What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2021-10-29 · 84 added, 149 removed, 136 unchanged (63% of the section changed)

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Unless the context otherwise indicates, all references in this quarterly report to “Orion,” “the Company,” “we,” “our,” or “us” are to Orion Group Holdings, Inc.

and its subsidiaries taken as a whole .

and its subsidiaries as a whole .

Certain information in this Quarterly Report on Form 10-Q, including but not limited to Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), may constitute forward-looking statements as such term is defined within the meaning of the “safe harbor” provisions of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

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We plan our operations and bidding activity with these factors in mind and they generally have not had a material adverse impact on the results of our operations in the past.

Third Quarter 2021 Recap and 2021 Outlook

In the quarter ended September 30, 2021, we recorded revenues of $139.9 million, of which $54.7 million was attributable to our marine segment and the remaining $85.2 million to our concrete segment.

First Quarter 2022 Recap and 2022 Outlook

In the quarter ended March 31, 2022, we recorded revenues of $174.9 million, of which $84.5 million was attributable to our marine segment and the remaining $90.4 million to our concrete segment.

In addition, we ended the quarter with a consolidated backlog of $604.1 million.

Our revenues in the quarter decreased by 26.1% as compared with the comparable prior year period and we recorded a net loss of $10.2 million, as compared with net income of $11.8 million in the comparable prior year period.

Looking toward the balance of 2021, the Company continues to focus on developing opportunities across the infrastructure, industrial, and building sectors through organic growth, greenfield expansion, and strategic acquisition opportunities.

Our revenues in the quarter increased by 14.1% as compared with the comparable prior year period and we recorded a net loss of $4.9 million, as compared with net income of $0.9 million in the comparable prior year period.

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

The spread of COVID-19 has impacted the global economy, leaving supply chains disrupted.

As the world uses tactics like “social distancing” and “stay at home orders” to slow and stop the spread of COVID-19, demand destruction has led to increased unemployment and to the weakening of consumer confidence.

Although to date the Company hasn’t experienced materially negative impacts from COVID-19, such as widespread project

stoppage/cancelations or a slowdown/stoppage of accounts receivables collections, any delays in the timing of future awards could create gaps in the Company’s project delivery schedule across quarterly periods.

The use of business practices like “social distancing” and “stay at home orders” to slow and stop the spread of COVID-19, led to increased unemployment and to the weakening of consumer confidence.

Although to date the Company hasn’t experienced materially negative impacts from COVID-19, such as widespread project stoppage/cancelations or a slowdown/stoppage of accounts receivables collections, we have had and may

continue to see disruptions to our operations as variants of the COVID-19 virus have caused increases in absenteeism rates among our workforce.

Further, any delays in the timing of future awards could create gaps in the Company’s project delivery schedule across quarterly periods.

Federal and State governments have increased spending as part of efforts to mitigate the impact of COVID-19 on the economy.

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

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

Marine Segment

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However, we have some concerns about the short-term outlook for and are closely monitoring the short and long-term cruise line capital expenditures as their current demand has been severely impacted by COVID-19.

Further, while we currently see bid opportunities from our private sector energy-related customers as they expand their marine facilities related to the storage, transportation and refining of domestically produced energy, we recognize that the timing of project awards may be impacted as a result of volatility of oil prices due to COIVD-19 related uncertainties.

Over the long-term, we expect to see bid opportunities in this sector from petrochemical-related businesses, energy exporters, and liquefied natural gas facilities.

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

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

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

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

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

● Potential opportunities related to the impending federal infrastructure bill.

● Potential opportunities related to the federal infrastructure bill.

Concrete Segment

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

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

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

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

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

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

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

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

● Potential opportunities related to the impending federal infrastructure bill.

● Potential opportunities related to the federal infrastructure bill.

Consolidated Results of Operations

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

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

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

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

September 30, 2021

June 30, 2021

March 31, 2022

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September 30, 2021

June 30, 2021

March 31, 2021

Marine segment

Concrete segment

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

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

We, however, remain optimistic in our end-markets and in the opportunities that are emerging across our various marketplaces as evidenced by the $2.0 billion of quoted bids outstanding at quarter end, of

which $103 million we are the apparent low bidder on or have been awarded contracts subsequent to the end of the quarter ended September 30, 2021.

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

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

Backlog has since increased significantly and we are optimistic in our end-markets and in the opportunities that are emerging across our various marketplaces as evidenced by the $2.1 billion of quoted bids outstanding at quarter end, of which $112 million we are the apparent low bidder on or have been awarded contracts subsequent to the end of the fiscal quarter ended March 31, 2022.

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

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

Three months ended September 30, 2021, compared with three months ended September 30, 2020

Three months ended September 30,

Three months ended March 31, 2022, compared with three months ended March 31, 2021.

Three months ended March 31,

(dollar amounts in thousands)

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Other expense, net

Income before income tax expense

Income tax (benefit) expense

Contract Revenues.

Contract revenues for the three months ended September 30, 2021 of $139.9 million decreased $49.6 million or 26.1% as compared to $189.4 million in the prior year period.

The decrease was primarily driven by the timing and mix of several large marine projects that had driven activity in the prior year, which were not replicated or replaced in the current year quarter.

This decrease was partially offset by increased production volumes in our concrete segment due to an increase in activity during 2021, including on several larger jobs in the current year period as compared to the prior year period.

Gross Profit.

Gross profit was $6.6 million for the three months ended September 30, 2021, compared to $22.5 million in the prior year period, a decrease of $15.9 million or 70.8%.

Gross profit in the third quarter was 4.7% of total contract revenues as compared to 11.9% in the prior year period.

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

Decreased project performance in the concrete segment was driven by inefficiencies in executing work from COVID-19 and weather-related impacts, along with cost overruns in the current period on the completion of one project.

Selling, General and Administrative Expense.

Selling, general and administrative ("SG&A") expenses were $15.7 million for the three months ended September 30, 2021 compared to $15.3 million in the prior year period, an increase of $0.5 million or 3.0%.

As a percentage of total contract revenues, SG&A expenses increased from 8.1% to 11.2%, primarily due to lower revenues in the current period.

The increase in SG&A dollars was driven primarily by an increase in ERP implementation expense, partially offset by a decrease in bonus expense as compared to the prior year period.

Gain on Disposal of Assets, net.

During the three months ended September 30, 2021 and 2020, we realized $0.8 million and $6.4 million, respectively, of net gains on disposal of assets.

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

Other Income, net of Expense.

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

Income Tax Expense.

We recorded tax expense of $1.0 million in the three months ended September 30, 2021, compared to tax expense of $0.3 million in the prior year period.

Our effective tax rate for the three months ended September 30, 2021 was (10.9)%, which differs from the federal statutory rate of 21% primarily due to the movement in the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Nine months ended September 30, 2021, compared with nine months ended September 30, 2020

Nine months ended September 30,

(dollar amounts in thousands)

Contract revenues

Cost of contract revenues

Selling, general and administrative expenses

Amortization of intangible assets

Gain on disposal of assets, net

Operating income (loss) from operations

Other (expense) income:

Interest income

Interest expense

Other expense, net

Income before income taxes

(Loss) income before income tax expense

Income tax expense

Net (loss) income

Contract Revenues.

Contract revenues for the nine months ended September 30, 2021 of $439.1 million decreased $100.7 million or 18.7% as compared to $539.8 million in the prior year period.

The decrease was primarily driven by severe winter weather that shut down most of Texas for seven to ten days in February 2021, a reduction in project activity compared to the prior year in the marine segment and decreased project performance and margins in the concrete segment.

Contract revenues for the three months ended March 31, 2022 of $174.9 million increased $21.6 million or 14.1% as compared to $153.3 million in the prior year period.

The increase was primarily driven by the start up on large jobs awarded in the second half of 2021 in the marine segment and increased cubic yard production on light commercial projects in the concrete segment.

Gross Profit.

Gross profit was $34.3 million for the nine months ended September 30, 2021, compared to $63.0 million in the prior year period, a decrease of $28.7 million or 45.5%.

Gross profit in the period was 7.8% of

total contract revenues as compared to 11.7% in the prior year period.

The decrease in gross profit dollars and percentage was driven by the decreased activity and volumes which negatively impacted revenue and contributed to an under recovery of indirect costs primarily related to decreased labor and equipment utilization as the result of the winter and spring weather delays in the current year period.

We also incurred decreased project performance in our concrete segment.

Gross profit was $12.8 million for the three months ended March 31, 2022, compared to $15.5 million in the prior year period, a decrease of $2.7 million or 17.1%.

Gross profit in the first quarter was 7.3% of total contract revenues as compared to 10.1% in the prior year period.

The decrease in gross profit dollars and percentage was primarily driven by write-downs in the concrete segment as a result of project conditions, reduced dredging volume in the current quarter and a change in the mix of work in the current period.

Selling, General and Administrative Expense.

Selling, general and administrative ("SG&A") expenses were $44.1 million for the nine months ended September 30, 2021 compared to $47.7 million in the prior year period, a decrease of $3.6 million or 7.5%.

As a percentage of total contract revenues, SG&A expenses increased from 8.8% to 10.0%.

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

Selling, general and administrative ("SG&A") expenses were $16.2 million for the three months ended March 31, 2022 compared to $14.6 million in the prior year period, an increase of $1.6 million or 10.5%.

As a percentage of total contract revenues, SG&A expenses decreased from 9.6% to 9.2%, primarily due to higher revenues in the current period.

The increase in SG&A dollars was driven primarily by additional consulting fees related to the management transition and additional property taxes, partially offset by reduced bonus expense.

Gain on Disposal of Assets, net.

During the nine months ended September 30, 2021 and 2020, we realized $9.8 million and $7.7 million, respectively, of net gains on disposal of assets.

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

See Note 6 – Property and Equipment in this form 10-Q for a further description of the sale of property.

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

During the three months ended March 31, 2022 and 2021, we realized $0.8 million and $1.6 million, respectively, of net gains on disposal of assets.

Other Income, net of Expense.

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

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

Income Tax Expense.

We recorded tax expense of $0.3 million in the nine months ended September 30, 2021, compared to tax expense of $1.7 million in the prior year period.

Our effective tax rate for the nine months ended September 30, 2021 was (6.3)%, which differs from the federal statutory rate of 21% primarily due to the movement in the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

We recorded tax expense of $1.3 million in the three months ended March 31, 2022, compared to tax expense of $0.2 million in the prior year period.

Our effective tax rate for the three months ended March 31, 2022 was (37.5)%, which differs from the federal statutory rate of 21% primarily due to the movement in the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Segment Results

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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 $3.0 million for the three months ended September 30, 2020 and $2.9 million and $9.2 million for the nine months ended September 30, 2021 and 2020, respectively.

Three months ended September 30, 2021 compared with three months ended September 30, 2020.

Three months ended September 30,

(dollar amounts in thousands)

Contract revenues

Marine segment

Public sector

Private sector

Marine segment total

Concrete segment

Public sector

Private sector

Concrete segment total

Operating (loss) income

Marine segment

Concrete segment

Marine Segment

Revenues for our marine segment for the three months ended September 30, 2021 were $54.7 million compared to $112.9 million for the three months ended September 30, 2020, a decrease of $58.2 million, or 51.5%.

The decrease was primarily driven by the timing and mix of several large projects which had significant activity in the prior year but were not repeated or replaced in the current year.

Operating loss for our marine segment for the three months ended September 30, 2021 was $5.0 million, compared to operating income of $12.0 million for the three months ended September 30, 2020, a decrease of $17.0 million.

Excluding the net gain on insurance recoveries and the recovery on a disputed receivable in the prior year operating loss was $8.3 million for the three months ended September 30, 2020, a decrease of $13.2 million.

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

Concrete Segment

Revenues for our concrete segment for the three months ended September 30, 2021 were $85.2 million compared to $76.6 million for the three months ended September 30, 2021, an increase of $8.6 million, or 11.3%.

This increase was primarily driven by increased production volumes due to the timing and mix of projects including larger light commercial jobs that burned in the current year quarter.

Operating loss for our concrete segment for the three months ended September 30, 2021 was $3.8 million, compared to operating income of $1.1 million for the three months ended September 30, 2020, a decrease of $4.9 million.

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

Nine months ended September 30, 2021 compared with nine months ended September 30, 2020.

Nine months ended September 30,

These corrections resulted in an offsetting change in operating income (loss) for each segment of $2.9 million for the three months ended March 31, 2021.

Three months ended March 31, 2022 compared with three months ended March 31, 2021.

Three months ended March 31,

(dollar amounts in thousands)

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Concrete segment total

Operating (loss) income

Operating income (loss)

Marine segment

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Marine Segment

Revenues for our marine segment for the nine months ended September 30, 2021 were $190.8 million compared to $290.5 million for the nine months ended September 30, 2020, a decrease of $99.7 million, or 34.3%.

The decrease was primarily attributable to the Texas winter storm in February 2021 and a reduction in project activity compared to the prior year period.

Operating income for our marine segment for the nine months ended September 30, 2021 was $6.5 million, compared to operating income of $21.6 million for the nine months ended September 30, 2020, a decrease of $15.1 million.

Excluding the impact of the sale of property in Tampa, Florida in the current year and the net gain on insurance recoveries and the recovery on a disputed receivable in the prior year operating loss was $0.2 million for the nine months ended September 30, 2021, compared to operating income of $17.8 million for the nine months ended September 30, 2020, a decrease of $18.0 million.

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

Revenues for our marine segment for the three months ended March 31, 2022 were $84.5 million compared to $72.1 million for the three months ended March 31, 2021, an increase of $12.4 million, or 17.1%.

The increase was primarily driven by the start up on large jobs awarded in the second half of 2021.

Operating income for our marine segment for the three months ended March 31, 2022 was $1.8 million, compared to operating income of $2.8 million for the three months ended March 31, 2021, a decrease of $1.0 million.

This decrease in operating income was primarily due to the decrease in gross profit margin noted above and the increase in selling, general and administrative expense noted above.

Concrete Segment

Revenues for our concrete segment for the nine months ended September 30, 2021 were $248.3 million compared to $249.2 million for the nine months ended September 30, 2021, a decrease of $1.0 million, or 0.4%.

This decrease resulted from decreased production volumes in the current year period, in part due to job delays caused by bad weather.

Operating loss for our concrete segment for the nine months ended September 30, 2021 was $7.6 million, compared to $0.1 million for the nine months ended September 30, 2020, an increase in operating loss of $7.5 million.

This increase in operating loss was primarily due to the aforementioned decreased production volumes due to weather related impacts, decreased project performance and lower margins on several projects during the 2021 period.

Revenues for our concrete segment for the three months ended March 31, 2022 were $90.4 million compared to $81.2 million for the three months ended March 31, 2021, an increase of $9.2 million, or 11.4%.

This increase was primarily driven by increased cubic yard production in light commercial projects.

Operating loss for our concrete segment for the three months ended March 31, 2022 was $4.7 million, compared to $0.8 million for the three months ended March 31, 2021, a decrease of $3.9 million.

This decrease in operating income was primarily due to the decline in project profits due to write-downs on several projects in addition to unabsorbed indirect expenses related to additional project management labor expense.

Liquidity and Capital Resources

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

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

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

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

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

At September 30, 2021, our working capital was $49.2 million, as compared with $54.8 million at December 31, 2020.

As of September 30, 2021, we had unrestricted cash on hand of $0.9 million.

Our borrowing capacity at September 30, 2021 was approximately $29.3 million.

At March 31, 2022, our working capital was $32.7 million, as compared with $36.2 million at December 31, 2021.

As of March 31, 2022, we had unrestricted cash on hand of $6.7 million.

Our borrowing capacity at March 31, 2022 was approximately $13.4 million.

Ninth Amendment to Revolving Credit Facility

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

For further details of the Ninth Amendment, see Note 11 in the Notes to the Financial Statements (of this Form 10-Q).

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

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

The following table provides information regarding our cash flows and our capital expenditures for the three and nine months ended September 30, 2021 and 2020:

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

The following table provides information regarding our cash flows and our capital expenditures for the three and months ended March 31, 2022 and 2021:

Three months ended

Nine months ended

September 30,

Net (loss) income

Adjustments to remove non-cash and non-operating items

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Change in operating assets and liabilities (working capital)

Cash flows (used in) provided by operating activities

Cash flows provided by operating activities

Cash flows (used in) provided by investing activities

Cash flows provided by (used) in financing activities

Cash flows used in financing activities

Capital expenditures (included in investing activities above)

Operating Activities.

During the three months ended September 30, 2021, we used approximately $7.0 million in cash in our operating activities.

The net cash outflow is comprised of $3.0 million of cash outflows from net loss, after adjusting for non-cash items and $4.0 million of cash outflows related to changes in net working capital.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Condensed Consolidated Statements of Cash Flows, were primarily driven by a $8.1 million outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period and a $1.2 million decrease in operating lease liabilities, partially offset by a $2.7 million inflow pursuant to the relative timing and significance of project progression and billings during the period and $2.6 million of other inflows.

During the nine months ended September 30, 2021, we generated approximately $4.2 million in cash from our operating activities.

The net cash inflow is comprised of $11.0 million of cash inflows from net income, after adjusting for non-cash items and $6.8 million of cash outflows related to changes in net working capital.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our

Condensed Consolidated Statements of Cash Flows, were primarily driven by a $12.0 million outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period, a $3.8 million decrease in operating lease liabilities during the period, partially offset by a $7.1 million inflow pursuant to the relative timing and significance of project progression and billings during the period and $1.9 million of other inflows.

During the three months ended March 31, 2022, we generated approximately $10.1 million in cash from our operating activities.

The net cash inflow is comprised of $2.2 million of cash inflows from net loss, after adjusting for non-cash items and $7.9 million of cash inflows related to changes in net working capital.

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Condensed Consolidated Statements of Cash Flows, were primarily driven by a $9.7 million inflow pursuant to the relative timing and significance of project progression and billings during the period, $2.5 million of inflows from the decrease in prepaid expense and other assets and $1.2 million of other inflows, partially offset by a $4.3 million outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period and a $1.2 million decrease in operating lease liabilities.

Investing Activities.

Capital asset additions and betterments to our fleet were $6.9 million in the three months ended September 30, 2021, as compared with $4.4 million in the three months ended September 30, 2020.

Proceeds from the sale of property and equipment were $0.9 in the three months ended September 30, 2021, as compared with $4.1 million in the three months ended September 30, 2020.

Capital asset additions and betterments to our fleet were $11.6 million in the nine months ended September 30, 2021, as compared with $9.4 million in the nine months ended September 30, 2020.

Proceeds from the sale of property and equipment were $25.6 in the nine months ended September 30, 2021, as compared with $5.8 million in the nine months ended September 30, 2020.

The increase in proceeds from the sale of property and equipment for the nine months ended September 30, 2021 is primarily related to the sale of our property in Tampa, Florida.

Capital asset additions and betterments to our fleet were $3.5 million in the three months ended March 31, 2022, as compared with $1.6 million in the three months ended March 31, 2021.

Proceeds from the sale of property and equipment were $0.7 in the three months ended March 31, 2022, as compared with $2.0 million in the three months ended March 31, 2021.

Financing Activities.

During the three and nine months ended September 30, 2021, we drew down $13.0 million and $33 million, respectively from our revolving line of credit.

During the nine months ended September 30, 2021 we repaid $19 million on our revolving line of credit.

During the three months ended June 30, 2021 we fully extinguished the term loan portion of our Credit Facility, in part using proceeds from the sale of property in Tampa, Florida.

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

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

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

During the three months ended March 31, 2021, we repaid $11.6 million on our revolving line of credit, had payments of $0.6 million on finance lease liabilities and incurred $0.5 million of loan costs related to the Ninth Amendment of the Credit Facility.

Sources of Capital

As of September 30, 2021, our available sources of capital consist of borrowing availability on our revolving line of credit of $29.3 million pursuant to our Credit Facility.

As of March 31, 2022, our available sources of capital consist of borrowing availability on our revolving line of credit of $13.4 million pursuant to our Credit Facility.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

• Consolidated EBITDA minimum of:

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

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

• Consolidated Leverage Ratio

- Fiscal Quarter Ending September 30, 2022 and each Fiscal Quarter thereafter, maximum of 3.00 to 1.00

• Consolidated Fixed Charge Coverage Ratio

- Fiscal Quarter Ending December 31, 2022 and each Fiscal Quarter thereafter, minimum of 1.25 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;

breaches of representations and warranties that are not timely cured;

violation of covenants;

bankruptcy and insolvency events;

and events constituting a change of control.

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

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Our ability to obtain surety bonds depends on our capitalization, working capital, past performance and external factors, including the capacity of the overall surety market.

At September 30, 2021, the capacity under our current bonding arrangement was at least $750 million, with approximately $85 million of projects being bonded.

At March 31, 2022, the capacity under our current bonding arrangement was at least $750 million, with approximately $235 million of projects being bonded.

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

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis