What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-03-07 · 108 added, 113 removed, 241 unchanged (48% of the section changed)

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and its consolidated subsidiaries.

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

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

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

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

Its concrete segment services the building sector by providing turnkey concrete construction services including place and finish, site preparation, layout, forming, and rebar placement for large commercial structural and other associated business areas.

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

Our contracts are obtained primarily through competitive bidding in response to “requests for proposals” by federal, state and local agencies and through negotiation and competitive bidding with private parties and general contractors.

Our bidding activity and strategies are affected by such factors as our backlog, current utilization of equipment and other resources, job location, our ability to obtain necessary surety bonds and competitive considerations.

Our bidding activity and strategies are affected by factors such as our backlog, current utilization of equipment and other resources, job location, our ability to obtain necessary surety bonds and competitive considerations.

The timing and location of awarded contracts may result in unpredictable fluctuations in the results of our operations.

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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.

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

See “Liquidity and Capital Resources” below for more information.

2022 Recap and 2023 Outlook

In 2022, we recorded revenues of $748.3 million, of which $339.2 million was attributable to our marine segment and the remaining $409.1 million to our concrete segment.

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

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

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

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.

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.

In addition, we ended 2022 with a consolidated backlog of $448.8

Our revenues in 2022 increased by 24.4% as compared with 2021 and we recorded a net loss of $12.6 million, as compared with net loss of $14.6 million in the prior year.

Looking toward 2023, the Company continues to focus on developing opportunities across the infrastructure, industrial, and building sectors through organic growth.

Although to date the Company hasn’t experienced materially negative impacts from COVID-19, we have had and may continue to see some disruption to our operations due to variants of the COVID-19 virus that caused temporary increases in absenteeism rates among our workforce and other impacts to supply chains and labor markets.

Marine Segment

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We continue to see bid opportunities to help maintain and expand the infrastructure that facilitates the movement of goods and people on or over waterways.

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, opportunities under the Tourist Opportunities and Revived Economies of the Gulf Coast States Act (the “RESTORE Act”) may arise into 2022.

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

Cruise line capital expenditures have yet to recover significantly from the pullback due to COVID-19, however we anticipate that, with continued recovery of end customer demand, we will see renewed interest in capital improvements from these customers.

Opportunities from local port authorities and private clients are expected to expand over the long-term due to the need to accommodate larger ships and deeper drafts because of the expanded Panama Canal.

Though the pace of bidding opportunities from the U.S.

Army Corps of Engineers slowed towards the end of 2022, significant approved funding for USACE projects leads us to believe that we will see this translate into an increase in bid opportunities as we progress through 2023.

The Coastal Protection and Restoration Authority (“CPRA”) has a $1.35 billion budget for fiscal 2023, and our capabilities are well-suited to win a portion of this spending.

In addition to these, the $1.2 trillion Infrastructure Investment and Jobs Act contains billions of dollars allocated to ports and water infrastructure, bridges, and causeways.

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

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

● Continuing need to repair and improve degrading U.

● Continuing need to repair and improve degrading U.S.

marine infrastructure;

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● Renewed focus on coastal rehabilitation along the Gulf Coast, particularly through the use of RESTORE Act funds based on fines collected related to the 2010 Gulf of Mexico oil spill;

● Funding for highways and transportation under successor Acts to the FAST Act;

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

● Potential opportunities related to the federal infrastructure bill.

● Funding for highways and transportation under successor Acts to the Fixing America’s Surface Transportation Act;

● Nearly $7 billion of federal funding provided by the US Army Core of Engineers (“USACE”) in connection with disaster recovery in Texas;

● Opportunities related to the Infrastructure Investment and Jobs Act (IIJA).

Concrete Segment

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

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

their positions as leading destinations for population and business growth.

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 macroeconomic impacts.

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

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

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● Population growth in the state of Texas driven by corporate relocations;

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

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

● Continued investment in warehouse/distribution space in our core markets;

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

● Potential opportunities related to the federal infrastructure bill.

● Potential opportunities related to the Infrastructure Investment and Jobs Act (IIJA).

Consolidated Results of Operations

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Concrete segment

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

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

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

The sequential decline in backlog was due to a lower book-to-bill ratio in the concrete segment which was driven by more disciplined bidding practices and an effort to reduce exposure to under-performing projects.

We are optimistic in our end-markets and in the opportunities that are emerging across our various marketplaces as evidenced by the $2.4 billion of quoted bids outstanding at quarter end, of which over $582 million we are the apparent low bidder on or have been awarded contracts subsequent to the end of the fiscal year ended December 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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Contract Revenues.

Contract revenues for the year ended December 31, 2022 of $748.3 million increased $146.9 million or 24.4% as compared to $601.4 million in the prior year period.

The increase was primarily driven by the start of large jobs awarded in the second half of 2021 in the marine segment, higher volume in the concrete segment, and the impact from claims and unapproved change orders recognized related to work primarily incurred in previous periods.

Gross Profit.

Gross profit was $50.7 million for the year ended December 31, 2022, compared to $41.0 million in the prior year period, an increase of $9.7 million or 23.9%.

Gross profit in both periods was 6.8% of total contract revenues.

The increase in gross profit dollars was primarily driven by the impact from claims and unapproved change orders recognized related to work primarily incurred in previous periods and the release of discretionary project bonuses.

Selling, General and Administrative Expense.

SG&A expenses were $62.5 million for the year ended December 31, 2022, compared to $60.2 million in the prior year period, an increase of $2.3 million or 3.9%.

As a percentage of total contract revenues, SG&A expenses decreased from 10.0% to 8.4% primarily due to higher revenues in the current period.

The increase in SG&A dollars was driven primarily by severance, consulting fees related to the management transition and property tax true-ups in the current year period, partially offset by a decrease in ERP implementation expense.

Gain on Disposal of Assets, net.

During the year ended December 31, 2022 and 2021, we realized $5.0 million and $11.4 million, respectively, of net gains on disposal of assets.

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

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

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 prior 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 $0.4 million in the year ended December 31, 2022, compared to tax expense of $0.5 million in the prior year period.

Our effective tax rate for the year ended December 31, 2022 was (3.5)%, which differs from the federal statutory rate of 21% primarily due to the tax impact from the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

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

Contract Revenues.

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

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Selling, General and Administrative Expense.

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

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

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

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

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

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

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

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

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

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

Contract Revenues.

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

Gross Profit.

Gross profit was $84.7 million for the year ended December 31, 2020, compared to $64.0 million in the prior year period, an increase of $20.7 million or 32.3%.

Gross profit for the year ended December 31, 2020 was 11.9% of total contract revenues as compared to 9.0% in the prior year period.

The increase in gross profit dollars and percentage were primarily driven by margin improvement on projects and efficiencies in labor and equipment utilization.

Selling, General and Administrative Expense.

Selling, general and administrative ("SG&A") expenses were $65.1 million for the year ended December 31, 2020 compared to $61.0 million in the prior year period, an increase of $4.1 million, or 6.4%.

As a percentage of total contract revenues, SG&A expenses increased from 8.7% to 9.3%.

The increase in both dollars and percentage was primarily attributable to the increased accrual of the annual incentive compensation plan during the current year period as compared to the prior year period.

Gain on Disposal of Assets, net.

During the year ended December 31, 2020, we realized $6.2 million of net gains on sales of assets and $2.9 million of net gains on insurance recoveries from involuntary dispositions of assets.

This compared to realizing $1.8 million of net gains on the assets we sold during the 2019 comparative period.

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 $2.0 million for the year ended December 31, 2020, compared to tax expense of $1.9 million in the prior year period.

Our effective tax rate for the year ended December 31, 2020 was 8.9%, which differs from the federal statutory rate of 21% primarily due to the movement in the valuation allowance for current year activity, state income taxes and the non-deductibility of other permanent items.

Our effective tax rate for the year ended December 31, 2021 was (3.6)%, which differs from the federal statutory rate of 21% primarily due to the valuation allowance related to the current year net loss.

Segment Results

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

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

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

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

Year ended December 31,

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Marine Segment

Revenues for our marine segment for the year ended December 31, 2022 were $339.2 million compared to $263.9 million for the year ended December 31, 2021, an increase of $75.3 million, or 28.5%.

The increase was primarily driven by the start of large jobs awarded in the second half of 2021 and the impact from claims and unapproved change orders recognized related to work primarily incurred in previous periods.

Operating income for our marine segment for the year ended December 31, 2022 was $9.8 million, compared to operating income of $5.8 million for the year ended December 31, 2021, an increase of $4.0 million.

Excluding the impact of the sale of property in Tampa, Florida in the prior year, operating income was $9.8 million for the year ended December 31, 2022, compared to an operating loss of $0.6 million for the year ended December 31, 2021, an increase of $10.5 million.

This increase in operating income was primarily due to the increase in revenue noted above, the impact from claims and unapproved change orders recognized related to work primarily incurred in previous periods, the gain on the disposal of excess equipment and the release of discretionary project bonuses, partially offset by the increase in SG&A expense noted above.

Concrete Segment

Revenues for our concrete segment for the year ended December 31, 2022 were $409.1 million compared to $337.5 million for the year ended December 31, 2021, an increase of $71.6 million, or 21.2%.

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

Operating loss for our concrete segment for the year ended December 31, 2022 was $17.8 million, compared to $15.1 million for the year ended December 31, 2021, an increase in operating loss of $2.7 million.

This increase in operating loss 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, partially offset by the release of discretionary project bonuses.

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

Marine Segment

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

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

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

Marine Segment

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

Operating income for our marine segment for the year ended December 31, 2020 was $29.8 million, compared to operating income of $12.8 million for the year ended December 31, 2019, an increase of $17.0 million.

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

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

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

Concrete Segment

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

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

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

Critical Accounting Estimates

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Revenue Recognition

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

We 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 our marine and concrete segments were evaluated in order to determine the impact as of the date of adoption.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Our revenue is derived from contracts to provide marine construction, dredging, turnkey concrete services, and other specialty services.

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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.

These estimates are

subject to uncertainties and require judgment.

Estimates of 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.

Upfront costs, such as incurring costs to mobilize personnel and equipment prior to satisfying a performance obligation are capitalized and amortized over the contract performance period.

These estimates consider historical performance, the complexity of the work to be performed, the estimated time to complete the project, and other economic factors such as inflation and market rates.

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

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Under the liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those

temporary differences are expected to be recovered or settled.

Under the liability method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

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Liquidity and Capital Resources

Our primary liquidity needs are to finance our working capital, fund capital expenditures, and pursue strategic acquisitions.

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.

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As of December 31, 2022, we had unrestricted cash on hand of $3.8 million.

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

Ninth Amendment to Revolving Credit Facility

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

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

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

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

Our borrowing capacity under our revolving credit facility at December 31, 2022 was approximately $6.0 million.

Our primary liquidity needs are to finance our working capital, fund capital expenditures, and pursue strategic acquisitions.

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

The assessment of the liquidity and going concern requires us to make estimates of future activity and judgments about whether we are compliant with financial covenant calculations under our debt and other agreements and have adequate liquidity to operate.

Significant assumptions used in our forecasted model of liquidity include forecasted sales, costs, and capital expenditures;

expected timing and proceeds of planned real estate transactions.

Going Concern

As described in Note 11 of Notes to 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 which matures on July 31, 2023.

As of the date of these financial statements, our existing cash and cash equivalents are not sufficient to satisfy our operating cash needs for at least one year after the issuance of these financial statements.

To alleviate these conditions, we are engaged in a syndication process to refinance the outstanding debt.

Based on the advanced nature of our discussions, the completion of substantial due diligence by potential lenders, agreement among the parties on key terms of a new credit facility, and the expected timeline for documentation and execution of a new credit agreement, Management believes it will successfully complete a refinancing transaction prior to the maturity of the current credit facility.

Additionally, we are exploring sales of underutilized assets as a source of liquidity.

Our ability to continue as a going concern is dependent on our ability to successfully refinance the credit facility, sale of underutilized assets and continue operations in forthcoming reporting periods.

As our refinancing activities are ongoing, there can be no assurances that we will be able to secure financing on terms that are acceptable to us or at all.

These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued.

While management has developed and is in process to implement plans that management believes could alleviate in the future the substantial doubt that was raised, management concluded at the date of the issuance of the financial statements that substantial doubt exists as those plans are not within the control of management.

Our consolidated financial statements do not include adjustments, if any, that may arise from the outcome of this uncertainty.

There is an explanatory paragraph included in the report of our independent registered public accounting firm describing the uncertainty about our ability to continue as a going concern, which is considered an event of noncompliance under our Credit Facility.

Management has obtained a consent with respect to the delivery of annual financial statements with an audit opinion unqualified as to going concern from the Credit Facility lenders, and we are compliant with the financial covenants of the credit agreement.

Please see “Risk Factors – Risk Factors Relating to Our Indebtedness and Financing Plans”.

The following table provides information regarding our cash flows and our capital expenditures for the years ending December 31, 2022, 2021 and 2020:

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Change in operating assets and liabilities (working capital)

Cash flows provided by (used in) operating activities

Cash flows provided by (used in) investing activities

Cash flows provided by (used in) financing activities

Cash flows provided by operating activities

Cash flows (used in) provided by investing activities

Cash flows(used in) provided by financing activities

Capital expenditures (included in investing activities above)

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The net cash inflow is comprised of $14.8 million of cash inflows from net income, after adjusting for non-cash items and $5.2 million of cash outflows related to changes in net working capital.

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

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Consolidated Statements of Cash Flows, were primarily driven by a $4.7 million decrease in operating lease liabilities during the period and a $4.7 million outflow pursuant to the relative timing and significance of project progression and billings during the period, partially offset by a $4.1 million inflow related to an increase in our net position of accounts receivable and accounts payable plus accrued liabilities during the period and $0.1 million of other cash inflows.

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

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

million outflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period and a $4.9 million decrease in operating lease liabilities during the period, partially offset by $0.5 million of other cash inflows.

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

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

The changes in net working capital, which are reflected as changes in operating assets and liabilities in our Consolidated Statements of Cash Flows, were primarily driven by a $6.5 million outflow pursuant to the relative timing and significance of project progression and billings during the period, a $5.4 million decrease in operating lease liabilities during the period and $1.3 million of other outflows, partially offset by a $12.7 million inflow related to a decrease in our net position of accounts receivable and accounts payable plus accrued liabilities during the period.

During 2019, we used approximately $0.7 million in cash from our operating activities.

The net cash outflow is comprised of $30.1 million of cash inflows from net income, after adjusting for non-cash items and $30.8 million of cash outflows related to changes in net working capital.

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

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

retainage whereas accounts payable typically turn in 30 days.

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

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

Investing Activities.

Capital asset additions and betterments to our fleet were $14.6 million in 2022, as compared with $17.0 million and $14.7 million in 2021 and 2020, respectively.

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

Proceeds from the sale of property and equipment were $4.9 million in 2022, as compared with $27.1 million and $5.9 million in in 2021 and 2020, respectively.

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

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During the year ended December 31, 2022, we drew down $24.0 million from our revolving line of credit.

During the year ended December 31, 2022, we repaid $28.0 million on our revolving line of credit, had payments of $3.0 million on finance lease liabilities and incurred $0.7 million of loan costs related to the Ninth Amendment of the Credit Facility.

During the year ended December 31, 2021, we drew down $53.0 million from our revolving line of credit.

During the year ended December 31, 2021, we repaid $19.0 million on our revolving line of credit.

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Additionally, we repaid $41.0 million on our revolving line of credit, as well as made the regularly scheduled debt payment on the term loan of $3.8 million and an additional principal paydown of $3.4 million with proceeds from the sale of equipment.

During 2019, we drew down $63.0 million from our revolving line of credit.

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

Sources of Capital

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

Financial covenants

Restrictive financial covenants under the Credit Facility include:

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

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

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

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

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

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

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

• Consolidated Leverage Ratio

- Fiscal Quarter Ending December 31, 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;

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and events constituting a change of control.

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

The Company executed the Ninth Amendment during March 2022.

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

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

The Company was in compliance with all financial covenants as of December 31, 2022, with the reported consolidated leverage ratio of 2.38 to 1.00 and the reported consolidated fixed charge coverage ratio of 1.76 to 1.00.

See Note 11 of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K for further discussion on the Company’s Debt.

Bonding Capacity

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At December 31, 2022, the capacity under our current bonding arrangement was at least $750 million, with approximately $175 million of projects being bonded.

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

We are confident that our balance sheet and working capital position are sufficient to allow us to continue to access bonding capacity necessary to pursue and deliver projects.

Effect of Inflation

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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 7. Management’s Discussion and Analysis