATION

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A no later than April 30, 2021.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by Item 403 of Regulation S-K is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A no later than April 30, 2021.

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A no later than April 30, 2021.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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Financial Statements

The Company’s Consolidated Financial Statements at December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 and the notes thereto, together with the Report of the Independent Registered Public Accounting Firm on those Consolidated Financial Statements are hereby filed as part of this Report, beginning on page F‑1.

The Company’s Consolidated Financial Statements at December 31, 2020 and 2019 and for each of the three years in the period ended December 31, 2020 and the notes thereto, together with the Report of the Independent Registered Public Accounting Firm on those Consolidated Financial Statements are hereby filed as part of this Report, beginning on page F-1.

Financial Statement Schedule

The following financial statement schedule of the Company for each of the three years in the period ended December 31, 2020 is filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of the Company.

Schedule II –

Schedule of Valuation and Qualifying Accounts

Schedule II – Schedule of Valuation and Qualifying Accounts

Amended and Restated Certificate of Incorporation of Orion Group Holdings, Inc.

(incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2016, filed with the Securities and Exchange Commission on August 5, 2016 (File No.

(incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the Securities and Exchange Commission on August 5, 2016 (File No.

Amended and Restated Bylaws of Orion Group Holdings, Inc.

(incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2016, filed with the Securities and Exchange Commission on August 5, 2016 (File No.

D escription of Registered Securities of Orion Group Holdings, Inc.

Form of Indemnity Agreement for Directors and Certain Officers dated November 24, 2008 (incorporated herein by reference to Exhibit 1.01 to the Company’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on November 25, 2008 (File No.

(incorporated herein by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the Securities and Exchange Commission on August 5, 2016 (File No.

Description of Registered Securities of Orion Group Holdings, Inc.

(Incorporated herein by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission on March 28, 2020 (File No.

Form of Indemnity Agreement for Directors and Certain Officers dated November 24, 2008 (incorporated herein by reference to Exhibit 1.01 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2008 (File No.

Orion Marine Group, Inc.

2007 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on August 20, 2007 (File No.

2007 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 20, 2007 (File No.

333-145588)).

Form of Stock Option Agreement Under the 2007 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S‑1 filed with the Securities and Exchange Commission on August 20, 2007 (File No.

Form of Stock Option Agreement Under the 2007 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to the Company’s Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 20, 2007 (File No.

333-145588)).

Orion Marine Group, Inc.

2011 Long Term Incentive Plan (incorporated herein by reference to Appendix A to the Company’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 4, 2011 (File No.

Form of Stock Option Agreement Under the 2011 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 6, 2012 (File No.

Form of Restricted Stock Agreement and Notice of Grant of Restricted Stock under the 2011 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 6, 2012 (File No.

Executive Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2008, filed with the Securities and Exchange Commission on November 7, 2008 (File No.

Form of Stock Option Agreement Under the 2011 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2012 (File No.

Form of Restricted Stock Agreement and Notice of Grant of Restricted Stock under the 2011 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 6, 2012 (File No.

Executive Incentive Plan (incorporated herein by reference to Exhibit 10.14 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed with the Securities and Exchange Commission on November 7, 2008 (File No.

Orion Group Holdings, Inc.

2017 Long-Term Incentive Plan (incorporated herein by reference to Appendix A to the Company’s Proxy Statement on Schedule 14A, filed with the Securities and Exchange Commission on April 11, 2017 (File No.

Form of Stock Option Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Form of Restricted Stock Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Form of Performance Unit Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Summary of Non-Employee Director Compensation (incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Real Estate Purchase and Sale Agreement (Jones Spoils Tracts, Harris County, TX) dated February 3, 2014, by and between PASADENA NITROGEN LLC, a Delaware limited liability company, as Seller, and CPB PROPERTIES, LLC, a Texas limited liability company, as Purchaser, and joined in by AGRIFOS HOLDINGS, INC., a Delaware corporation, effective February 26, 2014 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K/A filed with the Securities and Exchange Commission on March 4, 2014) (File No.

Form of Stock Option Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Form of Restricted Stock Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.10 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Form of Performance Unit Agreement under the 2017 Long-Term Incentive Plan (incorporated herein by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Summary of Non-Employee Director Compensation (incorporated herein by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Real Estate Purchase and Sale Agreement (Jones Spoils Tracts, Harris County, TX) dated February 3, 2014, by and between PASADENA NITROGEN LLC, a Delaware limited liability company, as Seller, and CPB PROPERTIES, LLC, a Texas limited liability company, as Purchaser, and joined in by AGRIFOS HOLDINGS, INC., a Delaware corporation, effective February 26, 2014 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the Securities and Exchange Commission on March 4, 2014) (File No.

Employment Agreement dated January 1, 2015 between Orion Marine Group, Inc.

Stauffer (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on January 2, 2015)(File No.

Stauffer (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 2, 2015)(File No.

First Amendment, effective January 1, 2017, to Employment Agreement by and between Orion Group Holdings, Inc.

and Mark Stauffer dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on March 20, 2017 (File No.

and Mark Stauffer dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 20, 2017 (File No.

Second Amendment, effective June 5, 2018, to Employment Agreement by and between Orion Group Holdings, Inc.

and Mark Stauffer dated January 1, 2015 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on June 8, 2018 (File No.

and Mark Stauffer dated January 1, 2015 (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 8, 2018 (File No.

Third Amendment, effective June 19, 2019, to Employment Agreement by and between Orion Group Holdings, Inc.

Employment Agreement dated January 1, 2015 between Orion Marine Group, Inc.

Buchler (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8‑K filed with the Securities and Exchange Commission on January 2, 2015) (File No.

Buchler (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 2, 2015) (File No.

First Amendment, effective April 1, 2017, to Employment Agreement by and between Orion Group Holdings, Inc.

Buchler dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on April 5, 2017 (File No.

Buchler dated January 1, 2015 (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on April 5, 2017 (File No.

Second Amendment, effective June 5, 2018, to Employment Agreement by and between Orion Group Holdings, Inc.

Third Amendment, effective June 19, 2019, to Employment Agreement by and between Orion Group Holdings, Inc.

Employment Agreement dated September 30, 2015 between Orion Group Holdings, Inc., and Robert L.

Tabb, as amended by the First Amendment, effective September 25, 2017 (incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10‑K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Tabb, as amended by the First Amendment, effective September 25, 2017 (incorporated herein by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2019 (File No.

Employment Agreement dated June 19, 2019 between Orion Group Holdings, Inc., and Robert L.

Tabb (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on June 21, 2019 (File No.

Tabb (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 21, 2019 (File No.

Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, The Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-Syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2015, filed with the Securities and Exchange Commission on August 7, 2015 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, The Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-Syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, filed with the Securities and Exchange Commission on August 7, 2015 (File No.

First Amendment, effective March 31, 2016, to the Credit Agreement dated as of August 5, 2015, among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time To Time, as Guarantors, The Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-Syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended March 31,2016, filed with the Securities and Exchange Commission on May 6, 2016 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time To Time, as Guarantors, The Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-Syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,2016, filed with the Securities and Exchange Commission on May 6, 2016 (File No.

Second amendment, effective June 30, 2017, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2017, filed with the Securities and Exchange Commission on August 3, 2017 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, filed with the Securities and Exchange Commission on August 3, 2017 (File No.

Third amendment, effective September 30, 2017, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended September 30, 2017, filed with the Securities and Exchange Commission on November 9, 2017 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the Securities and Exchange Commission on November 9, 2017 (File No.

Fourth amendment, effective July 31, 2018, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10‑Q for the quarter ended June 30, 2018, filed with the Securities and Exchange Commission on August 3, 2018 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, filed with the Securities and Exchange Commission on August 3, 2018 (File No.

Fifth amendment, effective March 21, 2019, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on March 26, 2019 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, as Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on March 26, 2019 (File No.

Sixth Amendment, effective May 7, 2019, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8‑K, filed with the Securities and Exchange Commission on May 9, 2019 (File No.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA DBA Bank of Texas, and Branch Banking and Trust Company, Co-syndication Agents, Regions Capital Markets, a division of Regions Bank, as Lead Arranger and Book Manager (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 9, 2019 (File No.

Seventh amendment, effective June 8, 2020, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

as Borrower, Certain Subsidiaries of the Borrower Party Hereto From Time to Time, as Guarantors, the Lenders Party Hereto, Regions Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A., BOKF, NA dba Bank of Texas, Iberia Bank, Trust Bank, and Trustmark National Bank, as Lenders (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on June 10, 2020 (File No.

Eighth amendment, effective October 9, 2020, to the Credit Agreement dated as of August 5, 2015 among Orion Marine Group, Inc.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on October 13, 2020 (File No.

List of Subsidiaries.

Consent of Independent Registered Public Accounting Firm -KPMG.

Consent of Independent Registered Public Accounting Firm -KPMG, LLP.

Power of Attorney (included on signature page of this filing).

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XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

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ORION GROUP HOLDINGS, INC.

February 28, 2020

March 2, 2021

President, Chief Executive Officer and Director

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President, Chief Executive Officer and

February 28, 2020

March 2, 2021

/s/ Robert L.

Vice President and Chief

February 28, 2020

March 2, 2021

Financial Officer

/s/ Richard L.

/s/ Austin J.

Chairman of the Board

February 28, 2020

March 2, 2021

/s/ Thomas N.

February 28, 2020

March 2, 2021

/s/ Margaret M.

February 28, 2020

/s/ Austin J.

February 28, 2020

March 2, 2021

/s/ Richard L.

March 2, 2021

/s/ Michael J.

February 28, 2020

March 2, 2021

ORION GROUP HOLDINGS, INC.

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Consolidated Statements of Operations for the Years Ended December 31, 202 0 , 2019 and 2018

Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2019, 2018 and 2017

Consolidated Statement of Stockholders’

Equity for the Years Ended December 31, 2019, 2018 and 2017

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2020, 2019 and 2018

Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2020, 2019 and 2018

Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019 and 2018

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We have audited the accompanying consolidated balance sheets of Orion Group Holdings, Inc.

and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive (loss) income, stockholders’

and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2020, in conformity with U.S.

generally accepted accounting principles.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2020 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 2, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for revenue as of January 1, 2018 due to the adoption of Accounting Standards Update No.

2014-09, Revenue from Contracts with Customers (Topic 606).

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update No.

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Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2017.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of variable consideration and estimated costs at completion for long-term, fixed-priced construction contracts

As discussed in Note 2 to the consolidated financial statements, revenue is recognized over time because control is continually transferred to the customer.

The Company estimates variable consideration related to claims and unapproved change orders based on the most likely amount to which it expects to be entitled.

Progress is measured by the percentage of actual costs incurred to date to the total estimated costs at completion.

Contract costs include

all direct costs, such as material and labor, and those indirect costs incurred that are related to contract performance.

We identified the evaluation of variable consideration and estimated costs at completion for long-term, fixed-priced construction contract in the Marine segment as a critical audit matter.

Evaluating the Company’s estimates of variable consideration involved auditor judgment given the uncertainty in determining the costs the Company is entitled to recover under the contract.

Additionally, evaluating the estimated costs at completion for contracts in progress involved auditor judgment given the variability and uncertainty associated with estimating costs, including costs of material and labor to be incurred over a long-term contract period.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s revenue process, including controls over the estimation of variable consideration and costs to complete long-term, fixed-priced construction contracts.

We evaluated the Company’s ability to estimate these amounts by comparing the Company’s previous estimates to actual results.

We evaluated variable consideration for certain contracts by:

● comparing a selection of costs underlying the claims and unapproved change orders to supporting documentation, including contractual documents and correspondence between the Company and the customer

● assessing management’s determination of the most likely amount to which it expects to be entitled by comparing it to the Company’s historical experience with similar claims and unapproved change orders.

We evaluated estimated costs at completion for certain in-progress contracts by:

● inspecting contractual documents with customers

● conducting interviews with and reviewing questionnaires prepared by project personnel to gain an understanding of the status, risks and uncertainties of projects

● analyzing documentation for a selection of costs in the estimated costs at completion, including the cost of labor, materials and subcontracts.

We have served as the Company’s auditor since 2017.

Houston, Texas

February 28, 2020

March 2, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited Orion Group Holdings, Inc.

and subsidiaries’

(the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated February 28, 2020 expressed an unqualified opinion on those consolidated financial statements.

and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated March 2, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Houston, Texas

February 28, 2020

March 2, 2021

Orion Group Holdings, Inc.

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Consolidated Balance Sheets

December 31, 2019 and 2018

(In Thousands, Except Share and Per Share Information)

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Accounts receivable:

Trade, net of allowance of $2,600 and $4,280, respectively

Trade, net of allowance for credit losses of $ 411 and $ 2,600 , respectively

Income taxes receivable

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Other non-current

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Total liabilities

Stockholders’

Stockholders’ equity:

Preferred stock -- $ 0.01 par value, 10,000,000 authorized, none issued

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Treasury stock, 711,231 shares, at cost, as of December 31, 2020 and December 31, 2019, respectively

Other comprehensive loss

Accumulated other comprehensive loss

Additional paid-in capital

Retained loss

Total stockholders’

Total liabilities and stockholders’

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements

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Amortization of intangible assets

Gain on sale of assets, net

Gain on disposal of assets, net

Goodwill impairment charges

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Other expense, net

Loss before income taxes

Income (loss) before income taxes

Income tax expense (benefit)

Net (loss) income

Basic (loss) income per share

Diluted (loss) income per share

Shares used to compute (loss) income per share:

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Shares used to compute income (loss) per share:

The accompanying notes are an integral part of these consolidated financial statements

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and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

Year ended December 31,

Net (loss) income

Change in fair value of cash flow hedge, net of tax benefit of $228, net of tax benefit of $15, and net of tax expense of $53 for the years ended December 31, 2019, 2018 and 2017, respectively

Total comprehensive (loss) income

Net income (loss)

Change in fair value of cash flow hedge, net of tax benefit of $ 128 , $ 228 and $ 15 for the years ended December 31, 2020, 2019 and 2018, respectively

Total comprehensive income (loss)

The accompanying notes are an integral part of these consolidated financial statements

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and Subsidiaries

Consolidated Statement of Stockholders’

Consolidated Statement of Stockholders’ Equity

(In Thousands, Except Share and Per Share Information)

Accumulated Other

Comprehensive

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Balance, January 1, 2018

Adoption of ASC 606 (Note 2)

Stock-based compensation

Deferred tax adjustment

Exercise of stock options

Issuance of restricted stock

Cash flow hedge, net of tax

Forfeiture of restricted stock

Cash flow hedge

Balance, December 31, 2018

Adoption of ASC 606 (Note 2)

Stock-based compensation

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Issuance of restricted stock

Cash flow hedge, net of tax

Forfeiture of restricted stock

Cash flow hedge

Balance, December 31, 2019

Stock-based compensation

Exercise of stock options

Issuance of restricted stock

Cash flow hedge, net of tax

Forfeiture of restricted stock

Purchase of vested stock-based awards

Cash flow hedge

Balance, December 31, 2020

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Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Operating activities:

Depreciation and amortization

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Amortization of ROU finance leases

Unamortized debt issuance costs upon debt modification

Write-off of debt issuance costs upon debt modification

Amortization of deferred debt issuance costs

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Stock-based compensation

Gain on sale of property and equipment

Gain on disposal of assets, net

Gain on involuntary disposition of assets, net

Goodwill impairment charges

Allowance for doubtful accounts

Allowance for credit losses

Other gain from continuing operations

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Billings in excess of costs and estimated earnings on uncompleted contracts

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

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Purchase of property and equipment

Acquisition of TBC

TBC acquisition adjustment

Contributions to CSV life insurance

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Payments of finance lease liabilities

Purchase of vested stock-based awards

Exercise of stock options

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Net change in cash, cash equivalents and restricted cash

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Description of Business

Orion Group Holdings, Inc., its subsidiaries and affiliates (hereafter collectively referred to as the "Company"), provide a broad range of specialty construction services in the infrastructure, industrial, and building sectors of the continental United States, Alaska, Canada and the Caribbean Basin.

The Company’s marine segment services the infrastructure sector through marine transportation facility construction, marine pipeline construction, marine environmental structures, dredging of waterways, channels and ports, environmental dredging, design, and specialty services.

Its concrete segment services the building sector by providing turnkey concrete construction services including pour and finish, dirt work, layout, forming, rebar, and mesh across the light commercial, structural and other associated business areas.

The Company is headquartered in Houston, Texas with offices throughout its operating areas.

The tools used by the chief operating decision maker ("CODM") to allocate resources and assess performance are based on two reportable and operating segments:

marine, which operates under the Orion Marine Group brand and logo, and concrete, which operates under the TAS Commercial Concrete brand and logo.

Although we describe the business in this report in terms of the services the Company provides, its base of customers and the areas in which it operates, the Company has determined that its operations currently comprise two reportable segments pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 280, Segment Reporting .

The tools used by the chief operating decision maker ("CODM") to allocate resources and assess performance are based on two reportable and operating segments:

marine, which operates under the Orion brand and logo, and concrete, which operates under the TAS Commercial Concrete brand and logo.

In making this determination, the Company considered the similar economic characteristics of its operations that comprise its marine segment.

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Environmental Protection Agency and U.S.

Occupational Safety and Health Administration ("OSHA"), among others.

Additionally, the segment is driven by macro-economic considerations including the level of import/export seaborne transportation, development of energy-related infrastructure, cruise line expansion and operations, marine bridge infrastructure development, waterway pipeline crossings and the maintenance of waterways.

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All intercompany balances and transactions have been eliminated in consolidation.

Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation in the Company’s condensed consolidated statement of operations.

As part of the Company’s Invest, Scale and Grow (“ISG”) initiative it realigned its project management personnel within the operating groups for the combined company.

As a result of the realignment, beginning in the second quarter of 2019, the Company elected to classify certain project management costs in Cost of contract revenue in its Consolidated Statements of Operations (the “Statements of Operations”) to better represent how those costs are managed and controlled.

For periods reported prior to the second quarter of 2019, certain project management costs were included in Selling, general and administrative (“SG&A”)

The Company’s SG&A expense for 2019 included project management costs of $1.1 million incurred in the first quarter of 2019, and SG&A expense for 2018 and 2017 included project management costs of $4.9 million and $4.7 million, respectively.

Summary of Significant Accounting Principles

Summary of Significant Accounting Policies

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management’s estimates, judgments and assumptions are continually evaluated based on available information and experience;

however, actual amounts could differ from those estimates.

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● Revenue recognition from construction contracts;

Accounts receivable and allowance for doubtful accounts;

● Accounts receivable and allowance for credit losses;

● Property, plant and equipment;

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The Company recognized the cumulative effect of initially adopting Topic 606 guidance as an adjustment to the beginning balance of retained earnings.

Contracts with customers that were not substantially complete in both the Company’s marine and concrete segments were evaluated in order to determine the impact as of the date of adoption.

The Company’s revenue is derived from contracts to provide marine construction, dredging, turnkey concrete services, and other specialty services.

The Company’s projects are typically short in duration and usually span a period of less than one year.

Contracts with customers that were not substantially complete in both the Company’s marine and concrete segments were evaluated in order to determine the impact as of the date of adoption.

The Company’s revenue is derived from contracts to provide marine construction, dredging, turnkey concrete services, and other specialty services.

The Company’s projects are typically short in duration and usually span a period of less than one year.

The Company determines the appropriate accounting treatment for each contract before work begins and generally records revenue on contracts over time.

Performance obligations are promises in a contract to transfer distinct goods or services to the customer and are the unit of account under Topic 606.

The Company’s contracts and related change orders typically represent a single performance obligation because the Company provides a significant integrated service and individual goods and services are not separately identifiable.

Revenue is recognized over time because control is continuously transferred to the customer.

For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its best estimate of the stand-alone selling price of each distinct good or service.

Progress is measured by the percentage of actual contract costs incurred to date to total estimated costs for each contract.

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Variable consideration is included in the estimated recognition of revenue to the extent it is probable that a significant reversal of cumulative recognized revenue will not occur.

Based on its reading of the contract and its performance, the Company believes collection of these claims is probable, although the full amount of the recorded claims may not be collected.

A determination that the collection of a claim is probable is based upon compliance with the terms of the contract and the extent to which the Company performed in accordance therewith but does not guarantee collection in full.

Contract assets and liabilities include the following:

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Contract Liabilities) and are recorded as a current liability, until the underlying obligation has been performed or discharged.

The following table summarizes the cumulative effect of the changes made to the Company’s unaudited Consolidated Balance Sheet as of January 1, 2018 from the adoption of Topic 606:

Costs and estimated earnings in excess of billings on uncompleted contracts

Billings in excess of costs and estimated earnings on uncompleted contracts

Deferred income tax liability

Retained earnings

The following tables summarize the impact of adopting Topic 606 on the Company’s Consolidated Balance Sheet as of December 31, 2018 and Statement of Operations for the year ended December 31, 2018:

Balances Without

Effect of Change

Higher (Lower)

Costs and estimated earnings in excess of billings on uncompleted contracts

Billings in excess of costs and estimated earnings on uncompleted contracts

Deferred income tax liability

Retained earnings

Balances Without

Effect of Change

Higher (Lower)

Contract revenues

Cost of contract revenues

Income tax (benefit) expense

Net (loss) income

Basic (loss) income per share

Diluted (loss) income per share

Remaining performance obligations represent the transaction price of firm orders or other written contractual commitments from customers for which work has not been performed, or is partially completed and excludes unexercised contract options and potential orders.

As of December 31, 2019, the aggregate amount of the remaining performance obligations was approximately $572.3 million.

Of this amount, the Company expects to recognize $465.1 million, or 81%, in the next 12 months and the remaining balance thereafter.

Classification of Current Assets and Liabilities

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The Company has not historically sustained losses on its cash balances in excess of federally insured limits.

Cash equivalents at December 31, 2019 and 2018 consisted primarily of overnight bank deposits.

Restricted cash as of December 31, 2019 consisted of $1.0 million of collateral related to a marine project and is classified in current assets.

Cash equivalents at December 31, 2020 and December 31, 2019 consisted primarily of overnight bank deposits.

Restricted cash of $ 1.0 million at December 31, 2019 consisted of collateral related to a marine project that was completed during the quarter ended June 30, 2020.

The Company had no restricted cash as of December 31, 2020.

Risk Concentrations

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The Company depends on its ability to continue to obtain federal, state and local governmental contracts, and indirectly, on the amount of funding available to these agencies for new and current governmental projects.

Therefore, a portion of the Company’s operations is dependent upon the level and timing of government funding.

Statutory mechanics liens provide the Company high priority in the event of lien foreclosures following financial difficulties of private owners, thus minimizing credit risk with private customers.

Accounts Receivable

Accounts receivable are stated at the historical carrying value, less allowances for doubtful accounts.

The Company has significant investments in billed and unbilled receivables as of December 31, 2019 and 2018.

Accounts receivable are stated at the historical carrying value, net of allowances for credit losses.

The Company has significant investments in billed and unbilled receivables as of December 31, 2020 and December 31, 2019.

Billed receivables represent amounts billed upon the completion of small contracts and progress billings on large contracts in accordance with contract terms and milestone achievements.

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Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability.

In establishing an allowance for doubtful accounts, the Company evaluates its contract receivables and costs in excess of billings and thoroughly reviews historical collection experience, the financial condition of its customers, billing disputes and other factors.

The Company writes off potentially uncollectible accounts receivable against the allowance for doubtful accounts if it is determined that the amounts will not be collected or if a settlement is reached for an amount that is less than the carrying value.

As of December 31, 2019 and 2018, the Company has recorded an allowance for doubtful accounts of $2.6 million and $4.3 million, respectively.

In establishing an allowance for credit losses, the Company evaluates its contract receivables and costs in excess of billings and thoroughly reviews historical collection experience, the financial condition of its customers, billing disputes and other factors.

The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected or if a settlement is reached for an amount that is less than the carrying value.

December 31, 2020, and December 31, 2019, the Company has recorded an allowance for credit losses of $ 0.4 million and $ 2.6 million, respectively.

Balances billed to customers but not paid pursuant to retainage provisions in construction contracts generally become payable upon contract completion and acceptance by the owner.

Retainage at December 31, 2019 totaled $42.5 million, of which $11.0 million is expected to be collected beyond 2020.

Retainage at December 31, 2020 totaled $ 36.5 million, of which $ 3.6 million is expected to be collected beyond December 31, 2021.

Retainage at December 31, 2019 totaled $ 42.5 million.

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Successful claims negotiations could result in the recovery of previously recorded losses.

Significant losses on receivables could adversely affect the Company’s financial position, results of operations and overall liquidity.

Advertising Costs

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Environmental liabilities, if any, are recognized when the expenditure is considered probable and the amount can be reasonably estimated.

The Company did not recognize any environmental liabilities as of December 31, 2019 or 2018, respectively.

The Company did not recognize any environmental liabilities as of December 31, 2020 or 2019.

Fair Value Measurements

The Company evaluates and presents certain amounts included in the accompanying consolidated financial statements at “fair value”

in accordance with U.S.

The Company evaluates and presents certain amounts included in the accompanying consolidated financial statements at “fair value” in accordance with U.S.

GAAP, which requires the Company to base its estimates on assumptions that market participants, in an orderly transaction, would use to price an asset or liability, and to establish a hierarchy that prioritizes the information used to determine fair value.

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Where shipping and handling costs are incurred by the Company, these charges are included in inventory and charged to cost of contract revenue upon use.

Refer to Note 8 for more information regarding inventory.

Non-current inventory consists of spare parts (including engines, cutters and gears) that require special order or long-lead times for manufacture or fabrication, but must be kept on hand to reduce downtime and is valued at the lower of cost (using historical average cost) or net realizable value.

Property and Equipment

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When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in results of operations for the respective period.

Depreciation is computed using the straight-line method over the estimated useful lives of the related assets for financial statement purposes, as follows:

is computed using the straight-line method over the estimated useful lives of the related assets for financial statement purposes, as follows:

Automobiles and trucks

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The Company elected to not separate lease and non-lease components for all classes of underlying assets in which it is the lessee and made an accounting policy election to not account for leases with an initial term of 12 months or less on the balance sheet.

Adoption of the standard resulted in the recording of additional net ROU operating lease assets of approximately $23.3 million and lease liabilities for operating leases of approximately $24.0 million on the Consolidated Balance Sheets as of January 1, 2019.

Adoption of the standard resulted in the recording of additional net right-of-use (“ROU”) operating lease assets of approximately $ 23.3 million and lease liabilities for operating leases of approximately $ 24.0 million on the Consolidated Balance Sheets as of January 1, 2019.

The adoption of this guidance did not have an impact on net income.

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In addition, the Company evaluates the remaining useful life of intangible assets in each reporting period to determine whether events and circumstances warrant a revision of the remaining period of amortization.

If the estimate of an intangible asset’s remaining life is changed, the remaining carrying value of such asset is amortized prospectively over that revised remaining useful life.

Intangible assets that have infinite lives are not amortized, but are subject to impairment testing at least annually or more frequently if events or circumstances indicate that the asset may be impaired.

The Company has one infinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable.

Impairment is calculated as the excess of the trade name’s carrying value over its fair value.

The fair value of the trade

name is determined using the relief from royalty method, a variation of the income approach.

This method assumes that if a company owns intellectual property, it does not have to “rent”

the asset and is, therefore, “relieved”

from paying a royalty.

The Company has one infinite-lived intangible asset, a trade name, which it tests for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable.

Impairment is calculated as the excess of the trade name’s carrying value over its fair value.

The fair value of the trade name is determined using the relief from royalty method, a variation of the income approach.

This method assumes that if a company owns intellectual property, it does not have to “rent” the asset and is, therefore, “relieved” from paying a royalty.

Once a supportable royalty rate is determined, the rate is then applied to the projected revenues over the expected remaining life of the intangible assets to estimate the royalty savings.

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This assessment is updated on a periodic basis.

See Note 16 for further discussion of the Company’s stock-based compensation plan.

See Note 15 for further discussion of the Company’s stock-based compensation plan.

The Company determines its consolidated income tax provision using the asset and liability method prescribed by U.S.

GAAP, which requires the recognition of income tax expense for the amount of taxes payable or refundable for the current period and for deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.

The Company must make significant assumptions, judgments and estimates to determine its current provision for income taxes, its deferred tax assets and liabilities, and any valuation allowance to be recorded against any deferred tax asset.

The current provision for income tax is based upon the current tax laws and the Company’s interpretation of these laws, as well as the probable outcomes of any tax audits.

The value of any net deferred tax asset depends upon estimates of the amount and category of future taxable income reduced by the amount of any tax benefits that the Company does not expect to realize.

Actual operating results and the underlying amount and category of income in future years could render current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate, thus impacting the Company’s financial position and results of operations.

The Company computes deferred income taxes using the liability method.

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The Company maintains insurance coverage for its business and operations.

Insurance related to property, equipment, automobile, general liability, and a portion of workers’

compensation is provided through traditional policies, subject to a deductible or deductibles.

A portion of the Company’s workers’

compensation exposure is covered through a mutual association, which is subject to supplemental calls.

Insurance related to property, equipment, automobile, general liability, and a portion of workers’ compensation is provided through traditional policies, subject to a deductible or deductibles.

A portion of the Company’s workers’ compensation exposure is covered through a mutual association, which is subject to supplemental calls.

The marine segment maintains five levels of excess loss insurance coverage, totaling $ 200 million in excess of primary coverage.

The marine segment’s excess loss coverage responds to most of its policies when a primary limit of $1 million

has been exhausted;

provided that the primary limit for Contingent Maritime Employer’s Liability is $10 million and the Watercraft Pollution Policy primary limit is $5 million.

The marine segment’s excess loss coverage responds to most of its policies when a primary limit of $ 1 million has been exhausted;

provided that the primary limit for Contingent Maritime Employer’s Liability is $ 10 million and the Watercraft Pollution Policy primary limit is $ 5 million.

The concrete segment maintains five levels of excess loss insurance coverage, totaling $ 200 million in excess of primary coverage.

The concrete segment’s excess loss coverage responds to most of its policies when a primary limit of $1 million has been exhausted.

The concrete segment’s excess loss coverage responds to most of its policies when a primary limit of $ 1 million has been exhausted.

If a claim arises and a potential insurance recovery is probable, the impending gain is recognized separately from the related loss.

The recovery will only be recognized up to the amount of the loss once the recovery of the claim is deemed probable and any excess gain will fall under contingency accounting and will only be recognized once it is realized.

The Company does not net insurance recoveries against the related claim liability as the amount of the claim liability is determined without consideration of the anticipated insurance recoveries from third parties.

Separately, the Company’s marine segment employee health care is paid for by general assets of the Company and currently administered by a third party.

Company does not net insurance recoveries against the related claim liability as the amount of the claim liability is determined without consideration of the anticipated insurance recoveries from third parties.

Separately, the Company’s marine segment employee health care is paid for by general assets of the Company and currently administered by a third party.

The administrator has purchased appropriate stop-loss coverage.

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Any adjustments to such reserves are included in the Consolidated Results of Operations in the period in which they become known.

The Company’s concrete segment employee health care is provided through two policies.

A fully funded policy is offered primarily to salaried employees and their dependents while a partially self-funded plan with an appropriate stop-loss is offered primarily to hourly employees and their dependents.

The self-funded plan is funded to the maximum exposure and, as a result, is expected to receive a partial refund after the policy expiration.

The accrued liability for insurance includes incurred but not reported claims of $3.7 million and $5.7 million at December 31, 2019 and 2018, respectively.

The total accrual for insurance claims liabilities was $ 60.4 million and $ 3.7 million at December 31, 2020 and December 31, 2019, respectively, reflected as a component of accrued liabilities in the consolidated balance sheet.

The total accrual for insurance claims receivable was $ 57.0 million and $ 1.1 million at December 31, 2020 and December 31, 2019, respectively, reflected as a component of other accounts receivable in the consolidated balance sheet.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) issues accounting standards and updates (each, an "ASU") from time to time to its Accounting Standards Codification (‘ASC’), which is the primary source of U.S.

The Company regularly monitors ASUs as they are issued and considers applicability to its business.

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In June 2016, the FASB issued ASU 2016 - 13, Measurement of Credit Losses on Financial Instruments (Topic 326), which changes the way in which entities estimate and present credit losses for most financial assets, including accounts receivable.

The guidance is effective for the Company’s fiscal year beginning January 1, 2020, including interim periods within that fiscal year.

Early adoption is permitted, although the Company does not intend to do so.

For the Company’s trade receivables, certain other receivables and certain other financial instruments, it will be required to use a new forward-looking “expected”

credit loss model based on historical loss rates that will replace the existing “incurred”

credit loss model, which will generally result in earlier recognition of allowances for credit losses.

The Company is currently evaluating the impact this guidance will have on its consolidated financial statements, but it does not anticipate the new standard will materially impact the financial statements.

During the periods presented in these financial statements, the Company implemente d other new accounting pronouncements other than those noted above that are discussed in the notes where applicable.

Business Acquisitions

TBC Acquisition

On April 9, 2017, T.A.S.

Commercial Concrete Construction, LLC, a wholly owned subsidiary of Orion Group Holdings, Inc.

("the Company") entered into a Stock Purchase Agreement ("the Agreement") for the purchase of all the issued and outstanding shares (the "shares") of Tony Bagliore Concrete, Inc.

("TBC"), a Texas corporation.

The Company and the two sole shareholders of TBC closed the purchase transactions on April 10, 2017 (the "Closing Date").

Upon the terms of and subject to the conditions set forth in the Agreement, the total aggregate consideration paid on the Closing Date by the Company to the Sellers for the shares was $6.0 million in cash.

In addition however, if certain target considerations were met in future periods, an additional cash payment of up to $2.0 million would become payable to the Seller.

The purpose of the acquisition was primarily to achieve growth by expanding the Company’s current service offerings in addition to expansion into new markets.

The tangible assets acquired include accounts receivable, retainage and fixed assets.

Under the acquisition method of accounting, the total acquisition consideration is allocated to the acquired tangible and intangible assets and assumed liabilities of TBC based on their estimated fair values as of the closing of the acquisition.

The table below outlines the total actual acquisition consideration allocated based on the preliminary fair values of TBC’s tangible and intangible assets and liabilities as of April 9, 2017:

Accounts receivable

Fixed assets, net

Other intangible assets

Accounts payable

Accrued expenses and other current liabilities

Contingent consideration

Deferred tax liability

Total Acquisition Consideration at April 9, 2017

Working capital adjustment (all attributable to Goodwill)

Total Acquisition Consideration

The excess of the acquisition consideration over the fair value of assets acquired and liabilities assumed was allocated to goodwill.

The goodwill of $3.1 million arising from the acquisition consisted primarily of synergies and business opportunities that were expected to be realized from the purchase of TBC.

The goodwill was not deductible for income tax purposes.

In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result the goodwill related to the TBC acquisition was written off.

Finite-lived intangible assets acquired include customer relationships and contractual backlog.

(See Note 10 ).

The fixed assets acquired include construction equipment as well as automobiles and trucks and will be depreciated in accordance with Company policy, generally three to 15 years.

As stated in the Agreement, the Company agreed to pay the sellers up to $2.0 million in cash, if earned, as additional purchase consideration.

The seller’s right to receive the contingent consideration, if any, was to be based on the Company’s achievement of certain future financial targets.

The Company measured the fair value of the contingent consideration at the Acquisition Date, and determined that fair value to be approximately $0.5 million, as shown in the table above.

This amount of contingent liability was initially classified on the Consolidated Balance Sheets as an other long-term liability.

During 2019 it was determined that the financial targets had not been met.

The $0.5 million liability was removed from the balance sheet and reflected as component of other income in the Consolidated Statement of Operations.

The Company adopted the new standard on January 1, 2020.

For the Company’s trade receivables, certain other receivables and certain other financial instruments, the Company is required to use a new forward-looking “expected” credit loss model based on historical loss rates that replaced the prior “incurred” credit loss model.

The adoption of the new standard generally results in earlier recognition of allowances for credit losses.

Adoption of the standard resulted in no adjustment for credit losses;

however, subsequently primarily as a result of the COVID-19 pandemic additional bad debt expense of approximately $ 0.4 million was recorded as of December 31, 2020.

During the periods presented in these financial statements, the Company implemented other new accounting pronouncements other than those noted above that are discussed in the notes where applicable.

Contract revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table represents a disaggregation of the Company’s contract revenues by service line for the marine and concrete segments:

Year ended December 31,

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Additionally, as discussed, both the marine and concrete segments have limited contracts with multiple performance obligations.

The Company’s contracts often combine multiple services, such as engineering, dredging, diving and construction, into one distinct finished product which is transferred to the customer.

These contracts are often estimated and bid as one project and evaluated as to performance as one project, not by individual services performed by each.

Both the marine and concrete segments have a single chief operating decision maker (“CODM”) for the entire segment, not by service lines of the segments.

The Company’s contracts are often estimated and bid as one project and evaluated as to performance as one project, not by individual services performed by each.

Both the marine and concrete segments have a single Senior Vice President responsible for the entire segment, not by service lines of the segments.

Resources are allocated by segment and financial and budgetary information is compiled and reviewed by segment, not service line.

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Light commercial services include horizontally poured concrete for products such as sidewalks, ramps, tilt walls and trenches.

Other services comprise labor related to concrete pouring such as rebar installation and pumping services and typically support the Company’s structural and light commercial services.

Concentration of Risk and Enterprise Wide Disclosures

In both reportable segments account s receivable include amounts billed to governmental agencies and private customers and do not bear interest.

In both reportable segments accounts receivable include amounts billed to governmental agencies and private customers and do not bear interest.

Balances billed to customers but not paid pursuant to retainage provisions generally become payable upon contract completion and acceptance by the owner.

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Private Companies

Total receivables

Gross receivables

Allowance for credit losses

Net receivables

At December 31, 2020 and 2019, no single customer accounted for more than 10.0% of total current receivables.

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Total contract revenues

In the year ended December 31, 2020 one customer in the Local Governments category accounted for 11.4 % of total contract revenues.

In the years ended December 31, 2019 and 2018, no single customer exceeded 10.0% of total contract revenues.

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Billings to date

Included in the accompanying Consolidated Balance Sheet under the following captions:

( 1,355,220 )

( 1,035,796 )

Included in the accompanying Consolidated Balance Sheets under the following captions:

Costs and estimated earnings in excess of billings on uncompleted contracts

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Included in cost and estimated earnings in excess of billings on uncompleted projects is approximately $ 3.1 million and $ 0.1 million at December 31, 2020 and 2019, respectively, related to claims and unapproved change orders.

See Note 2 - Summary of Significant Accounting Principles to the Company’s consolidated financial statements for discussion of the accounting for these claims.

Contract costs include all direct costs, such as materials and labor, and those indirect costs incurred that are related to contract performance such as payroll taxes and insurance.

General and administrative costs are charged to expense as incurred.

Incentive fees, if available, are billed to the customer based on the terms and conditions of the contract.

Pending claims are recognized as an increase in contract revenue only when the collection is deemed probable and if the amount can be reasonably estimated for purposes of calculating total profit or loss on long-term contracts.

Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.

Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined, without regard to the percentage of completion.

During the year-ended December 31, 2018, we recognized unfavorable changes in our estimates on two construction projects in our Marine Segment.

These changes were caused by prolonged weather delays, unforeseen access and other client-imposed restrictions that impacted our productivity.

The result of these changes in estimates is reflected as a decrease in revenue of $22.8 million in the consolidated statement of operations for the year-ended December 31, 2018 and included in billings in excess of costs and estimated earnings on uncompleted contracts.

See Note 2 - Summary of Significant Accounting Policies for discussion of the accounting for these claims.

Remaining performance obligations represent the transaction price of firm orders or other written contractual commitments from customers for which work has not been performed or is partially completed and excludes unexercised contract options and potential orders.

As of December 31, 2020, the aggregate amount of the remaining performance obligations was approximately $ 439.5 million.

Of this amount, the current expectation of the Company is that it will recognize $ 401.9 million, or 91 %, in the next 12 months and the remaining balance thereafter.

Property and Equipment

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Construction in progress

At December 31, 2018, the Company had $9.2 million of assets, net of accumulated depreciation, under capital leases which are reflected in the above table.

For the years ended December 31, 2020, 2019 and 2018, depreciation expense was $ 21.8 million, $ 23.5 million and $ 28.4 million, respectively.

Substantially all depreciation expense is included in the cost of contract revenue in the Company’s Consolidated Statements of Operations.

Substantially all of the assets of the Company are pledged as collateral under the Company’s Credit Agreement (as defined in Note 12 ).

Substantially all of the Company’s long-lived assets are located in the United States.

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or the fair value, less the costs to sell, and are no longer depreciated.

Approximately $6.4 million were classified as held for sale on the Company’s Consolidated Balance Sheet at December 31, 2016.

During the year ended December 31, 2017, approximately $5.4 million of these assets were sold for cash of $4.5 million.

The difference of $0.9 million is classified as a loss on the sale of assets on the Consolidated Statements of Operations.

The remaining assets held for sale of $1.0 million was classified as a total loss as a result of Hurricane Harvey.

Insurance claims of approximately $0.9 million were received in the fourth quarter of 2017.

The difference of $0.1 million is classified as a loss on disposal of assets on the Consolidated Statements of Operations.

No assets remained as held for sale on the Company’s Consolidated Balance Sheet at December 31, 2019 or December 31, 2018.

Current inventory at both December 31, 2019 and 2018 of $1.1 million consisted primarily of spare parts and small equipment held for use in the ordinary course of business.

Non-current inventory at December 31, 2019 and 2018 totaled $7.0 million and $7.6 million, respectively, and consisted primarily of spare engine components or items which require longer lead times for sourcing or fabrication for certain of the Company’s assets to reduce equipment downtime.

Substantially all depreciation expense is included in the cost of contract revenue in the Company’s Consolidated Statements of Operations.

Substantially all of the assets of the Company are pledged as collateral under the Company’s Credit Agreement (as defined in Note 11 ).

Substantially all of the Company’s long-lived assets are located in the United States.

Other Current Accounts Receivable

Other current accounts receivable at December 31, 2020 and 2019 consisted of the following:

December 31, 2020

December 31, 2019

Insurance claims receivable

Accident loss receivables

Other current receivables

Total other current accounts receivable

Recurring Fair Value Measurements

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Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value requires judgment and may affect the placement of assets and liabilities within the fair value hierarchy levels.

The following table sets forth by level within the fair value hierarchy the Company’s recurring financial assets and liabilities that were accounted for at fair value on a recurring basis as of December 31, 2019 and December 31, 2018:

The Company’s assessment of the significance of a particular input to the fair value requires judgment and may affect the placement of assets and liabilities within the fair value hierarchy levels.

Fair Value Measurements

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Cash surrender value of life insurance policy

The Company’s derivatives, which are comprised of interest rate swaps, are valued using a discounted cash flow analysis that incorporates observable market parameters, such as interest rate yield curves and credit risk adjustments, that are necessary to reflect the probability of default by us or the counterparty.

These derivatives are classified as a Level 2 measurement within the fair value hierarchy.

See Note 12 for additional information on the Company’s derivative instrument.

See Note 11 for additional information on the Company’s derivative instrument.

Our concrete segment has life insurance policies with a combined face value of $ 11.1 million as of December 31, 2020.

The policies are invested in mutual funds and the fair value measurement of the cash surrender balance associated with these policies is determined using Level 2 inputs within the fair value hierarchy and will vary with investment performance.

These assets are included in the "Other noncurrent" asset section in the Company’s Consolidated Balance Sheets.

These assets are included in the "Other noncurrent"

asset section in the Company’s Consolidated Balance Sheets.

Non-Recurring Fair Value Measurements

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Other Fair Value Measurements

The fair value of the Company’s debt at December 31, 2019 and 2018 approximated its carrying value of $73.3 million and $80.5 million, respectively, as interest is based on current market interest rates for debt with similar risk and maturity.

If the Company’s debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

The fair value of the Company’s debt at December 31, 2020 and 2019 approximated its carrying value of $ 35.1 million and $ 73.3 million, respectively, as interest is based on current market interest rates for debt with similar risk and maturity.

If the Company’s debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

Goodwill and Intangible Assets

The table below summarizes changes in goodwill recorded by the Company during the periods ended December 31, 2019 and 2018:

Beginning balance, January 1

Ending balance

In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result it incurred a goodwill impairment charge of $69.5 million with $33.8 million related to the Marine segment and $35.7 million related to the Concrete segment.

In the fourth quarter of 2018, the Company’s annual goodwill impairment test indicated that its goodwill was fully impaired, primarily due to a decline in the Company’s market capitalization and as a result it incurred a goodwill impairment charge of $ 69.5 million with $ 33.8 million related to the Marine segment and $ 35.7 million related to the Concrete segment.

Intangible assets

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Future expense remaining of approximately $ 3.2 million will be amortized as follows:

Additionally, the Company has one indefinite-lived intangible asset, a trade name, which is tested for impairment annually on October 31, or whenever events or circumstances indicate that the carrying amount of the trade name may not be recoverable.

Impairment is calculated as the excess of the trade name’s carrying value over its fair value.

The fair value of the trade name is determined using the relief from royalty method, a variation of the income approach.

This method assumes that if a company owns intellectual property it does not have to "rent" the asset and is, therefore, "relieved" from paying a royalty.

Once a supportable royalty rate is determined, the rate is then applied to the projected revenues over the expected remaining life of the intangible assets to estimate the royalty savings.

This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables.

The impairment test concluded that the fair value of the trade name was in excess of the carrying value, therefore no impairment was recorded.

The annual impairment test concluded that the fair value of the Company’s infinite-lived trade name was in excess of the carrying value, therefore no impairment was recorded.

Accrued Liabilities

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Accrued salaries, wages and benefits

Accrual for insurance liabilities

Accrual for insurance claims liabilities

Property taxes

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Accounting and audit fees

Capital lease liability (1)

Equipment purchase

Other accrued expenses

Total accrued liabilities

December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.

Long-term Debt and Line of Credit

The Company entered into an amended syndicated credit agreement (the “Credit Agreement”

also known as the “Fourth Amendment”) on July 31, 2018 with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:

The Company entered into an amended syndicated credit agreement (the “Credit Agreement” also known as the “Fourth Amendment”) on July 31, 2018 with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:

Bank of America, N.A., BOKF, NA dba Bank of Texas, KeyBank National Association, NBH Bank, IBERIABANK, Trustmark National Bank, First Tennessee Bank NA, and Branch Banking and Trust Company.

The Credit Agreement, which may be amended from time to time, provides for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”).

The Credit Facility matures on July 31, 2023.

The Credit Agreement, which may be amended from time to time, provides for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”).

The Credit Facility is guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and may be used to finance general corporate and working capital purposes, to finance capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and associated fees, and to pay for all related expenses to the Credit Facility.

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Amounts repaid under the revolving line of credit may be re-borrowed.

The Credit Facility matures on July 31, 2023.

Total debt issuance costs for the Fourth Amendment, which included underwriter fees, legal fees and syndication fees were approximately $ 0.9 million and were capitalized as non-current deferred charges and amortized using the effective interest rate method over the duration of the loan.

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The remaining debt issuance costs of approximately $ 0.9 million related to the Fourth, Fifth, and Sixth Amendments will be amortized over the duration of the loan.

The Company entered into a new syndicated credit agreement (the “364-Day Revolving Credit Facility”) on June 8, 2020 with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:

Bank of America, N.A.

and BOKF, NA dba Bank of Texas.

Concurrent with this the Company executed an amendment to the Credit Agreement with its existing lenders (“also known as the “Seventh Amendment”) for the sole intent and outcome of executing the 364-Day Revolving Credit Facility.

The 364-Day Revolving Credit Facility, which may be amended from time to time, provides for borrowings under a new revolving line of credit.

The 364-Day Revolving Credit Facility is guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and may be used to finance general corporate and working capital purposes, to finance Permitted Acquisitions, and to pay transaction fees, costs and expenses related to the consummation of the Seventh Amendment.

Interest is due and is computed based on the designation of the loan, with the

option of a Base Rate Loan (the base rate plus the Applicable Margin), or an Adjusted LIBOR Rate Loan (the adjusted LIBOR rate plus the Applicable Margin).

Interest is due on the last day of each quarter end for Base Rate Loans and at the end of the LIBOR rate period for Adjusted LIBOR Rate Loans.

Principal balances drawn under the 364- Day Revolving Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty.

Amounts repaid under the 364-Day Revolving Credit Facility may be re-borrowed.

The 364-Day Revolving Credit Facility matures on June 7, 2021.

Total debt issuance costs for the 364-Day Revolving Credit Facility, which included underwriter fees, legal fees and syndication fees were approximately $ 0.4 million and were capitalized as current deferred charges and will be amortized over the duration of the loan.

To date the Company has had no borrowings under the 364-Day Revolving Credit Facility.

Effective, October 9, 2020, the Company entered into an amendment (the "Eighth Amendment") to its syndicated credit agreement (the "Credit Agreement"

, with Regions Bank, as Administrative Agent and Collateral Agent and Bank of America, N.A., BOKF, NA dba Bank of Texas, Iberiabank, NBH Bank, Truist Bank, and Trustmark National Bank, as Lenders.

The Eighth Amendment provides for administrative revisions to the Credit Agreement, including changes to repayment requirements for involuntary asset dispositions and changes to the timing of repayment for voluntary asset dispositions.

The yearly weighted average interest rate for the Credit Facility as of December 31, 2020 was 3.11 %.

The Company’s obligations under debt arrangements consisted of the following:

December 31, 2020

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Total long-term debt

Total debt issuance costs, include underwriter fees, legal fees and syndication fees and fees related to the execution of the Fourth, Fifth, and Sixth Amendments to the Credit Agreement.

Provisions of the revolving line of credit and accordion

(1) Total debt issuance costs, include underwriter fees, legal fees and syndication fees and fees related to the execution of the Fourth, Fifth, Sixth, Seventh and Eighth Amendments to the Credit Agreement.

Provisions of the revolving line of credit

The Company has a maximum borrowing availability under the revolving line of credit and swingline loans (as defined in the Credit Agreement) of $ 50.0 million.

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There is also a swingline sublimit equal to the lesser of $ 5.0 million and the aggregate unused amount of the revolving commitments then in effect.

Revolving loans may be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and must be drawn in an aggregate minimum amount of $1.0 million and integral multiples of $250,000 in excess of that amount.

Revolving loans may be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and must be drawn in an aggregate minimum amount of $ 1.0 million and integral multiples of $ 250,000 in excess of that amount.

Swingline loans must be drawn in an aggregate minimum amount of $ 250,000 and integral multiples of $ 50,000 in excess of that amount.

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The maturity date for amounts drawn under the revolving line of credit is the earlier of the Facility termination date of July 31, 2023, or the date the outstanding balance is permanently reduced to zero.

Prior to the fourth quarter of 2018, the Company classified amounts drawn as current liabilities based on an intent and ability to repay the amounts using current assets within the next twelve months.

During the fourth quarter of 2018, the Company determined it no longer has the intent to repay amounts drawn within the next twelve months.

As of December 31, 2020, the Company determined that it still does not have the intent to repay amounts drawn within the next twelve months.

Therefore, the Company has classified the entire outstanding balance of the revolving line of credit as non-current.

As of December 31, 2019, the outstanding balance for all borrowings under the revolving line of credit was $36.0 million, where $32.0 million was designated as an Adjusted LIBOR Rate Loan at a weighted average rate of 4.50% and $4.0 million was designated as a Base Rate Loan at a rate of 6.50%.

There were also $1.4 million in outstanding letters of credit as of December 31, 2019, which reduced the maximum borrowing availability on the revolving line of credit to $12.6 million as of December 31, 2019.

During 2019, the Company drew down $63.0 million for general corporate purposes and made payments of $49.0 million on the revolving line of credit which resulted in a net increase of $14.0 million.

As of December 31, 2020, the outstanding balance for all borrowings under the revolving line of credit was $ 5.0 million, designated as a Base Rate Loan at a rate of 4.5 %.

There were also $ 1.7 million in outstanding letters of credit as of

December 31, 2020, which reduced the maximum borrowing availability on the revolving line of credit to $ 43.3 million as of December 31, 2020.

During the year ended December 31, 2020, the Company drew down $ 10.0 million for general corporate purposes and made payments of $ 41.0 million on the revolving line of credit which resulted in a net decrease of $ 31.0 million.

Provisions of the 364-day revolving credit facility

The Company has a maximum borrowing availability under the 364-Day Revolving Credit Facility of $ 20.0 million.

Borrowings may be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and must be drawn in an aggregate minimum amount of $ 1.0 million and integral multiples of $ 250,000 in excess of that amount.

The Company may convert, change, or modify rate designations from time to time.

The Company is subject to a commitment fee for the unused portion of the maximum borrowing availability under the 364-Day Revolving Credit Facility.

The commitment fee, which is due quarterly in arrears, is equal to the Applicable Margin of the actual daily amount by which the Aggregate Revolving Commitments exceeds the Total Revolving Outstanding.

As of December 31, 2020, there were no outstanding borrowings under the 364-Day Revolving Credit Facility.

Provisions of the term loan

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The table below outlines the total remaining payment amounts annually for the term loan through maturity of the Credit Facility:

During 2019 the Company made the scheduled quarterly principal payments of $3.0 million, and an additional principal paydown of $18.2 million with proceeds from a sale-leaseback arrangement.

During 2020 the Company made the scheduled quarterly principal payments of $ 3.8 million, and an additional principal paydown of $ 3.4 million with proceeds from the sale of equipment which reduced the outstanding principal balance to $ 30.1 million as of December 31, 2020.

The current portion of debt is $ 4.5 million, and the non-current portion is $ 25.6 million.

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● A consolidated Leverage Ratio to not exceed the following during each noted period:

-Fiscal Quarter Ending December 31, 2019, to not exceed 4.00 to 1.00;

- Fiscal Quarter Ending March 31, 2020 and each Fiscal Quarter thereafter, to not exceed 3.00 to 1.00.

A consolidated Adjusted EBITDA to not be less than the following during each noted period:

- Fiscal Year Ending December 31, 2019 :

$21.7 million.

In addition, the Credit Facility contains events of default that are usual and customary for similar arrangements, including non-payment of principal, interest or fees;

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On September 16, 2015, the Company entered into a series of receive-variable, pay-fixed interest rate swaps to hedge the variability in the interest payments on 50 % of the aggregate principal amount of the Regions Term Loan outstanding, beginning with a notional amount of $ 67.5 million.

There were a total of five sequential interest rate swaps to achieve the hedged position and each year on August 31, with the exception of the final swap, the existing interest rate swap was scheduled to expire and be immediately replaced with a new interest rate swap until the expiration of the final swap on July 31, 2020.

There was a total of five sequential interest rate swaps to achieve the hedged position and each year on August 31, with the exception of the final swap, the existing interest rate swap was scheduled to expire and be immediately replaced with a new interest rate swap until the expiration of the final swap on July 31, 2020.

On December 6, 2018, the Company entered into a sixth receive-variable, pay-fixed interest rate swap to hedge the variability of interest payments.

The sixth swap will begin with a notional amount of $27.0 million on July 31, 2020 and will hedge the variability in the interest payments on the aggregate scheduled principal amount of the Regions Term Loan outstanding.

The sixth swap began with a notional amount of $ 27.0 million on July 31, 2020 and hedges the variability in the interest payments on the aggregate scheduled principal amount of the Regions Term Loan outstanding.

The sixth swap is scheduled to expire on July 31, 2023.

At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting, and as such, the effective portion of unrealized changes in market value are recorded in accumulated other comprehensive (loss) income and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

At inception, these interest rate swaps were designated as cash flow hedges for hedge accounting, and as such, the effective portion of unrealized changes in market value are recorded in other comprehensive income (loss) and reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.

Gains and losses from hedge ineffectiveness are recognized in current earnings.

The change in fair market value of the swaps as of December 31, 2019 is approximately $1.0 million.

The change in fair market value of the swaps for the comparative periods ended December 31, 2020, December 31, 2019, and December 31, 2018, as reflected in accumulated other comprehensive loss in the Consolidated Statements of Stockholders’ Equity, is approximately $ 0.6 million, $ 1.0 million and less than $ 0.1 million.

The fair market value of the swaps as of December 31, 2020 is reflected as a liability of $ 1.6 million on the Consolidated Balance Sheets.

See Note 9 for more information regarding the fair value of the Company’s derivative instruments.

See Note 8 for more information regarding the fair value of the Company’s derivative instruments.

Other Long-Term Liabilities

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Sale-leaseback arrangement

Accrual for insurance liabilities

Capital lease liability (1)

Deferred rent

Contingent consideration - TBC acquisition

Deferred compensation

Accrual for insurance claims liabilities

Total other long-term liabilities

December 31, 2018 balance relates to capital leases accounted for under ASC 840 and prior to the adoption of ASC 842 as of January 1, 2019.

Sale-Leaseback Arrangement

On September 27, 2019, the Company entered into a purchase and sale agreement (the “Purchase and Sale Agreement”).

Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its 17300 & 17140 Market Street location in Channelview, Texas (the “Property”) for a purchase price of $19.1 million.

Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of approximately $1.5 million, subject to annual rent increases of 2.0%.

On September 27, 2019, the Company entered into a purchase and sale agreement (the “Purchase and Sale Agreement”).

Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its 17300 & 17140 Market Street location in Channelview, Texas (the “Property”) for a purchase price of $ 19.1 million.

Concurrent with the sale of the Property, the Company entered into a fifteen-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the Property at an annual rental rate of approximately $ 1.5 million, subject to annual rent increases of 2.0 % .

Under the Lease Agreement, the Company has two consecutive options to extend the term of the Lease by ten years for each such option.

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The Company recorded a liability for the amounts received, will continue to depreciate the non-land portion of the asset, and has imputed an interest rate so that the net carrying amount of the financial liability and remaining assets will be zero at the end of the initial lease term.

Concurrently with the sale, the Company paid $18.2 million towards the Term loan portion of the Company’s Credit Facility, consistent with terms of the Sixth Amendment.

Concurrently with the sale, the Company paid $ 18.2 million towards the Term loan portion of the Company’s Credit Facility, consistent with terms of the Sixth Amendment.

The following table presents the components of our consolidated income tax (benefit) expense for the years ended December 31, 2020, 2019 and 2018:

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State and local

Includes a $5.9 million net benefit recorded in the fourth quarter of 2017 resulting from the enactment of the Act on December 22, 2017.

The Company’s income tax provision reconciles to the provision at the statutory U.S.

federal income tax rate for each year ended December 31, as follows:

Statutory amount (computed at 21% in 2019 and 2018 and 35% in 2017)

Re-measurement of deferred tax assets (a)

Valuation allowance on foreign tax credits (a)

Statutory amount

Valuation allowance on foreign tax credits

State income tax, net of federal benefit

Permanent differences, other

Permanent differences, incentive stock options

Permanent differences, stock compensation

Valuation allowance, other

Uncertain tax provision

Consolidated income tax provision

Consolidated effective tax rate

In 2017, represents impact resulting from the enactment of the Act on December 22, 2017.

In the year ended 2019, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to the recording of an additional valuation allowance to offset net operating loss carryforwards and foreign tax credits generated during the period, foreign taxes, state income taxes and the non-deductibility of certain permanent items.

In the year ended 2018, the Company’s effective tax rate differed from the statutory rate of 21% primarily due to recording an $11.0 million, or $0.39 per share, valuation allowance against the Company’s net deferred tax assets, including net operating losses and foreign tax credits.

In the year ended 2020, the Company’s effective tax rate differed from the statutory rate of 21 % primarily due to the movement in the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

In the year ended 2019, the Company’s effective tax rate differed from the statutory rate of 21 % primarily due to the recording of an additional valuation allowance to offset net operating loss carryforwards and foreign tax credits generated during the period, foreign taxes, state income taxes and the non-deductibility of certain permanent items.

In the year ended 2018, the Company’s effective tax rate differed from the statutory rate of 21 % primarily due to recording an $ 11.0 million, or $ 0.39 per share, valuation allowance against the Company’s net deferred tax assets, including net operating losses and foreign tax credits.

The Company also recorded tax expense of $ 1.2 million related to the $ 69.5 million goodwill impairment.

Additionally, the Company recorded tax expense related to permanent differences from meals and entertainment.

In the year ended 2017, the Company’s effective tax rate differed from the statutory rate of 35% primarily due to the impact of the Act enacted on December 22, 2017.

We recorded a net tax benefit of $5.9 million, or $0.21 per share, resulting from the re-measurement of the Company’s net deferred tax liabilities to reflect the new, lower U.S.

corporate income tax rate of 21%, partially offset by the addition of a partial valuation allowance recorded against existing foreign tax credit carryforwards not expected to be utilized in future tax years.

This net tax benefit was partially offset by the addition of an uncertain tax position reserve as well as tax expense for permanent differences associated with incentive stock options and meals and entertainment.

Deferred Taxes

The Company’s deferred tax assets and liabilities are as follows:

As of December 31,

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Net operating loss carryforward

Non-qualified stock options

Stock-based compensation

Foreign tax credits

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The Company has net operating loss carryforwards for federal income tax purposes of $ 23.1 million as of December 31, 2020, which are available to reduce future taxable income.

The amount of net operating loss that arose before the 2018 tax year is $7.5 million.

These net operating losses will expire beginning 2032 and continuing through 2037.

In addition, the Company has $36.6 million of net operating losses that arose after the 2017 tax year.

These carryforwards last for an indefinite period of time but are limited to offset 80% of taxable income in any given year.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.

The Company’s federal net operating losses arose after the 2017 tax year and can be carried forward for an indefinite period of time but are limited to offset 80 % of taxable income in any given year.

The Company has state net operating losses of $ 132.6 million that expire beginning in 2027.

A portion of the state losses that arose after the 2017 tax year may be carried forward indefinitely.

Additionally, the Company has foreign tax credits of $ 3.8 million that can be carried forward for up to ten years .

The Company has foreign tax credits that will expire next year.

The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets.

The Company considers the scheduled reversal of deferred tax liabilities, available carryback periods, and tax-planning strategies in making this assessment.

According to ASC subtopic 740‑10, the Company’s three-year cumulative loss is a significant piece of objective evidence.

This objective evidence is weighed more heavily than the Company’s subjective positive evidence such as our estimated future taxable income and growth.

Therefore, as of December 31, 2019, the Company continued to maintain a valuation allowance of $17.0 million.

This includes an increase of $1.1 million during the year ended December 31, 2019 primarily to offset the value of additional foreign tax credits generated during the year.

According to ASC subtopic 740-10, the Company’s three-year cumulative loss is a significant piece of objective evidence.

This objective evidence is weighed more heavily than the Company’s subjective positive evidence such as our estimated future taxable income and growth.

Therefore, as of December 31, 2020, the Company continues to maintain a valuation allowance of $ 12.5 million.

This valuation allowance decreased by $ 4.5 million during the year ended December 31, 2020 primarily related to the utilization of net operating losses to offset income during the current period.

Uncertain Tax Benefits

The Company and its subsidiaries file consolidated federal income tax returns in the United States and also file in various states.

The Company and its subsidiaries file consolidated federal income tax returns in the United States and also file in various states and foreign jurisdictions.

With few exceptions, the Company remains subject to federal and state income tax examinations for the years of 2013-2020.

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The final outcome of these uncertain tax positions is not yet determinable.

Our uncertain tax benefits, if recognized, would affect the Company’s effective tax rate.

The change in the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the years ended December 31, 2020 and 2019 are reconciled in the table below:

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Balance at the end of year

The Company’s policy is to recognize interest and penalties related to any unrecognized tax liabilities as additional tax expense.

No interest or penalties have been accrued at December 31, 2020, 2019 and 2018.

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Although the Company believes its recorded assets and liabilities are reasonable, tax regulations are subject to interpretation and tax litigation is inherently uncertain;

therefore the Company’s assessments can involve both a series of complex judgments about future events and rely heavily on estimates and assumptions.

Although the Company believes that the estimates and assumptions supporting its assessments are reasonable, the final determination of tax audit settlements and any related litigation could be materially different from that which is reflected in historical income tax provisions and recorded assets and liabilities.

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Such dilution is dependent on the excess of the market price of our stock over the exercise price and other components of the treasury stock method.

The exercise price for certain stock options awarded by the Company exceeded the average market price of the Company’s common stock for the years ended December 31, 2019 and 2018.

The exercise price for certain stock options awarded by the Company exceeded the average market price of the Company’s common stock for the years ended December 31, 2020, 2019 and 2018.

Such stock options are antidilutive and are not included in the computation of earnings (loss) per share for those periods.

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Stock-Based Compensation

The Compensation Committee of the Company’s Board of Directors is responsible for the administration of the Company’s stock incentive plans, which include the balance of shares remaining under the 2011 Long Term Incentive Plan (the "2011 LTIP") and 2017 Long Term Incentive Plan (the "2017 LTIP"), which was approved by shareholders in May 2017 and authorized the maximum aggregate number of shares to be issued of 2,400,000.

In general, the Company’s 2017 LTIP provides for grants of restricted stock and stock options to be issued with a per-share price equal to the fair market value of a share of common stock on the date of grant.

Option terms are specified at each grant date, but are generally are 10 years from the date of issuance.

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Restricted Stock

The following table summarizes the restricted stock activity under the Company’s equity incentive plans :

Nonvested at January 1, 2018

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Independent directors receive equity compensation in the form of grants.

In May 2020, the Company’s six independent directors each received equity compensation grants of 39,823 shares, with a fair value of $ 2.26 per share.

In January 2019, two new independent directors each received equity compensation grants of 8,427 shares, with a fair value of $ 4.45 per share.

In May 2019, the Company’s independent directors each received equity compensation grants of 45,918 shares, with a fair value of $1.96 per share.

In May 2019, five of the Company’s independent directors each received equity compensation grants of 45,918 shares, with a fair value of $ 1.96 per share.

In October 2019, a new independent director received an equity compensation grant of 14,218 shares, with a fair value of $ 4.22 per share.

In May 2018, the Company’s independent directors each received equity compensation grants of 12,064 shares, with a fair value of $7.46 per share.

In May 2017, the Company’s independent directors each received equity compensation grants of 12,465 shares, with a fair value of $7.22 per share.

In May 2018, the five of the Company’s independent directors each received equity compensation grants of 12,064 shares, with a fair value of $ 7.46 per share.

In February 2020, the Company granted an executive of the Company 15,121 shares of restricted common stock, which vested immediately on the date of grant.

The fair value of all shares awarded on the date of grant was $ 4.96 per share.

In March 2020, certain officers and executives of the Company were awarded 170,235 shares of restricted common stock with a vesting period of three years and a fair value of $ 3.73 per share.

In May 2020, certain officers and executives of the Company were awarded 100,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 2.26 per share.

In September 2020, the Company granted an executive of the Company 25,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 2.58 per share.

In December 2020, certain officers and executives of the Company were awarded 95,000 shares with a vesting period of three years and a fair value of $ 4.92 per share.

In March 2019, the Company granted an executive of the Company 168,350 shares of restricted common stock, which vested one-third at March 31, June 30, and September 30, 2019, respectively.

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In July 2019, certain officers and executives of the Company were awarded 46,500 shares with a vesting period of three years and a fair value of $ 3.66 .

In December 2019, certain officers and executives of the Company were awarded 31,500 shares with a vesting period of three years and a fair value of $5.08 per share.

2019, certain officers and executives of the Company were awarded 31,500 shares with a vesting period of three years and a fair value of $ 5.08 per share.

In May 2018, certain officers and executives of the Company were awarded 203,752 shares with a vesting period of three years and a fair value of $ 7.46 per share.

In July 2018 an executive was awarded 2,769 shares of restricted common stock with a fair value of $ 9.03 per share.

Additionally, in 2017, certain officers and executives of the Company were awarded 213,643 shares with a vesting period of three years and a weighted average fair value of $7.22 per share.

Performance Stock

In May 2020, the Company awarded certain executives 300,000 shares of performance stock.

The performance-based stock will potentially vest 50% if the target is met, with 25% each vesting on the second and third anniversary of the grant, with 100% of the shares to be earned based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period.

The performance-based stock will potentially vest 50 % if the target is met, with 25 % each vesting on the second and third anniversary of the determination that the target was met, with 100 % of the shares to be earned based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period ending June 30,2021.

The Company evaluates the probability of achieving this each reporting period.

The fair value of all shares awarded on the date of the grant was $ 2.26 per share.

In May 2018, the Company awarded certain

executives 67,023 shares of performance based stock, which will potentially vest at the end of fiscal 2021, with 100% of the shares to be earned based on the achievement of an objective, tiered return on invested capital measured over a three-year performance period.

The Company evaluates the probability of achieving this each reporting period.

In May 2019, the Company awarded certain executives 187,500 shares of performance stock.

The performance-based stock will potentially vest 50 % if the target is met, with 25 % each vesting on the second and third anniversary of the grant, with 100 % of the shares to be earned based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period.

The fair value of all shares awarded on the date of the grant was $ 1.96 per share.

In May 2017, the Company awarded certain executives 69,945 shares of performance based stock, which vest based on the achievement of an objective return on invested capital measured over a two-year performance period covering the 2018 and 2019 fiscal years.

The fair value on the date of grant was $7.22 per share.

In August 2020, the Company determined the performance-based stock awarded in May 2019 vested at the outperformance level established above the target set based on the achievement of an objective, tiered return on invested capital, measured over a one-year performance period ending June 30, 2020.

As a result, the executives earned an additional 93,750 shares of performance-based stock awards with a fair value of $ 1.96 , of which 50 % vested immediately on the date of determination and 25 % each will vest on the first and second anniversary of the date of determination.

In May 2018, the Company awarded certain executives 67,023 shares of performance based stock, which will potentially vest at the end of fiscal 2020, with 100 % of the shares to be earned based on the achievement of an objective, tiered return on invested capital measured over a three-year performance period.

The fair value of all shares awarded on the date of the grant was $ 7.46 per share.

In January 2021, the Company assessed the performance metric was not met and therefore these shares of performance based stock were forfeited.

Stock Options

The following table summarizes the stock option activity under the Company’s equity incentive plans:

Outstanding at January 1, 2018

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Treasury zero-coupon issues that match the contractual terms of the stock option grants.

The expected term represents the period in which the Company’s equity awards are expected to be outstanding, which for the years presented is based on the exercise history.

For years ended December 31, 2020, 2019 and 2018, compensation expense related to stock based awards outstanding for the periods was $ 2.0 million, $ 2.8 million and $ 2.2 million, respectively.

The Company applies a 3.2 % and 5.5 % forfeiture rate, which gets compounded over the vesting terms of the individual award, to its restricted stock and option grants, respectively, based on historical analysis.

During the year ended December 31, 2018, certain officers and executives of the Company were awarded 374,215 options with a vesting period of three years and a weighted average exercise price of $7.49 per share.

For the year ended December 31, 2020, expense related to the purchase of vested stock-based awards for certain officers of the Company was approximately $ 0.2 million.

In the year ended December 31, 2020, no stock options were exercised.

In the year ended December 31, 2019, the Company received proceeds of less than $ 0.1 million upon the exercise of 7,021 options.

In the year ended December 31, 2018, the Company received proceeds of approximately $ 2.8 million upon the exercise of 488,303 options.

In the year ended December 31, 2017, the Company received proceeds of $1.3 million upon the exercise of 229,551 options.

As of December 31, 2020, total unrecognized compensation expense related to unvested stock and options was approximately $ 2.4 million, which is expected to be recognized over a period of approximately 2.2 years.

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Employee Benefits

All of the Company’s marine segment employees except the Associate Divers, the Associate Tugmasters, and union employees in the Pacific Northwest, are eligible to participate in the Company’s 401(k) Retirement Plan after completing six months of service.

Each participant may contribute between 1 % and 80 % of eligible compensation on a pre-tax basis, up to the annual IRS limit.

The Company matches 100 % on the first 2 % of eligible compensation contributed to the Plan and 50 % on the next 2 % of eligible compensation contributed to the Plan.

Participants’

contributions are fully vested at all times.

Participants’ contributions are fully vested at all times.

Employer matching contributions vest over a four-year period.

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During the years ended December 31, 2020, 2019 and 2018 the Company contributed $ 1.2 million, $ 1.3 million and $ 1.4 million, respectively to the Plan.

All of the Company’s concrete segment employees except Leads, Helpers, Laborers, Finishers, Formsetters, Carpenters, Rodbusters, Patchmen, Equipment Operators, Field Engineering Trainees and certain Highly Compensated Employees are eligible to participate in the AGC Southwest Chapters 401(k) Retirement Plan, a multiple employer plan, after completing three months of service.

Each participant may contribute up to the annual IRS limit.

The Company matches 50 % on the first 6 % of eligible compensation contributed to the Plan.

Participants’

contributions are fully vested at all times.

Participants’ contributions are fully vested at all times.

Employer matching contributions vest over a five-year period.

At its discretion, the Company may make additional matching and profit-sharing contributions.

During the year ended December 31, 2019, 2018 and 2017, the Company contributed $0.1 million, $0.2 million and $0.4 million, respectively.

The Company’s contributes to several multi-employer defined pension plans under the terms of collective-bargaining agreements that cover its union-represented employees.

During the year ended December 31, 2020, 2019 and 2018, the Company contributed less than $ 0.1 million, $ 0.1 million and $ 0.2 million, respectively.

The Company contributes to several multi-employer defined pension plans under the terms of collective-bargaining agreements that cover its union-represented employees.

Risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:

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● If the Company chooses to stop participating in its multi-employer plans, it may be required to pay a withdrawal liability based on the underfunded status of the plan.

The following table presents the Company’s participation in these plans:

Pension Protection

Act ("PPA")

Certified Zone Status

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Engineers - AGC Retirement Trust of the Inland Empire

Western Conference of Teamsters Pension Trust Fund

Alaska Carpenters Trust Fund

Alaska Laborers Trust Fund

The most recent PPA zone status available in 2019 and 2018 is for the plan’s year end during 2018 and 2017, respectively.

(1) The most recent PPA zone status available in 2020 and 2019 is for the plan’s year end during 2019 and 2018, respectively.

Zone status is based on information received from the plan and is indicative of the plans funding status.

Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the orange zone are less than 80 percent funded and have an Accumulated Funding Deficiency in the current year or projected into the next six years, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded.

The FIP/RP Status P/I column indicates plans for which a financial improvement plan ("FIP") or a rehabilitation plan ("RP") is either pending ("P"), or implemented ("I").

(2) The FIP/RP Status P/I column indicates plans for which a financial improvement plan ("FIP") or a rehabilitation plan ("RP") is either pending ("P"), or implemented ("I").

There are currently no plans to withdraw from any of the multi-employer plans in which the Company participates.

Commitments and Contingencies

The Company and one former and two current officers are named defendants in a class action lawsuit filed on April 11, 2019 in the United States District Court for the Southern District of Texas, Houston Division, seeking unstated compensatory damages under the federal securities laws allegedly arising from materially false and misleading statements during the period of March 13, 2018 to March 18, 2019.

The complaint asserts, among other things, that the current and former officers caused the Company to overstate goodwill in certain periods;

The Company and one former and two current officers were named defendants in a class action lawsuit filed on April 11, 2019 in the United States District Court for the Southern District of Texas, Houston Division, seeking unstated compensatory damages under the federal securities laws allegedly arising from materially false and misleading statements during the period of March 13, 2018 to March 18, 2019.

The complaint asserted, among other things, that the current and former officers caused the Company to overstate goodwill in certain periods;

overstate accounts receivable;

that the company lacked effective internal controls over financial reporting related to goodwill impairment testing and accounts receivable;

and that as a result the required adjustments to goodwill and accounts receivable materially impacted the company’s financial statements causing the company’s stock price to be artificially inflated during the class period.

The Company has responded to the complaint, considers all of these allegations without merit and is vigorously contesting the allegations.

In addition, from time to time, the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business.

These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damage, civil penalties or other losses, or injunctive or declaratory relief and on rare occasions punitive damages.

With respect to such lawsuits, the Company accrues reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated.

The Company does not believe any of these or any other proceedings, individually or in the aggregate, would be expected to have a material adverse effect on results of operations, cash flows, or financial condition

A legal matter was settled in the Company’s favor for $5.5 million during the first quarter of 2018.

and that as a result certain adjustments to goodwill and accounts receivable materially impacted the company’s financial statements, which in turn caused the company’s stock price to be artificially inflated during the class period.

The District Court granted the Company’s Motion to Dismiss the Complaint on June 29, 2020 and the ruling became final on July 20, 2020 after no appeal was filed.

On August 21, 2020, a Company dredge, the Waymon L.

Boyd, was consumed by a fire while working on a project in the Port of Corpus Christi.

Five crewmembers were killed, several more were injured, some seriously, and the vessel was declared a total loss.

This incident also resulted in the discharge of approximately 18,000 gallons of oil, diesel fuel and contaminated water into the Corpus Christi Ship Channel, all of which was promptly cleaned up.

The Company is fully cooperating with the U.S.

Coast Guard, the Port of Corpus Christi Authority, and the National Transportation Safety Board, among others, while they investigate the cause of this incident.

The National Transportation Safety Board has named the

Company as a party of interest in their investigation.

Thus far, eight separate lawsuits have been filed against the Company by certain crewmembers or their heirs under the general maritime law and the Jones Act.

In response thereto, the Company has filed an action in the U.S.

District Court for the Southern District of Texas seeking consolidation of the lawsuits for procedural purposes since they all arise out of the same occurrence and seeking exoneration from or limitation of liability relating to the foregoing incident as provided for in the federal rules of procedure for maritime claims.

The Limitation Court set a deadline of February 17, 2021 by which all claims must be filed and as of the Court’s deadline, thirteen persons, estates and/or entities filed claims in the Limitation for personal injuries, death, property damages and business interruption, loss of profit, loss of use of natural resources and other economic damages for unspecified economic and compensatory damages.

Some of these claimants may not have standing to bring their claims and will be challenged and, in any case, the Company will soon file a Default Motion with the Court which, upon approval, will bar the filing of any further claims.

Applicable accounting guidance under ASC 450 would require the Company to recognize a loss if the loss is determined to be probable and reasonably estimable.

However, this is a multi-party, complex tort proceeding, and it is too early in the proceedings for the Company to do so at this time.

In any event, insurance coverage is available, the carriers of such insurance have taken over the costs of the defense of the claims and the Company currently believes that it has adequate insurance coverage for all pollution, marine, economic and other potential liabilities arising from the incident.

The Company is also confident that it otherwise has adequate vessels, equipment and personnel to fulfill all ongoing, booked and reasonably foreseeable work.

In addition, the Company is involved in various other legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations or cash flows.

Management believes that it has recorded adequate accrued liabilities and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies.

A legal matter was settled in the Company’s favor for $ 5.5 million during the first quarter of 2018.

Settlement amounts were recorded in Other gain from continuing operations in the Consolidated Statement of Operations, Prepaid expenses and other (current portion of the notes receivable) and Other non-current assets (non-current portion of the notes receivable) in the Consolidated Balance Sheets.

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Legal fees related to this matter were expensed as incurred during the respective reporting period.

As a result of charges brought in September 2015 and October 2016 by the Houston Police Department, Environmental Enforcement, two subsidiaries of the Company were indicted at the request of the Harris County, Texas District Attorney’s

Office by a duly organized Grand Jury of Harris County, Texas for separate but similar violations of the Texas Water Code, allegedly arising from the handling of construction concrete at certain work sites.

Specifically, in each case the Company was charged with unlawfully, intentionally or knowingly discharging a waste or pollutant and is subject to a maximum fine of $250,000.

The Company considers both cases without merit.

However, without admitting to fault, the Company has, in both cases, agreed to diversion agreements under which the charges were dismissed, without prosecution, upon our payment of fines.

None of these allegations nor the costs of defense, taken separately or as a whole, is expected to have a material impact on the Company’s balance sheet or its liquidity.

During the quarter ended September 30, 2020, the Company settled a long-standing dispute with a customer that resulted in recovery of $ 0.9 million of previously reserved accounts receivable.

Segment Information

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marine and concrete.

The Company’s financial reporting systems present various data for management to run the business, including profit and loss statements prepared according to the segments presented.

Management uses operating income to evaluate performance between the two segments.

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Contract revenues

Operating income (loss)

Operating income

Depreciation and amortization expense

Property, plant and equipment, net

Property and equipment, net

Contract revenues

Operating (loss) income

Operating income

Depreciation and amortization expense

Property, plant and equipment, net

There were $1.2 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2019.

There were $2.5 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2018.

The marine segment had foreign revenues of $11.4 million and $12.2 million, respectively, for the years ended December 31, 2019 and 2018.

Property and equipment, net

There were $ 2.8 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2020.

There were $ 1.2 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2019.

The marine segment had foreign revenues of $ 12.5 million and $ 11.4 .

million, respectively, for the years ended December 31, 2020 and 2019.

These revenues are derived from projects in the Caribbean Basin and Mexico and are paid primarily in U.S.

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Finance and operating lease ROU assets and liabilities are recognized based on the present value of future minimum lease payments over the expected lease term at commencement date.

As the implicit rate is not determinable in most of the Company’s leases, management uses the Company’s incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

The expected lease term includes options to extend or terminate the lease when it is reasonably certain the Company will exercise such option.

Lease expense for minimum lease payments is recognized on a straight-line basis over the expected lease term.

The Company’s lease arrangements have lease and non-lease components.

Leases with an expected term of 12 months or less are not accounted for on the balance sheet and the related lease expense is recognized on a straight-line basis over the expected lease term.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Leases recorded on the balance sheet consists of the following:

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Total liabilities

Operating lease right-of-use assets are recorded net of accumulated amortization of $5.2 million as of December 31, 2019.

Financing lease right-of-use assets are recorded net of accumulated amortization of $6.2 million as of December 31, 2019

(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 9.0 million and $ 5.2 million as of December 31, 2020 and 2019, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 6.4 million and $ 6.2 million as of December 31, 2020 and 2019, respectively.

Other information related to lease term and discount rate is as follows:

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The components of lease expense are as follows:

December 31, 2019

Year Ended December 31,

Operating lease costs:

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Supplemental cash flow information related to leases is as follows:

December 31, 2019

Year Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

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Long-term lease obligations

Related Party Transactions

Upon the completion of the TAS acquisition, the Company entered into a lease arrangement with an entity in which an employee owns an interest.

This lease is for office space and yard facilities used by the concrete segment.

Annual lease expense was approximately $478,000 for the year ending December 31, 2017.

Due to the resignation of this employee, these transactions ceased to be related party transactions as of July 31, 2017.

Selected Quarterly Financial Data (Unaudited)

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(in thousands, except per share data)

Operating income

Income before income taxes

Earnings per share:

(in thousands, except per share data)

Operating (loss) income

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(Loss) earnings per share:

(in thousands, except per share data)

Gross profit (loss)

Operating income (loss)

Income (loss) before income taxes

Net income (loss)

Earnings (loss) per share:

ORION GROUP HOLDINGS, INC.

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Year ended December 31, 2018

Provision for doubtful accounts

Allowance for credit losses

Reserve for losses on uncompleted contracts

Year ended December 31, 2019

Provision for doubtful accounts

Allowance for credit losses

Reserve for losses on uncompleted contracts

Year ended December 31, 2020

Provision for doubtful accounts

Allowance for credit losses

Reserve for losses on uncompleted contracts

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-K

Item 9A. Controls and Procedures