What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-07 compared with 2021-03-02 · 262 added, 278 removed, 972 unchanged (36% of the section changed)

23 unchanged sentences

OTHER INFORMATION

Following the departure of the Company’s Chief Financial Officer on October 29, 2021, our Chief Executive Officer, Mark R.

Stauffer (the former Chief Financial Officer), assumed the duties of Interim Chief Financial Officer while the Company conducts a search for a new Chief Financial Officer.

COVERED ISSUER

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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Chairman of the Board

President, Chief Executive Officer and Director

Vice President, Chief Financial Officer and Treasurer

President, Chief Executive Officer, Interim Chief Financial Officer and Director

Executive Vice President, Chief Administrative Officer, Chief Compliance Officer, General Counsel and Secretary

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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.

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.

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.

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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 21, 2019 (File No.

Fourth Amendment to Employment Agreement by and between Orion Group Holdings, Inc.

Stauffer, effective June 30, 2021.

(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 July 2, 2021 (File No.

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

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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 June 21, 2019 (File No.

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.

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.

Fourth Amendment to Employment Agreement by and between Orion Group Holdings, Inc.

Buchler, effective June 30, 2021.

(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 July 2, 2021 (File No.

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

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(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.

Ninth amendment, effective March 1, 2022, 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.

and BOKF, NA dba Bank of Texas, as Co-Syndication Agents.

List of Subsidiaries.

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March 7, 2022

President, Chief Executive Officer and Director

President, Chief Executive Officer, Interim Chief Financial Officer and Director

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

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March 7, 2022

/s/ Robert L.

Vice President and Chief

Interim Chief Financial Officer

March 7, 2022

Financial Officer

/s/ Austin J.

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March 7, 2022

/s/ Margaret M.

/s/ Michael J.

March 7, 2022

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March 7, 2022

/s/ Margaret M.

March 7, 2022

/s/ Michael J.

/s/ Quentin P.

March 7, 2022

ORION GROUP HOLDINGS, INC.

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December 31, 2021

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID 185 )

Consolidated Balance Sheets at December 31, 2021 and 2020

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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, 2021, 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 7, 2022 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 leases as of January 1, 2019 due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842).

Basis for Opinion

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

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.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates 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 a critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of estimated costs at completion for certain long-term, fixed-priced construction contracts

As discussed in Note 2 to the consolidated financial statements, contract revenue is recognized over time because control of the promised goods and services is continually transferred to the customer.

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.

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

The Company reported contract revenues of $601.4 million, which included revenue related to long-term, fixed price construction contracts.

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

Evaluating the Company’s estimated costs at completion for contracts in progress involved auditor judgment given the variability and estimation uncertainty associated with 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 design and tested the operating effectiveness of certain internal controls over the Company’s revenue process, including controls over the estimation of costs to complete certain 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:

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

/s/ KPMG, LLP

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

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG, LLP

Houston , Texas

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Cash and cash equivalents

Restricted cash

Accounts receivable:

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Other current

Costs and estimated earnings in excess of billings on uncompleted contracts

Contract assets

Prepaid expenses and other

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Income taxes payable

Billings in excess of costs and estimated earnings on uncompleted contracts

Contract liabilities

Current portion of operating lease liabilities

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Gain on disposal of assets, net

Goodwill impairment charges

Other gain from continuing operations

Operating income (loss)

Operating (loss) income

Other (expense) income:

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Other expense, net

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Basic earnings (loss) per share

Diluted earnings (loss) per share

Shares used to compute income (loss) per share:

(Loss) income before income taxes

Income tax expense

Net (loss) income

Basic (loss) earnings per share

Diluted (loss) earnings per share

Shares used to compute (loss) income per share:

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

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Year ended December 31,

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)

Net (loss) income

Change in fair value of cash flow hedge, net of tax expense of $ 368 , tax benefit of $ 128 and tax benefit of $ 228 for the years ended December 31, 2021, 2020 and 2019, respectively

Total comprehensive (loss) income

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

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Balance, January 1, 2019

Adoption of ASC 606 (Note 2)

Stock-based compensation

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Stock-based compensation

Exercise of stock options

Issuance of restricted stock

Forfeiture of restricted stock

Purchase of vested stock-based awards

Cash flow hedge

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Stock-based compensation

Exercise of stock options

Issuance of restricted stock

Forfeiture of restricted stock

Purchase of vested stock-based awards

Payments related to tax withholding for share-based compensation

Cash flow hedge

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Cash flows from operating activities:

Net income (loss)

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

Net (loss) income

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

Operating activities:

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Gain on involuntary disposition of assets, net

Goodwill impairment charges

Allowance for credit losses

Other gain from continuing operations

Change in operating assets and liabilities:

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Prepaid expenses and other

Costs and estimated earnings in excess of billings on uncompleted contracts

Contract assets

Accounts payable

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Income tax payable

Billings in excess of costs and estimated earnings on uncompleted contracts

Contract liabilities

Net cash provided by (used in) operating activities

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Contributions to CSV life insurance

Proceeds from return of investment

Insurance claim proceeds related to property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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Loan costs from Credit Facility

Capital lease liability

Payments of finance lease liabilities

Purchase of vested stock-based awards

Payments related to tax withholding for share-based compensation

Exercise of stock options

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Net change in cash, cash equivalents and restricted cash

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Taxes, net of refunds

Non-cash investing activity:

Capital lease expenditures included in accrued expenses

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

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For the marine segment, the methods used, and the internal processes employed, to deliver marine construction services are similar throughout the segment, including standardized estimating, project controls and project management.

This segment has the same customers with similar funding drivers, and it complies with regulatory environments driven through Federal agencies such as the U.S.

This segment has the same customers with similar funding drivers and are subject to similar regulatory regimes driven through Federal agencies such as the U.S.

Army Corps of Engineers, U.S.

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The methods used, and the internal processes employed, to deliver concrete construction services are similar throughout the segment, including standardized estimating, project controls and project management.

This segment complies with regulatory environments such as OSHA.

The projects of this segment are subject to similar regulatory regimes such as OSHA.

Additionally, this segment is driven by macro-economic considerations, including movements in population, commercial real estate development, institutional funding and expansion, and recreational development, specifically in metropolitan areas of Texas.

These considerations, and others, are key catalysts for future prospects and are similar across the segment.

These considerations, and others, are key catalysts for current operations and future prospects and are similar across the segment.

Basis of Presentation

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All intercompany balances and transactions have been eliminated in consolidation.

In connection with preparing consolidated financial statements for each annual and interim reporting period, the Company is required to evaluate whether there are conditions or events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Substantial doubt exists when conditions and events, considered in aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans and actions that have not been fully implemented as of the date that the financial statements are

When substantial doubt exists, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both:

(1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued;

and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

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, our ability to manage spending on capital expenditures, limit spending on the ERP system implementation and improve working capital.

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.

Therefore, management’s conclusion is that substantial doubt is not raised as to our ability to continue as a going concern.

Summary of Significant Accounting Policies

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● Revenue recognition from construction contracts;

● Accounts receivable and allowance for credit losses;

● Property, plant and equipment;

● The recording of accounts receivable and allowance for credit losses;

● The carrying value of property, plant and equipment;

● Finite and infinite-lived intangible assets, testing for indicators of impairment;

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Revenue Recognition

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), on January 1, 2018, using the modified retrospective method.

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.

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

The Company’s projects are typically brief in duration, however may span a period of over one year.

The Company determines the appropriate accounting treatment for each contract before work begins and, subject to qualifications discussed in the next paragraph, generally records contract 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.

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

Revenue is recognized over time because control of the promised goods and services are continuously transferred to the customer over the life of the contract.

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.

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This method is used because management considers contract costs incurred to be the best available measure of progress on these contracts.

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

Contract costs include all direct costs, such as

material 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.

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The effect of changes in estimates of contract revenue or contract costs is recognized as an adjustment to recognized revenue on a cumulative catch-up basis.

When losses on uncompleted contracts are anticipated, the entire loss is recognized in the period in which such losses are determined.

When the Company anticipates a loss on a contract that is not yet complete, it recognizes the entire loss in the period in which such losses are determined.

Revenue is recorded net of any sales taxes collected and paid on behalf of the customer, if applicable.

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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:

Assets and liabilities derived from contracts with customers include the following:

● Accounts Receivable:

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Retainage - Represent amounts which have not been billed to or paid by customers due to retainage provisions in construction contracts, which amounts generally become payable upon contract completion and acceptance by the customer.

● Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts - Represent revenues recognized in excess of amounts billed, which management believes will be billed and collected within one year of the completion of the contract (i.e.

Contract Assets) and are recorded as a current asset, until such amounts are either received or written off.

● Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts - Represent billings in excess of revenues recognized (i.e.

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

● Contract Assets - Represent revenues recognized in excess of amounts billed, which management believes will be billed and collected within one year of the completion of the contract and are recorded as a current asset, until such amounts are either received or written off.

● Contract Liabilities - Represent billings in excess of revenues recognized and are recorded as a current liability, until the underlying obligation has been performed or discharged.

Classification of Current Assets and Liabilities

The Company includes in current assets and liabilities amounts realizable and payable in the normal course of contract completion.

Cash, Cash Equivalents and Restricted Cash

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

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Cash equivalents at December 31, 2021 and December 31, 2020 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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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.

Unbilled receivables on contracts, which are included in costs in excess of billings, arise as revenues are recognized over time.

Unbilled amounts on contracts represent recoverable costs and accrued profits not yet billed.

Unbilled receivables on contracts represent recoverable costs and accrued profits that are not yet capable of being billed under the terms of the applicable contracts.

Revenue associated with these billings is recorded net of any sales tax, if applicable.

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

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.

Past due balances over 90 days and other higher risk receivables identified by management are reviewed individually for collectability.

In establishing an allowance for credit losses, the Company evaluates its contract receivables and contract assets 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 with respect to a disputed receivable is reached for an amount that is less than the carrying value.

As of December 31, 2021, and December 31, 2020, the Company has recorded an allowance for credit losses of $ 0.3 million and $ 0.4 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.

1 unchanged sentence

Retainage at December 31, 2020 totaled $ 36.5 million.

The Company negotiates change orders and claims with its customers.

From time to time, the Company negotiates change orders and claims with its customers.

Unsuccessful negotiations of claims could result in a change to contract revenue that is less than amounts previously recorded, which could result in the recording of a loss in the amount of the shortfall.

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Other environmental costs are also charged to expense unless they increase the value of the property and/or provide future economic benefits, in which event the costs are capitalized.

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, 2020 or 2019.

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

The Company did not recognize any environmental liabilities as of December 31, 2021 or December 31, 2020.

Fair Value Measurements

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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.

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.

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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Ordinary maintenance and repairs that do not improve or extend the useful life of the asset are expensed as incurred.

Major renewals and betterments of equipment are capitalized and depreciated generally over three to seven years until the next scheduled maintenance.

Major renewals and betterments of equipment are capitalized and depreciated generally over three to ten years until the next scheduled maintenance.

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.

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

Depreciation 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

3 to 10 years

Buildings and improvements

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Office equipment

The Company generally uses accelerated depreciation methods for tax purposes where appropriate.

Dry-docking costs are capitalized and amortized using the straight-line method over a period ranging from three to 15 years .

The Company generally uses accelerated depreciation methods for tax purposes where beneficial.

Dry-docking costs are capitalized and amortized using the straight-line method over a period ranging from three to seven years .

Dry-docking costs include, but are not limited to, the inspection, refurbishment and replacement of steel, engine components, tailshafts, mooring equipment and other parts of the vessel.

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There were no assets classified as held for sale as of December 31, 2021 or December 31, 2020.

The Company adopted ASU 2016-02, Leases (Topic 842), on January 1, 2019, on a prospective basis, forgoing comparative reporting.

The Company elected to utilize the transition guidance within the new standard, which allows the Company to carryforward the historical lease classification.

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 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.

Management determines if a contract is or contains a lease at inception of the contract or modification of the contract.

A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration.

Control over the use of the identified asset means the lessee has both (a) the right to obtain substantially all of the economic benefits from the use of the asset and (b) the right to direct the use of the asset.

Finance and operating lease right-of-use (“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.

See Note 19 for more information regarding leases.

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The fair value of restricted stock grants is equivalent to the fair value of the stock issued on the date of grant and is measured as the closing price of the stock on the date of grant.

Compensation expense is recognized only for share-based payments expected to vest.

Compensation expense is recognized only for stock-based payments expected to vest.

The Company estimates forfeitures at the date of grant based on historical experience and future expectations.

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The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, Income Taxes which prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on its consolidated tax return.

The Company evaluates and records any uncertain tax positions based on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.

The Company evaluates and records any uncertain tax positions based

on the amount that management deems is more likely than not to be sustained upon examination and ultimate settlement with the tax authorities in the tax jurisdictions in which it operates.

See Note 13 for additional discussion of income taxes.

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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.

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.

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.

3 unchanged sentences

Actual claims may vary from estimates.

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

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

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

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The total accrual for insurance claims liabilities was $ 19.8 million and $ 60.4 million at December 31, 2021 and December 31, 2020, 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.

The total accrual for insurance claims receivable was $ 13.3 million and $ 57.0 million at December 31, 2021 and December 31, 2020, respectively, reflected as a component of other current accounts receivable in the consolidated balance sheet.

Recent Accounting Pronouncements

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All ASUs are adopted by their respective due dates and in the manner prescribed by the FASB.

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 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.

In December 2019, the FASB issued ASU 2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes (Topic 740).

This standard simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The standard also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 and interim periods within that year.

The adoption of this ASU had no material impact on the Company’s Consolidated Financial Statements.

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.

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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.

Both the marine and concrete segments have a single Executive 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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Included in the accompanying Consolidated Balance Sheets under the following captions:

Costs and estimated earnings in excess of billings on uncompleted contracts

Billings in excess of costs and estimated earnings on uncompleted contracts

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 Policies for discussion of the accounting for these claims.

Contract assets

Contract liabilities

Included in contract assets is approximately $ 3.8 million and $ 3.1 million at December 31, 2021 and December 31, 2020, respectively, related to claims and unapproved change orders.

See Note 2 to the Company’s consolidated financial statements 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.

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Construction in progress

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

During the year ended December 31, 2021 the Company sold its land, building and improvements located in Tampa, Florida.

The book value of the assets and related accumulated depreciation have been removed from the balance sheet and the Company recognized a net gain on the sale of $ 6.7 million.

For the years ended December 31, 2021, 2020 and 2019, depreciation expense was $ 21.1 million, $ 21.8 .

million and $ 23.5 .

million, respectively.

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

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

See Note 2 to the Company’s consolidated financial statements for further discussion of property and equipment.

Other Current Accounts Receivable

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Our concrete segment has life insurance policies with a combined face value of $ 11.1 million as of December 31, 2021.

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.

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"

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Other Fair Value Measurements

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.

The fair value of the Company’s debt at December 31, 2021 and 2020 approximated its carrying value of $ 39.4 .

million and $ 35.1 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

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

Intangible assets

The tables below present the activity and amortizations of finite-lived intangible assets:

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Customer relationships were valued at approximately $ 18.8 million and are being amortized over eight years using an accelerated method based on the pattern in which the economic benefits of the assets are consumed.

For the year ended December 31, 2020, $ 2.1 million of amortization expense was recognized for these assets.

For the years ended December 31, 2021, 2020 and 2019, $ 1.5 million, $ 2.1 million and $ 2.6 million, respectively, of amortization expense was recognized for these assets.

In 2021 and 2020, the Company evaluated the useful lives of these finite-lived intangible assets and no change was needed.

Future expense remaining of approximately $ 1.7 million will be amortized as follows:

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.

The annual impairment test for both 2021 and 2020 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 in each respective year.

Accrued Liabilities

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Accrued salaries, wages and benefits

Accrual for insurance claims liabilities

Accrued liabilities expected to be covered by insurance

Property taxes

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Total accrued liabilities

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which among other things includes an optional payment deferral of the employer's portion of the Social Security taxes that were otherwise due through December 31, 2020.

The Company elected to defer payments of approximately $ 7.6 million with $ 3.8 million paid in December 2021 and the remaining $ 3.8 million due December 2022 reflected in accrued liabilities in the Company’s Consolidated Balance Sheets.

Long-term Debt and Line of Credit

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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 was subsequently amended in March 2019 (the “Fifth Amendment”), May 2019 (the “Sixth Amendment”) June 2020 (the “Seventh Amendment”) and October 2020 (the “Eighth Amendment”).

The company incurred debt issuance costs related to the initial Credit Agreement and several of the subsequent amendments.

The Credit Facility matures on July 31, 2023.

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

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.

Additionally, the Company executed the Fifth Amendment during March 2019, which was made effective as of December 31, 2018, and executed the Sixth Amendment during May 2019.

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 scheduled for amortization using the effective interest rate method over the duration of the loan.

The Company incurred additional debt issuance costs of approximately $ 0.6 million and $ 0.9 million respectively for the Fifth and Sixth Amendments.

With the execution of the aforementioned Sixth Amendment, $ 50.0 million of the existing revolving line of credit was modified and accounted for under guidelines of ASC 470-50, Debt, Modifications and Extinguishments, and a pro-rated portion of unamortized debt issuance costs of approximately $ 0.4 million was recognized as interest expense as of May 2019.

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.

The then remaining debt issuance costs of approximately $ 0.9 million related to the Fourth, Fifth, and Sixth Amendments were scheduled to be amortized over the duration of the term loan, which coincides with the term of the Credit Facility.

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

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 364-Day Revolving Credit Facility provided for borrowings of up to $ 20 million under a new revolving line of credit.

No funds were ever drawn on the 364-Day Revolving Credit Facility.

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

Effective, October 9, 2020, the Company entered into the Eighth Amendment to 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.

There were no debt issuance costs incurred with respect to the Eighth Amendment.

The yearly weighted average interest rate for the Credit Facility as of December 31, 2021 was 2.60 %.

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Debt Issuance

Revolving line of credit

Term loan - current

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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.

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, 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.

As of December 31, 2021, the Company had $ 39.0 million of borrowings under the revolving line of credit.

There were $ 1.7 million in outstanding letters of credit as of December 31, 2021, which reduced the maximum borrowing availability on the revolving line of credit to $ 9.3 million.

During the year ended December 31, 2021, the Company drew down $ 53.0

million for general corporate purposes and made payments of $ 19.0 million on the revolving line of credit which resulted in a net increase of $ 34.0 million.

Provisions of the term loan

The original principal amount of $ 60.0 million for the term loan commitment is paid off in quarterly installment payments (as stated in the Credit Agreement).

At December 31, 2020, the outstanding term loan component of the Credit Facility totaled $ 30.1 million and was secured by specific assets of the Company.

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

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.

As of December 31, 2020, the term loan was designated as an Adjusted LIBOR Rate Loan with an interest rate of 2.44 %.

The original principal amount of $ 60.0 million for the term loan commitment was paid off in quarterly installment payments (as stated in the Credit Agreement).

During the quarter ended June 30, 2021, the term loan component of the Credit Facility was fully extinguished, in part using proceeds of the sale of property in Tampa, Florida (see Note 6 ).

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

Concurrent with extinguishing the term loan, the Company canceled the remaining open position on its 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 quarter ended June 30, 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.

The Company entered into a debt agreement with De Lage Landen Financial Services, Inc.

for the purpose of financing a piece of equipment purchased.

As of December 31, 2021, the carrying value of this debt is $ 0.4 million.

The agreement is secured by the financed equipment asset and the debt is included as a component of current debt and long-term debt on the Consolidated Balance Sheets.

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;

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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 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.

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.

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

For further details of the Ninth Amendment, see Note 20 in the Notes to the Financial Statements.

Derivative Financial Instruments

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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.

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

The sixth swap was 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 were 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 were recognized in current earnings.

Upon fully extinguishing the Term Loan during the quarter ended June 30, 2021, the Company canceled the remaining term of the sixth swap and no longer owns derivative financial instruments.

Other Long-Term Liabilities

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Deferred compensation

Accrual for insurance claims liabilities

Accrued liabilities expected to be covered by insurance

Total other long-term liabilities

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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:

The following table presents the components of our consolidated income tax expense for the years ended December 31, 2021, 2020 and 2019:

Year ended December 31, 2021

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Consolidated effective tax rate

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 2021, the Company’s effective tax rate differed from the statutory federal rate of 21 % primarily due to the valuation allowance related to the current year net loss.

In the year ended 2020, the Company’s effective tax rate differed from the statutory federal 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 federal 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.

Deferred Taxes

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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.

According to ASC subtopic 740-10, the Company’s history of losses 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, 2021, the Company continues to maintain a valuation allowance of $ 15.4 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.

This valuation allowance increased by $ 3.0 million during the year ended December 31, 2021 primarily to offset net operating losses generated during the current period.

Uncertain Tax Benefits

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The change in the total gross unrecognized tax benefits and prior year audit resolutions of the Company during the years ended December 31, 2021and 2020 are reconciled in the table below:

Balances at beginning of the year

Balance at beginning of the year

Additions based on tax position related to current year

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Lapse of statute of limitations

Balance at the end of year

Balance at end of the year

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

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The Company does not believe that its tax positions will significantly change due to any settlement and/or expiration of statutes of limitations prior to December 31, 2022.

Earnings (Loss) Per Share

Basic earnings (loss) per share is based on the weighted average number of common shares outstanding during each period.

Diluted earnings (loss) per share is based on the weighted average number of common shares outstanding as well as the effect of all dilutive common stock equivalents during each period net income is generated.

Earnings Per Share

Basic earnings per share is based on the weighted average number of common shares outstanding during each period.

Diluted earnings per share is based on the weighted average number of common shares outstanding as well as the effect of all dilutive common stock equivalents during each period net income is generated.

For the years ended December 31, 2021, 2020 and 2019, the Company had 831,077 , 1,159,440 , and 1,636,656 , securities, respectively, that were potentially dilutive in earnings per share calculations.

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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, 2021, 2020 and 2019.

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

The following table reconciles the denominators used in the computations of both basic and diluted earnings (loss) per share:

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

The following table reconciles the denominators used in the computations of both basic and diluted earnings per share:

Year ended December 31,

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Nonvested at January 1, 2019

Forfeited/repurchased shares

Forfeited shares

Nonvested at December 31, 2019

Forfeited/repurchased shares

Forfeited shares

Nonvested at December 31, 2020

Forfeited/repurchased shares

Forfeited shares

Nonvested at December 31, 2021

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In May 2021, the Company’s six independent directors each received equity compensation grants of 14,975 shares, with a fair value of $ 6.01 per share.

In September 2021, the Company granted an independent director 18,215 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 $ 5.49 .

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.

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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 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 May 2021, certain officers and executives of the Company were awarded 160,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 6.01 per share.

In September 2021, the Company granted an executive of the Company 9,901 shares of restricted common stock with a vesting period of three years and a fair value of $ 5.05 per share.

In December 2021, certain officers and executives of the Company were awarded 139,000 shares of restricted common stock with a vesting period of three years and a fair value of $ 3.75 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.

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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 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 .

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.

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 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.

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.

Performance Units

In May 2021, the Company awarded certain executives 240,000 performance-based units.

The performance-based units will potentially vest 100 % if the target is met, with 100 % of the units 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.

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

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 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.

The fair value of all units awarded on the date of the grant was $ 6.01 per unit.

In May 2020, the Company awarded certain executives 300,000 performance-based units.

The performance-based units 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 units 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 units awarded on the date of the grant was $ 2.26 per unit.

In August 2021, the Company determined the performance-based units awarded in May 2020 vested near 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, 2021.

As a result, the executives earned an additional 259,565 performance-based units with a fair value of $ 2.26 , 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 2019, the Company awarded certain executives 187,500 performance-based units.

The performance-based units 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 units 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 units awarded on the date of the grant was $ 1.96 per unit.

In August 2020, the Company determined the performance-based units 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 performance-based units 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.

Stock Options

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Exercisable at December 31, 2021

The Company calculates the fair value of each option on the date of grant using the Black-Scholes pricing model and the following weighted-average assumptions in each year:

Weighted average grant-date fair value of options granted

Risk-free interest rate

Expected volatility

Expected term of options (in years)

Dividend yield

The risk-free interest rate is based on interest rates on U.S.

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, 2021, 2020 and 2019, compensation expense related to stock based awards outstanding for the periods was $ 2.4 million, $ 2.0 million and $ 2.8 million, respectively.

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For the year ended December 31, 2021, expense related to the purchase of vested stock-based awards for certain officers of the Company was approximately $ 0.9 million.

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, 2021, the Company received proceeds of approximately $ 0.1 million upon the exercise of 28,546 options.

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.

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.

As of December 31, 2021, total unrecognized compensation expense related to unvested stock was approximately $ 3.2 million, which is expected to be recognized over a period of approximately 2.2 years.

Total intrinsic value of options exercised

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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, 2020, 2019 and 2018, the Company contributed less than $ 0.1 million, $ 0.1 million and $ 0.2 million, respectively.

At its discretion, the Company may make additional matching and

profit-sharing contributions.

During the year ended December 31, 2021, 2020 and 2019, the Company contributed $ 0.9 million, less than $ 0.1 million and $ 0.1 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.

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Commitments and Contingencies

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 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.

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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.

The Company has fully cooperated with the U.S.

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

The National Transportation Safety Board named the Company as a party of interest in their investigation.

A total of eight separate lawsuits were filed against the Company by certain crewmembers or their heirs under the general maritime law and the Jones Act.

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

District Court for the Southern District of Texas that requested consolidation of the lawsuits for procedural purposes since they all arose out of the same occurrence and sought 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 were required to 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.

The Company then filed a Default Motion with the Court which was granted on April 8, 2021 that barred the filing of any further claims.

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

As of December 31, 2021, we have recognized $ 206.7 million in total liabilities with respect to this incident, which includes approximately $ 192.0 million paid by the Company to date (including full settlements with 17 of the 18 crewmembers and wreck removal costs), and accruals totaling approximately $ 14.6 million for outstanding claims.

Since the end of the year the remaining crewmember claim has been settled, funded, and reimbursed, and the remaining property damages claim has settled, with funding and reimbursement pending.

Thus, all claims arising from the August 21, 2020 incident have been settled within insurance coverage limits, the carriers of such insurance have reimbursed the Company $ 189.6 million, to date, and the Company remains 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.

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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.

Settlement amounts were recorded in Other gain from continuing operations in the Condensed 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 Condensed Consolidated Balance Sheets.

As of December 31, 2021, the current portion of the notes receivable was $ 0.8 million and the non-current portion was $ 1.1 million, net of $ 0.1 million of unamortized discount.

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

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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Segment information for the periods presented is provided as follows:

December 31, 2020

December 31, 2019

Year Ended December 31,

Contract revenues

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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.

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.

There was less than $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the year ended December 31, 2021.

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

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The Company has operating and finance leases for office space, equipment and vehicles.

Management determines if a contract is or contains a lease at inception of the contract or modification of the contract.

A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period in exchange for consideration.

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.

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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Financing leases

(1) Upon adoption of the new lease standard, discount rates used for existing operating leases were established on January 1, 2019.

The components of lease expense are as follows:

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Long-term lease obligations

Selected Quarterly Financial Data (Unaudited)

The following tables set forth selected unaudited financial information for the eight quarters in the two-year period ended December 31, 2020.

This information has been prepared on the same basis as the audited financial statements and, in the opinion of management, contains all adjustments necessary for a fair presentation.

(in thousands, except per share data)

Operating income

Income before income taxes

Earnings per share:

(in thousands, except per share data)

Operating (loss) income

(Loss) income before income taxes

Net (loss) income

(Loss) earnings per share:

Subsequent Event

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.

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

This amendment to the Credit Agreement will among other things, waive covenant defaults, reset the revolver limit, implement an anti-cash hoarding provision and institute temporary covenant requirements.

As of the execution date, the amendment will require a minimum consolidated EBITDA of $ 2.6 million in the first quarter of 2022 and a minimum consolidated EBITDA of $ 7.7 million in the second quarter of 2022 on a year-to-date basis.

The consolidated leverage ratio requirement will be reinstated at not to exceed 3.00 times in the third quarter of 2022.

The consolidated fixed charge coverage ratio requirement will be reinstated at not to be less than 1.25 times in the fourth quarter of 2022.

Additionally, as of the execution date, the amendment will reduce the commitment on the revolving line of credit to $ 42.5 million.

With the execution of the Ninth Amendment, the existing Credit Facility will be treated as a modification of debt and accounted for under the guidelines of ASC 470-50, Debt, Modifications and Extinguishments.

The new debt issuance costs of approximately $ 1.0 million, inclusive of appraisal and bank consulting fees, related to the execution of the Ninth Amendment will be amortized through the maturity date.

ORION GROUP HOLDINGS, INC.

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

What changed 10-K

Item 9A. Controls and Procedures