What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-10-28 · 152 added, 236 removed, 549 unchanged (41% of the section changed)

4 unchanged sentences

(In Thousands, Except Share and Per Share Information)

September 30,

Current assets:

33 unchanged sentences

Common stock -- $ 0.01 par value, 50,000,000 authorized, 32,885,972 and 32,770,550 issued;

32,054,885 and 31,001,226 outstanding at September 30, 2022 and December 31, 2021, respectively

Treasury stock, 711,231 shares, at cost, as of September 30, 2022 and December 31, 2021, respectively

32,174,741 and 32,059,319 outstanding at March 31, 2023 and December 31, 2022, respectively

Treasury stock, 711,231 shares, at cost, as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

7 unchanged sentences

(In Thousands, Except Share and Per Share Information)

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Contract revenues

3 unchanged sentences

Gain on disposal of assets, net

Operating income (loss)

Operating loss

Other (expense) income:

2 unchanged sentences

Other expense, net

Income (loss) before income taxes

Income tax (benefit) expense

Net income (loss)

Basic income (loss) per share

Diluted income (loss) per share

Shares used to compute income (loss) per share:

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

Orion Group Holdings, Inc.

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In Thousands)

Three months ended September 30,

Nine months ended September 30,

Net income (loss)

Change in fair value of cash flow hedge, net of tax expense of $ 368 for the nine months ended September 30, 2021.

Total comprehensive income (loss)

Loss before income taxes

Income tax expense

Basic loss per share

Diluted loss per share

Shares used to compute loss per share:

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

3 unchanged sentences

(In Thousands, Except Share and Per Share Information)

Accumulated Other

Comprehensive

Earnings (Loss)

Balance, December 31, 2022

4 unchanged sentences

Balance, March 31, 2023

Stock-based compensation

Issuance of restricted stock

Forfeiture of restricted stock

Payments related to tax withholding for stock-based compensation

Balance, June 30, 2022

Stock-based compensation

Issuance of restricted stock

Forfeiture of restricted stock

Payments related to tax withholding for share-based compensation

Balance, September 30, 2022

Accumulated Other

Comprehensive

Earnings (Loss)

Balance, December 31, 2021

Stock-based compensation

Exercise of stock options

Payments related to tax withholding for stock-based compensation

Cash flow hedge

Balance, March 31, 2021

Stock-based compensation

Issuance of restricted stock

1 unchanged sentence

Payments related to tax withholding for stock-based compensation

Cash flow hedge

Balance, June 30, 2021

Stock-based compensation

Exercise of stock options

Issuance of restricted stock

Payments related to tax withholding for stock-based compensation

Balance, September 30, 2021

Balance, March 31, 2022

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

3 unchanged sentences

(in Thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

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

Operating activities:

2 unchanged sentences

Amortization of ROU finance leases

Write-off of debt issuance costs upon debt modification

Amortization of deferred debt issuance costs

13 unchanged sentences

Contract liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Cash flows from investing activities:

1 unchanged sentence

Purchase of property and equipment

Insurance claim proceeds related to property and equipment

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities:

Borrowings on credit

Payments made on borrowings on credit

Borrowings from Credit Facility

Payments made on borrowings from Credit Facility

Loan costs from Credit Facility

1 unchanged sentence

Payments related to tax withholding for share-based compensation

Exercise of stock options

Net cash used in financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Net cash provided by (used in) financing activities

Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Cash paid during the period for:

9 unchanged sentences

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.

23 unchanged sentences

Such adjustments are of a normal recurring nature.

Interim results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Interim results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

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

7 unchanged sentences

The assessment of the liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company is compliant with financial covenant calculations under its debt and other agreements and has adequate liquidity to operate.

Significant assumptions used in the Company's forecasted model of liquidity include forecasted sales, costs, our ability to manage spending on capital expenditures, our ability to complete certain asset sales, collect claims and unapproved change order revenue, limit spending on the Enterprise Resource Planning (“ERP”) system implementation and improve working capital.

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

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

Significant assumptions used in the Company's forecasted model of liquidity include forecasted sales, costs, and capital expenditures and expected timing and proceeds of planned real estate transactions.

The Company has sustained operating losses for the years ended December 31, 2022 and 2021.

Also as described in Note 11, the Company had $ 40.0 million of outstanding indebtedness under its Credit Facility as of March 31, 2023 which matures on July 31, 2023.

As of the date of the filing of the Company’s 2022 Form 10-K on March 16, 2023, the Company’s existing cash and cash equivalents were not sufficient to satisfy the Company’s operating cash needs for at least one year after the issuance of the financial statements.

These conditions raised substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements were issued.

As such, management concluded at the date of the issuance of the financial statements included in the Company’s 2022 Form 10-K that substantial doubt existed as to going concern.

To alleviate this condition, the Company engaged in a syndication process to refinance the outstanding debt.

On May 15, 2023, the Company entered into a new three-year $ 103.0 million senior secured credit facility with White Oak ABL, LLC and White Oak Commercial Finance, LLC (collectively, “White Oak”) which includes a $ 65.0 million asset based revolving credit facility (the “Revolver”) and a $ 38.0 million fixed asset term loan (the “Term Loan”).

See Note 19 for more information regarding the debt refinancing.

Based on an assessment of the completion of the debt refinancing process and the other factors above, management believes that the Company will have adequate liquidity for its operations for at least the next 12 months.

Therefore, management’s conclusion is that the conditions that previously raised substantial doubt have been resolved and substantial doubt is no longer raised as to the Company’s ability to continue as a going concern.

Summary of Significant Accounting Policies

16 unchanged sentences

Performance obligations are promises in a contract to transfer distinct goods or services to the customer and are the unit of account under Topic 606.

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

Each of the Company’s contracts and related change orders typically

represent a single performance obligation because the Company provides an integrated service and individual goods and services are not separately identifiable.

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

26 unchanged sentences

The Company has not historically sustained losses on its cash balances in excess of federally insured limits.

Cash equivalents at September 30, 2022 and December 31, 2021 consisted primarily of overnight bank deposits.

Cash equivalents at March 31, 2023 and December 31, 2022 consisted primarily of overnight bank deposits.

Risk Concentrations

5 unchanged sentences

Accounts receivable are stated at the historical carrying value, net of allowances for credit losses.

The Company had significant investments in billed and unbilled receivables as of September 30, 2022 and December 31, 2021.

The Company had significant investments in billed and unbilled receivables as of March 31, 2023 and December 31, 2022.

Billed receivables represent amounts billed upon the completion of small contracts and progress billings on large contracts in accordance with contract terms and milestone achievements.

4 unchanged sentences

The Company writes off potentially uncollectible accounts receivable against the allowance for credit losses if it is determined that the amounts will not be collected or if a settlement with respect to a disputed receivable is reached for an amount that is less than the carrying value.

As of September 30, 2022 and December 31, 2021, the Company had recorded an allowance for credit losses of $ 0.5 million and $ 0.3 million, respectively.

As of March 31, 2023 and December 31, 2022, the Company had recorded an allowance for credit losses of $ 0.5 million and $ 0.6 million, respectively.

Balances billed to customers but not paid pursuant to retainage provisions in construction contracts generally become payable upon contract completion and acceptance by the owner.

Retainage at September 30, 2022 totaled $ 46.9 million, of which $ 3.8 million is expected to be collected beyond September 30, 2023.

Retainage at March 31, 2023 totaled $ 52.9 million, of which $ 4.5 million is expected to be collected beyond March 31, 2024.

Retainage at December 31, 2022 totaled $ 50.9 million.

1 unchanged sentence

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

Successful claims negotiations could result in the recovery of previously recorded losses.

Successful claims negotiations could

result in the recovery of previously recorded losses.

Significant losses on receivables could adversely affect the Company’s financial position, results of operations and overall liquidity.

6 unchanged sentences

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

The Company did not recognize any environmental liabilities as of September 30, 2022 or December 31, 2021.

The Company did not recognize any environmental liabilities as of March 31, 2023 or December 31, 2022.

Fair Value Measurements

33 unchanged sentences

Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or the fair value, less the costs to sell, and are no longer depreciated.

There were no assets classified as held for sale as of September 30, 2022 or December 31, 2021.

There was $ 0.8 million of assets classified as held for sale as of both March 31, 2023 and December 31, 2022 included in prepaid expenses and other in the Company’s condensed consolidated balance sheets.

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

18 unchanged sentences

This method assumes that if a company owns intellectual property, it does not have to “rent” the asset and is, therefore, “relieved” from paying a royalty.

Once a supportable royalty rate is determined, the rate

is then applied to the projected revenues over the expected remaining life of the intangible assets to estimate the royalty savings.

Once a supportable royalty rate is determined, the rate is then applied to the projected revenues over the expected remaining life of the intangible assets to estimate the royalty savings.

This approach is dependent on a number of factors, including estimates of future growth and trends, royalty rates, discount rates and other variables.

12 unchanged sentences

The current provision for income tax is based upon the current tax laws and the Company’s interpretation of these laws, as well as the probable outcomes of any tax audits.

The value of any net deferred tax asset depends upon estimates of the amount and category of future taxable income reduced by the amount of any tax benefits that the Company does not expect to realize.

The value of any net deferred tax asset depends

upon estimates of the amount and category of future taxable income reduced by the amount of any tax benefits that the Company does not expect to realize.

Actual operating results and the underlying amount and category of income in future years could render current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate, thus impacting the Company’s financial position and results of operations.

24 unchanged sentences

Any adjustments to such reserves are included in the condensed consolidated statements of operations in the period in which they become known.

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

The Company’s concrete segment employee health care

is provided through two policies.

A fully funded policy is offered primarily to salaried employees and their dependents while a partially self-funded plan with an appropriate stop-loss is offered primarily to hourly employees and their dependents.

The self-funded plan is funded to the maximum exposure and, as a result, is expected to receive a partial refund after the policy expiration.

The total accrual for insurance claims liabilities was $ 4.0 million and $ 19.8 million at September 30, 2022 and December 31, 2021, respectively, reflected as a component of accrued liabilities in the condensed consolidated balance sheet.

The total accrual for insurance claims receivable was $ 0.1 million and $ 13.3 million at September 30, 2022 and December 31, 2021, respectively, reflected as a component of other current accounts receivable in the condensed consolidated balance sheet.

The total accrual for insurance claims liabilities was $ 4.9 million and $ 5.8 million at December 31, 2022 and December 31, 2021, respectively, reflected as a component of accrued liabilities in the condensed consolidated balance sheets.

Contract revenues are recognized when control of the promised goods or services is transferred to the customer in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

The following table represents a disaggregation of the Company’s contract revenues by service line for the marine and concrete segments:

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Marine Segment

9 unchanged sentences

The Company’s contracts are often estimated and bid as one project and evaluated as to performance as one project, not by individual services performed by each.

Both the marine and concrete segments have a single leader responsible for the entire segment, not by service lines of the segments.

Both the marine and concrete segments have a single individual responsible for managing the entire segment, not by service lines of the segments.

Resources are allocated by segment and financial and budgetary information is compiled and reviewed by segment, not service line.

1 unchanged sentence

Construction services include construction, restoration, maintenance, dredging and repair of marine transportation facilities, marine pipelines, bridges and causeways and marine environmental structures.

Dredging services generally enhance or preserve the navigability of waterways or the protection of shorelines through the removal or replenishment of soil, sand or rock.

Dredging services generally enhance or preserve the navigability of waterways or the protection of shorelines

through the removal or replenishment of soil, sand or rock.

Specialty services include design, salvage, demolition, surveying, towing, diving and underwater inspection, excavation and repair.

6 unchanged sentences

Balances billed to customers but not paid pursuant to retainage provisions generally become payable upon contract completion and acceptance by the owner.

The table below presents the concentrations of current receivables (trade and retainage) at September 30, 2022 and December 31, 2021, respectively:

September 30, 2022

The table below presents the concentrations of current receivables (trade and retainage) at March 31, 2023 and December 31, 2022, respectively:

March 31, 2023

December 31, 2022

6 unchanged sentences

Net receivables

At both September 30, 2022 and December 31, 2021, no single customer accounted for more than 10.0% of total current receivables.

Additionally, the table below represents concentrations of contract revenue by type of customer for the three and nine months ended September 30, 2022 and 2021, respectively:

Three months ended September 30,

Nine months ended September 30,

At March 31, 2023, one customer in the Private Companies category accounted for 10.9 % of total current receivables.

At December 31, 2022, no single customer accounted for more than 10.0% of total current receivables.

Additionally, the table below represents concentrations of contract revenue by type of customer for the three months ended March 31, 2023 and 2022, respectively:

Three months ended March 31,

Federal Government

3 unchanged sentences

Total contract revenues

In the three and nine months ended September 30, 2022 and 2021, no single customer exceeded 10.0% of total contract revenues.

In the three months ended March 31, 2023, one customer in the Private Companies category accounted for 10.9 % of total contract revenues.

In the three months ended March 31, 2022, one customer in the Federal Government category accounted for 10.4 % of total contract revenues.

The Company does not believe that the loss of any one of its customers would have a material adverse effect on the Company or its subsidiaries and affiliates since no single specific customer sustains such a large portion of receivables or contract revenue over time.

1 unchanged sentence

The loss of any one of these suppliers could adversely impact short-term operations.

Contract revenues generated outside the United States totaled 1.4 % and 0.0 % of total revenues for the three months ended September 30, 2022 and 2021, respectively, and 0.9 % and 0.6 % for the nine months ended September 30, 2022 and 2021, respectively, and were primarily located in the Caribbean Basin and Mexico.

Contract revenues generated outside the United States totaled 1.7 % and 0.4 % of total revenues for the three months ended March 31, 2023 and 2022, respectively, and were primarily located in the Caribbean Basin.

Contracts in Progress

Contracts in progress are as follows at September 30, 2022 and December 31, 2021:

September 30,

Contracts in progress are as follows at March 31, 2023 and December 31, 2022:

Costs incurred on uncompleted contracts

6 unchanged sentences

Contract liabilities

Included in contract assets is approximately $ 13.3 million and $ 3.8 million at September 30, 2022 and December 31, 2021, respectively, related to claims and unapproved change orders, primarily related to two customers in the marine segment.

Included in contract assets is approximately $ 12.6 million and 13.4 million at March 31, 2023 and December 31, 2022, respectively, related to claims and unapproved change orders.

See Note 2 to the Company’s consolidated financial statements for discussion of the accounting for these claims.

Remaining performance obligations represent the transaction price of firm orders or other written contractual commitments from customers for which work has not been performed or is partially completed and excludes unexercised contract options and potential orders.

As of September 30, 2022, the aggregate amount of the remaining performance obligations was approximately $ 548.6 million.

As of March 31, 2023, the aggregate amount of the remaining performance obligations was approximately $ 467.4 million.

Of this amount, the current expectation of the Company is that it will recognize $ 441.1 million, or 94 %, in the next 12 months and the remaining balance thereafter.

Property and Equipment

The following is a summary of property and equipment at September 30, 2022 and December 31, 2021:

September 30,

The following is a summary of property and equipment at March 31, 2023 and December 31, 2022:

Automobiles and trucks

6 unchanged sentences

Construction in progress

For the three months ended September 30, 2022 and 2021, depreciation expense was $ 4.9 million and $ 5.2 million, respectively.

For the nine months ended September 30, 2022 and 2021, depreciation expense was $ 15.1 million and $ 15.7 million, respectively.

For the three months ended March 31, 2023 and 2022, depreciation expense was $ 4.6 million and $ 5.2 million, respectively.

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

Substantially all of the assets of the Company are pledged as collateral under the Company’s Credit Agreement (as defined in Note 11 ).

In the three and nine months ended September 30, 2022, the Company sold underutilized equipment .

The book value of the assets and related accumulation were removed from the balance sheet and the Company recognized a net gain on the sales of $ 3.4 million and $ 4.6 million, respectively.

In the three and nine months ended September 30, 2021, the Company sold underutilized equipment .

The book value of the assets and related accumulation were removed from the balance sheet and the Company recognized a net gain on the sales of $ 0.8 million and $ 3.1 million, respectively.

During the quarter ended June 30, 2021, the Company sold its land, building and improvements located in Tampa, Florida.

The book value of the assets and related accumulation were removed from the balance sheet and the Company recognized a net gain on the sale of $ 6.7 million.

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

1 unchanged sentence

Other Current Accounts Receivable

Other current accounts receivable at September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022

Other current accounts receivable at March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023

December 31, 2022

Insurance claims receivable

Accident loss receivables

Other current receivables

Vendor receivables

Purchase incentive receivable

Bond premium dividend receivable

Other current accounts receivable

Total other current accounts receivable

8 unchanged sentences

The Company’s assessment of the significance of a particular input to the fair value requires judgment and may affect the placement of assets and liabilities within the fair value hierarchy levels.

The following table sets forth by level within the fair value hierarchy the Company’s recurring financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:

Fair Value Measurements

Carrying Value

September 30, 2022

March 31, 2023

Cash surrender value of life insurance policy

1 unchanged sentence

Cash surrender value of life insurance policy

Our concrete segment had life insurance policies with a combined face value of $ 11.1 million as of September 30, 2022.

Our concrete segment had life insurance policies with a combined face value of $ 11.1 million as of March 31, 2023.

The policies are invested in mutual funds and the fair value measurement of the cash surrender balance associated with these policies is determined using Level 2 inputs within the fair value hierarchy and will vary with investment performance.

6 unchanged sentences

Other Fair Value Measurements

The fair value of the Company’s debt at September 30, 2022 and December 31, 2021 approximated its carrying value of $ 31.1 million and $ 39.4 million, respectively, as interest is based on current market interest rates for debt with similar risk and maturity.

The fair value of the Company’s debt at March 31, 2023 and December 31, 2022 approximated its carrying value of $ 40.0 million and $ 35.7 million, respectively, as interest is based on current market interest rates for debt with similar risk and maturity.

If the Company’s debt was measured at fair value, it would have been classified as Level 2 in the fair value hierarchy.

1 unchanged sentence

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

September 30,

Finite-lived intangible assets, beginning of period

8 unchanged sentences

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

For the three and nine months ended September 30, 2022, $ 0.3 million and $ 0.9 million, respectively, of amortization expense was recognized for these assets.

For the three months ended March 31, 2023 and 2022, $ 0.2 million and $ 0.3 million, respectively, of amortization expense was recognized for these assets.

Future expense remaining of approximately $ 0.3 million will be amortized as follows:

1 unchanged sentence

Accrued Liabilities

Accrued liabilities at September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022

Accrued liabilities at March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023

December 31, 2022

6 unchanged sentences

Total accrued liabilities

On March 27, 2020, the U.S.

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

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

The Company entered into an amended syndicated credit agreement (the “Credit Agreement” also known as the “Fourth Amendment”) on July 31, 2018 with Regions Bank, as administrative agent and collateral agent, and the following co-syndication agents:

2 unchanged sentences

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

The Credit Facility matures on July 31, 2023.

The Credit Agreement, which may be amended from time to time, provides for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”).

The Credit Facility is guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and may be used to finance general corporate and working capital purposes, to finance capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and associated fees, and to pay for all related expenses to the Credit Facility.

Interest is due and is computed based on the designation of the loan, with the option of a Base Rate Loan (the base rate plus the Applicable Margin), or an Adjusted LIBOR Rate Loan (the adjusted LIBOR rate plus the Applicable Margin).

Interest is due on the last day of each quarter end for Base Rate Loans and at the end of the LIBOR rate period for Adjusted LIBOR Rate Loans.

Principal balances drawn under the Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty.

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

The Credit Facility had a maturity date of July 31, 2023.

The Credit Agreement provided for borrowings under a revolving line of credit and a term loan (together, the “Credit Facility”).

The Credit Facility was guaranteed by the subsidiaries of the Company, secured by the assets of the Company, including stock held in its subsidiaries, and was used to finance general corporate and working capital purposes, to finance capital expenditures, to refinance existing indebtedness, to finance permitted acquisitions and associated fees, and to pay for all related expenses to the Credit Facility.

Interest was due and was computed based on the designation of the loan, with the option of a Base Rate Loan (the base rate plus the Applicable Margin), or an Adjusted LIBOR Rate Loan (the adjusted LIBOR rate plus the Applicable Margin).

Interest was due on the last day of each quarter end for Base Rate Loans and at the end of the LIBOR rate period for Adjusted LIBOR Rate Loans.

Principal balances drawn under the Credit Facility could be prepaid at any time, in whole or in part, without premium or penalty.

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

Effective, March 1, 2022, the Company entered into the Ninth Amendment to the Credit Agreement to, among other things, waive certain covenant defaults, reset the revolver limit, implement an anti-cash hoarding provision and institute temporary covenant requirements.

1 unchanged sentence

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

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

The quarterly weighted average interest rate for the Credit Facility as of September 30, 2022 was 6.88 %.

The new debt issuance costs of approximately $ 1.0 million, inclusive of appraisal and bank consulting fees, related to the execution of the Ninth Amendment was amortized and will be written off at the early termination of the Credit Agreement.

The quarterly weighted average interest rate for the Credit Facility as of March 31, 2023 was 10.22 %.

The Company’s obligations under debt arrangements consisted of the following:

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

Total current debt

Refinancing debt issuance costs

Total long-term debt

(1) Total debt issuance costs include underwriter fees, legal fees, syndication fees and fees related to the execution of the Ninth Amendment to the Credit Agreement.

(1) Total debt issuance costs include underwriter fees, legal fees, syndication fees and fees related to the execution of the Ninth Amendment to the Credit Agreement and the refinancing of the Company’s debt further discussed in Note19.

Provisions of the revolving line of credit

The Company has a maximum borrowing availability under the revolving line of credit and swingline loans (as defined in the Credit Agreement) of $ 42.5 million.

There is a letter of credit sublimit that is equal to the lesser of $ 20.0 million and the aggregate unused amount of the revolving commitments then in effect.

There is also a swingline sublimit equal to the lesser of $ 5.0 million and the aggregate unused amount of the revolving commitments then in effect.

Revolving loans may be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and must be drawn in an aggregate minimum amount of $ 1.0 million and integral multiples of $ 250,000 in excess of that amount.

Swingline loans must be drawn in an aggregate minimum amount of $ 250,000 and integral multiples of $ 50,000 in excess of that amount.

The Company may convert, change, or modify such designations from time to time.

The Company is subject to a commitment fee for the unused portion of the maximum borrowing availability under the revolving line of credit.

The commitment fee, which is due quarterly in arrears, is equal to the Applicable Margin of the actual daily amount by which the Aggregate Revolving Commitments exceeds the Total Revolving Outstanding.

The revolving line of credit termination date is the earlier of the Credit Facility termination date, July 31, 2023, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the amended Credit Facility.

As of September 30, 2022, the Company had $ 30.0 million of borrowings under the revolving line of credit.

There were $ 1.7 million in outstanding letters of credit as of September 30, 2022, which reduced the maximum borrowing availability on the revolving line of credit to $ 10.8 million.

During the nine months ended September 30, 2022, the Company drew down $ 9.0 million for general corporate purposes and made payments of $ 18.0 million on the revolving line of credit which resulted in a net decrease of $ 9.0 million.

The Company had a maximum borrowing availability under the revolving line of credit and swingline loans (as defined in the Credit Agreement) of $ 42.5 million.

There was a letter of credit sublimit that was equal to the lesser of $ 20.0 million and the aggregate unused amount of the revolving commitments then in effect.

There was also a swingline sublimit equal to the lesser of $ 5.0 million and the aggregate unused amount of the revolving commitments then in effect.

Revolving loans could be designated as Base Rate Loan or Adjusted LIBOR Rate Loans, at the Company’s request, and could be drawn in an aggregate minimum amount of $ 1.0 million and integral multiples of $ 250,000 in excess of that amount.

Swingline loans could be drawn in an aggregate minimum amount of $ 250,000 and integral multiples of $ 50,000 in excess of that amount.

The Company could convert, change, or modify such designations from time to time.

The Company was subject to a commitment fee for the unused portion of the maximum borrowing availability under the revolving line of credit.

The commitment fee, which is due quarterly in arrears, was equal to the Applicable Margin of the actual daily amount by which the Aggregate Revolving Commitments exceeds the Total Revolving Outstanding.

The revolving line of credit termination date was the earlier of the Credit Facility termination date, July 31, 2023, or the date the outstanding balance is permanently reduced to zero, in accordance with the terms of the amended Credit Facility.

As of March 31, 2023, the Company had $ 40.0 million of borrowings under the revolving line of credit.

There were $ 1.5 million in outstanding letters of credit as of March 31, 2023, which reduced the maximum borrowing availability on the revolving line of credit to $ 1.0 million.

During the three months ended March 31, 2023, the Company drew down $ 5.0 million for general corporate purposes on the revolving line of credit.

The Company has entered into debt agreements with De Lage Landen Financial Services, Inc.

and Mobilease for the purpose of financing equipment purchased.

As of September 30, 2022, the carrying value of this debt was $ 1.1 million.

As of March 31, 2023, the carrying value of this debt was

$ 0.9 million.

The agreements are secured by the financed equipment assets and the debt is included as a component of current debt and long-term debt on the Condensed Consolidated Balance Sheets.

Financial covenants

Restrictive financial covenants under the Credit Facility include:

• 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.

The Company was in compliance with all financial covenants as of September 30, 2022, with the reported consolidated leverage ratio of 2.88 to 1.00.

The Company obtained from the Credit Facility lenders an extension of the consent with respect to the delivery of its annual financial statements with an audit opinion unqualified as to going concern and a consent for the Consolidated Leverage Ratio to exceed 3.00 to 1.00 and for the Consolidated Fixed Charge Coverage Ratio to be less than 1.25 to 1.00 for the Fiscal Quarter Ending March 31, 2023.

Debt Refinancing

On May 15, 2023, the Company entered into a new three-year $ 103.0 million senior secured credit facility with White Oak which includes a $ 65.0 million asset based revolving credit facility and a $ 38.0 million fixed asset term loan.

See Note 19 for more information regarding the debt refinancing.

Other Long-Term Liabilities

Other long-term liabilities at September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022

Other long-term liabilities at March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023

December 31, 2022

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For interim financial reporting, the Company estimates its annual tax rate based on projected taxable income for the full year and records a quarterly tax provision in accordance with the anticipated annual rate.

Income tax (benefit) expense included in the Company’s accompanying Condensed Consolidated Statements of Operations was as follows (in thousands, except percentages):

Income tax expense included in the Company’s accompanying Condensed Consolidated Statements of Operations was as follows (in thousands, except percentages):

Three months ended

Nine months ended

September 30,

Income tax (benefit) expense

Income tax expense

Effective tax rate

The effective rate for the three and nine months ended September 30, 2022 differed from the Company’s statutory federal 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.

The effective rate for the three months ended March 31, 2023 differed from the Company’s statutory federal 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.

The Company assessed the realizability of its deferred tax assets and determined that it was more likely than not that some portion or all the deferred tax assets would not be realized and therefore recorded a valuation allowance on the net deferred tax assets.

1 unchanged sentence

The Company considers the scheduled reversal of deferred tax liabilities, available carryback periods, and tax-planning strategies in making this assessment.

For the period ended September 30, 2022 the Company evaluated all positive and negative evidence in determining the amount of deferred tax assets more likely than not to be realized.

Based on the review of available evidence, Management believes that a valuation allowance on the net deferred tax assets at September 30, 2022 remains appropriate.

The Company does not expect that unrecognized tax benefits as of September 30, 2022 for certain federal income tax matters will significantly change due to any settlement and/or expiration of statutes of limitations over the next 12 months.

For the period ended March 31, 2023 the Company evaluated all positive and negative evidence in determining the amount of deferred tax assets more likely than not to be realized.

Based on the review of available evidence, Management believes that a valuation allowance on the net deferred tax assets at March 31, 2023 remains appropriate.

The Company does not expect that unrecognized tax benefits as of March 31, 2023 for certain federal income tax matters will significantly change due to any settlement and/or expiration of statutes of limitations over the next 12 months.

The final outcome of these tax positions is not yet determinable.

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

For the three months ended September 30, 2022 and 2021, the Company had 322,637 and 793,028 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the nine months ended September 30, 2022 and 2021, the Company had 553,813 and 866,925 securities, respectively, that were potentially dilutive in earnings per share calculations.

For the three months ended March 31, 2023 and 2022, the Company had 280,644 and 680,447 securities, respectively, that were potentially dilutive in earnings per share calculations.

Such dilution is dependent on the excess of the market price of our stock over the exercise price and other components of the treasury stock method.

The exercise price for certain stock options awarded by the Company exceeded the average market price of the Company’s common stock for the three and nine months ended September 30, 2022 and 2021.

The exercise price for certain stock options awarded by the Company exceeded the average market price of the Company’s common stock for the three months ended March 31, 2023 and 2022.

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

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Weighted average shares outstanding

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Stock-Based Compensation

The Compensation Committee of the Company’s Board of Directors is responsible for the administration of the Company’s stock incentive plans, which include the balance of shares remaining under the 2022 Long Term Incentive Plan (the “2022 LTIP”), which was approved by shareholders in May 2022 and authorized the maximum aggregate number of shares to be issued of 2,175,000 plus any shares available for grant under prior long term incentive plans as of the date the 2022 LTIP was approved, and any shares subject to awards granted under the prior plans that expire or are cancelled, forfeited, exchanged, settled in cash or otherwise terminated.

The Compensation Committee of the Company’s Board of Directors is responsible for the administration of the Company’s stock incentive plans, which include the balance of shares remaining under the 2022 Long Term Incentive Plan (the “2022 LTIP”), which was approved by shareholders in May of 2022 and authorized 2,175,000 shares, the maximum aggregate number to be issued, plus any shares available for grant under prior long term incentive plans as of the date the 2022 LTIP was approved, and any shares subject to awards granted under the prior plans that expire or are cancelled, forfeited, exchanged, settled in cash or otherwise terminated.

In general, the Company’s 2022 LTIP provides for grants of restricted stock, performance based awards and stock options to be issued with a per-share price not less than the fair market value of a share of common stock on the date of grant.

2 unchanged sentences

The Company applies a 3.2 % and a 5.5 % forfeiture rate, which is compounded over the vesting terms of the individual award, to its restricted stock and option grants, respectively, based on historical analysis.

In the three months ended September 30, 2022 and 2021, compensation expense related to stock-based awards outstanding was $ 1.0 million and $ 0.5 million, respectively.

In the nine months ended September 30, 2022 and 2021, compensation expense related to stock-based awards outstanding was $ 2.1 million and $ 2.2 million, respectively.

In the three months ended September 30, 2022 and 2021, payments related to tax withholding for stock-based compensation for certain officers of the Company was $ 0.3 million and $ 0.7 million, respectively.

In the nine months ended September 30, 2022 and 2021, payments related to tax withholding for stock-based compensation for certain officers of the Company was $ 0.4 million and $ 0.9 million, respectively.

In January 2022, the Company granted an independent director 8,929 shares of restricted common stock, which vested immediately on the date of grant and had a fair value on the date of grant of $ 3.36 per share.

In May 2022, independent directors as well as Mr.

Shanfelter, the Company’s Executive Chairman, Interim Chief Executive Officer and Interim Chief Financial Officer, were awarded an aggregate of 623,655 shares of restricted common stock.

The total number included 193,548 shares, which were awarded to the six independent directors and vested immediately on the date of the grant, as well as 430,107 shares of time-vested restricted stock units awarded to Mr.

In September 2022, 179,211 of the time-vested restricted stock units cliff vested and were settled in stock as a result of Mr.

Shanfelter fulfilling his term as Interim Chief Executive Officer.

The remaining 250,896 time-vested restricted stock units will cliff vest and will be settled

in stock, unless the Company's Compensation Committee exercises its discretion to settle all or a portion in cash (on a one-for-one basis), provided Mr.

Shanfelter fulfills his term as Executive Chairman, which the Company expects to occur prior to April 6, 2023.

The fair value on the date of the grant of all shares awarded in May 2022 was $ 2.79 per share.

In August 2022, the Company granted an executive 446,097 shares of restricted common stock with a vesting period of three years .

In addition, the Company granted the executive 241,636 performance-based units.

The performance-based units will potentially vest 100 % if the target is met, with 100 % of the units to be earned based on the achievement of an objective, tiered return on invested capital, measured over a three-year performance period.

The Company evaluates the probability of achieving this each reporting period.

The fair value of all grants awarded in August 2022 was $ 2.69 per unit.

In September 2022, the Company granted an executive 130,909 shares of restricted common stock with a vesting period of three years .

In addition, the Company granted the executive 87,273 performance-based units.

In the three months ended March 31, 2023, compensation expense related to stock-based awards outstanding was $ 0.5 million and $ 0.4 million, respectively.

In the three months ended March 31, 2023 and 2022, payments related to tax withholding for stock-based compensation for certain officers of the Company was $ 0.2 million and less than $ 0.1 million, respectively.

In January 2023, certain officers and executives of the Company were awarded a total of 180,333 shares of restricted common stock with a vesting period of three years and a fair value of $ 3.00 per share.

In March 2023, the Company granted certain executives a total of 335,851 performance-based units.

The Company evaluates the probability of achieving this each reporting period.

The fair value of all grants awarded in September 2022 was $ 2.75 per unit.

In the three and nine months ended September 30, 2022, there were no options exercised.

In the three months ended September 30, 2021, there were 4,791 options exercised, generated proceeds to the Company of less than $ 0.1 million.

In the nine months ended September 30, 2021 there were 28,546 options exercised generating proceeds to the Company of approximately $ 0.1 million.

At September 30, 2022, total unrecognized compensation expense related to unvested stock was approximately $ 3.7 million, which is expected to be recognized over a period of approximately 2.4 years.

The fair value of all grants awarded in March 2023 was $ 2.65 per unit.

In the three months ended March 31, 2023 and 2022, there were no options exercised.

At March 31, 2023, total unrecognized compensation expense related to unvested stock was approximately $ 3.1 million, which is expected to be recognized over a period of approximately 2.4 years.

Commitments and Contingencies

On August 21, 2020, a Company dredge, the Waymon L.

Boyd, was consumed by a fire while working on a project in the Port of Corpus Christi.

Five crewmembers were killed, several more were injured, some seriously, and the vessel was declared a total loss.

This incident also resulted in the discharge of approximately 18,000 gallons of oil, diesel fuel and contaminated water into the Corpus Christi Ship Channel, all of which was promptly cleaned up.

The Company has fully cooperated with the U.S.

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

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

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

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

District Court for the Southern District of Texas that requested consolidation of the lawsuits for procedural purposes since they all arose out of the same occurrence and sought exoneration from or limitation of liability relating to the foregoing incident as provided for in the federal rules of procedure for maritime claims.

The Limitation Court set a deadline of February 17, 2021 by which all claims were required to be filed and as of the Court’s deadline, thirteen persons, estates and/or entities filed claims in the Limitation for personal injuries, death, property damages and business interruption, loss of profit, loss of use of natural resources and other economic damages for unspecified economic and compensatory damages.

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

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

As of September 30, 2022, the Company had recognized

$ 206.4 million in total liabilities with respect to this incident, which includes approximately $ 206.1 million paid by the Company to date including full settlements with crewmembers and wreck removal costs, and accruals totaling approximately $ 0.3 million for outstanding claims.

All claims arising from the August 21, 2020 incident have been settled within insurance coverage limits, the carriers of such insurance have reimbursed the Company $ 205.3 million, to date, and the Company remains confident that it otherwise has adequate vessels, equipment, and personnel to fulfill all ongoing, booked and reasonably foreseeable work.

In addition, the Company is involved in various other legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations or cash flows.

Management believes that it has recorded adequate accrued liabilities and believes that it has adequate insurance coverage or has meritorious defenses for these other claims and contingencies.

The Company is involved in various legal and other proceedings which are incidental to the conduct of its business, none of which in the opinion of management will have a material effect on the Company’s financial condition, results of operations or cash flows.

Management believes that it has recorded adequate accrued liabilities and believes that it has adequate insurance coverage or has meritorious defenses for these claims and contingencies.

Segment Information

5 unchanged sentences

Three months ended

Nine months ended

September 30,

Contract revenues

Operating income (loss)

Operating (loss) income

Depreciation and amortization expense

4 unchanged sentences

Property and equipment, net

There were less than $ 0.1 million and no intersegment revenues between the Company’s two reportable segments for the three months ended September 30, 2022 and 2021, respectively.

There were $ 0.1 million and less than $ 0.1 million in intersegment revenues between the Company’s two reportable segments for the nine months ended September 30, 2022 and 2021, respectively.

The marine segment had foreign revenues of $ 2.5 million and less than $ 0.1 million for the three months ended September 30, 2022 and 2021, respectively.

The marine segment had foreign revenues of $ 5.1 million and $ 2.8 million for the nine months ended September 30, 2022 and 2021, respectively.

These revenues are derived from projects in the Caribbean Basin and Mexico and are paid primarily in U.S.

There were less than $ 0.1 million and no intersegment revenues between the Company’s two reportable segments for the three months ended March 31, 2023 and 2022, respectively.

The marine segment had foreign revenues of $ 2.8 million and $ 0.7 million for the three months ended March 31, 2023 and 2022, respectively.

These revenues are derived from projects in the Caribbean Basin and are paid primarily in U.S.

There was no foreign revenue for the concrete segment.

1 unchanged sentence

Leases recorded on the balance sheet consists of the following:

September 30,

Operating lease right-of-use assets, net (1)

3 unchanged sentences

Total liabilities

(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 9.6 million and $ 9.5 million as of September 30, 2022 and December 31, 2021, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 4.4 million and $ 2.7 million as of September 30, 2022 and December 31, 2021, respectively.

(1) Operating lease right-of-use assets are recorded net of accumulated amortization of $ 11.0 million and $ 10.5 million as of March 31, 2023 and December 31, 2022, respectively.

(2) Financing lease right-of-use assets are recorded net of accumulated amortization of $ 5.7 million and $ 5.1 million as of March 31, 2023 and December 31, 2022, respectively.

Other information related to lease term and discount rate is as follows:

September 30,

Weighted Average Remaining Lease Term (in years)

5 unchanged sentences

The components of lease expense are as follows:

Three Months Ended September 30,

Nine months ended September 30,

Three Months Ended March 31,

Operating lease costs:

7 unchanged sentences

Supplemental cash flow information related to leases is as follows:

Nine Months Ended September 30,

Three Months Ended March 31,

Cash paid for amounts included in the measurement of lease liabilities:

9 unchanged sentences

Year ending December 31,

2022 (excluding the nine months ended September 30, 2022)

2023 (excluding the three months ended March 31, 2023)

Total future minimum lease payments

3 unchanged sentences

Long-term lease obligations

Subsequent Events

On April 26, 2023, the Company entered into a Land Sale Contract with Equity Resource Partners - East West, LLC, a Georgia limited liability company, who, subject to normal due diligence conditions, has agreed to purchase two parcels of land in Harris County, Texas (approximately 341.3 acres), previously used by the Company as dredge placement areas.

The purchase price is approximately $ 36.0 million, and closing is anticipated on or before September 29, 2023.

On, May 5, 2023, the Company obtained from the Credit Facility lenders an extension of the consent with respect to the delivery of its annual financial statements with an audit opinion unqualified as to going concern and a consent for the Consolidated Leverage Ratio to exceed 3.00 to 1.00 and for the Consolidated Fixed Charge Coverage Ratio to be less than 1.25 to 1.00 for the Fiscal Quarter Ending March 31, 2023.

On May 15, 2023, the Company entered into a new three-year $ 103.0 million senior secured credit facility with White Oak.

This credit facility has replaced the Company’s $ 42.5 million revolver with Regions Bank and other lenders.

At the same time, the Company entered into a $ 13.0 million sale-leaseback of certain concrete segment equipment with Gordon Brothers (the “Sale-Leaseback”).

The new credit facility includes a $ 65.0 million asset based revolving credit facility and a $ 38.0 million fixed asset term loan.

The Revolver will initially bear interest at a rate of the 30-day SOFR plus 5.5 % and the Term Loan at a rate of the 30-day SOFR plus 8.0 %, subject to a SOFR floor of 4.0 %.

At closing, the Company made an initial Revolver draw of $ 9.5 million.

Borrowings from the facility will primarily be used to refinance existing debt as well as for other general corporate and working capital purposes.

The Sale-Leaseback includes equipment on lease schedules of 24-months and 36-months .

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 1. Financial Statements