What changed in this filing

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Item 1A. Risk Factors

2023-03-16 compared with 2022-03-07 · 54 added, 73 removed, 227 unchanged (36% of the section changed)

9 unchanged sentences

Many of these contracts include express or implied certifications of compliance with applicable laws and contract provisions.

Any violations of these regulations could bring about litigation, including the possibility of qui tam (“whistleblower”) litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, and could cause termination of other existing government contracts and result in the loss of future government contracts.

Any violations of these regulations could bring about litigation,

including the possibility of qui tam (“whistleblower”) litigation brought by private individuals on behalf of the government under the Federal Civil False Claims Act, and could cause termination of other existing government contracts and result in the loss of future government contracts.

Due to the significant competition in the marketplace and the level of regulations on government contracts, we could suffer reductions in new projects and see lower revenues and profit margins on those projects, which could have a material adverse effect on the business, operating results and financial condition.

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These attacks or armed conflicts may affect our operations or those of our customers or suppliers and could impact our revenues, our production capability and our ability to complete contracts in a timely manner.

The current COVID-19 pandemic has affected and may continue to adversely affect our business and results of operations and financial condition.

In March of 2020, there was an outbreak of a pandemic, and the President of the United States declared the outbreak a national emergency.

In response to the COVID-19 pandemic, federal, provincial, state, county and local governments and public health organizations and authorities around the world implemented a variety of measures intended to control the spread of the virus, including quarantines, “shelter-in-place,” “stay-at-home” and similar orders, travel restrictions, school closures, business curtailments and closures, social distancing and hygiene requirements, and other measures.

We provide a broad range of specialty construction services in the infrastructure, industrial and building sectors of the continental United States, Alaska, Canada and the Caribbean Basin , which are generally considered essential services exempt from many of the above measures.

Since March 2020, when the World Health Organization declared the COVID-19 to be a global pandemic, we have continued to provide these services to our customers, but with added focused attention on the safety and health of our employees.

However, the COVID-19 pandemic and related governmental and business responses has had and may continue to have an adverse effect on the markets we derive project opportunities from, our customers, and our operations.

Several private sector markets from which we derive project opportunities have been and

may continue to be impacted by the COVID-19 pandemic.

Customers in these impacted markets have delayed and may continue to delay both near term and future projects due to macroeconomic factors driven by the COVID-19 pandemic.

These delays have and may continue to negatively impact our ability to acquire new projects from increased competition due to fewer projects being available in the market place.

Supply chains for materials incorporated into the building of our projects and for our equipment used to complete our projects have been and may continue to be impacted.

Labor markets have been and may continue to be impacted by COVID-19 related government transfer payments and other pandemic related factors, which have and may continue to result in a lower workforce participation rate.

Additionally, as a result of the pandemic and various governmental orders, we have altered our operations to allow for appropriate social distancing and hygiene, which has led to decreased efficiency and productivity in our workforce and our operations, and a significant number of our corporate employees have been working from home.

We have had and may continue to see disruptions to our operations as variants of the COVID-19 virus cause increases in absenteeism rates among our workforce.

In addition, management is focused on mitigating the effects of the COVID-19 pandemic, which has required and will continue to require a substantial investment of time, energy, resources and focus.

The extent to which the COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that are uncertain and that we are not able to predict, including:

the severity of the virus;

the duration and scope of the pandemic;

the impact of the vaccines and their effectiveness against COVID-19 and its evolving variants;

governmental, business, individual and other actions taken in response to the pandemic;

the effect on our suppliers and disruptions to the global supply chain;

the impact on economic activity;

the extent and duration of the impact on consumer and business confidence and spending;

the effect on our end-user customers;

the effect of any closures or other changes in operations of our and our suppliers’, distributors’ and end-user customers’ facilities;

the health of and the effect on our employees and our ability to meet staffing needs in our construction and other critical functions, particularly if employees become ill, are quarantined as a result of exposure, or are reluctant to show up for work;

our ability to provide services, including as a result of travel restrictions, work from home requirements and arrangements, and other restrictions or changes in behavior or preferences for interactions;

the effect on employee healthcare costs;

restrictions or disruptions to transportation, including reduced availability of ground, sea or air transport;

the ability of our end-user customers to pay for our services;

the potential effects on our internal controls, including those over financial reporting, as a result of changes in working arrangements that are applicable to our employees and business partners;

and the effect on our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of any economic recession that has occurred or may occur in the future.

We depend on continued growth in population in our geographic market areas in Texas to support residential and nonresidential construction for our concrete construction segment.

Demand for our services may decrease due to economic recession or a reduction of demand in end markets of our customers.

Our concrete segment depends on continued growth in population in our geographic market areas in Texas to support residential and nonresidential construction.

A growing population generates economic growth and expansion in construction for retail, office buildings, etc.

If the population decreases or slows in growth, it often times adversely affects economic growth, which ultimately limits the need for residential and nonresidential construction services in the areas we currently perform services.

If the population decreases or slows in growth, it may adversely affect economic growth and ultimately limit the need for residential and nonresidential construction services in the areas we currently perform services.

Moreover, even when the underlying economic fundamentals that ordinarily drive the level of construction activity are strong, the level of economic activity in such markets may be suppressed during inflationary periods that are accompanied by increasing interest rates.

There is a risk that, if the Federal Reserve Board continues to increase interest rates to respond to inflation concerns, our concrete business could see a reduction in demand.

The timing of new contracts may result in volatility in our cash flow and profitability.

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In some cases, we may be required to bear the cost of a readily available workforce and fleet of equipment that is larger than needed at the time, resulting in unpredictability in our cash flow, expenses and profitability.

If an expected contract award or the related notice to proceed is delayed or not received,

we could incur substantial costs without receipt of any corresponding revenues.

Delays by our customers in obtaining required approvals and permits for their infrastructure projects may delay their awarding contracts for those projects and, once awarded, the ability to commence construction under those contracts.

If an expected contract award or the related notice to proceed is delayed or not received, we could incur substantial costs without receipt of any corresponding revenues.

Delays by our customers in obtaining

required approvals and permits for their infrastructure projects may delay their awarding contracts for those projects and, once awarded, the ability to commence construction under those contracts.

Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments by a customer and may expose us to potential credit risk if such customer should encounter financial difficulties.

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Any such predictions may be impacted by these factors as well as others that are beyond our control and might not turn out to be accurate.

Fluctuations in commodity prices may affect our customers’ investment decisions and therefore subject us to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards.

Fluctuations in commodity prices or interest rates may affect our customers’ investment decisions and therefore subject us to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards.

Additionally, fluctuations in commodity prices can negatively affect our project costs.

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To the extent commodity prices decline or fluctuate and our customers defer new investments or cancel or delay existing projects, the demand for our services decreases, which may have a material adverse impact on the business, financial condition, and results of operations.

Additionally, rising interest rates may affect the cost of financing for our customers’ capital projects and investments.

These increased costs may affect their capacity and willingness to undertake new investments, and may result in the delay or cancellation of projects they would otherwise undertake.

Commodity prices can also strongly affect the costs of projects.

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Our contracts are typically entered into on a project-by-project basis, so we generally do not have continuing contractual commitments with our customers beyond the terms of the current contract.

We benefit from key customer relationships built over time and with both public and private entities.

We benefit from key customer relationships

built over time and with both public and private entities.

We also benefit from our reputation in the marine and concrete construction markets developed over years of successfully performing on projects.

Both of these aspects of our business were developed and are maintained through our executives and key project managers.

Our inability to retain our executives

and key project managers or inability to complete projects timely and successfully resulting in customer satisfaction could have a material adverse effect on our current customer relationships and reputation.

Our inability to retain our executives and key project managers or inability to complete projects timely and successfully resulting in customer satisfaction could have a material adverse effect on our current customer relationships and reputation.

The inability to maintain relationships with our customers in general or obtain new customers based on our reputation could have a material adverse effect on our business, operating results and financial condition.

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Restrictions on foreign ownership of our vessels could limit our ability to sell off any portion of our marine construction segment or result in the forfeiture of our vessels or in our inability to continue our operations in United States navigable waters.

The Dredging Act, the Jones Act, the Shipping Act and the Vessel Documentation Act require vessels engaged in the transport of merchandise or passengers between two points in the United States or dredging in the navigable waters of the United States to be owned and controlled by United States citizens.

The Foreign Dredge Act of 1906, the Merchant Marine Act of 1920 (the “Jones Act”), the Shipping Act of 1984 and the Vessel Documentation Act require vessels engaged in the transport of merchandise or passengers between two points in the United States or dredging in the navigable waters of the United States to be owned and controlled by United States citizens.

The United States citizen ownership and control standards require the vessel-owning entity to be at least 75% U.S.

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As a result, the sales price for that portion of our marine segment may not attain the amount that could be obtained in an unregulated market.

The COVID-19 pandemic affected and may again adversely affect our business and results of operations and financial condition.

The COVID-19 pandemic and related governmental and business responses had and may again have an adverse effect on the markets we derive project opportunities from, our customers, and our operations.

The extent to which the COVID-19 pandemic could again impact us will depend on numerous evolving factors and future developments that are uncertain and that we are not able to predict, including:

the timing, extent, trajectory and duration of the pandemic;

the emergence of new variants;

the development, availability, distribution and effectiveness of vaccines and treatments;

the imposition of protective public safety measures;

and the impact of the pandemic on the global economy and demand for our products and services.

Although the COVID-19 pandemic has subsided, we could again experience adverse impacts to our business as a result of any related economic recession that occurred or may occur in the future from COVID-19 or other similar global pandemics.

Risk Factors Relating to Our Employees

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We maintain insurance to cover claims that arise from injuries to our workforce subject to a deductible.

During 2021, we recorded less than $0.1 million of expense for our self-insured portion of these liabilities.

We believe our recorded self-insurance reserves represent our best estimate of the outcomes of these claims.

During 2022, we recorded $0.3 million of expense for our self-insured portion of these liabilities.

We believe our recorded self-insurance reserves

represent our best estimate of the outcomes of these claims.

Should negative trends persist;

1 unchanged sentence

General Risk Factors

Our strategy of growing through strategic acquisitions may not be successful.

We may pursue growth through the acquisition of companies or assets that will enable us to broaden the types of projects we execute and also expand into new markets.

We have completed several acquisitions and plan to consider strategic acquisitions in the future.

We may be unable to implement this growth strategy if we cannot identify suitable companies or assets or reach agreement on potential strategic acquisitions on acceptable terms.

Moreover, an acquisition involves certain risks, including:

● difficulties in the integration of operations, systems, policies and procedures;

● enhancements in our controls and procedures including those necessary for a public company may make it more difficult to integrate operations and systems;

● failure to implement proper overall business controls, including those required to support our growth, resulting in inconsistent operating and financial practices at companies we acquire or have acquired;

● termination of relationships with the key personnel and customers of an acquired company;

● additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls;

● the incurrence of environmental and other liabilities, including liabilities arising from the operation of an acquired business or asset prior to our acquisition for which we are not indemnified or for which the indemnity is inadequate;

● disruption of or receipt of insufficient management attention to our ongoing business;

● inability to realize the cost savings or other financial benefits that we anticipate.

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms.

Moreover, to the extent an acquisition transaction financed by non-equity consideration results in additional goodwill, it will reduce our tangible net worth, which might have an adverse effect on our credit and bonding capacity.

Systems and information technology interruption or failure and data security breaches could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.

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Risk Factors Relating to Our Indebtedness and Financing Plans

Our bonding requirements may limit our ability to incur indebtedness.

We generally are required to provide various types of surety bonds that provide an additional measure of security for our performance under certain government and private sector contracts.

Our ability to obtain surety bonds depends upon various factors including our capitalization, working capital and amount of our indebtedness.

In order to help ensure that we can obtain required bonds, we may be limited in our ability to incur additional indebtedness that may be needed for potential acquisitions and operations.

Our inability to incur additional indebtedness could have a material adverse effect on our business, operating results and financial condition.

Our indebtedness requires significant debt service payments that could adversely affect our financial condition and prevent us from fulfilling our obligations under our indebtedness.

Our indebtedness includes covenants and obligations with regard to our business activities that may restrict our ability to take certain actions which may negatively affect our financial condition.

At December 31, 2022, our total indebtedness under the Credit Agreement was approximately $35.0 million.

We must comply with various affirmative and negative covenants contained in our Credit Agreement, some of which may restrict

the way in which we would like to conduct our business.

We must comply with various affirmative and negative covenants contained in our Credit Agreement, some of which may restrict the way in which we would like to conduct our business.

Among other things, our requirements under out debt instruments could potentially limit our ability to:

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● place us at a competitive disadvantage as compared to our competitors that have less debt.

We may incur additional indebtedness in the future under our existing Credit Agreement, by issuing debt instruments, under new credit agreements, under joint venture credit agreements, under capital leases or synthetic leases, on a project-finance or other basis or a combination of these.

If we incur additional indebtedness in the future, it likely would be under our existing Credit Agreement or under arrangements that may have terms and conditions at least as restrictive as those contained in our existing Credit Agreement.

We may incur additional indebtedness in the future by issuing debt instruments, under new credit agreements, under joint venture credit agreements, under capital leases or synthetic leases, on a project-finance or other basis or a combination of these.

If we incur additional indebtedness in the future, it likely would be under arrangements that may have terms and conditions at least as restrictive as those contained in our existing Credit Agreement.

At December 31, 2022, available capacity to borrow on the revolving lines of credit was $6.0 million.

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Our current Credit Agreement expires on July 31, 2023.

Failure to secure a new credit facility could restrict our access to capital, which may prevent us from funding our operations or from engaging in certain transactions which might otherwise be considered beneficial to us.

Additionally, rising interest rates may increase our cost of capital and, therefore, reduce the amount of capital available to fund our operations.

The Company’s ability to continue as a going concern is dependent upon obtaining sufficient liquidity to repay its existing credit facility through a combination of proceeds from new debt, proceeds from the sale of underutilized assets, and operating cash flow.

As the Company’s refinancing activities are ongoing, there can be no assurances that the Company will be able to secure financing on terms that are acceptable to the Company or at all.

An explanatory paragraph is included in the report of our independent registered public accounting firm contained in this Annual Report describing an uncertainty about our ability to continue as a going concern.

The inclusion of this explanatory paragraph related to going concern is considered an event of noncompliance with the Credit Agreement.

We have received a consent for this noncompliance with the Credit Agreement from our lenders.

We are negotiating with new financing sources to refinance the indebtedness under our Credit Agreement, which is due on July 31, 2023, but we cannot assure we will complete the refinancing before the maturity date or the expiration date of the lenders’ consent.

Our current Credit Agreement expires on July 31, 2023, and all amounts there under are due on such date.

The consent from our lenders expires on May 1, 2023.

The Company does not presently have sufficient cash or other sources of liquidity to repay the debt under Credit Agreement at maturity or the expiration date of the consent.

We are presently negotiating with financing sources to refinance the indebtedness under the Credit Agreement, but there is no assurance we will complete the financing before the maturity date, the expiration of the consent or at all.

Our negotiation with financing sources is a rapidly evolving situation.

Failure to secure a new credit facility before the maturity date of the Credit Agreement or expiration of the consent from the lenders could restrict our access to capital which could prevent us from repaying amounts borrowed under our existing credit facility, from funding our operations, or from engaging in certain transactions which might otherwise be considered beneficial to us.

In this event, we may be required to delay, limit, reduce, or terminate certain commercial efforts or strategies, may need to accelerate or add to planned disposals of certain equipment, real estate, or other assets, and may be prevented, or hindered from pursuing or performing contracts, all of which could adversely affect our business and stockholders.

As described in Note 11 of the Notes to the Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, we had $35.0 million of outstanding indebtedness under our Credit Facility as of December 31, 2022.

Because that Credit Agreement matures on July 31, 2023, and we have not yet completed the work necessary to refinance the outstanding indebtedness under the Credit Agreement, our independent registered public accounting firm included in its report covering our audited financial statements for the period ended December 31, 2022, an explanatory paragraph describing the uncertainty about our ability to continue as a going concern.

Please see the Notes to the Consolidated Financial Statements beginning on page F-10 of this Annual Report on Form 10-K.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

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If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed will remain the same, and our net income and operating cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.