What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-07 compared with 2021-03-02 · 103 added, 164 removed, 251 unchanged (52% of the section changed)

27 unchanged sentences

In addition, we ended 2021 with a consolidated backlog of $590.0 million.

Our revenues in 2020 increased by 0.2% as compared with 2019 and we recorded net income of $20.2 million, as compared with a net loss of $5.4 million in the prior year.

Our revenues in 2021 decreased by 15.3% as compared with 2020 and we recorded a net loss of $14.6 million, as compared with net income of $20.2 million in the prior year.

Looking toward 2022, the Company continues to focus on developing opportunities across the infrastructure, industrial, and building sectors through organic growth, greenfield expansion, and strategic acquisition opportunities.

4 unchanged sentences

The amount and timing of such spending will be directly impacted by the duration of required efforts to contain COVID-19 and the severity of the negative impacts created by the virus and its effect on the economy.

Although little progress has been made to date and on a federal infrastructure bill, the Company will continue to track and monitor any developments on a federal infrastructure bill which could potentially create bid opportunities for the Company.

Marine Segment

5 unchanged sentences

Opportunities from local port authorities will also remain over the long-term, many of which are related to the widened Panama Canal.

Additionally, bid opportunities related to coastal restoration funded through the Resource and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States Act (the “RESTORE Act”) may arise into 2021.

Additionally, bid opportunities related to coastal restoration funded through the Resource and Ecosystems Sustainability, opportunities under the Tourist Opportunities and Revived Economies of the Gulf Coast States Act (the “RESTORE Act”) may arise into 2022.

We believe our current equipment fleet will allow us to better meet market demand for projects from both our public and private customers.

8 unchanged sentences

● Nearly $7 billion of federal funding provided by the USACE in connection with disaster recovery in Texas;

● Potential opportunities related to the impending federal infrastructure bill.

● Potential opportunities related to the federal infrastructure bill.

Concrete Segment

Demand for our concrete segment’s services continues, although timing of certain new project releases could be delayed as a result of COVID-19 related macroeconomic impacts.

We currently see long-term demand for our concrete construction services in the Texas building sector as Texas’ four major metropolitan areas, and expanding suburbs, continuously retain their positions as leading destinations for population and business growth.

We currently see long-term demand for our concrete construction services in the Texas building sector as Texas’ four major metropolitan areas, and expanding suburbs, continuously retain

their positions as leading destinations for population and business growth.

Population growth throughout our markets continues to drive new distribution centers, education facilities, office expansion, retail and grocery establishments, new multi-family housing units, and structural towers for business, residential or mixed-use purposes.

The diversified Texas economy provides us with multiple sources of bid opportunities.

Additional demand for concrete services in our markets could be provided by work as part of a federal infrastructure bill.

Additional demand for concrete services in our markets could be provided by work as part of the federal infrastructure bill.

In the long-term, we see positive trends in demands for our services in our end markets, including:

1 unchanged sentence

● Continued investment in warehouse/distribution space in the Dallas-Fort Worth region;

● COVID-19 driven shift of populous moving from the inner cities to suburban areas;

● COVID-19 driven shift of people moving from the inner cities to suburban areas;

● Nearly $7 billion of federal funding provided by the USACE in connection with disaster recovery in Texas;

● Potential opportunities related to the impending federal infrastructure bill.

● Potential opportunities related to the federal infrastructure bill.

Consolidated Results of Operations

2 unchanged sentences

Given the typical duration of our contracts, which is generally less than a year, our backlog at any point in time usually represents only a portion of the revenue that we expect to realize during a twelve-month period.

We have not been adversely affected by contract cancellations or modifications in the past, we may be in the future, especially in economically uncertain periods.

We have not been adversely affected by contract cancellations or modifications in the past, however we may be in the future, especially in economically uncertain periods.

Backlog as of the periods ended below are as follows (in millions):

6 unchanged sentences

Concrete segment

Previously reported backlog amounts have been adjusted in the accompanying table to correct for an inadvertent clerical error in the underlying calculation file, as to which steps have been taken to prevent a recurrence.

Accordingly, reported backlog has been reduced by $17.6 million and $13.8 million for the periods ended March 31, 2020 and December 31, 2019, respectively.

The recent trend of declining backlog is due in significant part to headwinds created by the COVID-19 pandemic in certain end market sectors.

We, however, remain optimistic in our end-markets and in the opportunities that are emerging across our various market places as evidenced by the slight increase in backlog during the quarter ended December 31, 2020, and by the $1.6 billion of quoted bids outstanding at year end, of which $96 million we are the apparent low bidder on or have been awarded contracts subsequent to the end of fiscal 2020.

The increase in backlog during the quarter is primarily driven by new jobs we won.

The general trend of declining backlog over the past year through June 2021 is due in significant part to headwinds created by the COVID-19 pandemic in certain end market sectors, which has slowed the timing of project awards.

We, however, remain optimistic in our end-markets and in the opportunities that are emerging across our various marketplaces as evidenced by the $2.6 billion of quoted bids outstanding at quarter end, of which $138 million we are the apparent low bidder on or have been awarded contracts subsequent to the end of the fiscal year ended December 31, 2021.

These estimates are subject to fluctuations based upon the scope of services to be provided, as well as factors affecting the time required to complete the project.

1 unchanged sentence

In addition to our backlog under contract, we also have a substantial number of projects in negotiation or pending award at any given time.

Delays in decisions on pending awards also have a negative impact on the timing and amount by which we are able to increase backlog.

Income Statement Comparisons

6 unchanged sentences

Gain on disposal of assets, net

Goodwill impairment charges

Other gain from continuing operations

Operating income

Operating (loss) income

Other (expense) income:

2 unchanged sentences

Other expense, net

Income before income tax expense

(Loss) income before income tax expense

Income tax expense

Net (loss) income

Year ended December 31, 2021 compared with year ended December 31, 2020

Contract Revenues.

Contract revenues for the year ended December 31, 2021 of $601.4 million decreased $108.5 million or 15.3% as compared to $709.9 million in the prior year period.

The decrease was primarily driven by a reduction in project activity compared to the prior year in the marine segment as a result of reduced and/or delayed bid opportunities due to the continued impacts from COVID 19 on the industries in which we serve .

Gross Profit.

Gross profit was $41.0 million for the year ended December 31, 2021, compared to $84.7 million in the prior year period, a decrease of $43.7 million or 51.6%.

Gross profit in the period was 6.8% of total contract revenues as compared to 11.9% in the prior year period.

The decrease in gross profit dollars and percentage was driven by the decreased activity and volumes which negatively impacted revenue and contributed to an under recovery of indirect costs primarily related to decreased labor and equipment utilization.

We also incurred decreased project performance in our concrete segment.

Selling, General and Administrative Expense.

Selling, general and administrative ("SG&A") expenses were $60.2 million for the year ended December 31, 2021 compared to $65.1 million in the prior year period, a decrease of $4.9 million or 7.5%.

As a percentage of total contract revenues, SG&A expenses increased from 9.3% to 10.0% primarily as a result of the reduced revenue noted above.

The decrease in SG&A dollars was driven by a decrease in the current year period related to bonus expense, business development costs pursuant to timing of project pursuits and awards and travel related costs.

Gain on Disposal of Assets, net.

During the year ended December 31, 2021 and 2020, we realized $11.4 million and $9.0 million, respectively, of net gains on disposal of assets.

Included in the current year amount is a net gain of $6.7 million related to the sale of property in Tampa, Florida.

See Note 6 in this form 10-K for a further description of the sale of property.

Included in the prior year amount is a $2.9 million net gain on insurance recoveries.

Other Income, net of Expense.

Other expense primarily reflects interest on our borrowings, partially offset by interest income and non-operating gains or losses.

Interest expense for the current year period included $2.1 million related to the extinguishment of our term loan and related interest rate swaps.

Income Tax Expense.

We recorded tax expense of $0.5 million in the year ended December 31, 2021, compared to tax expense of $2.0 million in the prior year period.

Our effective tax rate for the year ended December 31, 2021 was (3.6)%,

which differs from the federal statutory rate of 21% primarily due to the valuation allowance related to the current year net loss.

Year ended December 31, 2020 compared with year ended December 31, 2019

Contract Revenues.

Contract revenues for the year ended December 31, 2020 of $709.9 million increased approximately 0.2% as compared to $708.4 million in the prior year period.

15 unchanged sentences

Our effective tax rate for the year ended December 31, 2020 was 8.9%, which differs from the federal 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.

Year ended December 31, 2019 compared with year ended December 31, 2018

Contract Revenues.

Contract revenues for the year ended December 31, 2019 of $708.4 million increased approximately 36.0% as compared to $520.9 million in the prior year period.

The increase was primarily attributable to the execution on the larger volume of work in our backlog in the marine segment as well as increased cubic yard production in the concrete segment in the current year period as compared to the prior year period.

While overall revenues increased, we did experience a shift in the component mix of our marine segment revenue from the private sector to the public sector when comparing the 2019 period to 2018.

In particular, the 2019 period included a large project in the public sector that did not contribute to 2018 results.

By contrast, the 2018 period included a large project in our private sector that was not replicated in the 2019 period.

Gross Profit.

Gross profit was $64.0 million for the year ended December 31, 2019, compared to $16.8 million in the prior year period, an increase of $47.2 million.

Gross margin in 2019 was 9.0% of total contract revenues as compared to 3.2% in the prior year period.

The increase in gross profit dollars and percentage were primarily driven by an improvement in labor efficiency resulting from application of activities from the Invest, Scale, Growth or ISG process and improved utilization rates in our marine segment, along with improved man hours per cubic yards placed in our concrete segment.

Comparatively, 2018 included unfavorable changes in cost estimates and the unfavorable impact of project disruptions due to unanticipated delays in commencing work caused by customer schedules in the marine segment and unfavorable weather patterns in the concrete segment that impacted the second half of the year.

Selling, General and Administrative Expense.

Selling, general and administrative ("SG&A") expenses were $61.0 million for the year ended December 31, 2019 compared to $53.2 million in the prior year period, an increase of $7.8 million, or 14.7%.

As a percentage of total contract revenues, SG&A expenses decreased as compared with the prior year, from 10.1% to 8.7%.

The increase in SG&A dollars was primarily attributable to expenses related to the ISG initiative.

Other Income, net of Expense.

Other expense primarily reflects interest on our borrowings, partially offset by interest income and non-operating gains or losses.

During 2019, we recognized $0.5 million of other income related to previously accrued contingent consideration from the purchase of TBC that was never achieved.

Interest expense for 2019 also included a $0.4 million charge related to recognizing unamortized debt issuance costs as a result of the Sixth Amendment to the Credit Facility.

During 2018, we recognized $1.6 million of other income on the sale of easement rights for one of our properties in the Houston area.

Interest expense for 2018 included a $2.2 million charge related to recognizing unamortized debt issuance costs on early extinguishment of debt.

Income Tax Expense (Benefit).

We recorded tax expense of $1.9 million in 2019, compared to tax benefit of $12.2 million in 2018.

Our effective tax rate in 2019 was (53.5)%, which differs 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.

Segment Results

The following table sets forth, for the periods indicated, statements of operations data by segment, segment revenues as a percentage of consolidated revenues and segment operating (loss) income as a percentage of segment revenues:

Segment Comparison

In connection with the preparation of the financial statements for the year ended December 31, 2021, the Company has identified and corrected certain immaterial errors in segment reporting for all periods presented.

Specifically, certain corporate overhead costs previously recorded to the marine segment as part of operating income (loss) and allocated from the marine segment to the concrete segment below operating income in the other income (expense) line have been allocated from the marine segment to the concrete segment as part of the determination of operating income for each segment.

These corrections resulted in an offsetting change in operating income (loss) for each segment of $12.9 million and $11.8 million for the years ended December 31, 2020 and December 31, 2019, respectively.

Year ended December 31,

9 unchanged sentences

Concrete segment total

Operating income

Operating income (loss)

Marine segment

2 unchanged sentences

Marine Segment

Revenues for our marine segment for the year ended December 31, 2021 were $263.9 million compared to $388.2 million for the year ended December 31, 2020, a decrease of $124.3 million, or 32.0%.

The decrease was primarily attributable to a reduction in project activity compared to the prior year period.

Operating income for our marine segment for the year ended December 31, 2021 was $5.8 million, compared to operating income of $29.8 million for the year ended December 31, 2020, a decrease of $24.0 million.

Excluding the impact of the sale of property in Tampa, Florida in the current year and the net gain on insurance recoveries and the recovery on a disputed receivable in the prior year operating loss was $0.6 million for the year ended December 31, 2021, compared to operating income of $26.1 million for the year ended December 31, 2020, a decrease of $26.7 million.

This decrease in operating income was primarily due to the decrease in revenue noted above and related under recovery of indirect costs as a result of decreased labor and equipment utilization.

Concrete Segment

Revenues for our concrete segment for the year ended December 31, 2021 were $337.5 million compared to $321.8 million for the year ended December 31, 2020, an increase of $15.7 million, or 4.9%.

This increase resulted from increased production volumes in the current year period.

Operating loss for our concrete segment for the year ended December 31, 2021 was $15.1 million, compared to $3.2 million for the year ended December 31, 2020, an increase in operating loss of $11.9 million.

This increase in operating loss was primarily due to decreased project performance and lower margins on several projects during the 2021 period.

Year ended December 31, 2020 compared with year ended December 31, 2019

Marine Segment

Revenues for our marine segment for the year ended December 31, 2020 were $388.2 million compared to $369.1 million for the year ended December 31, 2019, an increase of $19.1 million, or 5.2%.

1 unchanged sentence

This increase in operating income included $6.7 million of net gains on disposal of assets.

Excluding the increase in net gains on disposal of assets, net operating income for our marine segment for the year ended December 31, 2020 was $8.4 million compared to an operating loss of $0.2 million for the year ended December 31, 2019, an increase of $8.6 million.

Excluding the increase in net gains on disposal of assets, net operating income for our marine segment for the year ended December 31, 2020 was $21.7 million compared to operating income of $11.5 million for the year ended December 31, 2019, an increase of $10.2 million.

This increase in operating income was primarily due to project execution related margin improvement and non-direct cost recovery compared to the prior year period.

1 unchanged sentence

Revenues for our concrete segment for the year ended December 31, 2020 were $321.8 million compared to $339.3 million for the year ended December 31, 2019, a decrease of $17.5 million, or 5.2%.

Operating income for our concrete segment for the year ended December 31, 2020 was $9.7 million, compared to operating income of $1.1 million for the year ended December 31, 2019, an increase of $8.6 million.

This increase in operating income was primarily due to the improvement in project margins.

Year ended December 31, 2019 compared with year ended December 31, 2018

Marine Segment

Revenues for our marine segment for the year ended December 31, 2019 were $369.1 million compared to $243.9 million for the year ended December 31, 2018, an increase of $125.2 million, or 51.4%.

This increase is primarily attributable to the execution on the larger volume of work in our backlog in 2019 as compared to 2018 where we experienced $22.8 million of unfavorable changes in cost estimates on certain projects as well as unanticipated delays in commencing certain work due to customer schedules in the second half of 2018.

Operating income for our marine segment for the year ended December 31, 2019 was $1.1 million, compared to an operating loss of $61.0 million for the year ended December 31, 2018, an increase of $62.1 million.

This increase in operating income was primarily due to the prior year full impairment of goodwill in the marine segment of $33.8 million, certain projects in the prior year where we experienced unfavorable changes in cost estimates and unanticipated delays in commencing certain work due to customer schedules in the second half of 2018.

As a percentage of total contract revenues, operating income for our marine segment was 0.3% for the year ended December 31, 2019, compared to operating loss of 25.0% for the year ended December 31, 2018.

The prior year period included $33.8 million of goodwill impairment charges, $22.8 million of unfavorable changes in cost estimates and a $4.3 million reserve on disputed accounts receivable, partially offset by the recognition of a $5.4 million gain on the settlement of a legal matter which did not repeat in the current period.

The current year included $3.0 million of ISG expenses compared to none in the prior year.

After allowing for the comparative $52.4 million of non-recurring items between the periods, marine segment operating income (loss) improved by $9.7 million.

Concrete Segment

Revenues for our concrete segment for the year ended December 31, 2019 were $339.3 million compared to $277.0 million for the year ended December 31, 2018, an increase of $62.3 million, or 22.5%.

This increase in revenue was primarily due to an overall increase in cubic yard production on our projects.

Operating income for our concrete segment for the year ended December 31, 2019 was $1.1 million, compared to operating loss of $39.5 million for the year ended December 31, 2018, an increase of $40.6 million.

This increase in operating income was primarily due to the prior year full impairment of goodwill in the concrete segment of $35.7 million and production delays resulting from unfavorable weather patterns experienced during the first and third quarters of 2018.

As a percentage of revenues, operating income for our concrete segment was 0.3% for the year ended December 31, 2019, compared to operating loss of 14.3% for the year ended December 31, 2018.

The prior year period included $35.7 million of goodwill impairment charges.

The current year included $2.3 million of ISG expenses compared to none in the prior period.

After allowing for the comparative $33.4 million of non-recurring items between the periods, concrete segment operating income improved by $7.2 million.

The increase was primarily driven by production efficiencies in man hours per cubic yard in our markets.

Operating loss for our concrete segment for the year ended December 31, 2020 was $3.2 million, compared to an operating loss of $10.6 million for the year ended December 31, 2019, a decrease in operating loss of $7.4 million.

This decrease in operating loss was primarily due to the improvement in project margins.

Critical Accounting Estimates

42 unchanged sentences

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 we do not expect to realize.

The factors used to assess the likelihood of realization include our forecast of future taxable income

exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences and available tax planning strategies that could be implemented to realize the net deferred tax assets.

The factors used to assess the likelihood of realization include our forecast of future taxable income exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences and available tax planning strategies that could be implemented to realize the net deferred tax assets.

We consider both positive and negative evidence when evaluating the need for a valuation allowance on our deferred tax assets in accordance with ASC 740.

19 unchanged sentences

This excess loss coverage responds to most of its liability policies when a primary limit of $1 million has been exhausted.

Separately, our marine segment employee health care is provided through a trust administered by a third party.

Funding of the trust is based on current claims.

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.

3 unchanged sentences

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

Our concrete segment employee health care is provided through two policies.

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, expects to receive a partial refund after the policy expiration.

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.

Liquidity and Capital Resources

1 unchanged sentence

Historically, our source of liquidity has been cash provided by our operating activities and borrowings under our credit facilities.

The assessment of the liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company has adequate liquidity to operate.

Significant assumptions used in the Company's forecasted model of liquidity include forecasted sales, costs, and capital expenditures.

Based on a careful assessment of these factors management believes that the Company will have adequate liquidity for its operations for at least the next 12 months.

Changes in working capital are normal within our business given the varying mix in size, scope and timing of delivery of our projects.

2 unchanged sentences

Our borrowing capacity at December 31, 2021 was approximately $9.3 million.

Ninth Amendment to Revolving Credit Facility

On March 1, 2022, we entered into an amended revolving line of credit and swingline loan agreement (the “Ninth Amendment”) to, among other things, waive covenant defaults, reset the revolver limit, implement an anti-cash hoarding provision and institute temporary covenant requirements.

For further details of the Ninth Amendment, see Note 20 in the Notes to the Financial Statements (of this Form 10-K).

We expect to meet our future internal liquidity and working capital needs and maintain or replace our equipment fleet through capital expenditure purchases, leases and major repairs, from funds generated by our operating activities for at least the next 12 months.

We believe our cash position is adequate for our general business requirements discussed above and to service our debt.

Although our line of credit is reduced, we believe our cash position is adequate for our general business requirements discussed above and to service our debt.

The following table provides information regarding our cash flows and our capital expenditures for the years ending December 31, 2021, 2020 and 2019:

Net income (loss)

Net (loss) income

Adjustments to remove non-cash and non-operating items

2 unchanged sentences

Cash flows provided by (used in) operating activities

Cash flows used in investing activities

Cash flows (used in) provided by financing activities

Cash flows provided by (used in) investing activities

Cash flows provided by (used in) financing activities

Capital expenditures (included in investing activities above)

1 unchanged sentence

During 2021, we generated approximately $0.1 million in cash from our operating activities.

The net cash inflow is comprised of $8.2 million of cash inflows from net income, after adjusting for non-cash items and $8.1 million of cash outflows related to changes in net working capital.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Consolidated Statements of Cash Flows, were primarily driven by a $2.4 million outflow pursuant to the relative timing and significance of project progression and billings during the period, a $1.3 million outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period and a $4.9 million decrease in operating lease liabilities during the period, partially offset by $0.5 million of other cash inflows.

During 2020, we generated approximately $46.0 million in cash from our operating activities.

The net cash inflow is comprised of $46.5 million of cash inflows from net income, after adjusting for non-cash items, partially offset by $0.5 million of cash outflows related to changes in net working capital.

4 unchanged sentences

The increases in accounts receivable and accounts payable were consistent with our increased project activity year over year.

The year over year increase in accounts receivable is more pronounced than accounts payable due to the longer cycle times on the accounts receivable, which also include retainage whereas accounts payable typically turn in 30 days.

The year over year increase in accounts receivable is more pronounced than accounts payable due to the longer cycle times on the accounts receivable, which also include

retainage whereas accounts payable typically turn in 30 days.

The changes in net working capital also included a net outflow of $5.2 million from the net change in costs and estimated earnings in excess of billings on uncompleted contracts, offset by the change in billings in excess of costs and estimated earnings on uncompleted contracts.

These changes were driven by the timing and execution of the underlying projects.

During 2018, our operations provided approximately $21.9 million in net cash inflows.

The net cash inflow is comprised of inflows of $27.6 million related to changes in working capital, partially offset by $5.7 million of net loss after adjusting for non-cash items.

The changes in net working capital were primarily driven by a net inflow of $24.6 million of cash from the net change in costs and estimated earnings in excess of billings on uncompleted contracts, offset by the change in billings in excess of costs and estimated earnings on uncompleted contracts.

These changes were driven by the timing and execution of the underlying projects.

Investing Activities.

Capital asset additions and betterments to our fleet were $17.0 million in 2021, as compared with $14.7 million and $17.2 million in 2020 and 2019, respectively.

The changes are primarily a result of the timing of purchase of capital assets.

Proceeds from the sale of property and equipment were $27.1 in the year ended December 31, 2021, as compared with $5.9 million in the year ended December 31, 2020.

The increase in proceeds from the sale of property and equipment for the year ended December 31, 2021 is primarily related to the sale of our property in Tampa, Florida.

Financing Activities.

During the year ended December 31, 2021, we drew down $53 million from our revolving line of credit.

During the year ended December 31, 2021 we repaid $19 million on our revolving line of credit.

During the year ended December 31, 2021 we fully extinguished the term loan portion of our Credit Facility, in part using proceeds from the sale of property in Tampa, Florida.

The extinguishment of the term loan reduced our exposure to variability in interest rates and eliminated future loan amortization payment commitments.

Concurrent with extinguishing the term loan, we canceled the remaining open position on our interest rate swap, resulting in a $1.3 million loss on the mark to market value of the swap at the date of termination.

The $1.3 million was paid to the counterparty, cleared from the balance sheet as an interest rate swap liability, removed from Other Comprehensive Income and charged to interest expense during the year ended December 31, 2021.

Further, the remaining $0.8 million of unamortized deferred debt issuance costs were charged to interest expense related to the early extinguishment of the term loan.

There were no penalties incurred related to early payment of the term loan.

During 2020, we drew down $10.0 million from our revolving line of credit.

2 unchanged sentences

Additionally, we repaid $49.0 million on this draw, as well as made regularly scheduled debt payments on the term loan of $3.0 million and an additional principal paydown of $18.2 million with proceeds from a sale-leaseback arrangement.

During 2018, we drew down $39.9 million from our revolving line of credit.

Additionally, we repaid $27.9 million on this draw, as well as made debt payments on the term loan of $20.2 for a total of $48.1 million in debt payments.

Sources of Capital

We 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 Baking and Trust Company.

The primary purpose of the Credit Agreement was to provide the Company with greater flexibility as it provides for the calculation of Adjusted EBITDA that adds back various project specific costs.

Additionally, we executed the Fifth Amendment during March 2019, which was made effective as of December 31, 2018, executed the Sixth Amendment during May 2019, executed the Seventh Amendment during June 2020 and executed the Eighth Amendment during October 2020.

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.

Interest 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 Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty.

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

The Credit Facility matures on July 31, 2023.

We 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 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.

We have not made any borrowings under 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.

See Note 11 in the Notes to the Financial Statements (Part IV, Item 15 of this Form 10-K) for further discussion on the Company’s Debt.

As of December 31, 2021, our available sources of capital consist of borrowing availability on our revolving line of credit of $9.3 million pursuant to our Credit Facility.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

• A minimum consolidated EBITDA requirement to not be less than the following during each noted period:

- Fiscal Quarter Ending March 31, 2022 - $2.6 million.

- Fiscal Quarter Ending June 30, 2022 - $7.7 million on a year-to-date basis.

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

- Fiscal Quarter Ending September 30, 2022 and each Fiscal Quarter thereafter, to not exceed 3.00 to 1.00.

• A consolidated Fixed Charge Coverage Ratio to not be less than the following during each noted period:

- Fiscal Quarter Ending December 31, 2022 and each Fiscal Quarter thereafter, to not be less than 1.25 to 1.00.

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

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

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;

3 unchanged sentences

and events constituting a change of control.

The Company expects to meet its future internal liquidity and working capital needs and maintain or replace its equipment fleet through capital expenditure purchases, leases and major repairs, from funds generated by its operating activities for at least the next 12 months.

The Company believes that its cash position and available borrowings together with cash flow from its operations is adequate for general business requirements and to service its debt.

The Company was in compliance with all financial covenants as of December 31, 2020.

Derivative Financial Instruments

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

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%.

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

This transaction was recorded as a failed sale-leaseback.

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 as an additional principal payment towards the Term loan portion of the Company’s Credit Facility, consistent with terms of the Sixth Amendment.

During the fourth quarter of 2021, the Company initiated discussions with the lead bank due to concerns it would not be in compliance with financial covenants.

The Company executed the Ninth Amendment during March 2022.

execution of the aforementioned amendment, the Company obtained a waiver on the financial covenants as of December 31, 2021.

See Note 11 in the Notes to the Financial Statements (of this Form 10-K) for further discussion on the Company’s Debt.

Bonding Capacity

2 unchanged sentences

At December 31, 2021, the capacity under our current bonding arrangement was at least $750 million, with approximately $110 million of projects being bonded.

We believe our strong balance sheet and working capital position will allow us to continue to access our bonding capacity.

We believe our balance sheet and working capital position are sufficient to allow us to continue to access our bonding capacity.

Effect of Inflation

4 unchanged sentences

These arrangements are not reasonably likely to have an effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

See Note 17 – Commitments and Contingencies of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

Contractual Obligations

The following table sets forth information about our contractual obligations and commercial commitments as of December 31, 2020:

Payment Due by Period

(in thousands)

Debt obligations

Lease obligations

Sale-leaseback arrangement (1)

Purchase obligations (2)

(1) See Note 12 in the Notes to the Financial Statements (Part IV, Item 15 of this Form 10-K) for further discussion on the Company’s Sale-leaseback arrangement.

(2) Commitments pursuant to open purchase orders and subcontracts related to construction contracts are not included since such amounts are expected to be funded under contract billings.

To manage risks of changes in the material prices and subcontracting costs used in tendering bids for construction contracts, we routinely obtain firm quotations from our suppliers and subcontractors before submitting a bid.

These quotations do not include any quantity guarantees, and we have no obligation for materials or subcontract services beyond those required to complete the contracts that we are awarded for which quotations have been provided.

A summary of debt and other contractual obligations as of December 31, 2020 and December 31, 2019 is as follows:

December 31, 2020

December 31, 2019

Credit facility, non-current maturities

Credit facility, current maturities

Total long-term debt

Outstanding letters of credits

Leasing arrangements

Other long-term liabilities

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.

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

See Note 17 of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

Recently Issued Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies of the Notes to the Financial Statements (Part IV, Item 15 of this Form 10-K) for further discussion.

See Note 2 of the Notes to the Financial Statements (Part IV, Item 15 of this Form 10-K) for further discussion.

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 7. Management’s Discussion and Analysis